Democrats and the Decline of Manufacturing in America

We have heard it for so long that most people assume it is true: the Democratic Party is the party of the working man, the hard-working blue-collar guy, the primary beneficiary of the manufacturing economy. Nonsense.

The reality is the Democratic Party is both a potent political force in the demise of the manufacturing sector and a primary factor obstructing any type of resurgence. The party has been controlled for decades by forces that in fact are destructive to that most American of enterprises, manufacturing.

The rhetoric coming from the party is certainly not representative of their true role. Their demons are, of course, the evil corporations that move plants overseas just to make more evil profit. Then there are more demons running unfair trading partners, the ones that act in deliberately predatory ways that take unfair advantage of the justly deserved high wages of the noble American worker. And all these demons work together under a master plan run by shadowy secret business/political organizations. Villains everywhere with only the Democrats and their friends actually working hard on the workers’ behalf. Despite some elements of truth, this propaganda has been remarkably effective in keeping voting blocks intact despite years of steady decline in manufacturing jobs. While the Democrats pronounce their fealty to the “working man,” they, possibly more than any other group in the last 20 years, have been responsible for the toxic environment that has so advanced the decline of manufacturing in America.

Manufacturing is indispensable not only in the structure of the American economy, but also in the very culture and fabric of American society. Since World War II it was the backbone of the tremendous advancement of the American standard of living during a period spanning barely 50 years. Manufacturing jobs allowed the low-skilled and semi-skilled worker to generate enough economic value to create remarkable wealth among the working class, something quite unique to America. An average factory worker could live in a good home in a thriving neighborhood, drive a new car, take vacations, own a boat, and send his kids to college, all on a factory wage. Manufacturing provides the basis for economic prosperity to the person who has no desire to go to college, prefers to work with their hands, or is simply not cut out for “knowledge” work, as Peter Drucker used to term it. In order for this to occur, conditions must exist for the worker to produce enough value per hour to support wages at the elevated levels needed in America. In addition, the business must be able to operate in an environment that allows it to do the things to make such value generation both possible and marketable.

All businesses, and manufacturing in particular, must have certain resources available in order to thrive. First, they require a steady source of workers that possess sound basic skills in math, reading, and language in order to operate effectively on the plant floor. In addition, the workers need to have a strong sense of responsibility and a work ethic; they need to show up on time, work their shift productively, and get along with co-workers. The abilities of the individual worker largely determine the most important dynamic in manufacturing: productivity and the constant need to increase output and lower costs. It is the source not only of profit and competitive ability of the company relative to its competitors around the world, but it is also the basic determinant of the level of compensation that can be afforded to the average wage earner. If the company has high productivity it can and usually does pay a higher wage. The reverse is also true.

Second, manufacturing businesses need to have the resources to acquire and update needed equipment and plant facilities. Manufacturers are capital intensive, that is, they require physical assets of plant and equipment that need to be purchased, maintained, and constantly upgraded to new technology. Cash flow generated by their activity must be available to build and expand capabilities and not be unreasonably siphoned off into uses not related to production. Nor can their earnings be taken in taxes, depriving them of needed investment capital in order to fund less productive social activities. Simply put, the resources needed to stay competitive are such that manufacturers are hard-pressed to support their own needs while at the same time pay for government adventures.

Third, businesses need a stable and predictable market environment in order to assess risks involved in various strategies and then to pursue directions that appear to have potential. The risk-taking attitude that built the massive auto companies, steel mills, and millions of homes relies on the confidence that a well-conceived and well-executed business model will find a market. The potential of significant financial loss unrelated to the actual market forces, as from the threat of legal profiteers, stifles the willingness to take commercial risks.

In summary, manufacturing businesses need good workers with basic skills, they need the ability to acquire and generate from within the cash resources necessary for extensive investment in assets, and they need a market environment that reasonably allows them to assess the risks and profit potential of their endeavors. Pretty basic stuff.

Unfortunately, the Democratic Party has allied itself and become totally beholden to a small group of special interests that obstruct these factors and, in many cases, actively seek to undo them. Let’s consider them one at a time.