Riding the Rails

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The other week I took a trip to New York City to meet with some professors at Columbia University.  I took the train up to NYC and always find looking out the window and seeing the buildings along the way – many of them a telling sign of what has happened to our manufacturing base in the US – at least along the rail lines.

I was struck at how many places were boarded up, being torn down or just sitting there slowly crumbling.  From Baltimore, to Delaware, to Philadelphia, to the suburban areas in New Jersey outside of New York it was just one vacant building after another or former industrial site being reclaimed and torn down.  That always makes me sigh and wonder why.  But, then I saw this sign in Trenton, the sign that always that makes me smile but speaks to a former time.  Here is the sign.  Trenton makes, the World Takes.  Oh, how times have changed….

But, then I think about what MEP does and what it is focused on.  I also thought about the centers that serve the territories along that trip – from the University of Maryland’s Manufacturing Assistance Center, the Delaware MEP, the Delaware Valley Industrial Resource Center in Philadelphia, the New Jersey MEP, and the Industrial Technology Assistance Center in New York City.  These centers collectively are serving thousands of small and mid-sized manufacturers in helping them forward –  to develop new products, improve their operational performance, move into new domestic and foreign markets to create jobs and opportunities in the United States.

I was reminded of a news story in NJBIZ  I read citing Bob Loderstedt, the President and CEO of NJ MEP who suggested ““America has the talent and ability to rebuild this sector.” Imagine what we could accomplish by developing more effective objectives.  Bob went to suggest that “it’s all about jobs, and that’s exactly what we can bring back if we emphasize this message.”  If we embrace this thinking, together we can work to make a new future for manufacturing in the United States. Otherwise, we may all join Boxcar Willie and Penny DeHaven in singing the song “We Made Memories.” We have an opportunity and a choice, or maybe not.

About Author

Ken Voytek

Mr. Voytek is the Manager of the Manufacturing Policy and Research group and the Chief Economist with the Manufacturing Extension Partnership (MEP) program in the National Institute of Standards and Technology (NIST). In his spare time, he collects baseball cards, reads obscure books and articles, and shares his bubbly personality with family, friends, and colleagues.

8 Comments

  1. You can take a journey similar to this one any where in the nation and have the same memory developments, whoever you are. Taking the best of the memories from the past and using that strength of how much was put into that industry and the passion that accompanied it should provide us the right excitement to look forward and move forward to innovate some feeling we had from the memory that can apply dramatically to some future product or service. The problem\comfort gets in the way. The promise and proof of the future and success is having enough discomfort or initiative to drive forward. The memory you speak about should give us that incentive, or if not we should stay on the sideline and hope for retirement or someone to take care of us… and once again that is called comfort as well.

  2. Past as prologue. It would be nice if all we had to do was return to the past. But, it is more constructive to use the past to stimulate thought about what is next, not how to go back. When Abraham Lincoln standardized the railroad gauge there were riots among those whose stevedore jobs at railroad transhipment centers disappeared. The majority of people in the country then were involved in production agriculture. The railroads changed everything, there was no going back to thousands of freight wagons pulled by tens of thousands of oxen driven by thousands of bull wackers. As agriculture started to become a capital intensive industry, the displaced workers moved into assembly line manufacturing. Farms all over the country became stands of trees and falling down building, most of those are now burned, buried, and planted. Ken and Larry see the same process as it applies to labor intensive manufacturing. This time there are no neighbor farmers eager to add the land to their holdings, clean up the abandoned buildings, turn the land back into something productive. And the important point that no one seems to be talking about yet is what is the next new industry that the displaced manufacturing laborers can move into? The MEP, as it wakes up to the need for innovation as well as competitive efficiency, can nibble at the edges with new manufactured goods produced in small and medium sized, agile, adaptive, innovative, lean factories. But, the very efficiencies involved will insure that this will never again be a labor intensive industry. After all, the innovations will include production processes as well as new goods and services. So, while our challenge to return innovation to manufacturing is worthy, great, and necessary, the greater challenge is to discover the next mega-trend that will absorb existing and new workers in purposeful activity. I’d offer that it should be goods and value producing activity as much as possible, the nation needs new wealth, not just more shuffling of the wealth created by our parents. I have some ideas, but I’ll keep them to myself for now. With the diverse group available to blog here, we should get much better ideas than mine anyway!

  3. Ken,
    I’ve taken that trip on several occasions, too, and have had the same reaction. The other that I’ve had is the perennial question about why business and industry, in conjunction with local governments and planning authorities, don’t put forth greater effort to salvage and repurpose these facilities? The Northeastern U.S. was the leader, over the better part of two centuries, in ‘mill town manufacturing’ in a wide variety of disciplines. ‘Yankee Ingenuity’ contributed significantly to regional and national prosperity. Today, as you observe, that old infrastructure is crumbling into river beds and the communities are little more than ghost towns.
    Today, too, leading tech industries are being bought up and shipped out of the country, or relocated away from the local population base, to remote campuses that require a daily commute with significant ancillary costs. (Teleworking/telecommuting is an option in an idea-based industry, but hands on processes require ‘cheeks in the seats.’) An alternative to such dislocating business practices could come by renovating these old sites for new manufacturing processes and/or managed programs and product support services. The benefits are virtually immediate:
    1. Enact a community/industry partnership to rebuild and renovate cities’ inner cores and historical manufacturing areas. Environmental cleanup has to be a factor, in some cases, but the cost of leaving them unremediated and deteriorating is still a local cost; and the partnership has to provide guarantees for all parties, including agreements to not move the work to offshore locations
    2. Remediation and reconstruction can act as a local employment stimulant, but also serve as a magnet for new worker in-migration, potentially fostering a complete urban revival. And if there are special skills needed for rehabilitation and recovery work, it can foster specialized degree and/or certificated training through community colleges and job training partnerships.
    3. Site selection and rehab can be done using local permitting processes that could encourage historic site preservation, giving an old mill town a sense of what it looked like once, while aggressively fostering new types of business and industry.
    4. Salvaging a city’s core or previous production site could also provide for in-town housing development (apartments and condominiums, in-town destination malls and entertainment centers) where the labor force could virtually walk to work, fostering a new and healthier cityscape. The secondary benefit would be to decrease pressure on adjacent green spaces, and slow the need for new roads, highways, and expensive rural/suburban infrastructure.
    5. Concurrent development should include Light Rail and other public transportation from other business hubs; all, in turn, linked to extant passenger rail (i.e., AMTRAK, VRE, MARC, etc.), and established commuter networks.
    6. Reusing and recycling these historical centers also obviates many of the bureaucratic costs for rights-of-ways and other permits, and would be a far less expensive proposition for ‘heavying up’ sewer, water, and other utilities; rather than incurring all-new construction costs with all-new tax levies.
    7. Paying for the rehab will require a multidimensional approach that includes the investment community, U.S. (and foreign) business engagement, local and state tax incentives, and a measure of Federal participation. The immediate benefit, of course, would be that any given community can initiate this approach without necessarily seeking approvals from another governmental body. By localizing the effort, administrative costs can be contained (and even that money retained locally as a multiplier within the community partnership); and while there would be tax issues (i.e., industry waivers, mill levies, site remediation costs, etc.), the effort would be from the bottom up, rather than in discharge of some larger governmental mandate.
    Your observations and my comments do point to an obvious problem: not a single one of these ideas is either new or particularly complex. So why hasn’t such an effort been initiated before? My cynical conjecture is that industry and the banking community are not particularly interested in this approach to social engineering and salvaging the US economy, finding, instead, that it is easier to secure capital for overseas and ‘over the horizon’ investments.

  4. Ken Voytek

    Larry, Barry, and Allen –

    Thank you all for your interesting and perceptive comments. I agree that the issue of wishing we could turn back the clock is indeed foolish and naïve. We must look forward to the future. However, I think it is important to consider that factors that have played out in the story of decline (both in output and jobs) – the story of manufacturing decline is not the same story that played out in agriculture. As I suggested in my response to an earlier posting, the decline of manufacturing may not reflect the story of boosting productivity as in agriculture but rather a story of declining competitiveness. In addition, I agree that the issue of innovation and finding the next big thing is indeed important to consider but also problematic since our forecasts, crystal ball gazing, and asking the experts to lead us down the path to prosperity is itself subject to error. As Peter Drucker once suggested, “the best way to predict the future is to create it.” That is indeed what I suspect you have observed in the companies you and others work with – firms are not waiting for the future to reveal itself but instead creating for themselves. In terms of the future, and how best we can respond, I think it is indeed important to consider that multiple policy levers may need to be pulled, that there are no silver bullets, or single solutions. For instance, a recent report done by Nisha Mistry and Joan Byron for the Metropolitan Policy Program at the Brookings Institution paints a picture of how a comprehensive policy, in terms of urban areas, could be crafted to help manufacturing. I appreciate your comments and hope you will take the time to continue reading and reacting to the blog.

    Ken

  5. Not to belabor the point, but for a manufacturing economy to be sustainable, you need a product and access to raw materials. You cite Drucker, but I’m more disposed to look back at Herman Kahn in his 1960s analyses of the emerging Japanese Superstate. Their postwar growth was directly as a result of franchising particular industries to other countries (i.e., Korea, Taiwan, the Philippines, and other parts of Southeast Asia) to ensure operational control over their supply chain, but without the autocratic style in force before WWII. This was done with strong encouragement by Gen. MacArthur as Supreme Commander, Allied Powers (SCAP) in Japan, but not with the kinds of direct financial subsidies as the European Marshall Plan. The principal issue to be overcome, then, was in breaking the old Japanese industrialist (Zaibatsu) notion that their economic prosperity came through rigid and top-down control of the supply and sales chain. (A principal underpinning of their reason for starting World War II.) I think their subsequent Pacific Rim hub and spoke manufacturing extensions are directly analogous to the cities and towns of the Rust Belt, today. When I wrote my first set of comments I had in mind places like the Lehigh Valley in Pennsylvania and towns like Binghamtom or Cohoes in central/upstate New York. These are all locations in need of a product manufactury, if there is such a product, and for which a demand can be generated. Your point is well taken that it usually falls to industry to ‘invent the future.’ My challenge to the old industrial towns of the Northeast is to work in tandem with industry and innovators to actively build new and technologically savvy communities, on the bones of the old ones. I look forward to more articles from you.

  6. I was reading the Wall Street Journal recently and came across this blog posting by David Wessell:
    http://blogs.wsj.com/economics/2011/04/20/foreign-firms-arent-hiring-in-u-s/?mod=WSJBlog
    It makes the case that many US based companies are slowly dis-investing from the U.S. and investing more and more (and creating jobs) in overseas markets. I wonder about the reasons for such changes – are these companies simply seeking low cost direct-labor markets, access to new markets, or are more fundamental changes in play, particularly with high value-added products? Are we witnessing a trend that will continue to slowly move much more of our manufacturing, and dare I say, research, development, and innovation overseas?
    Whatever, it is a shame and I would be interested to understand specifically how the MEP program is responding to these challenges. What are the root causes? How are supply chains affected, and the existing manufacturing base? And what do we do in response as a nation? So far, beyond an export initiative, I am not sure I see any real response or strategy being articulated. All I see now are a series of discreet and disjointed responses – much like Allen articulated. They are nothing more than responses to a symptom but not addressing the cause(s).
    There is a slow, relentless hollowing out of our manufacturing capacity. We may also be losing our last competitive advantages – R&D activities and other high value-added knowledge work, as the trade statistics on advanced technology products suggest. Soon, we may not retain the knowledge & experience base we need to rebuild our manufacturing industries. I was once an engineer with a small innovative manufacturing company that today is nothing more than a brand. As Allen suggests, maybe we do need a Marshall Plan to rebuild our manufacturing might. It may indeed be too late.
    Doug

    • Chris Carbone on

      Many US based companies are in fact investing more and more overseas. Many are quick to point to lower labor costs abroad as the main reason. While there is some truth to that, in reality only roughly 13% of manufacturing overhead is in labor costs. While developing markets such as China grow, upward pressure on labor rates is rapidly shrinking the labor cost advantage that was there. Consumer spending growth is happening at a much quicker pace in developing countries such as China and India these days when compared to the United States (retail sales soared 16.3% in China in the first quarter of 2011), so some manufacturers are simply going where the money is. Of course, there are also more controversial issues that play some part in this, including tax and regulatory policies.

      The lack of a single, cohesive, well-articulated national manufacturing policy poses many challenges. While many states have economic development strategies in place that include a strong manufacturing base, scaling such a plan up to a national level is an issue that has yet to be tackled. As was mentioned in a previous comment, “creating the future” has been a heavy focus of the MEP program in recent years. MEPs focus has been on helping manufacturers grow, and a cornerstone of that strategy is to get small and mid-sized manufacturers focused on innovation. Our data shows we are headed in the right direction—36% of MEP clients cited “product innovation and development” as one of their top 3 challenges, while 52% cited “growth opportunities, including exporting” as another.

  7. I think in this case we have had all the opinions raised over the years, with a slow reluctance over the years, and the lack of perserverance, brought about in part by a benevolent democracy, acting as a democracy and thus unwilling to make a hard decision regarding what is good and expected of America. Instead of a land of decision and opportunity, it has become a land of reluctance and comfort and confusion and an entitlement mentality with the entitilement disappearing and then no hope. I can’t think of a better time to place in concrete and detail a national manufacturing and education policy to serve this generation, not the next. If you don’t target the present generation, it gets pushed to the next just like the national debt. There should be no comfort left in America, it should realize it is under siege everywhere, and very few emerging leaders of any persuasion to take the right risks for America, regardless of the special interest groups and all others providing the “interference noise” that makes any progress a miracle. I think NIST/MEP is trying to reinvent inself and align itself with this opportunity to make a significant step in vision and implementing the future of industy in America. Now is the time to put some lines in the sand regarding innovation, fortitude, risk, chance, opportunity, rewards in whole new dimensions, metrics and platitudes. We pride ourselves in being different than the other government agencies, now is the right time to really shine that light. If needed we can provide the sunglasses for the others.

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