October 27, 2008

THE SLOW DEMIZE OF THE ECONOMY OF THE USA                       

     I am not an economist, I am a manufacturer and as such I must make decisions about the most efficient ways of producing that which I make and sell. At this time Wiggy’s is for all intents and purposes the last manufacturer of sleeping bags in the USA. There are two or three companies that make down sleeping bags, however I product each week as many or more than they do combined in a year; therefore I think of my self as the last manufacturer of sleeping bags in the USA.

     The reason I am the last one here is because all of the other manufacturers closed their factories in the USA opting to become marketing companies and paying some one primarily in China to produce their bags. This can be said of their lines of clothing or it can be said of a myriad of products. When this took place in all industries over the past 40 years, not necessarily with the production in China, people working at these firms were laid off permanently. Initially it appears that only a small number of people had to find new jobs, but that was not the case. Over the years with so many manufacturers of clothing and other related textile products opting to get products made in Asia the suppliers to these factories found that their customer base was eroding. The end result was the closing of almost all of the weaving and dying and finishing plants. More people were laid off permanently.

     I can no longer buy the primary nylon taffeta that I have used for 22 years from a USA supplier. Even though I purchase several hundred thousands yards a year it is not enough to justify a textile mill to weave it for me; so I am forced to buy from a USA company who gets his fabrics woven in Asia.

     It is irrelevant the industry the bulk of what we buy may be assembled in the USA but the components may come from some place else in the world. The number of jobs initially lost to production in the USA that went some place else in the world must be in the millions. Will these jobs ever come back; conceivably, but doubtful. We in the USA are not alone, it is also happening in Europe and probably Japan. Business owners are relentless in their pursuit of a more profitable environment. They just do not on a whim close down a factory. There has to be an economic motive, and that motive is better profits.

     If manufacturers like me move off shore the suppliers follow, if one of these or several of these manufacturers decide to come back to the USA there suppliers will not, or at least will not until and unless there is justification to do so. It would be expensive to setup a textile weaving plant; i.e. it would have to be profitable.

     I personally do not see that happening in the distant future or at all. The reason is government. We business owners must deal with a variety of rules and regulations not to mention taxes that when figured into the costs of manufacturing make our products more costly than what it takes to make the same products in Asia.

     Wiggy’s is unique in the fact that I have proprietary machinery which would need to be sent to Asia if I wanted to produce my products there. The machinery is vital to me to keep the cost of manufacturing reasonable. Therefore, I purchase as much of my raw materials made here.

     In view of the fact that so many manufacturers of finished product have left the USA that has caused the bulk of their suppliers to follow suit, all jobs that I do not see returning.

     When a country rids it self of its manufacturing base and just relies on being a service based economy it declines, as we are beginning to see. The effects of the move to produce outside of the USA have taken several years to develop but develop they have and we have only one entity to blame; government.

     In November 1967 Ayn Rand published CAPITALISM: The Unknown Ideal. One of the essays is titled “Let us Alone” “Laissez-nous faire”. Much of what I will have written here comes directly from the article. I will bracket what comes from the essay.

[France in the seventeenth century, was an absolute monarchy. Her system has been described as “absolutism limited by chaos.” The king (Louis XIV) held total power over everyone’s life, work, and property—and only the corruption of government officials gave people an unofficial margin of freedom.] At that time France was the [leading power and cultural center of Europe.] France had national goals that cost money.[The fiscal policies of his government led to a chronic state of crisis, solved by the immemorial expedient of draining the country through ever-increasing taxation.] Does this sound familiar? Taxation by government did not start with the USA.

     [Colbert, chief adviser of Louis XIV, was one of the early modern statists. He believed that government regulations can create national prosperity and that higher tax revenues can be obtained only from the country’s “economic growth”; so he devoted himself to seeking “a general increase in wealth by the encouragement of industry.” The encouragement consisted of imposing countless government controls and minute regulations that choked business activity; the result was dismal failure.] Does this sound familiar?

     [Colbert was not an enemy of business (no more than those who would like to be our administrators elected in the current presidential election.) Colbert was eager to help  fatten the sacrificial victims—and on one historic occasion, he asked a group of manufacturers what he could do for industry. A manufacturer named Legendre answered: “LAISSE-NOUS FAIRE!” (“LET US ALONE!”)

     There is more to the essay and there are more essays, actually I recommend acquiring the book.

     The point being we have two candidates who would like to be the next president of the USA. Each claims to know how to resurrect the economy of the country, actually neither knows how to do that. If they did then the current president would also know, but they don’t. The answer is capitalism, pure and simple. It is readily explained in the book I am recommending. Politicians say anything that they think will help them get elected. Whoever is elected will be inheriting “a chronic state of crisis” and in one case the candidate is honest in saying he will increase taxes, if elected, he also says he will only increase it for the wealthiest of us; therefore the productive; i.e. the men of the mind who make everything possible will be penalized for their ability. If elected those who voted for him and are not among the wealthiest will find out he wasn’t what they wished for. The other candidate says he won’t tax us and that will encourage businesses to hire more people. He doesn’t consider that even if taxes are low it does not mean businesses will hire more people, unless of course there is a need for more production.

     As for me I would like for government to LEAVE US ALONE, so we who own businesses can do what we do best “trade”. After all buying and selling is trading and we can do more of it if we are LEFT ALONE.

     We would benefit the government because the more successful a company is the more taxes it pays.