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November 1, 2009

TOO DOWDY TO BEHOLD

Why is it that so many politicians talk about the importance of manufacturing during election years, yet beneficial policy changes are rare?

Honda Plant, Ohio, USA
Photo © Andy Sacks/Getty Images

When the American Iron & Steel Institute (AISI) launched a major public campaign to change the image of the steel business in 2006, it didn’t just focus on jobs, high-tech aspects of steel production or recycling. AISI also took care to refer to steel as “The New Steel,” a term which proved to have positive associations with focus groups.

“Analysis of the research made it clear that AISI needed to dispel misconceptions about the industry while rebranding steel as a clean, environmentally progressive industry,” says Nancy Gravatt, the institute’s vice president, communications. The $4.3 million campaign of full-page ads in publications most often read by policymakers, posters in Metro trains, dioramas in stations frequented by federal government workers, online banner ads and radio spots, saturated the Washington, D.C., area with five specific messages: “The Clean Little Secret,” “The Brains Behind the Brawn,” “America’s Job Engine is Made of Steel,” “The Backbone of America,” and “American Steel. Global Strength. Global Solutions.”

“We achieved a total shift of 16 points since we first measured policymaker perceptions of the industry in March 2006,” says Gravatt. “We moved perceptions toward a favorable view of the industry as modern, hightech, clean and competitive. We also achieved an eight percentage point gain in awareness of steel as the most recycled product.”

Keep in mind that in preliminary research, before the campaign, a plurality of people surveyed believed that the steel industry was better described as “old,” “dirty,” “outdated” and “needs trade protection to compete.”

This brings us to today’s subject, manufacturing, and why it consistently fails to gain traction in most public policy debates in Washington. It certainly isn’t for lack of advocates. The National Association of Manufacturers (NAM), for example, was founded in 1895 and remains the best-known and largest manufacturing advocate in Washington. Other trade groups, among them the Metals Service Center Institute, publisher of this magazine, vigorously take on issues related to a stronger manufacturing base. These include, in no particular order, such questions as tax policy, environmental issues, trade policy, workforce training, research and development expenditures, and the policy tangle presented by the immense growth of mercantilist China as a global economic power.

The problem is not that there aren’t companies and groups chipping away at how to create a better environment for manufacturing. It is, instead, that there is no long-term constituency for the idea of the United States, or North America, as a manufacturing stronghold, and as the backbone of a healthy economy.

“Job losses in manufacturing have been caused by the complete lack of a manufacturing agenda by our government, when the rest of the world has very well defined ones,” says Dan DiMicco, chairman, president and CEO of Nucor Corp. “In addition, the anti-manufacturing policies and regulations have driven up our costs versus the global competition. Our clout is building, but it is still not where it needs to be.”

“People don’t get it,” says Hansel H. “Hank” Cox, senior strategist for NAM. “They don’t understand that manufacturing was and remains an absolutely vital component of our economy.” As for policymakers, Cox says, “It’s hard to get our government to be serious about anything. They are on two-year cycles, and they want to get elected. So it’s automatic. They say, ‘This [manufacturing] is something we can hold out and give to the business folks at the last minute every year to keep their campaign contributions coming in.’ It’s just loony.”

The simple fact is that no coalition has made the effort to rehabilitate and market “manufacturing” in the same way that AISI has acted on behalf of steel. The second simple fact is that Americans, when surveyed, declare their support for manufacturing, yet very little ever happens. In a Forward magazine/Leo J. Shapiro & Associates survey of 1,000 people nationwide, conducted during the first part of October, 86.8% of those responding said manufacturing is “extremely important” or “very important” to the economy. Sixty-seven percent of those responding said there should be a national policy to support the nation’s manufacturing base, and about 49% of respondents recognized that no such national policy now exists.

Only 8.3% of those surveyed agreed that manufacturing should be left to other nations. Nearly 77% said they would favor location of a major industrial plant in their community. And about 69% of those surveyed said American-made goods are superior to products made elsewhere.

Yet, of 1,000 people who responded to a survey by Deloitte LLP and The Manufacturing Institute, part of NAM, only 30% said they would encourage their children to seek careers in manufacturing, 17% said their schools encourage students to pursue manufacturing jobs, and 13% were encouraged by their own parents to get into manufacturing.

In an effort to gain additional perspective on why manufacturing fails to capture the imagination of policymakers, Forward talked with a number of people for whom manufacturing’s well being is essential. They include Cox of NAM; Richard A. McCormack, editor and publisher of Manufacturing and Technology News and of a new book, Manufacturing a Better Future for America; Scott Paul, executive director of the Alliance for American Manufacturing, a collaborative advocacy effort of a number of metals companies (United States Steel, ArcelorMittal, AK Steel) and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union; and Thomas Gibson, president and CEO of AISI. Here is what they had to say.

The drum beat of support for manufacturing has been sounded for many, many years now. Yet it rarely seems to capture much attention. Why is that?
McCormack: One reason is the quite radical shift in thinking in this country that we don’t need manufacturing. It has occurred over decades, and it is now firmly implanted, that the service economy, the knowledge economy, is all we need. That idea is absolutely, totally fallacious, but it’s embedded in Washington, and among economists who have succeeded in making people think that we don’t need manufacturing to have a prosperous society.

I think another important reason is the rise of the retailers and importers and the influence of foreign enterprises that have really infiltrated Washington policy. It includes the financial influence, the idea that a company can do very well by shifting its production offshore. In the debate with these interests, the ultimate word is ‘protectionist.’ Once you label someone a protectionist, it’s the ultimate pejorative. They label you a protectionist, and they win.

Gibson: In a lot of places around the country, manufacturing has left. When you’re dealing with lawmakers, they’ve gotten used to hearing that the steel industry has left the United States, for instance. Well, maybe it left their town, but in fact, we’re making more steel in the United States than we ever did.

McCormack: That’s right. Now there are more Walmarts in their districts than factories. The retailers, global manufacturing companies, the shipping companies and think tanks control the debate now. They all conspire against the small and medium-sized companies that are busy fighting fires, trying to produce, that are focused on their business and not on the policy aspects of trade, incentives, or off-shoring. They have been busy trying to stay alive and have not gotten engaged or, when they have gotten engaged, they get discouraged and stop.

Gibson: Some of the trade associations that represent manufacturing interests are so broad in their view that it’s hard for traditional pro-manufacturing messages to go out. The multinationals feel that their products, which are competing in the world where people can buy cheap steel from China, should have access to cheap steel, too. Some of these groups have a whole bunch of members who don’t make anything. Their interests aren’t what our interests are.

Cox: Remember, there are only 12 million people working in manufacturing today. Thirty years ago, that total was nearly 20 million. Manufacturing was always a doorway to the middle class for people with a basic education and limited skills. But now there just aren’t as many voters and working people in manufacturing as there used to be.

Surveys suggest that the image of manufacturing is often positive, yet anecdotally, just the opposite seems to be true. Is manufacturing “sexy”?
Paul: The image of manufacturing has taken a beating, no question about it. We’ve found that the best way to change attitudes is to tell the real story of manufacturing, what it means to workers, who take pride in their work; communities that depend on factories for their social and economic support; and our nation, that depends on manufacturing for our national security and exports.

We took about 30 leading bloggers through a steel mill in Pittsburgh and to a person, they were blown away. They were mostly liberal arts types from the coasts who had only been exposed to pop culture images of manufacturing and its workers. Showing them the truth changed their minds on the spot.

McCormack: Right now, manufacturing has little sex appeal with Congress. One of the first things that people think about is manufacturing’s legacy. Drive by a brownfield site with a chain link fence, places that are rusted, with heaps of trash, pits full of oil lubricants for machine tools, and so on. It’s a legacy of dirt, grime and grit, and really awful jobs. That’s like a noose hanging over manufacturing. That’s not modern manufacturing, but that was what was manufacturing. We need to tear down those old brownfields.

I think the public gets it. They understand that China is a superpower not because of a service economy, but because they make everything Americans buy. People shop, and they know where things are made. They can’t believe we have lost so many of our industries.

Cox: We have a problem with image, if only because so many people I encounter think we no longer manufacture things in this country, when we are still the world’s largest manufacturer. I would love to see a lavish, broad-based media campaign about the power and glory of U.S. manufacturing, but I don’t know who would pay for it.

Gibson: One factor is part of the political equation, which is that the greatest centers for manufacturing are not primarily located where the media elites and opinion leaders live in the Northeast corridor, New York, Washington, D.C., Florida and California. That is where the greater number of electoral votes and members of Congress are located.

But certainly, more can be done to improve manufacturing’s image. We saw that with our New Steel Campaign … where we made measurable progress in shifting perceptions. At a time when the real rate of unemployment is over 15%, Congress cannot afford to ignore manufacturing.

What signs of progress, if any, do you see?
Gibson: I think the administration made a good step when the president named a senior counselor for manufacturing in the White House. We’ve had manufacturing officials in the Commerce Department, but never before in the White House. Even so, we’ll never achieve the degree of policy integration in the United States that we’ve seen in other countries. Nor should we.

McCormack: The only people that I see representing the interests of American workers now are the unions, and that wasn’t the case until very recently. You can think whatever you want about unions, you can assume they are the reason for America’s industrial demise, but they are the only ones fighting for manufacturing now. But they don’t have a voice, because when they start talking, everybody says, “They’re just union guys.” They don’t listen.

Ron Bloom (the new senior counselor for manufacturing) has done some interesting stuff, and he has fire in the belly when it comes to manufacturing. But people hate unions, and that’s where he comes from.

Paul: One thing that leads me to believe that it is possible to turn it around is that the executive branch is interested in revitalizing manufacturing, more so now than any time in the last 20 years. But we have to embrace a series of policies now, or we will continue to see some pretty dramatic losses in terms of capacity and employment.

Remember, we’ve been able to increase output because our workers are so highly productive, and we have processes that are continually being improved. But we’re not adding a lot of new capacity. Certainly not now, but also over time. And we’ve lost five million manufacturing jobs in the last decade. Some 50,000 factories have closed down. The rate of growth of manufacturing output is at its lowest level on record since the Great Depression.

The appointment of Ron Bloom is a very, very positive step. The fact that the president has said a number of times that we need to rebalance our economy and focus on making things is also helpful. Now, getting from point A to point B is extraordinarily difficult. But having a president who says this should be an economic goal of the country is positive.

What should we do now to support domestic manufacturing?
Paul: We should address the grip that Wall Street still has over policymaking in Washington. The financial world adheres to a very orthodox free trade philosophy, where you have to protect the philosophy at all costs, even it if means damaging your own economy, and even if all the evidence indicates that it’s not working out so well. It’s still like fundamentalists and religion; they can see no other way.

There also needs to be an understanding that we have micro- and macro-level issues. Micro issues are the specific support that you can get to manufacturers, a lot of them smaller companies. This would be things like extension partnerships, connecting community colleges to technical programs, high schools and manufacturers themselves. This is the kind of investment that pays important dividends back to the economy.

The macro issues are the kind that an agency or czar alone will not get done. I don’t know of any manufacturer, of any size, who does not worry about health care costs and want to get them under control. There has to be a larger conversation about tax reform and generating more revenue for important manufacturing programs. Most of our industrial competitors have a valueadded tax. We need the right incentives in the tax code to encourage production to stay in the United States. And on trade, the big issue is China. How do you deal with their currency policy, industrial subsidies and open their market to our exports? How do you make sure that they are honoring their existing commitments to trade rules?

Cox: Akio Morita, the late chairman of Sony, famously said that a world power that loses its manufacturing capacity will cease to be a world power. But there are sharply divergent views about what to do. People disagree pretty strongly, and that has been an issue with us. We’ve had disagreements among our members about what the appropriate stance on China ought to be. It’s a given that China violates all the rules of international trade, they manipulate the value of their currency, they subsidize domestic industries, they violate copyrights.

But we are international. We think international trade is good for everybody. And remember, 95% of the world’s consumers are not in the United States. If we want to grow consistently in the long term, we need open trade.

The real reason we can’t come to grips with China is that we depend on them to subsidize our profligacy. The only way to cover those trillion-dollar deficits is investment from China. We made a devil’s bargain because of our unsustainable fiscal policies.

So you can’t ignore China. You can’t shut it out. It has 1.3 billion people who are coming on strong. If you want to have a healthy and vibrant economy, you need a manufacturing base and access to that market.

McCormack: I hate to sound despondent. Maybe things will turn around. But look: Ford is opening its third plant in China. Why is Ford opening a plant in China? Why does Intel? Why aren’t we exporting chips to China? The people who really don’t know are our government. They are AWOL. They don’t ask these questions. The states ask occasionally, but states can’t compete with China. When you look at what the Obama team says or writes about these issues, there’s very little difference between them and the Bush team. I don’t think they even changed their speechwriter. Industry has not had an ally in government for a long time.

In the last 20 years, we’ve gone from having U.S. producers based in the United States to moving a huge percentage of production offshore. Those companies are not representing the interests of America anymore. They represent their own financial interests. It is in their vested interest to protect their overseas assets. They are the real protectionists.

Gibson: Basic manufacturers here have a better story to tell. We have found that to succeed [in the policy debates], we look for partners with similar interests. On the climate bills, for example, the U.S. Chamber of Commerce was in and out in opposition mode and not getting a hearing on the Hill. NAM has cross currents in it. So we allied with the chemical, aluminum and paper industries and built a coalition around that. We work with the union. We all have similar issues, and we all have a good story to tell.

About the Forward magazine, Leo J. Shapiro & Associates Poll

Individuals responding to the Forward magazine/Leo J. Shapiro & Associates survey in early October represented a broad cross-section of adult Americans. Of those people who responded to the question on the telephone survey, 365 identified themselves as Democrats and 321 as Republicans, with only 25 people who said they are political independents.

Some 554 of those surveyed said their incomes were $70,000 a year or lower; 270 said they earned more than $70,000 annually. Of those responding to the question, 266 said they had a high school education or less; 235 said they had taken some college courses, and 350 identified themselves as college graduates. More than half, 469, were female, and 428 were male.

A surprisingly large portion of those responding, 458 people, were aged 50 or older; 256 were 39 years old or younger, and the remainder, 194, were aged 40-49. Please note, in no instance do these segmented numbers add up to the total number of responses, 897, because some people did not answer some questions.

When asked what they first think of when they hear the word “manufacturing,” answers from this group were extremely diverse. The top answer, mentioned by just 16.3% of those responding, was simply “building, producing or making products or things.” The No. 2 answer was “automobiles” (15.9%), demonstrating the clearly strong relationship between the auto industry and manufacturing as a whole. The remaining responses among the top five answers were “overseas jobs, manufacturing going to other countries,” 11.7%; a specific product, 11.4%, and jobs generally, 11.2%.

The responses were entirely unprompted, running from these most popular responses to such immediate identification of “manufacturing” with “America,” 0.3%; “hard times,” 0.4%; “technology,” 0.6%; and “high U.S. costs,” 0.8%.

Asked how important manufacturing is to the economy, 52.9% said “extremely important” and 33.9% said “very important.” Only 2.2% said manufacturing is not important to the economy at all.

Asked if they believe there should be a national policy to support the U.S. manufacturing base, 67% said yes, and 27.6% said no, with 5.4% responding that they did not know.

There was more confusion when those surveyed were asked whether they believe there is already a policy in place to support the nation’s manufacturing base. There isn’t, but 15.9% said yes, there is such a policy in place; 48.8% correctly said no, there is no such policy, and 35.3% did not know.

An overwhelming majority, or 76.8%, said they would favor location of a major industrial plant in their community or nearby. Just 19.4% said they would oppose it. When asked whether they agree or disagree with the statement, “Manufacturing is best left to other nations,” 90.1% of those surveyed said they disagree, and just 8.3% agreed with the statement.

Finally, those surveyed were asked whether products made in the United States are inferior or superior to similar products made in other countries. A large majority, 68.9%, said U.S.-made goods are superior to similar goods made elsewhere, and 20.1% said they are inferior to foreign-made goods. An even 11% of those questioned had no answer.