Friday, April 09, 2010

"Specialty" Steel and Economic Recovery


As I emerge from beneath a pile of work, I see I'd set aside "Geithner Asserts 'Critical Role' of Manufacturing" from last Thursday's Post. In it, the Treasury secretary visits Allegheny Technologies Inc., which makes specialty metal products in Pennsylvania and elsewhere for aerospace, automotive and other applications.

The story quotes Geithner thusly:

"This is a sector that will play a critical role in helping to spur our economic recovery and contribute to our long-term prosperity."

The story then notes that the company has remained profitable through the economic downturn.

All well and good, but Allegheny is profitable not because it makes things everyone wants and can use, but because it makes relatively exotic items that other countries can't produce yet; for example, titanium is notoriously difficult to work in anything more complex than a mountain bike and if other countries can't use it to make aviation parts, Allegheny has pricing power and thus profitability for the time being.

But this doesn't change the fact that, as the article also notes, there has been

"a steady loss of jobs as the production of textiles, consumer electronics and other products has shifted overseas."

This is a polite way of saying that the U.S. is permanently, completely non-competitive in making things that everyone wants, from t-shirts and shoes to cell phones and TVs to my Apple laptop ("designed in California" its packaging whines, as if that matters).

Try this experiment: Find a parking meter near you and read what's written on the steel post holding the meter up. If it was installed 20 years ago, the steel is probably from Korea; 10 years ago, from Thailand.

The U.S. can't settle for just being the best at making things no one else makes (yet); it needs to find ways to be the best at making things everyone else makes and thus everyone wants. This is what will actually contribute to U.S. prosperity in the long term: a decades-long reindustrialization where the U.S. turns the tables on its foreign competitors and uses their technologies as the basis for building new, even more efficient factories in the U.S.

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