When The Music Stops

I can remember playing musical chairs as a child. The stylus would drop on the 45 and we would walk around and around a set of chairs placed in a circle with one less chair than the numbers of players. Nobody knew who was winning or losing as long as the music was playing. But when the music stopped, one of us didn’t have a seat. I can remember how much I hated losing.

Not to sound too alarmist, but lately the more studying and thinking I do about the global strength of Brand America, I have been getting the same feeling I recall as a kid playing musical chairs. The world is spinning while the music plays and I am not certain we will like the seat we’re left with when the music stops.

Why worry? The Anholt-GfK Roper Nation Brands Index ranks Brand America #1 in both their 2009 and 2010 global survey. The world thinks Brand America is doing just fine. Is the world perception wrong?

Maybe they are, maybe they’re not. By nature, I tend have a “glass half-full” perspective on the future. Here are two questions I am struggling with. But here are two questions I am struggling with:

  1. Is Brand America prepared to effectively compete with Brand China?
  2. One of the columnists I find thought provoking is Tom Friedman who writes for the NY Times. Here are two articles I found particularly concerning.

    We’re No. 1(1)! makes me wonder if both China and India have juked Brand America with a head fake and we’ve fallen for it, as the Nationwide Insurance advertisement claims, “hook, line and sinker”.

    China’s approach to winning a global leadership position in the expanding energy industry. makes me concerned China’s continued focus on and advancement in developing a capability for innovation is quickly becoming a meaningful long-term competitive challenge for Brand America.

    Can’t Keep a Bad Idea Down provides some data points that should make everybody concerned that Brand America is no where near as competitive as it needs to be. Friedman references the book Rise Above the Gathering Storm, Revisited: Rapidly Approaching Category 5. He cites some statistics provided by Charles Vest (former M.I.T. President): Brand America is sixth in global innovation-based competitiveness, but 40th in rate of change over the last decade; 11th among industrialized nations in the fraction of 25- to 34-year-olds who have graduated from high school; 16th in college completion rate; 22nd in broadband Internet access; 24th in life expectancy at birth; 27th among developed nations in the proportion of college students receiving degrees in science or engineering; 48th in quality of K-12 math and science education; and 29th in the number of mobile phones per 100 people.

  3. Is Brand America’s strategic pursuit of transitioning to a knowledge economy fundamentally flawed?
  4. Outsourcing manufacturing so Brand America could become a high technology, knowledge-based economy has been the vogue for over a decade. Manufacturing was seen as something emerging markets with low cost labor would be better suited to deal with. Sean Silverthorne points out that we are paying a price for that strategy.

    Dan Slane, Chairman of the U.S. – China Economic and Security Review Commission, recently gave a fascinating talk about the challenges outsourcing manufacturing presents to America’s long-term competitiveness. I found it powerful, alarming and thought provoking. Here is a link to an audio file of that talk – http://omi.osu.edu/policy/dan-slane-on-the-us-china-relationship-manufacturing/. Dan’s talk is well worth grabbing a cup of coffee and listening to.

    The more I learn, the more I believe the choice before Brand America is not whether to create a manufacturing economy OR a knowledge economy. I believe we need both and that manufacturing is actually an enabler of innovation.

    It has always been my experience that you learn best by doing. It is equally true that necessity is truly the mother of invention, and the best way to identify what’s necessary is to be involved in the making process. It also helps technical ideas and expertise to a specific geography. My concern is that by outsourcing manufacturing we are inadvertently enabling other countries to develop the capability and capacity to actually out-innovate our nation.

Where will Brand America be when the music stops? Will we like the seat we end up with? Is my concern unfounded? Is manufacturing an enabler of innovation? Should Brand America be pursuing a strategy of creating a Manufacturing AND Knowledge economy?

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16 Comments so far

  1. Glenn Daehn

    November 1, 2010

    I think your questions are right on. I think that with a little thought and research a couple things are plainly clear:

    1) Manufacturing is the thing that connects innovation and knowledge to a region and connects them to wealth creation.

    Beyond the references you cite, Clyde Prestowitz’s book “The Betrayal of American Prosperity” as well as Robert Kuttner’s Book, “Everything for Sale” detail how industries the United States collectively established have provided us wealth for a time and recently have been basically given away. Examples include microelectronics, steel, auto, nuclear, optoelectronics, and soon to be aircraft manufacture. This recent exodus of world-leading industries will make this “Great Recession” very different and more painful than those lesser recessions. Other countries seem to understand how important manufacturing is to their economic well-being and job creation and have been aggressively courting manufacturing facilities.

    2) Effective and coordinated national effort is required for U.S. Competitiveness. As I write this I am watching disgusting content-free campaign ads from both sides, and I worry we are headed for years of effective gridlock. As Dan Slane and others correctly point out countries DO compete, not just companies. I hope we can find the political will to support efficient and effective private-public partnerships to bring globally-competitive jobs back to the US. Our competitors are doing this very effectively.

    Glenn Daehn
    Professor, OSU; Director, Ohio Manufacturing Institute

  2. Jim Samuel

    November 1, 2010

    Let me start in reverse order of your comments and say with all certainty that a country without manufacturing is a country that will not survive as the dominant player. You are absolutely correct in your comment that manufacturing is an enabler of innovation. Every nation, including America, rose to its prominence as the world leader through its place as the world’s manufacturing and innovation leader. As the political leaders say we should focus all our efforts on the new knowledge economy as if it can be separated from a manufacturing base risks the underpinnings of our national strengths.

    Andy Grove, the former CEO and Chairman of Intel say’s it best in his piece entitled, “How to make an American job before it is too late” that was first published on July 1, 2010. Now, before you even begin to think about his primary points, look to his resume again. He was the CEO and Chairman of Intel from 1987 to 2005; did any of us even think Intel existed in 1987? Honestly? If you talk about the knowledge economy and start-ups, then you have to be thinking about companies that probably look a lot like Intel in the early ‘80’s. Well, these are the words of one of the original founders of the knowledge economy and he is telling us that we are going down the wrong path…but it isn’t too late. Here is a link to Mr. Groves own words, http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html

    A great example that Mr. Grove references is one that I have pondered with my recent personal involvement in a potential American-based battery manufacturing industry. America gave up its lead position on batteries when we relinquished our position in the consumer electronics industry. Why? Because tier 1 suppliers need to be close to the OEM. And where does most innovation occur? Usually where the OEM and Tier 1 supplier interact as they design new products. And sometimes the interaction is so amazing, that an entirely new industry is born from the supplier.

    As I was recently quoted in a business journal in regard to an upcoming Ohio election, “We lost a couple hundred thousand manufacturing jobs, and it still drives a quarter of our economy. I’d love for a governor [or President] to stand up and say, ‘We love our manufacturing sector, we want to embrace it, and we want to have policies in place to grow it.’ ”

  3. Margy Sweeney

    November 2, 2010

    During the financial crisis, clearly “Brand America” was left temporarily without a chair in this analogy. But what makes our nation’s brand so strong is our resilience, our ability to jump back in the game even when others have counted us out – when they think we’re out of the game. Even the world-rocking events of 2008 did not disturb our #1 status, thanks to this cultural and economic ability to bounce back. But as we continue to defend that position, we should remember that the battle for economic strength is not a binary equation: it is not Brand America versus Brand China, but a free-for-all, competing with Brand Europe, Brand Canada, Brand Japan and so on. Thank you for sharing the articles and an interesting post.

  4. Paul Boris

    November 2, 2010

    I think there is too much social engineering going on and not enough regular old engineering. We are not only going to put the gov’t in the business of running the auto industry, we are going to then market a car the gov’t wants as opposed to the consumer, tell people it is “all electric with 230 mpg” when it is not, charge huge prices for a family sedan (with 4 seats) after huge sibsidies, then fix the problems of the entire industry while avoiding the elephant in the room (labor and litigation). And to top it all off, simply forget to secure access to the most critical raw materials in that value chain (rare earth minerals) ! This is what happens when theoreticians try to run businesses.

    It would be great to have a partner in “the government” who opens new markets and levels the global playing field – then lets the entrepreneurs go at it.

    As for the original question above, the link sums it up nicely, “The more I learn, the more I believe the choice before Brand America is not whether to create a manufacturing economy OR a knowledge economy. I believe we need both and that manufacturing is actually an enabler of innovation.”

    Manufacturing drives solid jobs and good wages, fuels innovation and stabilizes the economy. Gone are the days where operators are uneducated, turning wrenches on a line. They are now an important part of the value chain – if we have any spots left for them.

  5. Rob Heuermann

    November 2, 2010

    Made in America means something in the rest of the world. Truly.

    American goods are seen “as the best” to the broadest segments of the population in the rest of the world. It is only here where we look to European goods (at an upmarket premium) as being better.

    Even if you are an “integrator”, the innovation, design, engineering, and quality standards created in america are “world class” in most cases, and recognized for that fact.

    India, Asia Pacific, China, the biggest installed customer base(s) in the world are looking for American goods to fill their supply lines and are willing to pay the premium to acquire them, because they know they’ll sell.

    Re-affirming to an earlier post:
    Flow manufacturing and steady demand generates a reliable job base, which our government can’t seem to get their head around.

    More free trade lowers the barrier to entry into foreign markets for U.S. manufacturers.

    Our rural communities are suffering due to the absence of available professional services opportunities there. Manufacturing has traditionally been their haven.

    U.S. manufacturers need access/education to alternative financing to cash flow operations, and the availability to Dept. of Commerce search services and private consultancy export resources “to gain visibility on foreign markets” and faithfully make the connection between buyers and sellers.

    Don’t let third world payrolls intimidate you into thinking you can’t compete on price. The top 1% of the population of China represents over 80% of the wealth … the right company company with the right product captures that 1% that represents 13m customers….you win.

    As you sit and wonder how to strategically manage your business in 2010, now that you’ve cut yourself back to break even, you’re considering next moves to acquiring new customers, think about selling internationally. You’ll hedge your current sales effort against domestic market fluctuation (improved cash flow), and with careful preparation open yourself to relationships with foreign distributors that will represent life long opportunities for new growth and profitability.

  6. Ed Burghard

    November 2, 2010

    Here is another look at the situation of manufacturing in the U.S.


  7. Mel Reed

    November 2, 2010

    Let me guess…if I say yes, I am a Republican…right?

  8. Gary Giles

    November 2, 2010

    I also believe we need to make things as well as innovate. As a country we seem to be dedicated to moving our strength to other countries and increasing the cost of doing business to such a degree that we can no longer encourage people to start new manufacturing. In the last two years while business has declined I have nearly twice the required reporting and paperwork for the government than I had before when things were going well. None of this additional work makes an income. Additionally my tax cost is increasing and I am getting nothing in return for it. We are literally paying other countries to take our business at a time when we are one of the biggest debtor nations and need that work here. If we don’t turn this around we won’t have much of anything to market a an afffordable price in another 10 years.

  9. Jocelyn

    November 3, 2010

    YES! We need manufacturing here. I used to work as an analyst following Multi-Industrial companies (translation: big conglomerates that make stuff).

    Quarter after quarter, they were more focused on cutting costs to deliver a few cents to EPS. They outsourced to China and Eastern Europe and Mexico. As all these jobs evaporated from the U.S., people said, “that’s OK, we will become a service or knowledge based economy.”

    I remember thinking, if you think manufacturing can be moved offshore easily, knowledge based businesses can be moved away even more quickly. No sooner did that thought cross my mind than some of the Investment banks toyed with the idea of moving some of the analyst jobs to places like India.

    Simply put, we have to make our own stuff.

    The manufacturing issue has so many other things tied to it, as well. We need to overhaul our education system, the unions and financial regulations to get our manufacturing back on track.

  10. Susan P.

    November 4, 2010

    I apologise in advance for not having read the other contributors comments. This is also fractionally rushed so apologies in advance for typos.

    I admit being a little lost on the meaning of this “have juked Brand America with a head fake” ??

    However, every country in my opinion should have some manufacturing base. Clearly, some countries will have greater capacities than others.

    It’s interesting how these issues relate to values and feeling about ‘country’ (and, even, ‘home and hearth’).

    We had an iconic brand – Bonds – and that has been largely sold out to overseas manufacturing processes and workers.

    I feel that loss and as a citizen as well as consumer, that loss is ‘heartplace’. I would feel more at ease, prouder, more comfortable, if we had retained the manufacturing here so we could continue to refer to is as a ‘true Aussie brand’.

    I suspect many of you feel the same about certain brands there.

    BUT, hasn’t there also been an historical shift in perspectives? I don’t think it unfair to suggest that, at one point, ‘giving’ manufacturing processes to certain countries was considered (by some anyway), as part and parcel of ‘assisting third world countries to rise’ or, ‘assisting poor workers to rise’.

    Yet, now, the balance of power has shifted and what we (certain Western nations) have largely done is to increase the wealth of a proportion of people in those nations to the level where they are now buying us out – our businesses, our land and so forth.

    And, many corporations should be ashamed of how workers have been treated (and are still continuing) to be, by way of poor and problematic health and safety conditions in certain countries that now conduct our manufacturing.

    I don’t much like knowing that when I buy product Z that workers became ill from the chemicals used and/or that, by way of continued illness and stress, they are committing suicide in large numbers.

    We’ve now got a rather complex set of ‘arrangements’ in place that are actually only suiting a very small proportion (in relative terms) of individuals. That wasn’t the original intention was it?

    I agree that manufacturing, like any act of ‘doing for self’, encourages innovation.

    It seems that innovation has been focused for too long on ‘saving money’ rather than locating new ways of doing, and being, at ‘home’.

    And, as a result, larger scale innovation has dropped away and creating a paucity of spirit as well as diminished at home wealth and spirit.

    I remember America very willing to subsidise it’s farmers – to Australia’s loss and frustration btw 🙂 – but there was, at that time and in that era, a better sense of America looking after it’s own. We’re in trouble in that area also.

  11. Doug Gray

    November 4, 2010

    America should outsource manufacturing if it makes the cost of products cheaper for US consumers (business & public) thus passing on a savings.

    America should not outsource manufacturing for all the sensible reasons noted in the above two comments – employment, innovation, export, skills base, security, etc.

    Clearly not an either or option. Best to look at what multinationals & medium sized co’s are doing since some have clear domestic and outsourcing strategies and examine why they make one product in China, one in Mexico and one in Cleveland.

    A lot has to do with the drivers in an industry (ie. medical devices VS white goods), the competition, company history, proximity to market & resources and cost of business. Some manufacturing is easier and more profitable to outsource than others (spy satellites VS gardening tools) while some of the skill sets are not available in many locations.

    Several case studies of US companies who manufacture in the US and overseas would help provide examples of how the market works in that industry and help address the topic question. Whether we think the US should manufacture more domestically (which I think many would agree with) is secondary to how and why US companies make this decision internally. From there policy issues can be crafted to make it more attractive for companies to manufacture here.

    Doug Gray
    Sector Marketing Ltd.
    New York, NY

  12. Ijaz Rana

    November 4, 2010

    BUT this not musical chairs Ed. Every one knows who is winning & who is losing.
    America has to rethink its policies & start in-sourcing NOW, before its a taltally lost case.
    Best Regards.

  13. Peter Shaw

    November 7, 2010

    Interesting questions. I believe that Brand America is still quite strong. As an individual involved with our young people through roles in Boy Scouts and as a School Board President, I am amazed at how much more advanced our children are than I was at their age. I think we did lose a generation or two who got caught up in the “working for a living” mentality, including myself. We focused on getting jobs instead of building careers around our interests.

    The younger people today have strong interests. They experiment with ideas. They are comfortable with technology. They communicate effectively online across borders. Therefore, I believe strongly that we are positioning ourselves for a better future through our children. We simply need to ensure that we do not bury them with too much debt from our past.

    With respect to China and India, there is a misconception that competition is a bad thing. A strong economic China and India is great for us and the world. The more these countries along with Brazil and Russia have populations where they have economic power the less likely that totalitarianism can remain in place for long. With populations of this size coming into the market there will be room for us all to compete. These BRIC countries can not be the best at everything just like we could not hold the lead on all industries. Remember in these four countries you are talking about 43% of the world’s population coming online as customers and free market participants, to some degree. That is fantastic!

    It will be a scary ride at times but we will do well. We are still a young country compared to some of our European competitors and Japan. Once we develop an immigration plan we can grow at a steady pace again and attract good people to stay here.

  14. Mark Reineck

    November 8, 2010

    The biggest reason that jobs leave the US and especially Ohio is not salaries or taxes, it is regulations. it is true that Americans make more money than the rest of the world but we are also far more productive than almost the rest of the world with only a few exceptions. A perfect example is oil drilling in the gulf. Those jobs are all gone now. The outsourcing to India started because there were not enough workers here, not because they were too highly paid. Regulations preventing companies from importing workers forced the companies to outsource.

    It costs a lot of money to ship things from the other side of the world and it takes a long time. That will pay for a lot of labor. The problem is that a lot of things can’t be made here anymore because of the regulations. And in other cases the constantly changing regulatory environment is just too risky. A lot of times the regulations have to do with safety and there is not much we can do about that. Workers in a 3rd world country will choose a dangerous job over starvation. But an awful lot of the regulation is just mindless implementation of people’s political agendas. Every rule has unintended consequences. Strickland did more to drive jobs out of Ohio than any past governor.

    I am sick of hearing drivel about corporations. You could not make most of the stuff we buy without corporations because no sole proprietorship or partnership has enough capital to do it. People want to have the things that are not possible without corporations like cars, appliances, hospitals, pharmaceuticals, airlines, and even green energy but they don’t want to have corporations around. So we tax them and regulate them to the point where they can’t compete here anymore. Remove the mindless regulations and see how much manufacturing returns.

  15. Tonya Britton

    November 12, 2010

    Yes, we should absolutely continue to pursue a combination of both knowledge and manufacturing.

    As we continue to outsource manufacturing, we are losing the resources (i.e., skilled labor, facilities, equipment) that would be necessary to get manufacturing moving again, should we ever be in a position to no longer be able to depend on “cheap overseas labor.”

    Currently, we have massive amounts of “scrap” metals that are being sold to China and other BRIC countries because there is the perception that we don’t need it since we are not doing a lot of manufacturing here on our soil. IMO, China has long had a desire to monopolize raw mined materials and eventually, we are going to end up paying a heavy price for our short-sightedness.

    There is also a huge quality control issue. We were touring a locally owned and operated manufacturing facility here in Texas a few weeks ago and the company literally assigned 4 men to work (shifts), all day and half of the night to file bolts because the threading from the Chinese imports was so unrefined they couldn’t use them in their current condition.

    There have been enough instances with food, children’s toys and other products to indicate that you get what you pay for. I wonder when the American public will realize that quality of quantity is preferable. When the bolts fall out of a plane and a few hundred people are killed? Or worse?

    And since IPP is virtually non-existent in the developing world, knowldge is a tenuous resource and is in many instances non-renewable. Once a products’ technology is deconstructed, it can be repackaged and sold, thereby removing the original inventor’s primary competitive advantage. Technology is also gaining ground at such a rapid pace, today’s knowledge workers will likely be tomorrow’s unemployed. We’ve seen this in disciplines as diverse as IT, Accounting and even Radiologic Technology.

  16. Karen Schultz

    August 13, 2011

    Global business spreads democarcy and capitalism….and innovation. WALCO Tool & Engineering is a contract manufacturer of parts for equipment, machinery, etc. There is plenty of work for what we accomplish at WALCO. The problem for us is the availability of today’s advanced machinists for hire. Knowledge of design, technology and understanding of materials and profitable business is truly what is needed by today’s skilled workers for long term profitability. Most large companies have become engineering groups who build assembly plants and need job shops for just in time delivery. This is a capital intense business that takes on the most difficult costs of manufacturing. Trade schools have closed. Education and parents have not pressed for their children to consider manufacturing….especially machining, forging and casting jobs. This is where it all begins, America! The R & D, the creative side of business in making what someone drew but does not know how to machine it in many cases. Designers should all be machinists first for at least ten years in a job shop, in my opinion for a true cost savings on “parts”. The costs of machining are expensive and the lack of machinists will drive costs and delivery if the US cannot market these jobs differently. All I can say is that I discovered manufacturing later in life and I enjoy it very much.

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