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.

In my neighborhood, the new year comes in with a bang – literally. It is as though my neighbors set out to fulfill every stereotype around about gun-wielding Americans. Amidst the volleys of semi-automatic weapons fire, fireworks mortars exploded close enough to our house that we could hear the fzzs that followed. Of course, from a half mile over you wouldn’t know the mortars were fireworks, and a friend-of-a-friend wondered on Facebook just what kind of explosions they were.

It all posed a… let’s say, particular… background for my new year’s reflections. In many ways, recent months have been increasingly tense, as though we all are on the verge of some dramatic event that will shape the coming era. Maybe I’m just noticing the changing millennium, or am picking up on my partner’s over-developed fears of the end of the Mayan calendar – and zombies. (Side note:  the Mayan calendar marked out a complete cycle – set to *renew* this December, as the Maya understood time cyclically. It makes learning the grammar awesome, too. I’ll reserve the rant about the “mystical Maya” for another day, though.) Living in a country where Evangelical Christianity inserts apocalyptic glee into every level of politics, especially the Republican presidential primary, only adds to the sense of impending doom. But at its core are key economic realities.

For some time now, students of history, economy, and politics have incorporated, to varying degrees, a Marxist-based understanding that capitalist society has followed a particular evolutionary path that incorporates specific social tensions and progressions. That understanding incorporates the idea that money – or the production of goods in industry – are the drivers of social structures. Hence, democracy and capitalism are linked, yet capitalism trumps democracy – which enabled US policy makers to promote one of the most perplexing paradoxes of US affairs by supporting the removal of democratically elected leaders around the world, even as the US trumpeted the benefits of democracy, because democracy hinged on capitalism – according to a Marxist-influenced paradigm that those same officials formally eschewed. Capitalism reigned victorious when the Soviet Union collapsed in the last decade of the 20th century. Much like the mysterious Mayan calendar, no one knew what, if any, cycle would follow – Marx never got past capitalism v. communism. Francis Fukuyama phrased the moment concisely in the title of his essay-come-book: The End of History? There was perhaps some vague hope for an golden era of capitalism-induced peace. But capitalist societies have not exactly shone in recent years, either. Neoliberalism perpetuates the skewed power structures of previous market relationships, while promotions of the free market in fact maintain restrictions in the form of subsidies and tax brakes that sustain big business and mega-corporations to the detriment of new or local enterprises.

The housing bust brings to question the value of allowing market actors to determine national economic realities. “Market actors” are the investment professionals who make their living investing (others’) money, and it is notable that they make more money on risky investments that they do on safe, predictable investments. Their motivation is thus contrary to, well, safety. Yet those same market actors are in charge of the great national banks. Capitalist economy depends on their investment to fuel industry, especially in the US where the Federal Reserve replaces a more typical central bank.

In other ways, the banking crisis reflects a deeper conflict in the US between proponents of centralized versus decentralized authority. It is easy to forget that only recently has the US moved towards a centralized federal government, and that we maintain a strong sense of the original, decentralized, federation-style government. While conservatives in the US are promoting family values and social values, in Europe conservatives promote austerity measures. The Euro Zone demands austerity measures that governments may be willing to enforce, but that people may not be willing to accept – raising questions about the democratic process of economic mandates from a centralized institution like the European Central Bank (that is, if you didn’t already have those questions because of World Bank/IMF policies over the last three decades). A New York Times article about debt incurred in Spain’s autonomous zones ends with a quote from a 17-year-old high school student: “…There are all kinds of cuts. This didn’t even happen under Franco.” That’s Franco, the Fascist dictator; the student compares the current austerity measures to policies under the one European Fascist dictator to outlast WWII, and suggests that current austerity measures are worse. Developing nations, meanwhile, have barely made headlines, but there are some indications that the rising BRICS nations – Brazil, Russia, India, China, and South Africa – are rising ever faster, even as the economic core wavers. It is also notable that the BRICS nations do not universally represent rising democracies, in yet another challenge to the presumption that the liberal, democratic nation-state will predominate in the future.

The problems of big banks, global development and democracy seem distant, if not looming. When contemplating the effects of these problems on my personal life, my initial impulse is to minimalize them. After all, we are not wealthy, and therefore would seem to have little to lose. Yet, I have recently begun to realize that we are, on the one hand, less poor than I imagine – my partner has full time work in a middle class job after all, even though I do not. At the same time, that status does less for us than I once would have imagined. Much of our current financial success, I think, comes from the fact that neither of us realized we were beginning to succeed – which we have only done with the assistance and good graces of my mother-in-law (and we are not yet able to declare total financial independence, either, much to what I can only assume to be her chagrin). In another time, it is possible that we would have been completely reasonable to expect financial stability or even mobility from one income, even with a house and two kids – in fact, I think that would have been standard. So perhaps times really are changing for those of my generation. Maybe I just assumed that student debt and financial pitfalls were nothing new, even while I thought my own struggles were the exception to an otherwise simple enough rule – make good decisions, and succeed (whereas I made some notably unsound decisions).

All of this brings up an additional question: what of my children’s generation? Can they succeed in an urban, public school? What kind of jobs will they have access to? Will they live in a free and open society? These reflections and pondering are ultimately questions about what the future will bring. The new year forebodes a new era, and what it will bring remains unclear.

I decided that sometimes my rants are, in fact, good ideas gone wild. Three years ago, I harassed a friend at length about how Obama should take advantage of the need to create jobs and boost flagging industry to boost the green industry. Well, he kinda sorta did that in the way that he kinda sorta did most things, and the fall out has been headline news this week. The green industry is poised for innovation and technological development of the kind Ford implemented, which sent the US hurtling along its hegemonic 20th century course. Simply put, industry in the US has to be innovative, creative, and successful to be a global leader. Green energy is a good bet, because almost every other industry depends on energy as a key resource. The financial industry may be an outlier here but even Wall Street likes to have the lights on. However, China has already positioned itself as a rising player in the green(er) energy industry, which means the window of opportunity for the US is creaking its way shut.

There’s a difference between what China has done and the US could do, however. China has developed a bright and shiny business environment rich in low wages and low environmental standards – and thus a low overhead even with shipping costs. Yet China is also notoriously bad at producing creative thinkers – and known to jail those it does have. Herein lies an opportunity for the US to foster the kind of creativity and innovation for which it is known, and develop products that do not depend on existing systems OR seek to replace them, but work instead side-by-side. Obama wants to foster such development; unfortunately, he has yield tangible results.

To elaborate on side-by-side: current alternative energy sources of electricity have to tie into the “electrical grid” in order to send electricity from where they are to where we are. One commonly referenced problem is that electrical supply from wind or solar is not constant the way a power plant is, and so storage is necessary to avoid power fluctuations. Yet, storage of electricity is easier said than done. Batteries can store electricity, but would be expensive and take vast amounts of space to be even somewhat functional for an urban grid. At the same time, it would be the ultimate redundancy to imagine creating a secondary grid. What does this mean for product development?

A successful product would be straightforward and easy to adopt, both financially and logistically. Right now, installing local energy-producing equipment in a home is expensive, complicated, confusing, bewildering, and… you get the point. You need *something to harness energy, another *something to turn it into electricity, an additional *something to store excess electricity for when you need it, and more *something(s) to tie all that in to your home’s electrical service. You might not be surprised to know that this is a specialized skill, beyond the scope of your average electrician, let alone your average homeowner. Information about such systems are often homespun directions, like how to turn pvc pipe into a windmill using an old junkyard generator. But I am astounded that it could be so incredibly difficult to turn your rooster-weather vane into a constantly spinning electrical source that plugs in, literally, to your home’s electrical grid. If an average consumer can go to their *Local-Big-Box-Home-Building-Super-Duper-Store* and buy something for <$50 that takes an hour or two to install… they would do that, especially if it saves them on their ever-rising electrical bill. Fine, so a $50 part won’t revolutionize industry. The idea is that we need creative ways for people to adopt new habits of energy consumption – and by “ways” I mean products that one innovates, produces, and sells, or it doesn’t really count as an industry.

Unfortunately, I am not an engineer, and my mama-skills can’t seem to produce this magical energy source. If only I could bottle my kids’ energy! And that, folks, is why Obama is responsible for the creation of this blog; if he would have just listened to my sage advice… through his obviously telepathic… psychic… oh, never mind.