Tom Friedman and The End of US Manufacturing

Outsourcing destroys our well of creativity, it is terminating American excellence, Mr. Friedman.

Thomas Friedman’s column Made In The World, in the 2012 Jan 29 issue New York Times is the ideological bible for modern business.   He had better be careful or his columns will supplant Ayn Rand as the prophet of choice for the very rich.  Disclosure: LastTechAge’s posts on American Inequality (such as Elite Deserve What They Get) oppose nearly every one of his statements.

This is a report on the current state of an ongoing epiphany described in Friedman’s 1999 book The Lexus and the Olive Tree and his 2005 book The World Is Flat.  Globalization has changed core economic concepts and we all will come out ahead. So what if we send American factories to China, India and South-East Asia?  This lifts the workers there and we all benefit as a thriving world-wide society. This is true because it fits Tom’s utopian vision of a wonderful world; also, he has the word of many of big company CEOs for it. We merely need to send our manufacturing centers abroad and train our entire workforce in advanced programming, nano-technology engineering, or something.  No, no, sorry! That last was from Bill Clinton.

Stay inside Friedman’s closed loop, and it all makes sense.  If we all just did reasonable things, if our top CEOs did what was best for their companies and the people who depend on them, there would indeed be a beautiful world a’ borning;  we would build a golden utopian world of peace and joy.  This is the structure of a classic ideology-based scheme –  IF everybody did right THEN all would work well.

Step outside the loop, and the image falls apart.  What actually happens is a variant on the theme of the 1968 work Tragedy of The Commons, by Garrett Hardin. (Try his 1995 update, Living Within Limits.)

Ideology-based controls have been tried many times. Religious and political communes have failed across the American continent. Soviet communism lead to human misery and failed; the utopian Khmer Rouge turned Cambodia into a horror story; China changed its Maoist ideals-based failed economy to capitalist communism – it is no longer has enforced idealism and it is clearly winning.

Friedman’s first point : “many” CEO’s who are “.. the people who lead premier companies that make things and create real jobs …”.
LastTechAge:   Premier apparently means wealthy, the end result when all the smaller competitors have been absorbed for ‘efficiency’s sake.’  They do create real jobs, yes, but in regions where people work 12+ hours every day, live in company barracks, and buy from the company store.  This is after they destroy real jobs here at home.  Friedman did a great job with this sentence, every bit as useful as the NPR show quoted in the LastTechAge reference (first paragraph).

The article is a response to the outcry that arose New York Times recently mentioned Obama meeting with Steve Jobs about the loss of manufacturing: “Those jobs aren’t coming back,” Jobs said.
LastTechAge:   Apple sells 100 million iThings annually, but refuses to make them efficiently and cheaply in their home country of their US headquarters.  Before his death,  Jobs just loved the profit margins associated with the Chinese.  Take Steve Jobs flat statement as a threat.

Friedman summarizes the dichotomy.  “So many of [American] companies actually see themselves now as citizens of the world.  But Obama is president of the United States.”
LastTechAge:  Good point!  These should never be called “American” companies, ever again.  To the directorship, it does not matter much where they put their HQ, they will take advantage of human misery anywhere they can profit.  Obama, of course, is just so provincial.  Friedman continues with several quotes:

Mike Splinter, CEO, Applied Materials.  “Outsourcing was so 10 years ago.”  … “Now you say ‘Hey, half my Ph.D.’s in my R&D department would rather live in Singapore, Taiwan, or China because their hometown is there’  ” … “This is evolution.”
LastTechAge:  Hmm, our exulted American enterprise called a dodo bird? Better analogy is the carrier pigeon.  What he means is that he successfully eliminated his American scientists, engineers and technicians.  What could be wrong with that?

Michael Dell, Founder of Dell, Inc.  “I always remind people that 96% of our potential new customers today live outside America.”  He adds, that if they want to sell there, they must be willing to manufacture and design there.
LastTechAge:  Even the U.S. wants foreign auto companies to show U.S. content in products they sell here.  But we do not insist that the  company close its home R&D centers and move all manufacturing here,  they just make things for local sale. (Actually, our “transplants” just do assembly, anyway.)  Dell has inserted a jack into this argument and pried it open to make it mean– manufacture everything in China, ship over sell with great profit inside the US.

Yossi Sheffi, Director, M.I.T. Center for Transportation and Logistics (CTL)   America can thrive it if empowers as many workers as possible to participate … in the global supply chains – either imagining products, marketing products, orchestrating the supply chain for products and retailing products.  If we get our share, we will do fine.
LastTechAge:  Sheffi’s arguments are at the heart of the move to terminate U.S. productivity.  Everyone who wants to “offshore” our industry uses ideas like these.   The argument must somehow put our workforce into well paying jobs.  There are 154M people in the U.S. labor force.  Excluding government (and public education) jobs, we must find work for 132 million people.  About Sheffi’s  visionary points …

  • Imagining products.  This is the idea that we will do all the heavy brain work required for new products. We powerful Americans will generate the original ideas, develop the innovative twists of technology, brilliantly do the product line modifications to produce new products that raise total value-added to the heavens. All this without the focus that comes with in-depth familiarity with the making of useful goods.  This chatter has been around since the early 1990s and is the mental equivalent to sugary baby food.  It cannot happen without immersion in a culture that makes things.
  • Marketing products.  In the past we had huge resistance toward other styles of looking at products. Marketing means designing the materials and methods used to sell products.  I worked with a group of salesmen selling high tech equipment for manufacturing.  I know that the off-shore makers of the equipment were in firm control of how the goods were presented.  Marketing in the American heartland for products made in Switzerland, Germany or England was strong resisted; this was during the last decade. I find it inconceivable to think Americans will take over all marketing ideas from the headquarter talent in the other countries.  Dr.  Sheffi is a well respected expert, so this is not the dream from a strange pipe, but I have to discount the size of the workforce involved in marketing. After we lose every last trace of manufacturing presence here on our continent, I believe we will see a net reduction in the design of sales materials as Sheffi and Friedman (and the Clintons…) desire.  So I note down very few jobs here.
  • Orchestrating the supply chain.  Someone will have to help guide the full flow of goods from out of country origins to in country destinations.  But, if the process self-organizes as successful networks do, there will not be many jobs doing centralized logistics.  Clusters of people, maybe, but not tens of millions of jobs.
  • Retail sales force.  Successful outsourcing policy means that everything would be totally manufactured abroad.  We almost do this now.  The first problem with the picture of a massive retailer workforce: there must be customers with sufficient income to support its existence.  Absent the reasonably paying manufacturing jobs, the only jobs around would be base menial labor. Work that only needs workers who walk and breath.  Not enough money to support sales of discretionary goods. The second problem is that, in the current market structure, retail sales may go away, anyway, since on-line sales are hard at work closing down brick and mortar competition.  This leaves very few jobs in the retailing category.  Amazon will never replace the tens of millions of jobs in retail sales.

LaundryJobs_txtArguments similar to Tom Friedman’s have been around since the early 1980s, when steel mills left the country, maybe before that.  There is a Think Tank cadre who preach that this will be a wonderful new world, but a strong economy does not make sense  without a truly solid infrastructure.

The arguments that are hauled out are similar to the one (right). It almost sounds reasonable, doesn’t it?

We are basking in the afterglow of our mid-20th century success.  Currently we are off-shoring even more than critical industries.  Our universities (such as Dr. Sheffi’s M.I.T.) have their technical graduate schools more than half filled by non-US citizens. Some of these stay when they graduate with their BS, MS or PhD. But many return to their own homelands, form new departments and build high quality universities there. In the  1990s U.S. students began opting out of the self discipline of hard technology, certainly so in physics, which I follow. Our own intellectual base has been steadily dropping over the last decades while the universities in the far East and elsewhere are becoming hugely competent. After we lose our base, why travel to M.I.T. for excellent training when the local schools are possibly better (!)  and offer things like on-the-job training?

click for our discussions on economic inequality

Our criticism is not about our bright foreign students, they are welcome and, while with us, they add greatly to our intellectual product.  LastTechAge comments are about the political con artists who advocate losing our children’s future over the next several decades.


Charles J. Armentrout, Ann Arbor
2012 Feb 02
Listed under   Economics   …thread  Economics >  Inequality  
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About LastTechAge

I am a physicist with years of work in fusion labs, industry labs, and teaching (physics and math). I have watched the tech scene, watched societal trends and am alarmed. My interest is to help us all improve or maintain that which we worked so hard to achieve.
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