Dear President Obama, Part I: About Manufacturing

Mr. President:

As you face the enormous challenge of guiding the rebuilding of the American economy, I urge you to look carefully at what some of us associated with manufacturing have come to call "the real economy," that is to say, the economy that involves the creation of things that have weight and mass, things that people can actually touch.

While the economy of intellectual property, and "high tech" in particular, has great allure, we cannot afford to turn completely away from the economy of the mundane objects that we use to brush our teeth, light our way at night, or help us get from point A to point B (literally, not metaphorically). Every year, a higher and higher percentage of these objects are being manufactured outside our borders. This trend should change. And it can.

On the surface, it would seem that low-wage countries like China, where an average factory worker earns less than US$2.00 per hour, would have an insurmountable advantage over America, where the minimum wage – the minimum wage – is more than three times the Chinese average wage.

Not true.

I can cite dozens of U.S. companies that are successfully competing in markets that are dominated by low-wage countries. America Apparel, for example, excels in cut-and-sewn goods, paying its workers wages far above the minimum and providing generous benefits as well. Mag Instruments, the "Mag-Lite" company, does exceptionally well competing against cheaper flashlights that have nowhere near the quality.

There are, in fact, a number of ways that U.S. companies can win: through quality, "coolness," niche marketing, lean manufacturing, export strategies, diversification into new markets and collaboration to cut costs, to name some of the more important approaches that work. (I'm writing a book on this theme and, knowing you're an avid reader, will make sure you get a copy as soon as it's published.)

I have to point out that the successful American companies I've identified are relatively small by global standards. In fact, the truth of the matter is, no really big company can be an American company. World market economics and the numbers-driven nature of very big business guarantee that large companies are almost always multinationals, de facto if not de jure. This means that if you want to help out American companies, you have to help out the small ones.

Small businesses create over 60 percent of the new jobs in America – and in some years that figure is over 75 percent. It's a no-brainer, sir.

I know you've got a few other things on your mind besides this blog, so I'll end for now. In my next post, I'll offer some specific suggestions.