I keep hearing about overseas manufacturing versus goods that are made-in-America. Barack Obama raised the issue in the State of the Union address last night (full text found here). Obama described incentives to bring manufacturing jobs back the the US:

Long before the recession, jobs and manufacturing began leaving our shores. Technology made businesses more efficient, but also made some jobs obsolete. […]  Tonight, I want to speak about how we move forward, and lay out a blueprint for an economy that’s built to last — an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values. […] Now, this blueprint begins with American manufacturing.

Obama went on to describe how the auto industry, especially GM, Chrysler and Ford, has rebounded, adding “nearly 160,000 jobs” in the process.

We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back.

What’s happening in Detroit can happen in other industries. […] We can’t bring every job back that’s left our shore. But right now, it’s getting more expensive to do business in places like China. Meanwhile, America is more productive. A few weeks ago, the CEO of Master Lock told me that it now makes business sense for him to bring jobs back home. (Applause.) Today, for the first time in 15 years, Master Lock’s unionized plant in Milwaukee is running at full capacity. (Applause.)

Obama outlined three tax dis/incentives to encourage businesses to bring manufacturing back to the US: no tax deductions for businesseses that outsource jobs – instead, tax deductions should be for companies that bring jobs back to the US; multinational companies should pay a basic minimum tax, rather than avoiding taxes “by moving jobs and profits overseas” – and again, money instead should be for companies that stay and hire in the US; and finally, American manufacturers should get bigger tax cuts, while doubling tax deductions for high-tech manufacturers, with financing assistance for new plants, equipment, or training when moving to certain communities.

So my message is simple. It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America. Send me these tax reforms, and I will sign them right away.

Simple, okay. The New York Times considered a similar problem in its article, “Apple, America, and a Squeezed Middle Class,” which described why Apple has moved its operations to China.

It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.

The article points out that Apple does not directly employ many of the workers who assemble Apple products. Instead, Apple turns to subcontractors for manufacturing. Apple may directly employ the person who writes the software for the iPhone, but probably not the worker who cuts the glass front. That worker is probably employed by a subcontractor instead. I’m not convinced Obama’s call to tax multinational corporations would impact the decision to hire an overseas subcontractor.

Charles Duhigg and Keith Bradsher do a great job for The New York Times in describing a central dilemma for Apple: Steve Jobs demands a different screen for the phone, one that won’t scratch. It has to be GLAAA-A-A-ASS! (Surely I’m not the only one who read that interaction as a kind of Jobsian temper tantrum?) What this explains is how Global Commodity Chains work. Normally I would link to Wikipedia’s page for Global Commodity Chains, but there isn’t one – presumably because it is a part of some other theoretical construct and I just forget which. Instead, I will wrack my brain for that sociology course I took in… Spring 2009? Global Commodity Chains specifically describe the way goods are produced in a globalized market. A chain begins with the source of the raw materials. Common examples of raw materials might be wood, minerals, metals, “rare earth metals,” crude oil, etc. Those materials go to manufacturing facilities, where workers turn them into parts. The parts are assembled into products. The products ship out to the (usually big box) stores that will retail them, so that consumers can then buy them. Every stop along the chain is thought of as a “node.”

Some people try to integrate research in Global Commodity Chains with World Systems Theory, in order to explain the relationships between countries: some primarily produce and export raw materials – usually the Developing World or Periphery, some manufacture goods (sometimes these are also producers of raw materials) – the Developing World or Semi-Periphery, and the countries where people buy the finished products – the Developed World, or Core. I find this especially important – remember, I’m in Latin American Studies – because those relationships are often one-way, wherein materials from one country are bought in another country. Because of government (and corporate) corruption, concentration of wealth and ownership of land, the technological investments needed to extract those materials, among other reasons, the benefits of raw material exports tends to be limited to a handful of wealthy individuals in the country that exports the materials. Sometimes, the materials are extracted by foreign companies that may not have a real interest or stake in benefiting the country where they extract materials – so wages suffer, the environment suffers, etc. In some cases, the corporations disrupt the ability of people to live independently of an income, in order to create a labor pool. It is this scenario that characterized development in Latin America, and is also the reason why the US is often seen as a pariah.

In the case of Apple’s manufacturing, the company considered sourcing its glass screens in the US, but the costs associated with developing the product were high. Instead, Apple went with a company in China that already had the facilities and resources to carry out testing. I think of those facilities and resources as the infrastructure of manufacturing. The New York Times article points out that in terms of worker wages, paying US wages would add $65 to the cost of each iPhone. It’s not about the wages – it’s the infrastructure needed to coordinate a global supply and commodity chain. You have to include shipping materials, components, and products. It seems that today’s factories are increasingly specialized as well, which is understandable considering development officials have long promoted comparative advantage, and it makes sense that you would see factories acting similarly by focusing on making one type of product very, very efficiently. The manufacturing infrastructure is what makes all these factories able to coordinate in a way that streamlines shipping and overall production as well. China is in a great position to achieve such infrastructure, because the government continues to subsidize its industrial development, in a socialist market economy that seems to blend command and market economies. In much the same way that foreign corporations built Latin American transportation infrastructure, China’s government is subsidizing it’s manufacturing infrastructure. The US would need a large level of investment to reconstitute our own manufacturing infrastructure, as well as an ability to incentivize doing so – and I suspect it will take more than tax breaks (especially when you consider that the US has many free trade agreements that limit the subsidies and incentives it can offer).

With all that in mind, the problem with using US labor has never been just about the wages. The thing that unions have done, to the apparent chagrin of people like the Indiana state republicans, has been to not only raise wages but to improve the working conditions in our own factories. US workers can make time-and-a-half for overtime – which kicks in after the 40 hour work week. We don’t put our children to work in factories. We no longer lock our poor inside factories during the work day. We also enforce environmental standards so that factories don’t turn our land into a wasteland. Don’t get me wrong, I’m not heralding the US or its unions as the end all and be all of labor standards. But when Apple points to the Chinese factory’s willingness to roust 3,000 workers from sleep in the middle of the night to start putting in the shiny, unscratchable glass screen, I don’t stop to wonder what went wrong with US workers. Instead, I wonder why the hell Apple can’t wait 12 hours to restart production. What I’m left with from that story is a narrative of a corporation that wants its product perfect, on the timeline of an arrogant and demanding caudillo, with more regard to profit than to the workers producing its product. And Apple isn’t even responsible, because it isn’t Apple’s plant that produces that product – it’s an unaffiliated subcontractor.

If the US is serious about reconstituting its manufacturing sector, we need to be serious about rebuilding the plants that make those little, seemingly-insignificant products that provide the components for the fancy gadgetry. The developed, core nations are understood to be so because they excel in high-tech industry. The US, as the uber-core nation, or (waning) hegemonic power, or whatever you want to call it, has kept at the forefront of the high-tech industry and innovation. The US rose to that position largely because of manufacturing innovations in the auto industry. But in the recent economic troubles, it is the semi-periphery that has (so far) stayed steady, while the US and Europe flail to regain their footing. The professor of that sociology class in 2009 described the flaw in betting that the finance industry would ever constitute a replacement for true high-tech industries, and I think his words ring even truer today. The thing is, the semi-periphery isn’t mid-tech industry somewhere between low tech and high tech; the semi-periphery has some remnants of low tech industry and some influx of high tech industry. That’s where China is currently successful – by using it’s lower tech industries to support its higher tech industries to make products extremely efficiently and cheaply. Maybe what the US needs is a renewed appreciation for the low tech (with updates). We still need our mills and our gasket manufacturers and our component factories – at least, if our goal is to stay at the forefront of global industry. These can be small, local(er) businesses, which is also cool. Maybe, while we’re at it, we can reconsider the worth of our shiny gadgetry, pay our workers a livable wage, and consider how to scale back our wanton consumerism so that, instead of boatloads of cheap crap, we focus on quality items that we recognize for what they are – luxury goods.

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