When is “Made in the USA” actually made in the USA?
Made in the USA. Fabricated in the USA. Assembled in the USA. Proudly Designed in the USA. Over the last five decades, these labels have popped up on everything from clothing tags and iPhones to heavy gauge steel pipe and hand drills.
From a pure sales perspective, “Made in America” has become big business. In fact, 64% of Americans older than 65 said they would spend more money to purchase domestically made goods, according to a report by market research firm Penn Schoen Berland. The number dips slightly as age decreases, but even in the 18-34-year-old range, 43% say they’d dish out more dough if it meant supporting domestic products.
As jobs have shipped overseas to places like China and India, and the quality of products has plummeted as a result, it’s not hard to understand why Americans would want to support American-made. But what does this trend signify for the future of American-made, and in particular domestic manufacturing?
To find out, we turned to Dan Dimicco, former Nucor CEO and author of the book, “American Made: Why Making Things Will Return Us to Greatness.” As one of the most respected leaders in the industry, Dan’s a man on a very serious mission: to right America’s economic ship by putting the manufacturing sector back to work.
His book aims to empower Americans to become champions on the issues facing the country, and to get their elected officials on board to “do the right thing.”
For Dan, “the right thing” is to get the country back on the path to creating real wealth by innovating, making and building things. He says the problem started when Americans bought into the idea that we can practice free trade and the rest of the world would follow us, when in fact, they didn’t.
A series of bubbles
Starting in the mid-90s, the emphasis on making things in the US waned, ushering in an era that Dan calls the “something-for-nothing” mentality. What he means by that is that our rush to make short-term profits has created a series of economic bubbles that built up, only to burst, leaving messy disasters in their wake.
“We moved from a country where manufacturing was 30% of our GDP in the 1990s to today where it’s somewhere around 10 – 11%,” says Dan. “What we need to realize is that manufacturing has always been the strength of our economy and our ability to make things is what’s allowed us to become a world leader.”
To illustrate his point, Dan says as we moved away from manufacturing, we saw the first bubble hit the savings and loan industry, followed in the late-90s by the now infamous dot-com bubble. “That was rapidly followed by the distortions in the accounting circles to make profits look like they’re there when they’re not by hiding debt and crossed-off balance sheets at companies like Enron, WorldComm and Tyco,” says Dan. “And they all self-imploded and we lost major accounting firms. New regulations and laws were passed that would hamstring us in the future growth of our economy.”
After that, we saw the real estate bubble of the mid-2000s and then of course, the devastating financial crisis, of which we’re still feeling the impact. “What they did was they took pieces of paper that were worth $100, cut them in two and said they were both worth $100. Then, they marketed them around the world and that all self-imploded,” Dan explains.
And even though it appears Wall Street is on the mend, Dan says it’s a false sense of security. He calls the current state of Wall Street the “lesser of all evils in the world,” as interest rates are basically at zero and retirement incomes that have historically depended on reasonable returns are not getting anything. Pair situations like those with a reckless industry and Dan says we’re building up toward another bubble that will cause disproportionate harm to the middle and lower classes:
“There’s a real wealth gap in this country because of this focus on a false economy of financial services and gimmickry instead of the sound, fundamental core values of taking something from nothing. You grow a strong middle class by creating, making and building things as opposed to playing manipulation games with money in Wall Street,” he says.
Putting people back to work
To begin to fix the problem, Dan says we first have to be honest with ourselves that the free trade model is a failure. “In the book, I’m specifically talking to the people who say, ‘There’s no going back, we are where we are and we can’t recoup what we lost,’” Dan says. “To those people, I say what Nucor has epitomized throughout its 50-year history, which is: ‘Tell those who say it can’t be done to get out of the way of those who can do it and are doing it.’”
After admitting that free trade won’t work, it’s then time to get back to what Dan says is the only way to create a strong middle class with real wealth: by backing investments that create opportunity and bringing back manufacturing, starting specifically with the low-hanging fruit of infrastructure. The American Society of Civil Engineers reports that we have a $3 trillion shortfall on our nation’s infrastructure in regard to our roads, bridges, airports, ports and air traffic control systems. “That’s not a political body by any means,” says Dan. “They’re engineers who look at real problems and come up with real solutions.”
He says that while it would be impossible to retrain the 8 million people currently out of jobs, it’s not impossible to put them back to work in the sectors that they’re trained in, which just so happens to be the manufacturing space.
“That’s always been what’s happened in previous recession cycles that we’ve had. As the economy gets better, people get back to work. 80% of the jobs lost in the country were tied to manufacturing and to construction, so the solution is to rebuild our manufacturing sector and create the jobs that people have the skills for. And where there’s a skills gap, get people trained to catch up, but that’s only 10% of the problem, not 100% as it’s made out to be,” Dan says.
The downfall of the global steel industry
However, getting people back to work isn’t the only issue America faces. To zero in on just one sector like the steel industry, we start to see how the US economy faces internal and external pressures that make it difficult to be successful.
To understand how the steel industry is where it is today, we have to look back at the early-2000s when the global industry banded together to get governments out of the business. ArcelorMittal was instrumental in this push, and the industry went from around 55% government-owned globally to one that was 15% government-owned.
“So now you had a situation where everyone involved was going to be profit bubbling and they would run their businesses based upon market forces that said grow your business or not, and cut your costs and raise your prices, if your market allows you to. And if it doesn’t, make sure your cross-structure allows you to survive,” Dan explains. “We were well-positioned as a global steel industry all around the world, including the US, to have a very profitable future, and yet provide a very important product to the economies of the world because steel is in everything.”
So what happened?
In a word: overcapacity. In 2000, the Chinese government decided that it would make steel a strategic industry instead of one driven by market forces. In order to grow their manufacturing sector, build infrastructure and put their people to work, they needed to have massive steel making capabilities.
“Instead of saying to the world, ‘Come and bring your steel to us, and help us to build the China of the future,’ they said, ‘We’re going to create a strategic industry. All the steel companies are going to be government-owned and government-subsidized, energy-wise and debt-wise. We’re going to have currency manipulation that allows you to export your product to the world, while we grow and start to use the product here in China,’” explains Dan.
And he says because political forces – not market ones – drove this move, the Chinese built massive overcapacity. “They went from 150 million tons of steelmaking to a billion in 13 years! It’s an amazing feat, but it put us right back in a position where 60% of the global steel industry was government-owned,” he says.
Until this issue of government control is neutralized, Dan says steel will always have a bad name because the overcapacity destroys profitability and shrinks the size of the industry outside of China. Even though there are many companies doing it right – utilizing technology, analyzing how people work together, taking ownership and leading by example – it doesn’t matter. “No matter how good you are, if you’re on a sinking ship, you might be on the top level and be out of the water, but the ship is still sunk and it’s not going anywhere. That’s the position that the global steel industry is in,” Dan adds.
Remaining hopeful for change
Still, despite these tall orders that Dan’s calling for – to get Americans back into manufacturing, into building things, into pressuring China to regulate itself and into encouraging the next generation to get on board – he’s still hopeful. He believes that if Americans puts our minds to it, we can make anything happen. “That’s what this country has been based upon. Facing tall orders, head on, realistically and coming up with a solution and game plan to overcome,” says Dan.
As for his parting remarks? “Never say never. This idea that we can’t be a straight nation again and we can’t rebuild our economy to be strong and provide jobs and grow our middle class, and we can’t become a manufacturing giant in the world again? That’s all loser talk! And losers need to get out of the way of the people making it happen.”