Out with the Old?

Harold Miller has a long "is too" post up arguing that MANUFACTURING (his word) is too really, really important to Pittsburgh's future. Read the whole thing.

I did, and I'm unimpressed. Here's why: The new manufacturing of the 21st century (which is what Harold describes) isn't the old manufacturing that built Pittsburgh in the 19th and early 20th centuries. Today's manufacturing, here and elsewhere in the U.S., is well on its way to becoming a high wage, professionalized, small employment base economic sector. I'm not an economist, but when I hear the word "manufacturing" I think scale. Manufacturing companies come in all shapes and sizes, but until they move toward mass production, they're custom or craft builders as much as they are "manufacturers." Twentieth century manufacturing companies are potential drivers of entire economies. Today's new manufacturing is important in its own right, but (to borrow an IT/early stage company metaphor) it doesn't scale.

Some of this dialogue is just semantics; MANUFACTURING (Harold's caps) has a strong nostaglic pull on western Pennsylvania and on old industrial cities generally.

But semantics intersect with economic vectors. We use language to express how we're pushing and pulling in one direction or another. Put another way, metaphors matter, and "manufacturing" is a metaphor. Is it important to the New Pittsburgh that the region be known for its manufacturing? Harold cites Medrad as a local "manufacturing" success story. I'm as enthusiastic about Medrad as the next person, but I classify that company as "high tech medical devices." That doesn't scale, either, in a classic manufacturer's sense, but when I describe the company that way, I stop imagining "one company to save us all" and return to imaginging lots of little Medrads.


3 Responses to "Out with the Old?"

Harold D. Miller said... 12/22/2006 7:21 PM

I'm not sure where you get the idea that manufacturing has to be about "one company to save us all" or that only manufacturing companies with large mass production facilities are worth considering as important for the regional economy -- that certainly isn't what I'm saying.

Similarly, I'm not sure why you dismiss small manufacturers as unimportant. Every big manufacturer that exists today started as a small manufacturer -- they didn't emerge from the patent office full-blown as multi-thousand employee companies. Not every small manufacturer will become large, but all else being equal, we are better off with multiple small firms than with few big firms, because our economy is then less at the mercy of the fortunes of one company or one specific industry (e.g., steel).

And you're really stretching a point to say that Medrad is a "high tech medical device company" but not a "manufacturer." Medrad will certainly tell you they are a manufacturer!

But all of that is really neither here nor there. The reason that manufacturing is so important is because, by and large, manufacturing firms are the core of the so-called "traded sectors" -- they import a lot of wealth into a region, because most of their customers are outside of the region. If a manufacturing firm grows in a region, it is unlikely to do so at the expense of another local firm. And when it grows, the dollars it brings in from other regions will in turn cause growth in other non-traded sector companies in the region, and that growth will also not be at the expense of other companies. On the other hand, without new dollars coming in from outside, growth in retail firms, local banks, small hospitals, etc. only grow by taking business away from another company. Manufacturing firms are not the only types of firms that bring in dollars from the outside, but they are highly desirable ones in terms of the quality of jobs they create and the multiplier effect they have. Tourism also brings in dollars from the outside, but do we really want to be an economy solely dependent on tourism (even if we could be)?

As I explained previously, you can't measure the importance of manufacturing by the number of people it employs directly. You have to measure its importance by the number of people in all firms, manufacturing and non-manufacturing, that depend on manufacturing firms' activities for their livelihood. Will the law firms here be unaffected if the manufacturing firms leave? (One just closed because Alcoa moved its headquarters to New York.) Will the accounting firms be unaffected? Will the United Way and the nonprofits it supports be unaffected? Answer -- no, they won't be unaffected. In fact, they will be affected in a BIG way.

This is not a debate about supporting manufacturing vs. something else. It's a plea to recognize the interconnectedness of the local economy. One of the most deep-seated problems in Pittsburgh is that everyone sees the economic pie as something stagnant or declining, and perceives that helping one sector means hurting another. The only way we will succeed as a region is to recognize that we all need to work together to grow the overall regional economy, and that means growing all of its (interconnected) parts.

Mike Madison said... 12/22/2006 10:39 PM

My post doesn't argue that manufacturers have to be big, or that only "one company to rule them all" matters. My post was about language and metaphor. The language and metaphor of manufacturing is a very different thing than the language and metaphor of a service driven economy. Choosing to emphasize the former can get in the way of appreciating the latter.

And a point about service firms, and especially law firms, that depend on local manufacturers: I haven't posted much directly about the local law firm economy in 2006, but two things are worth noting. One, the LeBoeuf, Lamb office didn't close simply because Alcoa relabeled its corporate HQ. LeBoeuf, Lamb closed that office because it didn't have enough non-Alcoa work to support itself. A more diverse practice would have survived. Two, all four of the major Pittsburgh-born law firms are now international legal conglomerates with no stronger ties to Pittsburgh than to several other places. K&L Gates, for example (formerly Kirkpatrick & Lockhart) explicitly says that it has no "home" office. The P-G recently carried a story about local boutique law firms teaming up with an international legal network that will function as a competitor to the thousand-lawyer firms. Changes to the local manufacturing economy may affect law firms, but wise law firms are already taking aggressive steps to make sure that won't happen. They, too, see that their future lies not in local manufacturing clients, but in clients of all types, all over the world.

Harold D. Miller said... 12/23/2006 8:45 AM

You are absolutely right on that score -- one of the least appreciated transformations of the Pittsburgh economy is how "traded" our service sector has become. Both K&L and Reed Smith are national/international in scope, Burt Hill (a architecture firm headquartered in Butler) has its largest office in Dubai, UPMC brings in patients from all over the world, etc., etc.

Manufacturing is not alone in being important in this regard, but by the same token, if you don't have it, your region has a much harder time growing than without it. The reason for emphasizing manufacturing is not because it is the only thing that is important, but because people seem to believe that it's already gone or has no future, and so it tends to get less attention and support than the other industries do.

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Pittsblog 2.0 is written by Mike Madison, a law professor at the University of Pittsburgh. Send email to michael.j.madison[at]gmail.com. Mike also blogs at Madisonian.net, on law and technology. Chris Briem of Null Space drops by from time to time.

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