President Trump in his Feb.5 State of the Union address touted the creation of 600,000 manufacturing jobs during his presidency, and newspaper fact checkers feverishly went to work on the figure. The verdict: It’s true, sort of.
Since Trump took office, there have been 436,000 manufacturing jobs created. The 600,000 figure dates back to November 2016, the Washington Post reports, citing Bureau of Labor Statistics (BLS) data. Either way, it’s good news — but manufacturing represents a small portion of the 4.9 million jobs created overall since January 2017.
The BLS notes that manufacturing investment in today’s marketplace is far more capital intensive than labor intensive, which means firms are spending more on facilities and machinery than on job creation, hiring, training, retention and benefits.
Interestingly, St. Louis Fed’s data on American manufacturing between 1947 and 2015 shows U.S. manufacturing’s contribution to real GDP has been essentially flat — between 11 and 13 percent — during the last 70 years; however, manufacturing’s share of U.S. employment fell from 32 percent of workers to 9 percent. This represents a threefold increase in manufacturing productivity, according to the St. Louis Fed and the BLS, and it illustrates the rise of automation.
In October, Forbes magazine reported: “Comparing the last 21 months of the Obama administration with the first 21 months of Trump’s, shows that under Trump’s watch, more than 10 times the number of manufacturing jobs were added.” Forbes attributed the growth in manufacturing jobs to two things: deregulation and tax cuts.
Yes, it’s clear that manufacturing jobs have grown since the end of Obama’s administration — but only from 8 percent to 9 percent of the total labor force. In other words, manufacturing jobs basically increased along with the rest of the labor market. Manufacturing’s share of the labor force is essentially at the same level as 2015.
The manufacturing vision for America that Trump pitches often draws upon a revival fantasy that hearkens back to the First, Second and Third Industrial Revolutions and ignores the Fourth.
The First Industrial Revolution was about building a nationwide logistics network to transport domestic raw materials and labor around the country. Think railroads, steel, iron, lumber and coal.
Around 1860 began the dawn of the Second Industrial Revolution. It was about the mass production of goods, or industrialization. Producers could source input materials and labor from all over the country, so resources were no longer an issue. The issue was speed. Machines could work longer, harder and cheaper, but they had to be operated by people of varying skill levels. Manufacturing cities popped up all over the country and suburbs grew around them. The U.S. invested in the creation of a backbone of utility lines and highways, as well as dams and bridges.
The Third Industrial Revolution – also known as the Digital Revolution – began in the manufacturing sector in the 1970s, but most of the public wasn’t aware of it until the emergence of personal computers in the 1980s. Of course, you don’t need this era explained to you. You’ve witnessed it, and you’re living it.
However, “Digital Revolution” doesn’t fully describe the transformation of industrial manufacturing during the last 50 years. It has also been an era of globalization. Domestic policies related to trade, the environment, labor and taxes drove American manufacturers abroad. Think outsourcing, consolidation and downsizing. Of course, the emergence of multi-national conglomerations wouldn’t have been possible without the technology-supported development of global communications, international banking digitization, real-time transcontinental supply chain tracking and worldwide logistics networks.
One of the remarkably profound things about the Digital Revolution is the breathtaking rate at which technology transforms entire industries. For example, just look at how quickly televisions have transformed from the console, to the projection TV, to the CRT, to the plasma TV, LCD, LCD HD, Internet-enabled LED, and now massive, curved OLED and AMOLED.
We are now approaching the dawn of the Fourth Industrial Revolution, also known as Industry 4.0 and 4IR. It’s characterized by algos, robotics, artificial intelligence (A.I.), 3D printing, fifth-generation wireless technologies (5G), cyber-physical systems (human chipping), biotechnology, quantum computing, nanotechnology and fully autonomous machines.
While workers in India, China and Japan are training and preparing for 4IR, it seems as though Americans are being kept in the dark about the next tech wave poised to transform the U.S. labor market. The New York Times revealed in a surprisingly salient report last month from the World Economic Forum in Davos, Switzterland:
In public, many executives wring their hands over the negative consequences that artificial intelligence and automation could have for workers. … and talk about the need to provide a safety net for people who lose their jobs as a result of automation.
But in private settings … these executives tell a different story: They are racing to automate their own work forces to stay ahead of the competition, with little regard for the impact on workers.
All over the world, executives are spending billions of dollars to transform their businesses into lean, digitized, highly automated operations. They crave the fat profit margins automation can deliver, and they see A.I. as a golden ticket to savings, perhaps by letting them whittle departments with thousands of workers down to just a few dozen. …
Few American executives will admit wanting to get rid of human workers, a taboo in today’s age of inequality. So they’ve come up with a long list of buzzwords and euphemisms to disguise their intent. Workers aren’t being replaced by machines, they’re being “released” from onerous, repetitive tasks. Companies aren’t laying off workers, they’re “undergoing digital transformation.
A third-quarter 2017 survey by Deloitte of 400 global Fortune companies found that more than half have replaced employees with robotic process automation (RPA), and that figure is expected to grow to 72 percent by 2020. Deloitte notes that RPA contributed to the loss of 800,000 jobs in the U.K. between 2001 and 2015, and that 35 percent of the country’s labor force is at risk of automation over the next 10 to 20 years. It’s no small wonder then that Davos seminars on A.I. and automation are coupled with lectures on Universal Basic Income (UBI), which detaches work from income.
In a robot-run UBI world, about a third of the capable labor force doesn’t work. Rather, they get “medicare for all” and a monthly welfare check from the government for doing absolutely nothing. These government-dependent citizens then spend 100 percent of those funds on products produced and sold by robots. Government handouts keeps the economic machine lubricated and prevents citizen revolts. Ironically, or perhaps intentionally, the widespread over-prescription of antidepressants and the legalization of marijuana fits nicely into this scheme.
On a Micro Level
And then there’s Jim. He’s sitting in his apartment in Mount Pleasant, Wisconsin, wearing his MAGA hat. He won’t wear it outside though, because Democrat political strategists have convinced left-wing extremists that it’s the equivalent of wearing a Nazi swastika, and Jim’s not a racist or bigot. He just wants the middle-class American dream: a steady job, a modest vacation once a year, a health plan, a little house that’s paid for by the time he’s 50, to send his kids to college and have them graduate without debt and to have a pension and nest egg for old age.
The “Make America Great Again” slogan captured the zeitgeist of generations of financially crippled Americans who want to keep American companies in America to employ Americans. The hope or belief is that doing so will restart the country’s economic engine and rebuild the country’s middle-class backbone. To them, everything else – Russia conspiracies, racism accusations, buffoonery, shutdowns, showdowns, whatever – is just political theater.
Unfortunately, Americans are susceptible to apple pie-type hopes and promises. Twenty years ago, the meme was “every American should own a home” coupled with false belief that “the value of real estate never goes down.” Using this rhetoric and market psychology, politicians and businesses came together and affected one of the biggest looting operations in history.
Today’s apple pie meme is “every American deserves a good job” and the false belief is that “manufacturing is the key to America’s economic prosperity.” Using this rhetoric and market psychology, politicians and businesses are coming together again to make it happen, and that means it’s time to be hyper-vigilant in spotting looting operations.
The Fox and the Con
Taiwanese global manufacturing firm Foxconn in October 2017 announced it had chosen Mount Pleasant, Wisconsin, for its $10 billion television production facility. The plant would produce high-end television displays, Foxconn said, though most television parts would continue to be manufactured oversees and assembled in the U.S. The Milwaukee Journal Sentinel explained:
Known as Generation 10.5 fabrication facilities, or fabs, such plants are the largest and most expensive in the display industry. They produce very large panels, such as 65-inch or 75-inch television screens, that are cut from ultra-thin pieces of “mother glass” measuring about 9.5 feet by 11 feet.
Wisconsin Gov. Scott Walker (R) wooed Foxconn founder and Chairman Terry Gou to the tiny village of Mount Pleasant by offering the largest subsidy given to a foreign company in history: $4.1 billion, of which nearly $2.8 billion would be in cash.
In return, Foxconn agreed to create somewhere between 3,000 and 13,000 jobs. This equates to a taxpayer cost of somewhere between $220,000 and $1 million per job — and it’s not clear whether the employees would even have to be American citizens. The funds would have hiring thresholds, with the first billion-dollar allocation following the first 3,000 jobs created.
However, the government also committed to providing Foxconn with a billion dollars worth of additional subsidies regardless of whether it ever created even one job. For example, the state committed to reallocating funds earmarked for highway rehab to building out roads for Foxconn. The water department committed to building infrastructure to divert approximately 75 percent of the community’s water supply to the company and to stick the cost on ratepayers. And the Army Corps of Engineers said that — although the 10-acre campus would be built on wetlands — the federal agency would expedite a permit without penalty. And the state waived its environmental regulations for Foxconn.
NOTE: Whether state or federal, environmental regulators don’t protect the environment. They collect a fee in advance for estimated environmental impacts. Where do the funds they collect go? Salaries and offices for regulators, of course.
Reports claim the details of the deal were written on the back of a napkin when Gou and the governor first met. (Really? Sounds like an episode of “The Sapranos.”) Walker came to the “bargaining table” desperate to fulfill his 2010 election promise of creating 250,000 new jobs during his first three-year term as governor, The Verge reports. Six years later, he was far short and badly in need of a big win for the upcoming 2018 election.
Subsidies aside, for Gou and for Foxconn, Wisconsin was a wise choice. In Mount Pleasant, Foxconn could operate virtually without oversight. And as the largest employer in area, it would have tremendous power over the local economy, which equates to greater political influence. Better to be a big fish in a little pond, as they say.
The majority of Foxconn’s manufacturing facilities are in China, so the company’s choice of the U.S. for a new plant was a big win for Trump. It showed he could make good on his campaign pledge that America would restart its manufacturing engine and become more competitive globally.
Indicative of a true globalist — or faux-nationalist — takeover, few in political circles or the national media questioned or even seemed to mind that a state governor roped taxpayers into giving a multi-billion-dollar handout to a foreign company. How is it fair and equitable to the people of Wisconsin, or to American businesses and competitors for that matter?
When Jim saw the headlines that Foxconn – the company that manufactures components for TVs and iPhones – was going to turn Mount Pleasant into the next Silicon Valley, he was so elated that he decided to wear his MAGA hat outside that day.
After the dust settled from the groundbreaking ceremony in June, the bait-and-switch looting operation became HD clear. Foxconn quietly revealed that the plant would built in phases, and Phase I would be a small facility producing smaller Gen 6 television screens.
Then in August, Foxonn spokesman Louis Woo told the local Journal Times newspaper that the company would never add a Gen 10.5 plant to its Mount Pleasant (Racine) campus because by the time it was built, the market would be glutted — and even the Gen 6 panels might not be manufactured in Racine for long.
The Verge: “We are not really interested in television,” Woo told the newspaper, though he said the company wants to build America’s first thin-film transistor (TFT) fabrication, which can be used in LCD products. Rather, Woo said, workers at the Wisconsin plant will be focused on figuring out new ways to use Foxconn’s display, cellular, and AI technology, building out an “ecosystem” Woo calls “AI 8K+5G.”
All this means Foxconn needs far fewer assembly line workers. “If, six months ago, you asked me, what would be the mix of labor? I would pull out the experience that we have in China and say, ‘Well, 75 percent assembly line workers, 25 percent engineers and managers,’” Woo said. But “now it looks like about 10 percent assembly line workers, 90 percent knowledge workers.”
Almost all the actual assembly line work, he added, will be done by robots.
Where will Foxconn find 11,700 A.I. engineers? China, of course. China churns out more STEM graduates every year than the U.S., Europe and Japan combined. In the U.S., the number of engineering graduates has declined almost yearly since the 1980s.
The news of the bait and switch didn’t seem to extend much further than Wisconsin state lines last summer. Walker, who campaigned on the Foxconn deal early on, became mum about it by September. In November, he lost his post to his Democrat challenger, high school principal Tony Evers.
Gou confirmed Foxconn’s commitment to transitioning from labor to robotics at the World Economic Forum last month, a New York Times article titled “The Hidden Agenda of the Davos Elite” reported:
For an unvarnished view of how some American leaders talk about [manufacturing] automation in private, you have to listen to their counterparts in Asia, who often make no attempt to hide their aims. Terry Gou, the chairman of the Taiwanese electronics manufacturer Foxconn, has said the company plans to replace 80 percent of its workers with robots in the next five to 10 years. Richard Liu, the founder of the Chinese e-commerce company JD.com, said at a business conference last year that “I hope my company would be 100 percent automation someday.”
In early February, the national broadcast networks finally pushed the Wisconsin-Foxconn debacle into the mainstream. Of course, the networks didn’t fully connect the dots on the story. Rather, the libtard media enthusiastically politicized the news, packaging it as a “Trump failure.” They didn’t explain that the taxpayer-subsidy strategy to lure businesses goes back to Alexander Hamilton — and it didn’t work then either. Nor did they explain that Foxconn has a long global history of making billion-dollar deals and breaking them.
Getting Wise to the Game?
Amazon — another company that has committed to leaning its operations through robotics — announced on Monday that it’s pulling out of its deal to open a headquarters in a borough of Queens, New York. State officials had offered Amazon $3 billion in exchange for creating 25,000 jobs for the local economy.
But local elected officials on Monday told national news networks that they were never consulted on the Amazon deal. When those local officials started posing questions to Amazon about their plans, the company decided to pull out rather than meet with them.
To put it into further context, this news followed the announcement over the weekend that for the umpteenth year in a row, Amazon is paying zero dollars in taxes.
There’s fantasy and there’s reality, and Americans are in need of a reality check when it comes to the “manufacturing jobs” political meme. The fact is that the manufacturing and industrial sector worldwide is is keenly focused on automation and eliminating manufacturing labor altogether.
So why do companies like Foxconn that plan to almost fully automate within the next five to 10 years offer to create thousands of jobs? Why are they keeping their automation agenda hidden? Three simple reasons: CEOs enjoy being wooed by and having influence over politicians; they want free money (subsidies) to purchase costly assets; and expansion chatter boosts the company’s stock price, even if only temporarily.
Local politicians may be oblivious to the automation agenda of mega manufacturers, but surely state and national leaders are not. So why do they promise a “manufacturing jobs” revival in the U.S.? Three reasons: votes; corporate campaign contributions (bribes); and Washington, D.C.’s imperative to make the U.S. globally competitive with China in trade and emerging technologies.
Now, please don’t get me wrong. There’s absolutely nothing wrong with business growth in the U.S. — even if it’s robot-driven. Business growth is what we should be striving for — but it should be based on real economic principles, not on taxpayer handouts and favors to mega conglomerates and multinational corporations. We simply cannot afford it.
This is not to say that we shouldn’t strive to be more business friendly. However, if you’re going to create incentives for business, they must be made across the board — not by individual politicians picking and choosing winners and losers. Don’t tell Foxconn they don’t have to comply with state and federal environmental regulations and costs, and then force small business owners to wait years and spend hundreds of thousands of hard-earned dollars to expand their businesses to meet real growing local demand.
Bottom line: Watch out for politicians who act like tinpot dictators. They shouldn’t be allowed to stick their hand in your pocket and give your money to public or private companies — even domestic ones, but especially not foreign ones. And they shouldn’t be able to pick financial winners and losers by deciding which businesses have to follow the rules and which don’t.
Don’t Get Fooled Again
If a politician is offering big taxpayer handouts to a manufacturing firm for choosing his or her district as the location of a new plant without taking into consideration things like access to distribution ports, the suitability of the local existing workforce, technology infrastructure and so on, then give it a big thumbs down. The project is nothing more than a corporate handout designed to help the image of the politician and revenues of a company. Ultimately, the project sold to the public won’t be built because, at the end of the day, it doesn’t make business sense.
Politicians are supposed to be representatives of the people, not of businesses. Businesses are only stakeholders in those communities in which they are already established. Businesses from outside the community have no right to the local funds of that community. Period. Good corporate governors know this and act with ethics. One should never ever assume or expect that a foreign multi-national corporation is going to operate ethically in foreign territory.
Okay, dear readers, that’s my lengthy Torchy rant for the week. Thanks for dropping by.