Re-Localizing Industry, One Thing at a Time

Yves here. I know it’s probably not the most consequential example for readers, but it is gratifying to read that the garment industry is coming back to Manhattan. When I first came to Manhattan in the early 1980s, the fashion biz wasn’t the only industry to make things in New York City. The printers who cranked out prospectuses were on West Street; junior associates got a steady diet of not-great ordered-in Italian food while they spent nights supervising getting the final changes in the documents. Soho was largely deserted, with artists legally in “artist in residence” space or squatting in turn of the century warehouse space, and they really did make art, irrespective of their commercial success.

And we described in a recent post why, contrary to popular perceptions, wage arbitrage was far from the only driver of the exodus of manufacturing from the US. From a recent post, more on the garment industry:

The worst is that this exploitation isn’t always driven by cheaper wages. In my old gym in NYC, one of the evening regulars was an energetic, gregarious early 50s man named Danny. He buttonholed me a couple of times about his fight as a Garment District manufacturer to keep his operations in Manhattan. I didn’t nail down who his buyers were; I think he made mid-range clothes. He was proud of the fact that he paid high wages, particularly to skilled workers like his cutters, who earned enough to send their kids to college.

But what had forced him to sent more and more of his work abroad (not to Asia but to Guatemala) wasn’t wages but rents. Even though the Garment District was zoned for light manufacture, the city effectively waved the zoning without going through any proper steps because gentrification. By contrast, developers in other parts of the city have to go through all sorts of hoops just to put up a building, particularly community meetings, and many more if they want any waivers. Danny, other manufacturers, and their lawyers met repeatedly with city officials, brandishing legal and economic arguments, to no avail. In the 1930s, the city’s fathers set out a long-term plan to turn Manhattan into a community of affluent professionals. The best account is Robert Fitch’s classic, The Assassination of New York. From its blurb:

In this indictment of those who have wrecked New York, Robert Fitch points to the financial and real-estate elites. Their goals, he argues, have been simple and monolithic: to increase the value of the land they own by extruding low-rent workers and factories, replacing them with high-rent professionals and office buildings. The planning establishment has been able of raise the value of real estate inside the city boundaries over twenty-fold. In doing so, Fitch suggests, it effectively closed New York’s deep-water port, eliminated its freight rail system, shuttered its factories and destroyed its capacity for incubating new business.

By Valerie Vande Panne, a writing fellow at Local Peace Economy, a project of the Independent Media Institute. She is an independent journalist whose work has appeared in Columbia Journalism Review, In These Times, Politico, and many other publications. Produced by Local Peace Economy, a project of the Independent Media Institute

“An incredible opportunity for domestic manufacturing.” That’s how Mercedes Gonzalez, a director at Global Purchasing Companies, describes an unexpected benefit of COVID-19: With shipments from China facing delays since the outbreak of the pandemic, what was once done overseas is rapidly being done here at home. The shift is revitalizing the once deserted factories, such as in New York City’s once-thriving garment district.

Thirty years ago the neighborhood’s sidewalks were clogged with racks of clothing and bustling with the city’s fashionistas. But by 2019, the same sidewalks were mostly empty of such activity, even during the day, when people were passing through the neighborhood or were stepping out of Port Authority Bus Terminal. At night, the neighborhood’s streets were eerily quiet, except for a few smokers or club-goers waiting for entrance to a party. The canyons of the once storied neighborhood seemed to be on the verge of abandonment.

Today, that’s changed. Racks are lined up along the sidewalks again, as designers desperate to meet orders can no longer wait for China to fill them. The sleepy garment district—once on the cusp of extinction—is humming with sewing machines and new hires.

In a country accustomed to endless supermarket shelves filled with every possible necessity, sudden shortages of everything from toilet paper to pork products have come as a shock. The scarcity created by COVID-19 has revealed the fragility of America’s reliance on far-flung factories, farms, and manufacturing plants that are nowhere near the consumers they sell to.

As these supplies have dried up, some have begun questioning this system, and asking how we can become more resilient to shocks that disrupt supply chains across the world.

Yet there are some places that are already ahead of the curve. Albuquerque, New Mexico, not only has a local toilet paper manufacturer, but the vast majority of employees in the state work for local small businesses and cooperatives—unlike many localities where the primary employer is a large corporation.

New Mexicans have long prided themselves on their self-sufficiency, and the government has reflected on this in recent years by championing “buy local initiatives.” The result is an economic model called import replacement, a term coined by legendary urban activist Jane Jacobs. Jacobs believed import replacement to be “the best way to achieve… sustainable economies,” by examining “what is now imported into a region and develop the conditions to produce those goods from local resources with local labor,” writes Susan Witt of the Schumacher Center for a New Economics. “By contrast,” continues Witt, “the typical economic development model is for a city to use tax credits and other incentives to lure the branch of a multi-national corporation… Yet without deep roots in the local economy and local community, the same corporation might suddenly leave the area… and abandon workers and families.” By looking at local gaps between local needs and production, and asking what can be provided for locally and taking action to implement it, local needs are met and imports replaced.

Jacobs viewed import replacement as uniquely suited to cities, which are versatile enough to build up import replacement rapidly. The diverse and concentrated needs of the city also support the notion as they make the production economically feasible.

What we’re seeing today, from businesses nationwide making a quick pivot to manufacturing face masks and hand sanitizers to the garment district coming back to life, seems to echo and confirm what was at the time of Jacobs’ writing in 1984 thought of more as a theory.

Yet with New Mexico’s buy local campaign, we might see the theory put in practice and the resiliency standing out in the current crisis. With a population of 2.1 million, it is the first “minority-majority” state, and according to state auditor Brian Colón, more than half of its workers are employed by small businesses and cooperatives. This hasn’t happened by chance. New Mexico is one of the country’s poorest states, and what corporate tax incentives are offered have brought little reward, prompting the state to seek more data on their impact. In addition, the people of color and Native Americans who live in New Mexico have needed to be resourceful to survive and thrive for centuries, notes Colón. Most of the state’s small businesses, he adds, are small family or intergenerational family businesses. “Communities of color are extremely entrepreneurial, based on circumstances and need. When you have communities that are under-resourced, they ID pathways to resources,” he says, filling their community’s needs.

“There’s a saying that you can’t manage what you don’t measure,” Dr. David Scrase, secretary of the state human services department, told the Santa Fe New Mexican. “We are trying every option to measure the critical resources we have to manage.”

This reliance on data has served New Mexico well. Recognizing the importance of small businesses to New Mexicans, current Albuquerque mayor Tim Keller, in 2017, while serving as then-state auditor, looked at the data and noted $3.2 billion was leaving the state in the procurement of needed items and services from outside New Mexico. He immediately directed his office to procure as many needed goods and services as possible locally, and he carried that ethos with him to Albuquerque, directing all 18 of the city’s departments to buy local. Since January of 2019, the city has moved more than $16.6 million in contracts home to New Mexico. The move is highly unusual; no other major U.S. city has taken such a drastic approach to buying local.

“We know that for every dollar we spend in-state, about 25 cents more stays in the local economy than if we spent that dollar out of the state,” says Synthia Jaramillo, director of the economic development department in Albuquerque. Albuquerque has become a major “anchor institution”—an institution rooted in the community, unlikely to leave, and with many needs to be met—for the state’s small businesses and cooperatives.

One of the biggest shifts to local has been in the procurement of office supplies, from a Florida-based office supplier to local Diverse Office Supply, a “women-owned business that employs a diverse workforce of adults with special needs, focusing on sustainable, earth-friendly products and office products manufactured by other women-owned and minority-owned businesses,” says Jaramillo. “Because of our contract with Diverse Office Supply the company has hired additional employees.” This meets a big part of the goal of the city’s buy local initiative: to support the hire of locals.

The city’s contract with Diverse Office Supply “has saved us,” says Kerry Bertram, president and CEO of the company. “The city of Albuquerque has given us a new lease on life. It’s enabled us to keep hiring those with special needs.”

Since the COVID-19 crisis began, Diverse Office Supply has put some additional expansion plans on hold, while continuing to provide Albuquerque’s police, firefighters, crime investigators, sanitation department—and more—with needed office supplies.

The city is using the model in its coronavirus response as well, not only to procure goods more efficiently but to help prop up the state economy. “In the midst of this crisis, when it comes to family and human services, homeless services, [those departments have] been instructed to use local companies for [needed] items—gloves, face masks,” says Jaramillo. When local companies “get a larger piece of the pie, they can recruit and retain employees who are New Mexico residents. The goal is to keep New Mexicans and Albuquerqueans employed.”

Colón celebrates the resiliency of the state’s local small businesses as being something rooted in a local tapestry of diversity, agility, ability, and self-sufficiency. “That agility is often not financial, but it’s the ability to move within the marketplace,” he notes. Policymakers, he notes, would be wise to lead with an eye toward how to think about an approach that isn’t siloed, but all-encompassing, and supports families, small businesses, institutions, governments, and more. The multi-pronged approach, Colón says, helps to identify resources to exist in the gaps other programs might fail to fill.

In Albuquerque, that thinking has led to the city’s new Micro-Business Relief Program. Local micro-businesses can use the grant directly for operating expenses, to help keep them going and be prepared for when the economy is rebooted, and grow out of the identification that many local small businesses were falling through the gaps of other small business assistance programs. The city has also launched programs that enable local businesses to access information about current contracts the city has with out-of-state providers, and gives them a way to contact the city about switching the contracts back home. And the city provides resources to small businesses, including access to capital, so they are able to scale up their businesses in order to meet the city’s needs, further cultivating the ability to grow and thrive in New Mexico.

Of course, New Mexico and Albuquerque will likely never be 100 percent local. There are things we all want and need from a globalized world, that are impossible to cultivate locally and will need to be imported, at least until another way is found.

Still, the state has its own toilet paper supplier: Roses Southwest Papers Inc., a local, minority, family-owned manufacturer of toilet paper just south of downtown Albuquerque that has opened its doors to support local families in need by setting up an online portal and offering home delivery.

While localized toilet paper likely wasn’t on the minds of many prior to the COVID-19 crisis, this might be a gap that can easily be filled with a localized business, not just in New Mexico, but nationwide.

After all, once the virus is over, the need for toilet paper, hand sanitizer and masks will likely remain. By keeping businesses local, more money is kept local, and there is a magnifying effect on the impact (more local jobs, more money—potentially millions or billions—staying locally, etc.).

And the impact can save not only the business, but the employees and local economic health: The city’s efforts to buy local, says Bertram, “is helping us survive the crisis,” fostering greater resiliency for the long term—and keeping people employed.

Looking to a post-COVID-19 world, Jaramillo says that the city of Albuquerque is working on an economic recovery plan: “It will always be a buy local initiative.”

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21 comments

  1. apleb

    All the reasons why every sort of manufacturing went abroad hasn’t changed. None of them have. While rents in NYC might have dipped slightly, this is not something with longterm consequences since the grip of real estate developers like Trump hasn’t slipped the slightest. There is a market dip and after that, there is increased opportunity for it to go up again and make MORE money.
    All of China is now more than eager to fill all contracts cheaply again, much cheaper than some mom and pop owned toilet paper manufacturer. Their transport costs are still low enough to be able to ship low cost, high bulk items toiletpaper around the world.

    Even if people want to buy locally produced toilet paper, economic realities of a looming depression or simply normal economics: people buy cheaper if possible, will force them to buy again the foreign toilet paper as soon as it’s available again. It will take a bit of time since those long distance supply chains will reassert their superiority again, but it will happen since all those many conditions that led to them dominating are still existing. In fact, the US is worse off right now: in China and many other places the pandemic is mostly suppressed, while in the US it’s more than rampant. What happens if this plucky local toilet paper maker has an outbreak in his factory and can’t deliver for 4 weeks? I’m sure Walmart and its customers will be really happy and understanding. Not. Some products like medicine precursors might hopefully be produced locally again, since it’s been shown that those are strategic resources. This however will only happen if those production sites are massively subsidized by the government. See the the recent Kodak announcement where they plan to build exactly such a new plant in the US, with massive gov funding. Of course it’s not just the building that needs to be subsidized but the production in the future indefinitely too. Subsidies with either constant money or laws that demand local supply chains. Not only the military industrial complex is a national security issue, other things are too. However I don’t see the US gov extend this protection to normal consumer goods like toilet paper, I have my doubts they will do it long time for medicine precursor chemicals.

    For the US to restart their manufacturing base there would be a fundamental change like a sustained increase in shipping cost due to climate change for example or at least a change in policy as radical as a New Deal or more. The important word is “sustained” here. Covid 19 is not sustained and not favoring the US. Everything else is just not happening. It’s about of similar substance as the Trump administration trying to entice Foxconn to build US assembling plants and equally doomed. This is a nice feel good article without substance, without thought.

    Reply
    1. Glen

      All very good points. The direct approach is often the best.

      The billionaires that have shipped our jobs, technology, and factories to China for nothing but more profit are traitors. The have wrecked our country. They deserve our wrath and scorn.

      Reply
    2. eg

      Actually, we probably need to see MORE deficit-funded industrial policy aimed simultaneously at strategic supply chain management and to support domestic employment.

      At least that’s a recommendation consistent with Matthew C. Klein and Michael Pettis’ “Trade Wars Are Class Wars” which outlines the pernicious effects of the “surplus” countries (the book concentrates on China and Germany) not only upon their own labor forces, but those of the “deficit” countries to which they export not only products, but immiseration.

      https://yalebooks.yale.edu/book/9780300244175/trade-wars-are-class-wars

      I just finished the book yesterday — it is excellent, and I highly recommend it.

      Reply
    3. BlakeFelix

      Well, it’s still kind of a subsidy, but I think that tariffs could help maintain a target level of domestic production deemed strategically useful. If domestic production is too low, raise the tariffs, if it’s too high lower them. If they hit zero and domestic production is still too high (like pollution or CO2) tax domestic production and possibly use tariffs too if you want to discourage foreign pollution as well.

      Reply
  2. Bert Schlitz

    No industrial policy=no manufacturing. Similarly, its why I think trade is overrated. Without it=less US consumption via higher inflation and less jobs. The way we grow is what matters.

    Reply
  3. ambrit

    The emphasis on locally sourced and or produced items is something that the State is promoting. This is basically, an act of political will. Compare this to the ‘captured’ institutions at the Federal level that bow and scrape to transnational entities. That example displays the lack of political will of the national level politicians.
    If, as an ancient one once opined, “All Politics is Local,” then this example from the State and Municipal level should be a wake up call to the upper echelons of power in America.
    Another ‘take’ on Mr Schlitz’s comment, just above, is that ‘growing’ is not on the ‘menu’ for the Covid Future. Rather, the way that we manage a societal “downsizing” is the key. The top 0.01% have reaped the lion’s share of the gains of the past four decades in America. Now, out off simple fairness, that cohort must bear the brunt of the losses that will be coming due in the future economy. However it is accomplished, either through a negotiated retreat from excess, or an enforced falling away from primacy, said diminishment will happen. As the popular fictional trope puts it; “We can do this the easy way, or we can do this the hard way. Your choice.”

    Reply
    1. CuriosityConcern

      My initial thought was, don’t locally produced goods in Hawaii have a price advantage from not having to be shipped in? Immediately followed by realizing that unless inputs are both not shipped and not scarce, the cost of production would not be lower than imported goods.
      I understand the impetus to buy local should supersede price consideration to a degree.

      Reply
      1. Heather

        Everything locally produced in Hawai’i costs more than on the Mainland. When I was 16 years old, in 1970, and worked as a pineapple trimmer in the Dole Cannery, a can of pineapple cost more in Honolulu than it did on the Mainland. Go figure.

        Reply
    2. drumlin woodchuckles

      What would happen to Hawaiian Consciousness if Hawaii adopted as its state motto:

      ” Welcome to Hawaii, America’s Baltic State”

      Reply
  4. JoeC100

    An interesting Maine company – “Origin USA” is bringing some manufacturing to the Farmington area. They had a niche market to begin with, but have now expanded into a boot line with all materials sourced in the US. Their jeans line began using imported fabric, but they found and set up weaving machinery equipment to begin weaving their own fabrics. They have great videos on YouTube – including on salvaging manufacturing equipment from abandoned Maine mills. Their boot line has benefitted form finding some old Maine “shoe dogs” who have the skills and are working to help set up their boot line and train their local employees. While Origin USA is probably not a broad model for expanding US manufacturing, they do demonstrate what talented, creative people dedicated to bringing manufacturing jobs back to places like Maine can accomplish.

    Reply
  5. Susan the other

    Very encouraging, thank you. Almost missed this one. Local supply chains. Replacement economics. Keeping more money local. Small family businesses. They surely will do local transit and distribution services to replace cars. We’ve been so obsessed with our delusions of “convenience” that the greatest convenience of all – that of not having to rush around in a frenzy – will feel very foreign for a while. Maybe Covid has been a good coach for staying put.

    Reply
  6. eg

    I do enjoy a little Jane Jacobs, chiefly “Systems of Survival”

    https://www.goodreads.com/book/show/85403.Systems_of_Survival

    I would note only that her “import replacement” is a more local version of the well-known “import substitution” model of economic development, the importance of which (among others) Ha-Joon Chang has explored in “Bad Samaritans” and other works, like this paper:

    http://www.cpes.org.uk/dev/wp-content/uploads/2016/06/Chang_Andreoni_2016_Industrial-Policy.pdf

    Reply
  7. drumlin woodchuckles

    As long as America remains under the Free Trade Occupation Regime, the only thing Americans who believe in American survival can do is to buy American if they can find it. All they/we can be is a cultureconomic resistance unless/until we can reconquer the government.

    In the meantime, there are some few cases where one can “buy American”. And also one can buy ” Foreign First World”. And then buy down the hierarchy of O K societies so as to avoid buying from the most evil and anti-social economies in the world. Like . . . buy from Taiwan or India before buying from China for example. If there isn’t the thing you want available from America or Europe or Japan or Korea.

    For example, if you want a hand-pulled furrower, you can buy it through alibaba from ZhaoYi Tools.
    https://images.search.yahoo.com/search/images;_ylt=AwrEzetwTjRfiPkAwvJXNyoA;_ylu=X3oDMTEyODk4MmhiBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQzA2NzJfMQRzZWMDc2M-?p=hand+furrower+images&fr=sfp#id=66&iurl=https%3A%2F%2Fs-media-cache-ak0.pinimg.com%2F736x%2F61%2Fe1%2F82%2F61e182b895916773dbae5f9891f58797.jpg&action=click

    Or you can buy it from Red Pig Tools made in America.
    https://www.redpigtools.com/Ridger-Furrowing-Plow_p_1255.html

    Red Pig will cost more money and may take more time. But the more money will send some of that money to an American tool maker who will then have that more money to spend, maybe on something American as well for more money going to yet another American . . . and so on in spreading circulateral circles of money facilitating trade after trade after trade. That is something that social survivalist Americans can do already right now even in the teeth of the Free Trade Occupation Regime.

    Reply
    1. everardus

      I’ve been striving to buy US-made (or even regionally made, if possible) for about eight years now. And, if you’re willing to put in a few minutes of searching, it really is possible to find versions of most things that are made in this country, or, if not, in some other country that has high standards of living and meaningful labor and environmental protections (as you list). Obviously, there are exceptions, mainly any sort of computer. But it is amazing what companies are still running factories here, and what new ones are cropping up. It is very, very rare that I buy something that was made in a country with a race-to-the-bottom labor economy. Generally only if I absolutely can’t find an alternative or if I genuinely need something immediately and don’t have time to find a better option.

      Does it cost more? Yes, often. Some domestic products are clearly produced at a higher quality than what I would have found in most bigbox stores so should last longer and this may even out over time. But I view it not just in terms of what it costs me, but in how it impacts the community. Some people spend the entire year buying everything as cheaply as possible from Amazon or Target, then donate a few hundred dollars to the local soup kitchen and feel like they’re helping the community. I’d rather help keep my neighbors employed than toss them scraps when I’m feeling beneficent.

      As this piece makes clear, we don’t need tariffs or trade-war tactics to promote domestic production. We just need to convince enough people (and businesses) to do this voluntarily. My feeling is that if you can afford it, (and pretty much anyone solidly middle class can), you owe it to your community to do it.

      Reply

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