This is Naked Capitalism fundraising week. 599 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page, which shows how to give via check, credit card, debit card, or PayPal. Read about why we’re doing this fundraiser,, what we’ve accomplished in the last year,, and our current goal, supporting expanded news coverage.
Yves here. Articles, particularly from individuals with important public roles, can often say more than then intend to. This piece from Tom Conway, the international head of the United Steelworkers Union, uses the logjam at California ports to call for making far more of US consumed goods here at home, in the interest of domestic security.
The dog whistle of “security” happens to be true. The US would come screeching to a halt in a few months at most if China were to play hardball and stop sending Americans stuff, such as pharmaceuticals, ascorbic acid (an essential food preservative) and chips, for starters. But the other reason for invoking “security” is that the Federal government has consider powers under various defense emergency statutes, which oddly were not invoked when Covid was acute in 2020.
However, as much as it clearly makes sense, for many reasons, to retool the US into again being more of an autarky, as they like to say in Maine, “You can’t get there from here.”
As we explained in reacting to a post by the hedge fund manager and sometimes writer Doomberg, who was forcefully calling for a great unwind of America’s extended and fragile supply chains, too many incentives run the wrong way, even before you get to the wee problem of “This is really hard” and our putative leaders aren’t into that sort of thing. From our post, Will the Supply Chain Crisis Lead to More Onshoring?
…it has taken 40 years to create tightly coupled supply chains that include substantial foreign sourcing, both of raw materials, intermediate product, and often a great deal of sub-assembly.
It doesn’t do any good to get more raw materials or inventory, even if you had someplace to put them, if you don’t also have the equipment and direct labor and systems (mechanical and IT) and skilled supervisors and plant managers to keep everything moving and prevent equipment and safety disasters. How long would it take to design and build a new factory, or an expansion of an existing factory? You have to get approvals, contract to have the structure built, buy equipment and have it delivered (oh, again probably from overseas, putting you back in the crosshairs of the ports/shipping mess), hire and train workers, shake down the operation…even assuming you could find seasoned operations managers who were good enough to manage a startup (way harder than overseeing an established operation)….
Let’s look at other practical issues. Will we have rare earths mining in the US any time soon? We let China have that not because rare earths are actually all that scarce, but mining and processing are really nasty. But there is also specialist know-how, and we’ve ceded that too…
But let’s get back to the biggest reason there is no way, no how we will see a massive wave of onshoring, no matter how bad supply chain breakdowns get: management incentives and financialization.
Look at some of the steps I set forth above. Even if a very brave company got religion and decided to embark on that path, what would it entail? Massive up front expenses, not all of which could be capitalized. That means trashed earnings until the new reshored company is humming, which is years down the road. And would retained earnings be enough to pay for all the investment? If not, that means borrowing or issuing stock. Gee, do you think investors would be keen about that?
On top of that, the current leadership would almost certainly be unable to execute a change program of this scale. Think they are prepared to sign job death warrants?
More generally, giving up on supply chain dependence is a huge negative for executive and manager pay. In many if not most cases, its real purpose was to transfer income from lower level workers to the executive and mid manager ranks by reducing hourly-type labor content and increasing risk. Both the (often illusory when properly risk adjusted) savings and the increased enterprise complexity justified higher pay.
And it is not as if one can expect political support for this type of shift. Moving production on shore will increase costs, if nothing else the need to recoup the considerable business restructuring and investment costs. Making voters pay more for stuff, or worse, asking them to sacrifice for any reason other than war, is not a popular proposition.
So while I applaud Conway’s problem statement, bringing significant amounts of production back to the US would require a fundamental restructuring of the US economy. Too many at the top are just fine with the way things are now.
Workers at the Sibanye-Stillwater complex in Montana mine minerals used to fight cancer, produce lifesavingsurgical instruments and manufacture the wind turbines and solar panels essential for the clean economy.
They touch so many facets of American life that Ed Lorash, president of United Steelworkers (USW) Local 11-0001, considers their work essential to national security.
Lorash knows that without strong supply chains stretching from mining to manufacturing, the nation is vulnerable, not just to a shortage of consumer goods but also to any number of crises from pandemics to natural disasters that could undermine America’s safety. And only revitalizing an industrial base decimated by bad trade will eliminate the country’s dangerous dependence on foreign products and protect America’s freedom.
“It keeps your enemy at bay,” Lorash said of a robust manufacturing sector. Foreign producers can cut off supplies for economic or political reasons, he noted, or raise prices on a whim.
“I just think we really need to look at making things here,” he said. “Then, if we get a surplus, we can sell it.”
Over the past quarter-century, greedy corporations closed hundreds of U.S. manufacturing facilities and offshored more than a million jobs to countries with low wages, weak labor laws and poor environmental standards.
But that wasn’t the only blow to America’s security. China and other competitor nations compounded the damage by dumping unfairly traded goods in U.S. markets, killing millions more jobs and further decimating the domestic manufacturing base.
COVID-19 threw the damage into sharp relief. Hollowed-out supply chains left the nation unable to produce the face masks, ventilators and other medical equipment essential for fighting the pandemic.
America once made 37 percent of the world’s computer chips, used not only in vehicles but also in electronics and myriad other high-tech products. Now, the U.S. accounts for only 12 percent of global production and buys much of what it needs from overseas.
The dozens of huge cargo ships floating off the West Coast provide yet another stark reminder of Americans’ overreliance on overseas products.
So many of those vessels—laden with billions of dollars in foreign-made clothing, electronics, furniture and other goods—converged on California ports at the same time that they created an unprecedented traffic jam.
As the ships take turns docking and unloading, millions of Americans continue to wait for goods and supplies they need to run their businesses, operate their households and care for their families.
Stuck somewhere in the supply chain are motors that Sibanye-Stillwater needs for Jeep-like vehicles used to transport miners underground. Without the motors, the machines sit idle.
“They’re small,” Lorash explained of the vehicles. “They’re durable. They’re very low-emission,” he said, and critical to responsible mining.
Ports have moved to around-the-clock operations and taken other steps to ease the congestion, but that does nothing to address the underlying factors that caused the gridlock in the first place.
President Joe Biden has taken initial steps to build back the nation’s manufacturing base and patch supply chains, such as directing new investments in the manufacturing of essential drugs, batteries and minerals.
The impending national infrastructure program also will help to reinvigorate manufacturing by generating demand for steel, aluminum, glass, paint and other products.
But only long-term investment—and continuous stewardship—will provide the industrial base and supply lines necessary for fighting diseases, bouncing back after natural disasters and meeting the daily challenges of a global economy.
That means locking down every link in supply chains and ensuring, for example, that America can produce not only platinum and palladium but also the steel, aluminum, fiberglass and other parts needed for surgical instruments, wind turbines, solar panels, autos, electronics and other finished products.
“It’s all so interdependent,” noted Matthew Bashaw, president of USW Local 01-01494, which represents about 65 workers who make citric acid at the Tate & Lyle facility in Dayton, Ohio.
The issue isn’t only about ensuring the availability of goods. As Bashaw pointed out, controlling supply lines end to end also means maintaining the quality and purity of goods Americans use and consume.
He and his coworkers follow strict on-the-job safety standards and meticulously safeguard the quality of their products, including a food-grade variety of citric acid used in items like soft drinks and macaroni and cheese.
But Bashaw noted that other countries tried to undercut domestic producers over the years and asked, “What are their regulations? Are they meeting standards consumers look for in their products?”
The platinum, palladium, copper, silver and nickel that USW members at Sibanye-Stillwater produce will become ever more important as the nation makes more electric vehicles and increasingly grows a clean-energy economy.
Lorash knows his coworkers are up for the challenge of supplying the country’s needs. He wants to see a manufacturing revitalization so that union workers at other companies have their own opportunities to help build a stronger, safer America.
“Keep it at home,” he said.