Hale and Hobijn find that the vast majority of goods and services sold in the United States are produced here. In 2010, total imports were about 16 percent of U.S. gross domestic product, and of that, 2.5 percent came from China. A total of 88.5 percent of U.S. consumer spending is on items made in the United States, the bulk of which are domestically produced services – such as medical care, housing, transportation, etc. – which make up about two-thirds of spending. Chinese goods account for 2.7 percent of U.S. personal consumption expenditures, about one-quarter of the 11.5 percent foreign share. Chinese imported goods consist mainly of furniture and household equipment; other durables; and clothing and shoes. In the clothing and shoes category, 35.6 percent of U.S. consumer purchases in 2010 were items with the “Made in China” label.

Much of what China sells us has considerable “local content.” Hale and Hobijn give the example of sneakers that might sell for $70. They point out that most of that price goes for transportation in the U.S., rent for the store where they are sold, profits for shareholders of the U.S. retailer, and marketing costs, which include the salaries, wages and benefits paid to the U.S. workers and managers responsible for getting sneakers to consumers. On average, 55 cents of every dollar spent on goods made in China goes for marketing services produced in the U.S.

Going hand in hand with today’s trade demagoguery is talk about decline in U.S. manufacturing. For the year 2008, the Federal Reserve estimated that the value of U.S. manufacturing output was about $3.7 trillion. If the U.S. manufacturing sector were a separate economy – with its own GDP – it would be tied with Germany as the world’s fourth-richest economy. Today’s manufacturing worker is so productive that the value of his average output is $234,220, three times higher than it was in 1980 and twice as high as it was in 1990. That means more can be produced with fewer workers, resulting in a precipitous fall in manufacturing jobs, from 19.5 million jobs in 1979 to a little more than 10 million today.

The bottom line is that we Americans are allowing ourselves to be suckered into believing that China is the source of our unemployment problems when the true culprit is Congress and the White House.

So now the news comes with the outcome both inconceivable and inevitable that the state is likely to shut down the Duquesne school system completely.   The city’s school district has already abdicated secondary education with its high school students shipped to nearby West Mifflin or East Allegheny. This is all more epilogue than news sadly.  Still feels like a story from the worse off parts of the third world. In security studies if you anonymized the name it would in part be indisinguishable from case studies in failed states and feral cities.

But that news story highlights again how little we understand our own problems.. how myth overtakes reality.  The section and quotes that caught my attention was the almost de rigueur logic on the impact of the steel industry. It goes by formula exactly like this:

Chepanoske points not to any person or government entity but to the loss of jobs and subsequent sharp population decline.

Census figures show Duquesne was home to 11,410 people in the 1970s when steel mills provided good-paying jobs. Today 5,565 people live there.

“When the mills were running full blast, things were really good,” Chepanoske said. “It started to deteriorate in the 1980s when people moved away.”

In other words.. it’s nobody’s fault.  Steel left.  Blame ’steel’.  Whatever that means.  That seminal year 1970 is the only horizon that matters it seems.

Did the decline of manufacturing cause Duquesne’s decline? Did it accelerate the population decline even?  When was the last time things were really ‘good’ in Duquesne?  Here is the city’s population over the century.  Can you identify any meaningful break in trend in the 1980s?  But if the problems are caused by the loss of steel jobs, and the decline in steel jobs are somehow beyond our control, then ergo..  this just isn’t anyone’s fault.

Is Duquesne’s plight unconnected to manufacturing? Of course not.  But the heyday of Duquesne came long ago at this point.  The workers in the mills along the rivers started abandoning those towns long before there was any conception steel was ever going away. The first hand memories people have of a growing or even stable Duquesne can only be among those receiving Social Security.  If we misunderstand our problems we can’t ever fix them and attributing the plight of many of the barely existing.

I have not even gotten into the joke that Duquesne with barely 5K population in 2010 is still a ‘City’ according to the laws of Pennsylvania.  Upper Darby Township in Delaware County, PA clocked in at over 82K residents in 2010. Makes sense somehow.  Goes back to what the real problems are in Pennsylvania.   Saddest part of the Duquesne story is that they just didn’t have any large bond payments to default upon.  If only they had been so irresponsinle as to build a garbage incinerator, the Commonwealth apparachiki might have paid some real heed.

If you want to obsess on on the stylized Duquesne history, don’t recereate the wheel.  Just jump over to DuquesneHunky. It would do the neighboring Tube City Almanac proud.  I actually can’t believe it’s author is not Jason’s alter ego.

The funny thing is that when I wrote that I really had folks Downtown laugh at me.  It was the past was the message, not the future.  For much a decade, other than some interest in ‘clean coal’, energy was not a focus of development. It was all talk of ‘high tech’ (pick your definition), biotech in particular, ‘advanced’ manufacturing (I’m not sure there is anything other than ‘advanced’ manufacturing still surviving these days) and until the bankruptcies of USAirways, air transportation. Remember when air transportation was going to ‘replace steel’ which was as stilly a concept then as it is now. Talk of energy was ‘quaint’ as literally put to me.  That general apathy was the main reason I felt compelled to write that piece.

The irony is that if you go back and look at the date of the oped.. 2005.  That must have been awfully close to the time some meeting somewhere was going on starting with “you know, we can get natural gas out of the shale in Pennsylvania”.  Funny how disruptive things work.  Just wait until the ‘greater’ Pittsburgh geothermal industry kicks in which will likely all center on fracking as well and found with Google’s help. Nothing happens on it’s own. It’s all interconnected.

One thing I mentioned in that article which didn’t plan out was the whole fuel cell project that did not pan out.  At the time it was the biggest thing on the horizon.  The fuel cells Siemens was working on were to be powered by natural gas for the most part. Even in failure, the fuel cell story is a lot more important than it may ever seem.  Pittsburgh beat out intense competition for the fuel cell investment from locations in Florida, but more intense competition from Ross Perot who was pushing for the site to go to Texas and clearly put more money on the table at the time. Yet sheer money didn’t win in that decision which says a lot.  In the end the market could not quite support what they were trying to do and they could not quite get their manufacturing costs low enough to make the product, mostly intermediate sized stationary fuel cells, viable.  In some counterfactual world, if the decline in natural gas prices had come a bit earlier, maybe we could have added a growing fuel cell industry to the region as well.  Think what the regional ‘energy story’ would have been.  Alas.

The site that was to be the fuel cell manufacuting operation? Taken over by US Steel for research.  Again, the more things change……

So is the local energy industry all or even mostly shale gas. Clearly no.  Is the increase in jobs or output reported in the story all shale related.  Probably not either. Check out the story on the gubenatorial election in WV decided this week.  In it is this quote:

But the rising price of coal has boosted the state’s economy, giving it a lower unemployment rate than the nation at large and allowing Mr. Tomblin to boast of a state budget surplus in contrast to the fiscal straits of some of its neighbors.

Decades of outsourcing manufacturing have left U.S. industry without the means to invent the next generation of high-tech products that are key to rebuilding its economy, as noted by Gary Pisano and Willy Shih in a classic article, “Restoring American Competitiveness” (Harvard Business Review, July-August 2009)

The U.S. has lost or is on the verge of losing its ability to develop and manufacture a slew of high-tech products. Amazon’s Kindle 2 couldn’t be made in the U.S., even if Amazon wanted to.

First, how can Gary Pisano and Willy Shih be sure of the keys to the future?  The eight-track used to be the way to the future of music; the laserdisc used to be the future of home movies (as did HD-DVDs).  How can anyone say with any degree of certainty that high tech products are the key to the future, especially in light of diminishing marginal returns?  The simple fact of the matter is that there is no way to predict what people in the future want, and there is no need, then, for this sort of histrionics.

Second, who says manufacturing is the key to future wealth?  What makes Apple products so popular isn’t their manufacturing specs; it’s how they’re marketed.  It may be that marketing is key to the future, especially if consumers become considerably more concerned with status.  As such, focusing on America’s ability (itself a logical fallacy) to manufacture certain products is shortsighted and unnecessary.

Finally, why is the ability to manufacture high-tech products considered a hallmark of American competiveness instead of domestic economic policy?  If one truly wants to understand why American manufacturing has declined, one need look no further than the federal government’s domestic economic policy.  It has become increasingly anti-business and anti-manufacturing over the past decades, and more supportive of foreign trade.  As I have demonstrated many times now, this combination is eventually going to prove fatal to American businesses.

Thus, the problem isn’t that “America can’t manufacture a Kindle,” it’s that American businesses are being increasingly hamstrung by the American government.  The solution, then, is to repeal the economically destructive laws put in place by the government; it is not lamenting over the decline of high-tech manufacturing.

Second, the idea that U.S. economic difficulties hinge crucially on our failures in international economic competition somewhat paradoxically makes those difficulties seem easier to solve. The productivity of the average American worker is determined by a complex array of factors, most of them unreachable by any likely government policy. So if you accept the reality that our “competitive” problem is really a domestic productivity problem pure and simple, you are unlikely to be optimistic about any dramatic turnaround. But if you can convince yourself that the problem is really one of failures in international competition—that imports are pushing workers out of high-wage jobs, or subsidized foreign competition is driving the United States out of the high value-added sectors—then the answers to economic malaise may seem to you to involve simple things like subsidizing high technology and being tough on Japan. [Emphasis added.]

A:  Paul Krugman (Pop Internationalism p. 16 [1996], The MIT Press, Cambridge).

In spite of his remarkable daily stupidity, Krugman actually correctly recognizes the problem of American competitiveness in international trade.  What hampers America is not foreign trade, but domestic productivity.  And one of the biggest hindrances to domestic productivity is government, both at the state and municipal level, and particularly at the federal level.  Thus, if one wants to know why Americans are losing manufacturing jobs, one need only look at domestic policy.  The federal government has increasingly hamstrung manufacturing jobs over the past several decades.