Recently Steve Rattner, the former Auto Czar for President Obama, wrote a piece in the New York Times denying the blossoming American Manufacturing Renaissance. In my weekly INC Column, we debunked his article.
7 Reasons Auto Czar Steve Rattner is Wrong
Steven Rattner, formerly the Obama-appointed czar for the auto industry and a former banker at Lehman Brothers, wrote a provocative piece in the New York Times recently trying to debunk the so-called "Made in America" renaissance, which he terms a “myth.” He makes some good points. But he’s wrong.
Make no mistake, there IS a surging American manufacturing renaissance. Here are some overriding issues that overwhelm his myth thesis.
First, value added in manufacturing recently exceeded $2 trillion for the first time (wow), showing that output continues to rebound strongly. That’s not chopped liver.
Second, Rattner’s analysis is a static one. He ignores the dynamic nature of the American spirit of capitalism, particularly the brilliant and innovative leaps in energy efficiency and labor productivity (among other things) that have made U.S. manufacturing more globally competitive. The advances behind the energy and labor are based on work by American engineers.
Third, natural gas. Rattner doesn’t even mention natural gas, and this is a game changer. We are now the Saudi Arabia of natural gas. Soon we will be exporting natural gas and even, you guessed it -- oil. This is the feedstock for many companies that will change their investment plans and park more money here - more new U.S. factories because of this advantage. That is good for us. Plus, we won’t be sending $700 billion each year to people who hate us. Instead, it will go to property owners in places like Ohio, Pennsylvania, North Dakota, and Texas. Those folks pay taxes, for our schools, roads, and national defense. Most importantly, they like us more than the oil sheiks in many parts of the Middle East.
Fourth, many of the announced investments for the natural gas and energy boom have not yet come online. These projects take two to five years to launch. Permitting and improving these facilities takes time. The snowball effect is going to kick in soon and then expand rapidly. You ain’t seen nothin’ yet.
Fifth, Rattner decries manufacturing wages, but the average U.S. manufacturing employee makes $77,000 a year (with benefits) and if the company exports, the average pay is $95,000 (with benefits). This is a lot better than the $14.50 per hour jobs in Tennessee and Kentucky that Rattner derides. Yes, those jobs exist, and they don’t pay as well as assembly line work used to. However, if the alternative for an auto worker is a minimum wage job, this is more than two times better. Many people like that alternative.
Sixth, Rattner does not mention WHERE the manufacturing job loss has occurred. Virtually all of the shrinkage in manufacturing employment has happened in union manufacturing jobs. Non-union jobs have been flat, on the other hand. Rattner missed the point, which is that while union manufacturing jobs evaporated, nonunion did okay. If there is a myth, it is that the problem is manufacturing.
Lastly, Thomas Edison, Henry Ford and Steve Jobs did not need the government-supported Manufacturing Innovation Institutes that Rattner blames for propping up industry statistics. That's because those Institutes are not where the next Facebook or stunning innovation will come from. It will come from some entrepreneur working in a garage right now. We don’t even know his or her name -- yet. Government cannot spearhead the next flash of brilliance. And that’s okay.
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