Home > Main > The Unappreciated Effects of Making Stuff

The Unappreciated Effects of Making Stuff

January 24, 2012

Making stuff isn’t always glamorous, and it seems like it pays to have people make things for your. However, there are benefits to making something that do not show up in the statistics.

Matt Yglesias talks about it a bit in this post. I fully agree with this sentiment.  Making stuff has spillover effects on the economy that aren’t easily measured in statistics.

For example, when you make something, you might be able to figure out how to make it a bit better, faster, or cheaper. Plus you then need to hire other people who might also slightly improve the products.

This is why cities are useful – they are serendipity machines for humans. Manufacturing zones like we used to have across the entire Midwest have value outside of the jobs created – they also create innovation.

Check this other article about Steve Jobs by Matt. Apple computer exists because of a highly localized computer science focus around the bay area allowed Apple to get over the initial hump.

In short, we’ve got the iPhone because it was exceptionally easy for Steve Jobs to get started in computers. If this hadn’t exited, we might have a few more nice looking fonts. Instead, we have civilization changing products like the desktop computer and iPhone.

Density of making and designing things is extremely valuable for reasons beyond jobs.  I know, the Trade Deficit is really people giving us stuff in exchange for a few bits in a computer. But is that all we’re giving away?

I suggest we’re giving away more than just bits. Perhaps we’re giving away more.

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  1. January 24, 2012 at 11:40 am

    Unfortunately I don’t think we have any choice. China has economies of scale the rest of us can only dream about.

    http://www.tuaw.com/2012/01/22/why-apples-products-are-designed-in-california-but-assembled/

    I think we’re stuck with the design role.

    • TC
      January 24, 2012 at 3:53 pm

      It’s true Neil China has huge advantages. But I tend to think there is enough work to do we can have our own advantages as well. We do have awesome design and build skills here in the states, and Europe isn’t so shabby either.

      Plugging the CA holes is a good first step, and making sure there is sufficient demand is another step. This doesn’t happen by itself as we see today.

      Remember, we do have something extremely valuable in the world – freedom and a good government. We can consume, because we’re safe enough to do so. It’s a Maslow thing, but I think it’s important, and I fear losing this fragile and precious resource.

  2. Badger
    January 24, 2012 at 2:20 pm

    “I think we’re stuck with the design role.”

    Pick up an academic journal in science or engineering. The design role went with the manufacturing. Little of the mid level or lower design jobs are left either. Perhaps a new “Economy 3.0″ technology will be worth competing for since we have ceded version 1.0 and 2.0.

    • TC
      January 24, 2012 at 3:41 pm

      I agree – part of design isn’t just thinking through stuff, it’s the feedback from every part of the process, and also serendipity to make random awesome things happen.

      The internet wasn’t an accident – it was a series of good accidents. Apple computer put an ethernet connection into their computers and it expanded the web by a few thousand percent in the early 1980’s – all because Jobs had a few random conversations with people working on early connectivity.

      I want this to happen for my kids, too.

  3. Sam
    January 24, 2012 at 2:28 pm

    There is always a choice. It depends on values, character, and other human attributes which Americans have largely lost in their headlong downward plunge. We have become prostitutes and have sold our souls, and we have let machine-like corporations literally hijack our country. We are in effect wretches and fools.

    The New York Times’ Ode to Foxconn and Anti-Employee Control Fraud
    By William K. Black

    http://neweconomicperspectives.blogspot.com/2012/01/new-york-times-ode-to-foxconn-and-anti.html

  4. John
    January 24, 2012 at 3:36 pm

    Re: China has economies of scale the rest of us can only dream about.

    China has a quasi-slavery economy of scale. Essentially a country that turns humans into a sub-human ant-heap. And everyone applauds it!

  5. beowulf
    January 24, 2012 at 3:39 pm

    Eamonn Fingleton keeps it real.
    http://www.fingleton.net/dollars-and-dragons/

    I’m less pessimistic than him. But clearly there’s no economic proposal that would do more for US growth long-term than balancing current accounts with something like Warren Buffett’s import certificate plan.

    • TC
      January 24, 2012 at 4:45 pm

      I fully agree. It’s not like we’re trying to keep China poor. Rather, we’re trying to stay rich while dragging China up to our level.

      We can do this. We can do both. Instead we’re fighting over scraps of demand out of the U.S. while we let 20% of our population work part time or less, because we want to strangle demand instead of letting it flourish.

      It’s foolish on such a profound level I don’t even know where to start pointing it out to people.

      I guess it’s really up to us now to do something about this mess, and educating people on how economies should work.

      Back in the day, I was a huge fan of Bucky Fuller. And he was crazy. But his point – we’re rich enough to provide massive luxury for everyone on the planet – is 100% true.

      Who knew reading a bunch of Bucky Fuller instead of going to another physics lab at 7:10am would end up being actually useful? 10 years ago I would have said the opposite.

  6. Frank
    January 24, 2012 at 5:52 pm

    During the final century of the Roman Empire, it was common for emperors to deny that their civilization was in decline. Only with the perspective of history can we see that the emperors were wrong, that the empire was failing, and that the Roman people were unwilling or unable to change their way of life before it was too late. The same, says Morris Berman, is true of twenty-first century America. The nation and its empire are in decline and nothing can be done to reverse their course. How did this come to be?

    In Why America Failed, Berman examines the development of American culture from the earliest colonies to the present, shows that the seeds of the nation’s “hustler” culture were sown from the very beginning, and reveals how the very tools that enabled the country’s expansion have become the instruments of its demise.

    At the center of Berman’s argument is his assertion that hustling, materialism, and the pursuit of personal gain without regard for its effects on others have been powerful forces in American culture since the Pilgrims landed. He shows that even before the American Revolution, naked self-interest had replaced the common good as the primary social value in the colonies and that the creative power and destructive force of this idea gained irresistible momentum in the decades following the ratification of the Constitution. As invention proliferated and industry expanded, railroads, steamships, and telegraph wires quickened the frenetic pace of progress—or, as Berman calls it, the illusion of progress. An explosion of manufacturing whetted the nation’s ravenous appetite for goods of all kinds and gave the hustling life its purpose—to acquire as many objects as possible prior to death

    The reign of Wall Street and the 2008 financial meltdown are certainly the most visible examples today of the negative consequences of the pursuit of affluence. Berman, however, sees the manipulations of Goldman Sachs and others not as some kind of aberration, but as the logical endpoint of the hustler culture. The fact that Goldman and its ilk continue to thrive in the wake of the disaster they wrought simply proves that it is already too late: America is incapable of changing direction.

    ————

    The principal goal of North American civilization, and of its inhabitants, is and always has been an ever-expanding economy – affluence – and endless technological innovation – “progress.” A nation of hustlers, writes [Walter] McDougall, a people relentlessly on the make.

    From the very start, from the Puritans’ shining “city on a hill” and the Jamestown settlement’s conquest and exploitation of Indian lands, this country has been about making and taking, a business culture with a commercial orientation, devoted to growth and power, wealth and property, private advancement and profit, militarism and materialism, expansion and empire. John Adams saw it at the beginning: the U.S. was “more Avaricious than any other Nation that ever existed.” Or as de Tocqueville was to say later: “As one digs deeper into the national character of the Americans, one sees that they have sought the value of everything in this world only in the answer to this single question: how much money will it bring in?”

    “Morris Berman’s masterpiece is a brutally honest, wonderfully crafted,exceptionally well-documented treatise on how America was spawned, several hundred years ago, to devour its offspring—financially, socially, and technologically. Why America Failed shines a harsh, unavoidable light upon the cunning business mindset at the core of America’s creation, expansion, and devolution. Berman describes with stunning clarity how and why the ‘hustler’mentality, upon which our country was predicated, eviscerated alternative moral or social doctrines, and thus incorporated the seeds of our self-destruction from its very inception. This book is as uncomfortable to read as it is impossible to miss.”

    —Nomi Prins, author of It Takes a Pillage and Other People’s Money

  7. January 26, 2012 at 9:50 am

    China’s wage gap is quickly shrinking as their middle class grows. The Chinese are often trying to outsource to Vietnam as a local “low cost” country but decades of political animosity are making that difficult.

    China’s quality gap is well documented, as the corrupt command economy they have never rewarded quality. Good or bad, all the refrigerators shipped from the Chengdu factory, even when 1/2 of the freon compressors failed within the first 12 months. Good thing all those fridges stayed in China, for displeased Chinese customers.

    Apple (and Siemens, and Phillips, and Nike, and other multi-nationals) have only been able to generate high quality, exportable products in China, when they RUN the entire operation within China, with incredibly tight (and very expensive) Western over-sight. If a Chinese supplier is left to their own devices, they will cut corners, improvise, fill baby milk & toothpaste with melamine, use lead paint, not use rebar in their concrete, steal the best plans & make counterfeit copies. Yes, the average Chinese worker is making $3 a day, but the managers, quality engineers, and auditors are raking in 100,000 frequent flier miles a year, and salaries thousands of times greater.

    After a while, companies start to wake up, and realize all the hidden costs of quality re-work, warranty, dissatisfied customers abandoning them, transoceanic shipping, and law suits (like lead & melamine & IP infringement). Cognizant companies then begin to in-source, back to the US. Heck, BMW and Mercedes view the US as a low cost country, compared to Deutschland, it is.

    Large items (aforementioned refrigerators, cars, large capital goods) carry substantial transportation costs, and as peak oil approaches, these costs will not go down. Likewise, all those frequent flier miles will not get any cheaper for companies to maintain close scrutiny of their Chinese operations.

    While I do not see a massive tide of manufacturing jobs returning to the US immediately, I think the inertia has changed, or at least slowed, and fewer companies are hopping on the band wagon to outsource for outsourcing sake. For cheap crap that Idocracy wants to purchase at Walmart, indeed China (and Brazil, Pakistan, India, Sri Lanka, Bangladesh, Nicaragua, etc) will continue to be strong suppliers. But higher quality goods, more complex, and larger / bulkier / heavier products will be manufactured increasingly on shore in the future. Slowly, but surely.

  8. Jim
    January 26, 2012 at 1:31 pm

    Change the Image, Not the Actual
    State of the Apple (Rotten)
    by JEFF BALLINGER [Counterpunch]

    President Barack Obama blew a kiss to Apple in the State of the Union speech, praising the entrepreneurial spirit of its founder, the late Steve Jobs, as the cameras panned to his widow in the audience.

    Obama’s timing couldn’t be weirder. In the last month, Apple has released a damning audit which found that almost 100 of Apple’s supplier factories force more than half their workers to exceed a 60-hour week. The company announced responsibility for aluminum dust explosions in Chinese supplier factories that killed four workers and injured 77. Hundreds more in China have been injured cleaning iPad screens with a chemical that causes nerve damage.

    Apple was just subjected to a “This American Life” radio special reporting on its abysmal factory conditions in China (Jon Stewart gigged ‘em on the issue, too). Last weekend a front-page New York Times story asked why the company offshored all of its manufacturing, mostly to China. (The answer is found in the what its executives call “flexibility.” Tens of thousands of workers there live in factory dorms on-site, where, the Times reports, they are woken in the middle of the night and forced onto 12-hour shifts when Apple decides a product needs tweaking.)

    In the face of all this bad press, the tech darling’s response has been to reveal its supplier factories and to announce a partnership with the Fair Labor Association to do stepped-up factory inspections. The FLA is the partly corporate-funded group that until now only monitored apparel factories, and which Nike helped establish after its own scandals in the ’90s.

    In sum, Apple is now doing what Nike has been doing for nearly 15 years: the apology-plus-transparency formula, straight out of the manuals offered by “reputation management” consultants.

    This was certainly enough for most mainstream media and even some activists. Some were a bit more dubious but still pinned their hopes for stemming the abuses on the chimera of “consumer pressure.” For those who may believe that rich-country consumer pressure should not be so summarily dismissed, I believe that it’s useful to turn to Jeffrey Swartz, until mid-2011 the CEO of Timberland, who says that consumers don’t care at all about workers’ rights. In a late-2009 article he wrote, “With regard to human rights, the consumer expectation today is somewhere in the neighborhood of, don’t do anything horrible or despicable… if the issue doesn’t matter much to the consumer population, there’s not a big incentive for the consumer-minded CEOs to act, proactively.” In a 2008 interview he mused about his desire to “seduce consumers to care” so that Timberland’s CSR report was not mere “corporate cologne”.

    It must be said that Apple looked more serious this week than it did two years ago, when it shrugged off 18 worker suicides at its main supplier, Foxconn, in China. Steve Jobs told the press that the high number of suicides was about average for the Chinese population as a whole. Just last week, Terry Gou, CEO of Foxconn, referred to his workers as “animals” during an appearance at the Taipei City Zoo—not a lot of empathy there, either.

    Change the Image, Not the Actual

    When anti-sweatshop campaigners in the ’90s relentlessly called Nike out for its miserable, toxic factories around the world, sneaker-buying Americans did have an impact on Nike.

    U.S. sales fell for four successive years, despite billion-dollar marketing outlays every year. So CEO Phil Knight rented the National Press Club and told reporters his shoes were “synonymous with slave wages, forced overtime and arbitrary abuse.” He vowed to put things right.

    Since then, Nike has spent hundreds of millions of dollars on factory “monitoring” and hired on a “corporate social responsibility” staff of over 200. Nike became a charter member of the FLA in 1999, and has a representative on its board.

    What has it wrought? Very little. Richard Locke, a highly-regarded business professor and long-time observer of Nike, has been granted extraordinary access by the shoe giant. “A decade’s-worth of high-profile efforts to change sweatshop conditions in overseas apparel factories hasn’t worked,” Locke concludes.

    Why hasn’t it? He who pays the piper calls the tune. All these new workers’ rights experts work for the corporations they’re monitoring—either directly, as on Nike’s social responsibility staff, or in NGO mode. NGOs sell their monitoring services to the big brands that are seeking cover while their supplier factories continue the same profitable patterns of worker abuse.

    The most recent example where this kind of voluntary monitoring has proved ineffective comes from Indonesia. An Indonesian union won in court a $950,000 settlement this month for 4,500 workers at a factory that supplied Nike. They were forced to work seven days a week without overtime pay—at a big factory supposedly under FLA monitoring for a decade. (It’s easy to miss 570,000+ unpaid overtime hours, right?)

    A decade’s-worth of high-profile efforts to change sweatshop conditions in overseas apparel factories hasn’t.

    This is not to say that these high-profile monitoring operations are worthless. Just ask the shareholders who saw Nike bounce back from being equated with slavery to join the top rankings of “responsible” companies. “Corporate social responsibility” has proved invaluable at repairing brand images and wrong-footing the anti-sweatshop movement – maybe what Bill Clinton had in mind when launching the Apparel Industry Partnership, precursor to the FLA.

    In fact, one could argue that the FLA has made the situation worse. It has been monitoring and certifying “compliance” for Nike and other apparel giants for more than a decade, apologizing for the corporations as they continue to squeeze suppliers, crush worker organizing, and cheat workers out of severance pay when their factories flee to lower-cost havens.

    FLA CEO Auret van Heerden has excused Nike and its other corporate “partners” for the below-subsistence prices paid to sweatshop contractors, saying “simply blaming buyers and the prices they pay is too simple.”

    Meanwhile sportswear companies unabashedly gloat over the power they have to dictate prices paid to supplier factories.

    When Reebok and Adidas merged in 2006, an executive bragged on an investor call about negotiations “with all our key footwear and apparel suppliers to lock in cost savings for 2007 that should be in the double-digit million range.”

    A New Hope?

    With Apple, however, we may be able to turn the FLA’s involvement to the workers’ advantage.

    An independent Hong Kong-based group, Students and Scholars Against Corporate Misbehavior (SACOM), has years of experience interacting with Foxconn workers.

    The situation is similar to what we’ve seen happen with United Students Against Sweatshops, which has developed on-the-ground relationships with garment worker organizations in Latin America for a decade.

    USAS and the Worker Rights Consortium, an independent factory monitor funded by its member colleges, have used a combination of pressure inside boardrooms and outside retail stores.

    When companies that supply garments to colleges close their contracted factories in the face of worker organizing, or subject workers to unsafe working conditions, the WRC investigates and USAS students agitate.

    Through pressure on the corporations at the top of the supply chain, several factories have reopened and hired back workers—with a union.

    In China, it is quite possible that SACOM could bird-dog the FLA, insisting on real-time sharing of its reports, for example.

    So far Apple, following Nike’s playbook, has produced audits that say violations are occurring, but does not reveal in which factories they’re happening. The FLA also doesn’t insist on that level of transparency, essentially saying “trust us.”

    The WRC, by contrast, insists on knowing where the factory is and what’s happening, so it can gauge progress. The FLA could use some pressure to do the same.

    One of the most refreshingly honest voices in the global worker rights field is the business professor, Prakash Sethi. For years he was the architect of Mattel’s supply chain code-and-monitoring apparatus and has done consulting work in this field for several other Fortune 500 firms (including – ugh! – Freeport McMoRan). He says that the major global players – the World Bank, OECD countries and the International Labor Organization – have failed to apply pressure on low-cost producing countries that do not protect workers’ human rights or health and safety. He has also called on corporations to pay restitution to developing-world workers for ‘years of expropriation’ enabled by corrupt, repressive regimes. (Particularly poignant was his brusque assertion in a New York Times interview that ‘bigotry’ was at the root of most companies’ refusal to even try to grapple with some of these issues.) Mattel ended its supplier-factory monitoring in 2009 and there were no untoward consequences, such as negative press reports.

    In any case, more attention paid to Apple’s supplier factories will further anti-sweat groups’ communications with workers, and help build networks through social media and texting. It’s not the UAW in the ’30s yet, but it’s a beginning.

  9. Richard
    January 26, 2012 at 2:08 pm

    The comments here are disconcerting to me: people thinking like good little machines. Don’t you get it? Jon Stewart does, he calls Foxconn an “abomination.”

    http://www.thedailyshow.com/watch/mon-january-16-2012/fear-factory

    You’ll have to ignore the morons who laugh at this sort of thing–unfortunately, our country is full of them, and they even get to vote.

    • TC
      January 31, 2012 at 1:28 pm

      The new Monetary Realism blog will be focusing on these issues. It’s turning out to be as much about the deficits we have with our foreign partners as the government deficit.

      These two deficits rule our economic lives in ways we need to comprehend, monitor, and control.

      Plus, I swear I should be on the phone right now talking to people about setting up a manufacturing roll up fund. I see vast opportunity for rolling up manufacturing plants in the U.S. and putting them under 1, friendly roof.

    • TC
      January 31, 2012 at 1:34 pm

      My dad is seeing smashing business. He’s been in business for 25 years and it’s never been as good as it’s been for the last 18 months.

  10. beowulf
    January 31, 2012 at 5:03 pm

    “I see vast opportunity for rolling up manufacturing plants in the U.S. and putting them under 1, friendly roof.”

    Of course you’ll want an idiot state govt (I’m thinking Alabama) that will pay you to set up factories
    :o)

    • TC
      January 31, 2012 at 5:23 pm

      It MUST be a right to work state, too. ;)

      • beowulf
        February 1, 2012 at 10:03 am

        In terms of harvesting corporate welfare, Cabella’s is the benchmark. As David Cay Johnston noted:
        I tell in detail the story of a little merchant [Jim Weaknecht] with lower prices than his bigger competitors, like Cabela’s, in the business of selling fishing and outdoor gear, who was run out of business in his little town [of Hamburg, Pennsylvania] because of $32 million in subsidies [provided by local government] to Cabela’s. That’s $8,000 for every man, woman, and child in town, equal to the entire budget of the little town for a decade.
        http://reason.com/archives/2007/12/28/the-cost-of-a-free-lunch

  1. January 31, 2012 at 7:59 am
  2. February 22, 2012 at 11:31 am
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