Friday, February 18, 2011

What, exactly, will HSR solve?

This article from last Sunday's New York Times doesn't at first appear to be about high-speed rail, but it really is.  It describes the loss of American manufacturing capacity, and the consequent loss of innovative ability.  Obama talked about that in his State of the Union speech where he also endorsed the high-speed rail vision for the United States. 

There is a fundamental contention proposed by its advocates that the development of high-speed rail in this country is a critical step to restoring our economy and economic competitiveness. Yet, in reading Louis Uchitelle's article from last Sunday's NYT, we discover some of the elements of our economic decline, our loss of manufacturing, and our desire to maximize our expenditures by purchasing goods and services from less expensive overseas manufacturing.  We even lay off America employees and move our own productivity overseas to lower cost labor markets to increase profits. 

So, I need to ask, how will that soon to be a permanent situation get turned around by borrowing and spending a trillion dollars to connect 80% or us by high-speed rail? What will those few of us riding on these faster trains accomplish?  What will be the impetus for each of us to increase our passenger transit miles -- in any modality -- in each of our lifetimes because we can also go 200 mph on a train?  Will that enhance our productivity?  Will it create domestic manufacturing capacity when we have been so diligent in reducing it for the profit motive?

We should challenge some basic assumptions, including the inexorable growth of our population at prior rates.  We should also challenge the assumption of the per capita travel patterns and whether these will increase as we now predict, and for which we presumably need this train.  We should challenge the idea of "build it and they will come" as a forecasting and stimulus model.

We don't make much stuff anymore, we buy it. We will buy the HSR rolling stock from China or France or Japan.  Also all the other hardware.  We will also buy, from overseas, the other construction materials as well as the expertise that we lack. Once in place, what do we expect to happen that turns around the wide-spread permanent unemployment that is the consequence of shipping manufacturing and more recently, services overseas? 

The President is also an advocate of broadband universality and greater information technology use for greater electronic connectivity.  Doesn't that increase out productivity at a permanently reduced headcount?  We are seeing that transition even as we speak.  And, won't that reduce our business travel needs and costs?  And you can figure out what that means regarding high-speed rail.

I'll give you an example. Once upon a time, banks had many branches and each of these branches, as well the home office was fully staffed with people, from tellers on up to the President.  Well, the President is still there, but many branches, and even more people are now gone. It's been automated.  So, will this turn around because of high-speed rail? There are as many other examples of this as there are businesses in the US. Have you seen the number of people on an automobile assembly plant floor recently? It's not what it was 25 years ago. Will the trains bring them back?

So, the high-speed rail vision for our future, as the President and Ray LaHood see it, consists of sitting on a HSR train, and using our laptop to stay office connected.  The train, the tracks and our laptop all made overseas. Along with our clothes.  So, where are the benefits of HSR for us in the United States?

When Factories Vanish, So Can Innovators

SPOONS and forks, the metal flatware that everyone uses, are no longer made in the United States. The last factory in an industry stretching back to colonial times closed eight months ago in Sherrill, N.Y., a small community in the foothills of the Adirondacks, and 80 employees lost their jobs.

No one paid much attention beyond the people in the town itself, even though the closing represented the demise of an industry that had flourished in this country for generations. Paul Revere, in fact, was a flatware craftsman.

Sherrill Manufacturing, which owned the factory, said in a statement that production had succumbed to less expensive Chinese imports. Robert A. Comis, the Sherrill city manager, said, “It is too common a situation.”

Losing an industry or ceasing to manufacture a particular product, in this case stainless steel flatware, has indeed become a fairly frequent event. Just in the last few years, the last sardine cannery, in Maine, closed its doors. Stainless steel rebars, the sturdy rods that reinforce concrete in all kinds of construction, are now no longer made in America. Neither are vending machines or incandescent light bulbs or cellphones or laptop computers.

Less noticeably, American manufacturers are importing more of the components that go into their products. The imported portion has risen to more than 25 percent from 17 percent in 1997, according to Susan Houseman, a senior economist at the W.E. Upjohn Institute in Kalamazoo, Mich. The Boeing Company, to consider one striking example, once bought all of its components from American suppliers, or made them in its factories here. Now the wings of several of its airliners are manufactured by Japanese subcontractors and shipped across the Pacific in giant cargo planes.

Foreign-made parts might also be infiltrating the sleek business jets that the Gulfstream Aerospace Corporation makes at its United States factories. Joseph T. Lombardo, Gulfstream’s president, says he isn’t sure, although Gulfstream buys components exclusively from American suppliers. “What I don’t know,” he says, “is how many of the parts in those components were imported by our American suppliers.”

It is certainly more than we measure, Ms. Houseman says. An accurate count would reduce manufacturing’s share of the gross domestic product, or total national output, to less than the 11.2 percent that the Bureau of Economic Analysis has reported through 2009, the latest figure available.

That 11.2 percent would be closer to 10.5 percent, if all of the imported components were counted as imported instead of domestically made. Even the 11.2 percent figure is down sharply from the 14.2 percent share of just a decade earlier, and the nearly 30 percent of the heyday 1950s, when almost every product bought by Americans was also made here.

Concern is increasing that this decline has gone too far. “I think there is a growing recognition that a diminished manufacturing sector will undermine our economy,” says Mark Zandi, chief economist for Moody’s Analytics.
How did the nation get into this situation? It gambled, in effect, that by importing more from foreign suppliers and from American companies that had set up shop abroad, consumer prices for manufactured products would fall, without any sacrifice in product quality. Low-wage workers abroad would make that happen.

American manufacturers, on the other hand, would be the world’s best innovators, developing sophisticated new products here at home and producing them, at least initially, in their domestic factories.

The first part of the arrangement worked very well. Consumer prices did fall as imports flooded in — from foreign manufacturers, of course, but also from factories newly opened abroad by American multinationals. The flood was so great that President Ronald Reagan in the 1980s placed temporary quotas on Japanese autos and motorcycles, and tariffs on selected electronic devices.

The second part of the arrangement, however, has been more problematic. As it turns out, the United States is not the only path-breaker. The Toyota Prius, the first hybrid, shines as an example of Japanese ingenuity, and more than a decade after that car was developed it is still being exported from Japanese factories, marrying innovation to production and jobs.

The iPad and the iPhone, developed by Apple in the United States, are spectacular technologies. But the devices themselves are made in Asia, not America. And as time passes, the people who make the iPad and the iPhone day after day — the engineers and factory workers in Asia — may produce the next innovations. Or so many experts are coming to believe, including Ms. Houseman.

“The big debate today is whether we can continue to be competitive in R&D when we are not making the stuff that we innovate,” she says. “I think not; the two can’t be separated.”

THE loss of manufacturing capacity, measured in lost workers, is startling. From the high point in the summer of 1979, through last month, employment in manufacturing has fallen by 8.1 million, to 11.6 million, with most of the drop in just the last decade. While consumers have benefited from lower prices, made possible by unrestricted imports, on the other side of the ledger are tens of billion of dollars in lost manufacturing wages.

Something else is gone, too. “We had a storehouse of knowledge and skill built up in these workers and we can’t use it now,” says James Jordan, president of the Interstate Maglev Project, promoting a high-speed rail technology that uses special magnets to levitate and propel trains. Maglev was invented in the United States, but equipment based on that technology is manufactured and used today in Japan.

Mr. Jordan argues that as manufacturing’s presence — and status — shrinks in America, the odds of a Henry Ford or a Thomas Edison or a Steve Jobs appearing in the next generation are reduced. Certainly people like Mark Zuckerberg of Facebook are inventors, though not of physical products.

“Young people stop thinking about making things,” Mr. Jordan says. “It is no longer in their heads. They have a different mental orientation.”