The Decimation of Manufacturing in US Cities

800px-Bethlehem_Steel_Pennellb

Bethlehem Steel works, “Watercolor in sepia brown, white and gray, on buff paper. Signed May ’81.”

The historic issue with manufacturing and jobs is one of demographics. Factories were built to make products. Housing was built for workers. When homes are built, retail follows and more land is given over to housing and retail. Next comes health and education services building, again decreasing land for plant expansion.

In about a decade, the factory plants were surrounded by employee/urban needs. The plants had no room to expand. The solution for the owners became one of logistics and that meant moving. The decision to move was also affected by several items: tax incentives from the states, land necessary for plant expansion, cheaper labor, better maker to market transportation, and lots of perks, eg; pre-existing industrial parks with utilities and roads already in place.

Currently, the same issue (see notes 1 & 2) plus cheaper imports that are subsidized by countries of other competing manufacturers, some of which are owned by US firms or hedge funds that are eroding the manufacturer base of basic products such as steel and iron ore.

All of this has contributed to the downturn in the bigger US cities that were heavily depended on basic manufacturing jobs that paid well and built an affluent US middle class. Now they are left with service industries with lower paying wages, a growing city population, higher unemployment and lower tax revenues for services. All of this has contributed to the angst of people wanting higher paying jobs for a better lifestyle. They are left with a feeling of hopelessness in getting ahead, of having a better life for them and their children. They are left in areas of abandoned homes, abandoned warehouses and abandoned factories. Slowly deteriorating and marking the cities, the neighborhoods and surrounding areas as surely as the bombed out areas of Europe after WWII.

Urban planning never included employment for the higher paying wages as a priority. Urban planning has and is centered on population, not will happen to the population when there are a loss higher paying jobs. Blames was laid on ”white flight, lower tax revenues, etc. Now, US cities are stuck with the fall out from the lack of including manufacturers in their urban planning. The one pivotal item that should have been at the top of their agenda for any future growth. Perhaps, in the future the owners will be included as a priority.

What can be done now? How can the US cities turn around the loss of manufacturing plants? How can the abandoned land usage be cleared enough for future expansion of any future plants? There are, no doubt, lots of other questions that need to be addressed but one thing is for sure, without the manufactures of higher cost products such as steel, the continuance of lower service jobs are the best hope for the majority of the population of US cities.

Notes:

1. Domestic steel producers are competing with foreign producers heavily subsidized by their governments:
US steel industry needs level playing field – Duluth News Tribune

2.

Congress needs to do what it can to ensure that the industry can compete fairly. U.S. Sen. Sherrod Brown, D-Ohio, has reintroduced legislation aimed at doing this. It’s called the “Leveling the Playing Field Act.” The bill, S. 891, would strengthen protections against unfair trade practices by foreign steel producers and governments.

Advertisements


Categories: Economic policy, Economics

10 replies

  1. Currently, politicians are stuck with the fall out, urban crime because people do see all the material things that people could want, in large part via TV. Of course, they are going to want things they see for sale and how they have no means of affording those material things. The result is for too many becoming criminals.

    Predatory lending is another result of this and no less criminal. The predatory lending translates into financial ‘bubbles’ that have and will affect all of the US population unless urban planners get their act together.

    Liked by 2 people

  2. This is an interesting take on why there has been an historic decline in the U.S. industrial sector. I don’t believe that land availability has been a significant factor. Certainly, land values are much cheaper in the developing world. But locating plants near abundant sources of raw materials and cheap labor in countries with less government regulation, lower taxation rates, and fewer environmental restrictions has been the primary driving force behind the flight of America based companies overseas.

    Capitalism is a system based on exploitation. Globalization has only expanded the opportunities for profit driven entities to enrich themselves at the expense of those who are economically vulnerable and politically underrepresented. The behavior of Shell Oil in Nigeria is a prime example. Private corporations are not persons. They have no sense of loyalty. They have no souls. And they have no conscience. They are patriots of no country, no matter how many millions they spend on advertising to convince people otherwise or how many Supreme Court justices say so. Capitalism is the sacred cow of western civilization.

    There has been a long developing historic trend in western civilization toward emphasizing the importance of the individual, a trend that has always been at odds with the capitalistic system. The labor, civil rights and environmental movements in American history are a reflection of this trend and of the inherent conflict between the interests of the individual and those of large scale private enterprise.

    Worker’s rights, affordable health care, decent housing, public sanitation, public health, public education, and protective environmental standards are all among the many things that the rise of the American middle class brought about. These values have seen even greater development in Europe.

    American manufacturing declined because of our nation’s historic political movements toward social and economic fairness. The Industrial Revolution in America was built upon the exploitation of desperately poor immigrants from Europe and Asia–and America’s historically poor, politically powerless and socially oppressed Negro citizens–and upon cheap child labor. The rise of the labor unions, the enactment of child labor laws, the promulgation of worker safety regulations and environmental standards have all acted to make America less attractive to traditional forms of big industry.

    Like

  3. ”driving the flight of “American” companies overseas” I use to think that also, but when I researched more than a few products, I found out that more US companies didn’t locate overseas for the more obvious reasons (as you wrote) but simply because their customers were overseas. Though that is not to negate those reasons. They were hoodwinked by companies also. Africa is currently undergoing that same problem, though a lot of the companies doing the pollution are Chinese.

    After all the world population and their needs or wants were and are proportionally too big for the US to be the sole provider of a product. Also, the sheer amount of product needed to export from Ports in the US, most of which are located in the South was holding up the export of products, time wise.

    Further I found, at the time, those countries didn’t have the know how (so to speak) nor the basic means of producing those products. It’s the why those countries were known as ”developing” countries. For instance, technology to manufacture something has usually started in the US but quite quickly the length of time from finished product to market was months and transportation of the product was costly.

    But back to the US plants and cities, this is a photo of the old Hudson plant in Detroit in 1940 and well illustrates what happened with the lack of urban planning for the basic US manufacturing plants. http://reuther.wayne.edu/node/6823.

    Volkswagen located in Chattanooga TN not long ago, Here is the photo of their plant, note the solar panels and the sheer amount of land use. http://www.bing.com/images/search?q=volkswagen+chattanooga&view=detailv2&id=366D6B5D420A730E143337AB3ED6810488E4F4B6&selectedindex=2&ccid=86DfzOdi&simid=608029630068166293&thid=JN.oHv6AObVd%2F7WCPQg9FPP0w&mode=overlay&first=1

    Land usage or future need of expansion is the top item for location of a manufacturing plant. The second one is the availability of transporting the finished product to customers.

    US Cities urban planning did not allow for the expansion or modernization. When the time came for expansion or modernization, plants were relocated and that became the issue with what was to be done with what was left behind. Some clean up was taken over by the EPA because the companies filed bankruptcy, some are probably going to be decades before cleanup is done because of the sheer cost of demolishing the abandoned buildings.

    In Detroit, it is estimated that demolishment of the old Packard plant is going to cost $350 million on top of the cost of buying the 40 acre site, paying taxes etc.http://www.canadianbusiness.com/business-news/crews-start-demolishing-old-packard-factory-long-a-symbol-of-detroit-blight/

    And than there’s the landfill byproduct that has to be dealt with also. It’s not like demolishing an abandoned house.

    Hopefully, the developer, if they sell to a manufacturer, will make sure that the land usage allows for expansion or modernization or there will be a repeat of what happened.

    Liked by 1 person

  4. I really like your response. You present some very interesting perspectives. It is genuinely fun to think about these things.

    I rewrote the comment that you are responding to here to clarify my views.

    The Volkswagen plant in Tennessee is a great example. But you kind of do make my point about the factors that motivate big multinational companies to relocate. Compared to Germany, Tennessee might as well be Guatemala. Tennessee and Kentucky are two of the poorest states in the United States. I promise you that Volkswagen opened a plant in Tennessee because they would have to pay the workers there much, much less than what they pay German employees to do the same work. It makes total sense for their bottom line. Given the opportunity, Rand Paul and Mitch McConnell will turn America into a Third World country. Which will be great for Volkswagen and Mitsubishi.

    The Wrangler Jeans Company used to have a factory in central Oklahoma. Their employees on average had worked there for twenty years and were being paid $20 an hour. They closed the plant and moved their operations to Mexico and Egypt. How much do you think those employees got paid?

    I’m sorry, but I don’t get how the collapse of America’s industrial base is the result of poor urban planning.

    Land usage or future need of expansion is the top item for location of a manufacturing plant. The second one is the availability of transporting the finished product to customers.

    Uh, no. Not even close. These may be the dominant reasons for choosing the location of a factory within a specific country, but these are not the dominant reasons for a company choosing to relocate industrial operations to another country.

    Walmart is the single biggest employer in the United States and the biggest consumer of their products is the American consumer. 90% of the merchandise in Walmart is manufactured in China.` Walmart did not relocate their factories to where their customers are but to the country whose slave wage workers most suited their bottom line–and at the expense of hundreds of thousands of well paying American jobs.

    Like

    • Again, where the factories go is for land usage and markets. When you add up the populations of Mexico, Central America that wear jeans, socks and T-shirts, it’s bigger than the population of Americans that create a buying market. Never underestimate market consumption, especially since the world’s population compared to the US makes the US look like a drop in the bucket.

      The secondary factor for the loss of American manufacturing: is when countries develop their own manufacturing base. Alabama lost all of their sock factories, back in the day, because of the rapid development of sock factories in China. With rapid global transportation, China’s government subsidy of those factories, a lack of interest in tariff’s by the US Congress were the basic cause of a loss for Alabama. There were other mitigating factors, one being undocumented workers hired by Alabama sock factories.

      The best indicator of market consumption is export and import data. It is a benchmark of a countries production amount. If you compare the US to a group of countries, not just China, research their production capacity for a product, for say the last 10 years, you will find that they began to develop their own factories, sometimes in conjunction with US companies, sometimes without.

      The previous country’s workers, who were the sole producers of a product, become collateral damage and that’s not said lightly either. Bottom line, it’s not about wages, number one is about the company being able to sell their products. With the global economy, locating a secondary or relocating a plant becomes a priority to enable sales of products.

      German workers pay is in EURO’s, not dollars. To get to actual wages, you have to use the conversion rate. Usually one Euro equals .90 cents US dollars. There are some other factors. The German government expects companies to pay workers enough so they can tax them for one. 🙂

      Not all governments are interested in their workers having a living wage. Since the US is one of those that don’t, there ya go.

      There are a lot of other factors, but usually it comes down to one thing, countries are not going to be a sole market for US companies products. They aren’t stupid. They develop their own.

      Like

  5. I’ll get back to this conversation later when I have more time. I do agree that locating production facilities closer to their markets is a very significant factor in plant relocations. But America is still probably the world’s largest consumer nation by far, and the Dollar has been and continues to be weak against the Euro, which today is worth $1.12. In the recent past it has been so strong against the dollar that it has crushed sales of European goods and stifled tourism. 🙂

    Like

    • The fallacy is thinking in terms of ”nations”. We must always think in terms of ‘markets’ and transportation of products, when analyzing sales Take the iPhone for example, the Market is global. In fact, the iPhone is a very good example of manufacturing to market areas. http://www.entrepreneur.com/article/228315.

      With the advent of computers, marketing to customers became a lot simpler. Just In Time production became simpler and most importantly, transportation of products became simpler.

      Other products such as steel, it became one of necessity for countries to build infrastructure. They weren’t going to allow in the long run, the US to be the sole supplier of steel. Currently, India, Brazil and China produces steel, enough to dump excess on the market which costs American jobs especially since Congress doesn’t do a lot about tariff’s. They’re too busy doing internal social issue’s. Another thing that has led to the decimation of US cities from the raw material aspect to the finished products. The focus isn’t where it should be.

      Back in the ’60’s, the first industrial parks came into being. Arlington TX is one of those, Greater Southwestern Industrial. https://www.youtube.com/watch?v=dlidmRpm4gg. So where there was land, that’s where companies went. When the city fathers were on focus with getting business’s, they did it. Whether it was for the benefit on their citizens or not was and is still up for debate.

      But the decimation of those that didn’t have the means or foresight of urban planning to do so, they were left with the fallout. Now, they have to claw back land usage to the bare ground to get enough to entice business building for manufacturers as well as provide ease of transportation of both raw materials and finished products. A costly endeavor.

      Liked by 1 person

      • I really like this post, Ecantados. Unfortunately, I’ve been so busy that I haven’t yet time to give it the attention it deserves.But I’ll definitely get back to checking this out.

        I hope you don’t mind me giving you a hard time. It’s kind of fun to get you a little riled. [grin.]

        Like

        • uhh, I’m not riled up, just pursuing facts. When you’ve seen inner cities, where houses, surround old, abandoned factories that have been there for decades, it’s shocking at first. When you find out that those same factories have moved to other states other countries, people should wonder why they did so. Finding out the why isn’t really difficult, but just saying that it’s because American companies went overseas leads to misinformation without details.

          We need to understand the global market a lot better. We need to understand the trade treaties and tariffs a lot better, but most of all we need to understand market driven sales a lot better because if we don’t, we’ll have politicians getting elected that have no clue about it either.

          Disenfranchising the population of jobs begins with urban planning. When a city draws in workers to a company without a forethought on how that company would be able to expand when the sales of their products increases, it has resulted in blighted areas. From small to large and it also includes EPA Superfund clean up sites. Spending money on cleanup has also drained the bank of money that could have been spent in other areas.

          US Companies have long enjoyed being subsidized by government for not only welfare for their workers, clean up of their pollution and the cost of establishing industrial parks. They lose nothing when they abandon the factories and the communities they started out in and thrived. Government, workers and cities are the losers and urban decay is the result.

          Liked by 1 person

  6. The Decimation isn’t limited to the cities and the populace it was also done to the land and the water around those abandoned factories. Lead poisoning, chemicals. The clean up would take decades and in the meantime, spot places are still and will still be contaminated.

    It is another reason that I’m so decisive when I write. The news media pretties it up or gives it fleeting attention and documentaries get lost in the plethora of others.

    Regardless, urban planning has been neglected or overlooked in the rush to make money.

    Like

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: