For over a half century, American manufacturing has dominated the globe. It turned the tide in World War ii and hastened the defeat of Nazi Germany; it subsequently helped rebuild Europe and Japan; it enabled the United States to outlast the Soviet empire in the Cold War. At the same time, it met all the material needs of the American people.
During this period, many American icons were born. Companies like General Motors, Ford, Boeing, Maytag and Levi Strauss became household names. American manufacturing became synonymous with quality and ingenuity.
On the back of this industrial output rose America’s middle class. High-paying manufacturing jobs, in turn, helped spur a robust and growing economy that depended little on foreign nations for manufactured goods and armaments.
However, manufacturing as a share of the economy has been plummeting. In 1965, manufacturing accounted for 53 percent of the economy. By 1988 it only accounted for 39 percent, and in 2004, it accounted for just 9 percent.
Considering the stupendous list of America’s manufacturing achievements and the vulnerabilities associated with foreign dependence when a nation lacks strong domestic manufacturing, it is alarming when economists are warning that the U.S. is facing the “gutting, hollowing out and closing down of American manufacturing forever” (Benson’s Economic & Market Trends, Feb. 27, 2004).
Job Losses
The loss of the manufacturing industry manifests itself most clearly in job losses. According to the Economist, “For the first time since the Industrial Revolution, fewer than 10 percent of American workers are now employed in manufacturing” (Oct. 1, 2005). But even this figure is probably double the actual percentage, because many workers in a typical manufacturing firm have service-type jobs. In comparison, during the 1970s, approximately 25 percent of American workers were employed in manufacturing. From 1990 to present, manufacturing jobs have decreased every single year; since 1996, they have plummeted by almost one fifth.
Most recently, these job losses and the hollowing out of American manufacturing have been evidenced in the auto industry.
On Nov. 21, 2005, General Motors Corporation (gm) announced plans to cut 30,000 jobs and close nine manufacturing plants across North America. According to its ceo, the decision represented an attempt to “get its costs in line with major global competitors” and “return North American operations to profitability as soon as possible” (Associated Press, Nov. 21, 2005). Following these cuts, gm will have laid off 40 percent of its white-collar staff since 2000.
In a reflection of the resultant loss of confidence in the company, last May gm’s debt (sold as bonds) was downgraded by s&p from investment grade to the highest level of junk status; in September, it was downgraded even further. Now it is five steps below investment grade. Analysts even recommend selling gm stock, with one Bank of America Securities analyst saying it was “inevitable” that gm would eventually seek bankruptcy protection (cnn/Money, Dec. 16, 2005).
gm’s layoffs exclude the cuts announced by former gm-owned auto parts maker Delphi, which filed for bankruptcy protection last October. In 1999, Delphi laid off 18,000 workers. Now it is reportedly seeking to cut two thirds of its 34,000 hourly workers and slash hourly wages from as much as $30 per hour to as little as $10.
Ford, another American icon, has been slashing jobs too. According to Forbes, Ford could cut up to 30,000 jobs and close 10 plants (Dec. 7, 2005).
Egan-Jones Ratings Co., an independent firm, is predicting that “[t]his is the beginning of the end of the U.S. auto industry as most people have come to know it” (TheStreet.com, May 5, 2005).
However, the auto industry is just one example of the overall decline in American industrial might over the past couple of decades. Other U.S. manufacturing giants are failing, too; in fact, the U.S. has lost 3 million manufacturing jobs just since 1998. In 2003, industrial giant Bethlehem Steel folded, causing thousands of employees and retirees to lose their pensions. Any Pittsburgh resident would be able to tell you how unprofitable the steel industry has been over the last 20 or so years. Between 1950 and 2000, the U.S. lost more than 491,000 jobs from the primary metals industry alone—most of those after 1980; from 2000 to 2003, an additional 149,000 of these jobs vaporized. In 2004, Levi Strauss closed the last of its more than 60 American factories. “It was like a death in the family,” said Emma Rice, of Morrilton, Arkansas, who worked for Levi Strauss for 32 years (Times,London, Jan. 10, 2004). Unfortunately, the former Levi-employed majority of Morrilton tell the same tale as those from thousands of towns across America that have also experienced the loss of manufacturing jobs.
But why is this happening?
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