Tuesday, July 7, 2009

Dust Off the Mills, Fire Up the Boilers, Mobilize the Workforce…the Jobs are Coming Home!!

Since the final hours of our region’s (Ohio, West Virginia, Pennsylvania) industrial heyday some 25+ years ago, watched a steady stream of jobs slip overseas. More often than not, it has seemed as if we are helpless against the economics of globalization. Cheap labor in developing nations like China has been fed by the removal of international trade tariffs producing an explosion of industrial growth for those nations. Previously, the tariffs imposed on foreign importers (or, domestic companies manufacturing in foreign lands shipping to the U.S.) have held the disparity of labor costs as inconsequential.

But, there’s a far more power which has fed the expansion of our trade deficit…’cheap oil’. Until the recent run up of oil prices (more than 500% since 2002), we’ve experienced a great expansion of ‘wealth’ on the backs of cheap oil. While the perceived wealth of our nation has expanded along with this trend, it has been accompanied by the removal of the foundation our economy is built upon. We’ve steadily transformed our nation into a service based, Wall St. driven nation whereby we utilized the sweat, labor and skill of other nations to build the ‘American Way’.

Logic tells us the current flow of our industrial economies is unsustainable. The simple fact that we’re often shipping raw materials around the world, manufacturing them, then shipping them back around the world to be consumed (and, often shipped back at their end life) is illogical to the untainted eye (likely one of those questions where 99% of kindergarteners would answer correctly against the 1% of adults). Many factors have held their ground for the past few decades which have made this model ‘work’ financially. Oil has held at around $20/barrel, tariffs have steadily been removed, newly tapped labor came cheaply and environmental regulations were imposed on developed countries (but not in developing countries).

So why should we dust off our mills which have slowed to a snail’s pace and often laid dormant for many years? Logic is taking hold and the many factors which have ‘globalized’ our economy are about to reverse course.

Oil - We’ve caught a few glimpses of this in the past year where triple-digit oil prices brought our economy to a halt (despite the focus on sub-prime lending, oil is the driver in our recession but that’s another discussion). We’ve felt some brief reprieve on oil prices however they remain well above the rates which fueled the trade deficit. And, we are na├»ve to believe oil will not return to last year’s levels and higher in the coming years. Suddenly, shipping materials around the world for low value:weight products (i.e. steel) doesn’t make financial sense…logic takes hold.
Labor - Meanwhile, the labor disparity is closing quickly. Wage gaps between the developed and developing world remain however they’re nowhere near the rates which took so many jobs overseas.
Global Environmental Concerns - Additionally, the combination of increased environmental awareness on a global scale (global warming via greenhouse gases has no borders) is forcing the developed world to consider means of putting a price on CO2 emissions. The U.S. is likely to join the EU in hosting a ‘cap and trade’ program which will reward those who determine means of producing in more efficient (carbon output wise) manners, and punish those who don’t. Yes, this by itself would only push the ball further into the developing world (where they don’t have environmental costs imposed on their products) however the U.S. (as the EU is currently considering) should also consider a carbon tariff on imported goods. Since the U.S. is more than 50% more efficient than countries like China, this would flip the jobs back to the U.S. in an immediate fashion. Many would oppose the addition of trade tariffs as unfair practices however the omission of a carbon tariff in theory is the unfair practice imposed on our own labor force (further, without it would only shift CO2 emissions to other lands which would end up in the same sky although via less efficient processes thus greater output).

Pull these factors together and we’ll end up with far more of barrier than the tariffs of a decade ago which blocked imports. Oil prices will rise again, labor gaps will continue to close and global environmental concerns will peak in the coming years. Are we ready to mobilize our industry? Is our region ready to take the lead again, and inspire our nation’s next great movement?

Our belief is that our tri-state region (Ohio, West Virginia and Pennsylvania) needs to grease up our old factories and (re)train our blue-collar workforce for the next phase of development. A new economy where globalization comes via technology but industry is held at home. Developing a high-speed rail system is a necessary step towards our nation’s infrastructure. Using our region’s assets to produce its supplies and host its early lines is a necessary step towards securing our nation’s economy for generations to come.