Rezoning Puts the Squeeze on Manufacturing

Lisa and all;

I think it is time for another reality check, as Lisa seems to be on some type of crusade to prove that industry is being squeezed out because of the recent development boom.

Over the last 50 years, NYC has lost well over 800,000 manufacturing jobs. I would say that this is a bit more than 37,000 lost under Bloomberg's watch, and well before any of the recent rezoning. It is well worth remembering that many areas that were formerly zoned for industrial use lay abandoned and fallow for years. One such area was SOHO, and for those who lived during the time, the first artists who moved into these lofts did so illegally, as they were not zoned for residential use.

The loss of manufacturing has nothing to do with the recent rezoning, nor with any particular policies pushed through by Bloomberg. It has to do with simple economics. I work for a major industrial company, and the last place in the world we would locate a plant is NYC. The cost of real estate, labor and utilities make it unsuitable for the vast majority of manufacturing operations, and no amount of zoning or other wishful thinking is going to change this situation. Moreover, those who think that the tide of globalization can be stopped are on the wrong side of history.

One more fact: the US is far from a has-been in terms of manufacturing. In fact, the US has the highest manufacturing output of any country in the globe. What has happened over the past 20-30 years is that we've outsourced low-value added manufacturing (like textiles) for higher end manufacturing (like aircraft and medical equipment) and services (like Google). It has increased prosperity in both China and the US, which is a good thing.

Lisa: I really wish you would do some background research before you write up such stories. While they may serve as great red meat for some, they have no context.

Posted by: benson at August 26, 2008 4:34 PM

Make My Heights...;

Point taken. However, as I mentioned, Lisa seems to be featuring such stories. She recently featured another one implying that the development of IKEA came at the expense of a ship repair operation taking over the decrepit Todd facility, and likewise for the former Revere sugar refinery. What ship repair operation in their right mind would have taken over such am antiquated and high-cost facility? Couldn't she have called up a few ship repair companies and see if there was any interest at all, before condemning IKEA in making an investment in NYC?

Posted by: benson at August 26, 2008 4:48 PM

Lurker in the mist;

I admit to having a certain amount of impatience with some of these discussions because they lack any historical or economic perspective, and rely on trite arguments.

No one doubts that there are negative aspects to any great transformation. I imagine that the transformation from an agricultural to an industrial economy had some bumps in the road, and some real segments of the population got hurt. However, that should not serve as a basis for stopping progress, nor engaging in wishful thinking about bring shipyards back to the East River. How about a movement to "bring back the farms"? I am supportive of programs to retrain people to adapt to transformations in the economy, but that is not what people are talking about here.

Moreover, as I said above, some of these arguments lack any historical or economic perspective. I hardly think that China is an "economic juggernaut" as a simple comparison of their GDP-per-capita with ours will reveal. Taking over the low-hanging fruit of cheap manufacturing labor is hardly an economic coup. In addition,it seems that China does not have the business class that is ready to move up the economic ladder, as the Japanese did years ago. Can anyone on this post name one Chinese Brand that has planted its image firmly in the mind of consumers, as the Japanese and Koream firms had done years ago(and effetively, I might add). The real money these days is in marketing, services, distribution, etc., not in paying slave-like wages to manufacture cheap toys. The US has created whole new economic sectors in the past 20 years. Where is the Chinese, Japanese or European version of Google, E-Bay, Intel, Apple or Microsoft? Answer: they do not exist.

Finally, I can tell you that the de-industrialization that folks lament here is happening on an even grander scale in Japan and Europe, despite (or perhaps because of) their protectionist and xenophobic urges. I go to Japan often to visit the home office for my company, and whole industrial cities are emptying out there, much as cities like Youngstown and Cleveland are doing here.

A little perpective, please.

Posted by: benson at August 26, 2008 5:14 PM

Folks;

Some interesting points raised. My response:

Lurker in the mist: perhaps I'm reading too much into it, but I do think there is some sentiment among some of the Brownstoner crowd for trying to return Brooklyn to some semblance of its industrial past. It is not so obvious in this story, but read the posts on a recent article about the theory that the land that IKEA stands on could have been put to better use as a ship repair facility.

I will concede the point to you and MFS that I am talking about global manufacturers, as this is the world I know. I really can't say anything intelligent about mom-and-pop manufacturers, as I've only dealt with them in a few instances. I do have two questions about them: do they really pay middle-class wages to their workers, and can you really build a substantial economy with them in a city like NYC?

Denton: I have to disagree with you about marketing. I'm not just talking about the relatively simple task of advertising. I'm talking about what it takes to build a brand that means something to consumers. When you see the words Sony or Google, they mean something to you. Compare that to brands that have been allowed to decline, like Zenith, or Magnavox. What do they mean to you today?

I've spent 15 years in engineering, 7 years in sales and now 3 years in marketing, and I believe that true marketing is the must sublime of the skills a company can possess. It's like watching a master play an instrument: it looks easy, but it is not. It is my belief that the Chinese presently do not possess what it takes to build up a brand image. If you want to understand why, I recommend that you read Francis Fukuyama's book "Trust". The tile is a clue about the key ingredient that is missing from China today.

Posted by: benson at August 26, 2008 10:51 PM