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June 29, 2009

Ramping up the recovery: Alan Tonelson looks to manufacturing to turn the economy around

By Susan Breyer

Alan Tonelson, the fiery CNN analyst and author of “Race to the Bottom,” gave Maine manufacturers an earful June 12 during his keynote address at the second annual summit of the Manufacturers Association of Maine. His advice — to confront distressing data about the health of manufacturing and then exercise some political might — registered with more than a few attendees.

“I think we’re going to notch things up a bit,” says Lisa Martin, executive director of MAM and one of the organizers of the event. “It was clear to my board that we need to do more legislative advocacy, at the local, state and federal levels.”

Martin just hired Ron Fish, an engineer with decades of experience in the aerospace industry, as director of Maine Aerospace Alliance, an offshoot of MAM that will focus on developing an aerospace cluster in Maine. In addition to positioning Maine manufacturers to gain from government and private aeronautics contracts, Fish, who Martin says has extensive experience in advocacy work, also will work on getting manufacturers’ voices heard.

“It’s very important that state and federal delegates and policymakers understand how policies affect how we can bring more contract work to Maine, and how it affects the cost of doing business,” Martin says.

The summit, titled “U.S. Manufacturing — the Engine for Global Economic Recovery,” provided a stage for Tonelson to outline his plan to restore the U.S. manufacturing sector. A commentator who’s appeared on Public Broadcasting Service specials, C-SPAN and CNN, Tonelson calls for trade policies that support vibrant U.S. manufacturing. His premise: Manufacturing’s good pay and exportable goods are a better foundation for economic recovery than cheap credit, which brought the country to its current calamity.

He encouraged manufacturers to become much more politically active on a federal level — reminding audience members that business environments are crucially shaped by decisions made not “at the table,” but in Washington.

To emphasize the need for a manufacturers’ physical presence during decision-making, Tonelson pointed to President Obama’s manufacturing representatives on the Economic Recovery Advisory Board: General Electric’s Jeff Immelt and Caterpillar’s Jim Owens — two men whose concerns are far removed from those of American small business owners.

Tonelson called out U.S. trade policy, saying its “mismanagement” and emphasis on promoting offshore opportunities frequently benefits U.S multinational companies (such as GE and Caterpillar) while draining production from local economies. “Trade policy needs a thorough overhaul … Washington will not do this on its own,” he said. Once American manufacturers arrive in the capital, they must adopt a “louder voice and a more constant presence” in federal trade policy decision-making, he said.

To help Maine manufacturers keep on top of federal and state policy changes, MAM alerts its 325 members to bills destined to have an impact on their sector, Martin says. MAM follows the alerts with polling and data collection, assesses the feedback and then distributes opinions to policymakers and lawmakers. But it needs to do more, she says.

“The whole political process can be very frustrating, but we have to get more involved,” Martin says.

Greater involvement could keep more manufacturing jobs in the state. Maine manufacturers have lost thousands of jobs in the last 10 years, some through offshore outsourcing and others to improved productivity in domestic plants. John Williams, executive director of the Maine Pulp and Paper Association, points out that Maine paperworkers used to produce 263 tons of paper per worker 15 years ago, but now produce 461 tons per worker as papermaking has become more automated and computerized.

At the manufacturing summit, Tonelson, who is also research fellow at the U.S. Business and Industry Council, used similar data to underscore his remarks. Last August, he noted, for the first time in about 26 years, the overall manufacturing wage sank below the overall service sector wage (which includes professional services). Between 1997 and 2008, Maine manufacturing grew by only 9.13% (inflation-adjusted) compared to overall growth of manufacturing in the U.S. of 29.75%. Whereas Maine’s durable goods sector of the GDP grew by 53.32 % (less than, but comparable to, the U.S. average of 63.08%), nondurable goods (which include paper) fell by 21.67% compared to the U.S. average, which shrunk only 3.57%. Tonelson said he was confident that 2009 numbers will show further deterioration.

He encouraged his audience to view manufacturing in a broader and more significant sense: As the “engine for global economic recovery,” saying that “manufacturing must grow not only in an absolute sense, but also relative to the rest of the economy. This is the only way that manufacturing wages will return to be higher than service wages.”

Tonelson, who was equally critical of both political parties, sees the recession as a result of the widening gap between what we produce and what we consume. U.S. consumption is “the goose that has laid everyone else’s golden eggs,” he said. Production happening elsewhere must move back within U.S. borders in order for the economy to thrive. “Manufacturing matters desperately,” he told the audience.

Editor Carol Coultas contributed to this report

Tracking wages

In September of 2008, the average hourly service-sector wage (adjusted for inflation in 1982 dollars) passed the average hourly manufacturing wage for the first time in decades, according to research by the U.S Business and Industry Council. Both categories have declined since the first of this year, but professional services still has an edge over manufacturing. The 2009 figures are not inflation-adjusted. Alan Tonelson, a fellow at the USBIC, uses the inflation-adjusted 1982 dollars to measure whether wages are high enough and rising fast enough to keep up with the cost of living.

Hourly sector wages

Manufacturing Professional services

1982 2009 1982 2009

Jan. $8.49 $18.03 $8.59 $18.23

Feb. $8.47 $18.07 $8.59 $18.33

March $8.46 $18.09 $8.56 $18.31

April (prelim.) $8.46 $18.15 $8.51 $18.25

May (prelim.) $8.39 $18.08 $8.44 $18.18

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