Thursday, June 1, 2017

Book Review: Making It

[WARNING: long and slightly polemical.]

Making It: Why Manufacturing Still Matters
Louis Uchitelle
Politics, sociology

At the center of Making It there is an extremely acute observation: there is no such thing as laissez-faire manufacturing. There's always some kind of governmental support. This was true two centuries ago, when Samuel Slater avoided a British ban on exporting the designs of spinning machinery by memorizing how it worked. It was true in the 19th century, when tariffs protected U.S. industry and land grants supported the railroads. It's true now, when cities offer massive tax incentives to lure corporations.

To have no policy is itself a policy. That's what the federal government does now. As a result, the existing subsidy system is an incoherent mess of states and localities, all competing against one another. When companies build plants by looking for the biggest windfall, the result is not to create new jobs; it's just to move jobs from one place to another. This being the case, why not try to have a rational policy that promotes the common good?

Making It documents this observation with a wealth of statistics and facts. It documents, as well, the damage that the decline in manufacturing employment has wreaked. Unfortunately, it doesn't do nearly as good a job in analyzing what it's documented. The book's logic is a semi-random stew of non-sequiturs, circular arguments, and absurd prescriptions--and prescriptions is the word: Louis Uchitelle seems to be enamored of the top-down, there-oughta-be-a-law, Five Year Plan approach. He ought to be thinking in terms of incentives, not mandates. Mandates don't work. Incentives do. (Not, admittedly, always as designed.)

For instance, consider this excerpt (emphasis added):
. . . in accepting the move to ATS [an outsourcing company], the mechanics lowered the odds that the two hundred or so assembly line workers they had left behind would have the leverage to organize a union and then bargain for higher wages and job security. While still on staff, the mechanics were in a position to support the assembly line workers by striking if the latter did, or by not striking but engaging in a work slowdown--dragging out repairs--if the company brought in outsiders to replace the assembly line workers. Without willing mechanics, a machinery breakdown can halt an assembly line in any factory and even shut it down. The Oplers [the company owners] understood this. "In our negotiations with ATS we specified that having skilled mechanics on all shifts and at all times was the reason for going with that company . . . We found that we could hold ATS to a higher standard than we were able to attain on our own."
Do you see the trick here? The bolded sentences are being deployed to imply that the company moved its mechanics to ATS specifically in order to weaken employees' ability to strike. But the speaker doesn't say that. He just says that outsourcing gave them better availability. This is an artfully arranged synthesis, meant to support Making It's propaganda goals. It's not logic.

Here's another one:
Harley-Davidson . . . publicly declared in 201 that it would move some factory operations from Milwaukee, where it is headquartered, to a lower-wage city such as Stillwater, Oklahoma, or Kansas City, Missouri, if its hourly workers in Milwaukee failed to accept certain concessions . . . In the end, the regulars . . . gave in and ratified the contract, fearful they might lose their jobs altogether if Harley-Davidson carried out its threat to relocate. The city's taxpayers, however, were given no say in the matter--no opportunity to bat down Harley's threat--although their taxes helped to subsidize the company's operation in Milwaukee . . . [their] taxes should have given them a right to amend Harley's plan, and even to veto it by withholding subsidies from the company.
Seriously? What does Louis Uchitelle imagine that the taxpayers could do? Pass a city ordinance forbidding Harley-Davidson from moving any jobs? Threaten to soak them with extra taxes on their Milwaukee operations? (That would go well, I'm sure.) Confiscate their HQ?

Those flaws are specific. Others are endemic. Making It repeatedly faults manufacturers for moving out of central cities, for instance, but its only proposed cure is this: ". . . government money . . . could have been used to keep manufacturers and distributors rooted in the cities by helping them pay for their operations." Except that, just a few pages earlier, a factory owner says flatly that even with these subsidies, "No, I would not move back. The biggest cost is attracting and training a workforce, and then once I've got three hundred people in place in St. Louis, someone's going to say, 'Let's organize a union'." In other words, the book is promoting a plan that by its own testimony wouldn't work.

Let's face reality: we're in a competitive, profit-driven economy, with every company in the world in the same race. The companies that don't make money go under. If Apple can't make a profit manufacturing cell phones, Apple will stop manufacturing cell phones. If Apple starts charging an extra $50 per phone to support a stateside factory, it will lose market share to their competitors that don't. If we could somehow mandate that every cell phone sold in the U.S. be made entirely in the U.S., then the U.S. will end up with overpriced, crappy cell phones, because every company on the planet will have a positive incentive to not sell their wares here.

(Aside: Louis Uchitelle depends a lot on argument by anecdote. Well, here's a counter-anecdote for him. My very own wife is a mechanical engineer who works in a factory. Her group is currently competing with a state-supported company in Italy, one with very much the kinds of policy supports that Uchitelle seems to prefer. Her outfit can't compete on price, because of the subsidies. Nonetheless, they're winning business from those competitors, because those competitors make lousy products.)

If Louis Uchitelle had gotten a tough-minded and thoughtful critique of his manuscript, Making It could have been a book with a lot of impact. Instead, it's a book that will appeal entirely who readers who already agree with its conclusions. Uchitelle is a reporter, and the reportage is excellent. The thinking is not.


  1. Japan keeps some manufacturing. Imports are regulated, which reduces competition, and props up domestic companies. Japanese manufacturers will produce in China or Vietnam for export in volume to the States at very low prices. They will manufacture domestically and charge a lot to the average Joe Tokyo. You can't buy a Samsung TV, so you have to buy a Sony, and pay for it. You would think that this is not something that the US would ever put up with, but there is precedent in pharmaceuticals. The US pays way too much compared to the rest of the world to prop up profits. Then again, I don't really know where the drugs are actually manufactured.

    1. Japan, unlike the U.S., actually has an explicit policy. Regulating imports seems like rather a heavyweight solution, though. It puts the burden directly on the individual consumer. Making It would, I think, argue for spreading the costs more broadly.

      Whether the U.S. would put up with it would depend on who lobbied whom, and how effectively.

    2. Pharmaceuticals. The US pays much more than the rest of the world. The reason the consumer doesn't rebel, however, is because they don't pay directly. They just care that they get the drug or treatment the doctor says they need.

      So it does exist, and I'm sure there were lobbyists involved.

    3. It's an interesting point. On the one hand, this is just a market distortion: prices are high because that's what the traffic will bear. On the other hand, that sort of bears out that not having a policy is itself a policy.

      I don't know anything about the economics of drug manufacturing, which is specifically what Making It is about. I suspect that job losses in that sector are driven by automation more than anything else. I'm sure it's true that the relationship between the market price of a drug and the cost to manufacture it is non-existent.