Tagged: Manufacturing

Its Time for Responsible Investment in Manufacturing, Community Development & Clean Economy Growth

I’d like to share a piece written by Marco Trbovich from Tricom Associates, Inc. on the Responsible Investment Forum I attended on February 22nd in Atlanta, GA in conjunction with the BlueGreen Alliance’s Good Jobs Green Jobs Southern Regional Conference.  This forum was put together by Thomas Croft from Heartland Capital Strategies and author of Up From Wall Street (definitely a must read).  Also special thanks to the Emerald Cities Collaborative and Emerald Cities Atlanta in coordinating the days events.  Overall I found it an invaluable experience, and I am looking forward to continuing the discussion as these forums move on to Los Angeles, Philadelphia, and Detroit

This piece originally appeared on Heartland Capital Strategies, and has since been reposted by the AFL-CIO, Huffington Post, and others with the title: Atlanta Mayor Joins Heartland Forum to Urge Investments in Sustainable Economy.  Many thanks to Marco Trbovich, Vice President of Strategic Communications for Tricom Associates for writing this up.  Give it a read, and give some thought about how the investments you are making for your future might be able to be put to better use.

Atlanta Mayor Kasim Reed led a presentation on his city’s initiative to retrofit a wide range of commercial, public and residential buildings in a 400-block area of downtown that proved the highlight of a gathering of investors, pension fund managers, business, labor and community leaders at Heartland Capital Strategies’ first Responsible Investment Forum.

Mayor Kasim Reed

The forum, sponsored in collaboration with the Blue Green Alliance, addressed the need for greater alternative investments to sustain the real economy, an investment arena largely abandoned by Wall Street.

In contrast, the responsible investment specialists attending the forum were characterized by Heartland Managing Director Thomas Croft as “a community interested in forging a new alternative path for responsible investment in manufacturing, community development and clean economy growth,” an approach that Heartland brands as “doing well by doing good.”

Mayor Reed urged forum attendees to consider investing in the Better Buildings Challenge, the city’s retrofitting initiative to create a more sustainable economy, improved air and water quality and job growth.

“Capital goes where it is needed and stays where it is well cared for,” he told the gathering. Aided by staff of the Better Buildings Challenge and the Emerald Cities Collaborative, the Mayor provided a comprehensive presentation on how investments in the project would be managed to minimize risk.

Many of the participants in Heartland’s one-day forum committed to further conversations to discuss possible investments in the Atlanta project, which hopes to put many of city’s 57,000 unemployed union tradesmen to work in the massive undertaking.

Financing a Sustainable Economy

The Atlanta forum was the first of four being sponsored by Heartland Capital Strategies in conjunction with the Blue Green Alliance’s Good Jobs, Green Jobs regional conferences. Inspired by the United Nations Principles for Responsible Investment (PRI), Heartland promotes investments and projects essential for revitalizing America’s productive economy and community prosperity.

Heartland’s commitment to responsible investment is based on the United Nations ESG principles, which call for investors’ attention to environmental concerns, social well being, including respect for labor rights, and the character of corporate governance, as well in addition to rates of return.

Throughout the day, forum presenters shared innovative ideas on how responsible pension investors and fund managers could maintain high rates of return while directing alternative investments toward domestic job creation in energy, manufacturing, housing and infrastructure, clear social benefits that derive from responsible investment.

Craig Overmyer, Managing Director of Hopewell Ventures, cited the complex challenges facing efforts to fund innovative alternative investments that stimulate job growth. He characterized sustainability as creating “an eco-system that keeps going,” which requires the considerable task of identifying gaps in the market and finding solutions for that gap.

“You have to identify a problem and the constituents so that you cover all your bases before the decision on the investment arises. You have to match returns of competitors and then you must lead by finding other constituent leaders” willing to advocate for ESG principles.  To overcome the fits and starts in regulatory and tax policy that hinder alternative investment, he added, “We need a national energy policy to establish continuity and consistency in policy and regulation.”

Jennifer von Bismarck, President of Towpath Renewables added that the current U.S. map of states with Renewable Portfolio Standards “looks like 29 different countries,” which she said made it especially difficult for investors and pension funds in particular to assess ROI and long-term viability.

Ups and Downs of Investing Responsibly

Landon Butler, who founded the $5 billion Multi-Employer Property Trust (MEPT) in 1982, offered a compelling overview of the explosive growth in construction investment trusts, financed by construction union pensions, since passage of the 1968 Fair Housing Act.

Mayor Kasim Reed

While working as President Carter’s deputy chief of staff, Butler said he gained a great respect for collective bargaining’s role in securing pension savings that represent a substantial source of investment capital for nourishing the nation’s job growth and retirement security.

“Somehow the social component has gotten lost in the process over the years,” he concluded, “at a time when there is a desperate need for jobs. We’re not sensing that [pension] trustees are looking at job creation, despite the substantial record of pension fund investments in creating them.” He allowed, however, that “trustees are shell shocked because of the downturn.”

Scott Woolsey, Managing Director of the Labor-Management Fund Advisors, added that trustees are not even recognizing the ancillary jobs that projects governed by ESG principles create. “It’s all ‘returns, returns, returns.'”

Innovative Leadership Crucial

Ted Chandler, Chief Operating Officer of the AFL-CIO’s Housing Investment Trust, noted that public funds have much less focus on targeted investment than in the 1990s, offering that “layers of gatekeepers” preempt focus on the ESG principles. Gatekeepers, such as investment consultants, “identify with the management perspective,” he said. “The real issue is leadership by trustees of pension funds in setting the agenda for investments.”

“Some consultants get it,” explained Mark Austin, Managing Director of North Sky Capital, “though they’re in the minority. Many consultants clearly don’t understand all the specific concerns of trustees. They’re focused on return without an understanding of all the other issues trustees have in their laps.”  Dan Givens, a pension administrator for the Miami Firefighters union, asserted that “trustee education is the whole deal, getting our people to get comfortable with their decisions, ” a daunting challenge, he averred, as the tenure of trustees in Florida is only three to five years, “so there’s little continuity.”

Trustee Training Crucial

The call for more substantial, ongoing training to strengthen trustees’ leadership role in advocating for ESG principles was voiced repeatedly throughout the forum. “One of our missions [in the International Association of Firefighters] is to educate trustees,” Givens said. “You have to have a platform for them to make the case for socially responsible investments. Build it and they will come.”

Bob Eason, former Vice President of the Savannah, Georgia local of the International Longshoremen, added that “it all gets back to education, and trustee education is now entirely captured by Wall Street.”

Deborah Nisson, Vice President of ULLICO added that fund managers need to understand that “public-private partnerships is not a four-letter word.” For the long-term nature of funds, she concluded, “we need to educate trustees on the value to their constituents and the real economy of including ESG principles in their considerations. Unions need to make the investment in staff and training.”

You can keep up with Marco Trbovich’s posts about labor, education, environment, politics and more on Twitter.

Economists Just Don’t Seem to Understand Manufacturing

Once again Clyde Prestowitz nails it in his blog over at Foreign Policy.

On Monday, Clyde’s post titled “Why don’t economists get it on manufacturing?” did what I’ve been wanting to do for a very long time: put the former Economic Advisers to President Obama in their place for not understanding economics.

Here is an excerpt, but please go read the whole thing, you’ll be much better off for it:

Writing in yesterday’s New York Times, Romer debunks the present wide concern over the decline of American manufacturing and the call by many, including the president in his State of the Union address, for tax breaks and other policies to help shore up manufacturing. She first notes that services industries are as valuable to the U.S. economy as manufacturing, emphasizing that consumers value haircuts as much as hair dryers and that earnings from exporting architectural plans to Shanghai are as real as those from exporting cars to Canada.

This sounds good because all industries have their value and no one wants to denigrate a particular industry or type of respectable work. But it’s just not true. Consumers may not value haircuts less than hair dryers but economists should. Production of hair dryers can be done in large factories that produce economies of scale. Such scale economies lead to lower prices, lower inflation, higher productivity and thus higher wealth creation for the whole economy. In addition, producers of hair dryers invest in research and development to foster innovation of new, more efficient, less energy using, and easier to produce dryers.

Now don’t get me wrong. I love my barber and want to be sure she stays in business, but her work doesn’t yield any of these benefits to the economy. It doesn’t have economies of scale, falling costs, rising productivity, or investment in R&D. So while I don’t want to lose my barber, I also don’t want to lose my hair dryer production unless it can be replaced with something that contributes equally or more to wealth creation. And I don’t see retraining the hair dryer workers to be hair dressers as a gain for the economy.

Clyde then goes on to point out several points about manufacturing that I have been blogging about over on the BlueGreen Blog, as have my colleagues Dr. Chris Busch and Michael Williams. He also does a great job of pointing out what the folks over at the Alliance for American Manufacturing have been saying all along:

U.S. proponents of manufacturing are not asking for special treatment or support that discriminates against services industries. They are merely urging that steps be taken to offset the market distortions being caused by the foreign industrial policies.

It’s no surprise that with people like Christina Romer and Larry Summers as economic advisers that it took President Obama until 2012 to get the message right.  It also makes me rue all the time this administration wasted following their bad advice.

In closing Clyde puts it best, and all economists need to realize this:

The point is that we should not have to make some false choice between manufacturing and services. We should be able to have both in those industries in which America can be competitive on the basis of prevailing market forces.

Now go read his whole blog.

The Makings of an Industrial Policy

Over at the BlueGreen Blog, you can read the piece written by my BlueGreen Alliance colleague Michael Williams and I.  The two of us offer our analysis of the President’s State of the Union, and offer some ideas how what he laid out last week can be improved upon.  Go check it out.

Let’s Make Our Future Not Trade for It

_____________

This blog post owes a lot to the work of Clyde Prestowitz & Kate Heidinger in an article they published in the Alliance for American Manufacturing’s (AAM) Manufacturing A Better Future For America called the Evolution of US Trade Policy, so please give it a read if this sparks your interest.  I revisited the above mentioned article yesterday after reading Matt Yglesia’s ill-informed piece on the President’s State of the Union over at Slate.  While I was getting my thoughts together I’m happy to say Scott Paul from AAM managed a great point by point rebuttal, which I highly recommend.

_____________

What do you actually know about US trade policy?  The more I read people’s take on trade issues, the more I am convinced people do not have a grasp on US trade policy, how we got here, and the economic issues surrounding it as it relates to manufacturing.

As the President spent a good deal of time talking about supporting domestic manufacturing in his State of the Union speech, it is important to understand why that needs to happen.

For nearly 60 years, the needs and interests of American manufacturers took a back seat to the country’s geopolitical interests and the interests of the U.S. financial sector.

After World War II, the victors re-established financial order via the creation of the International Monetary Fund, which subsequently created a world dollar-gold standard. What this meant was that now, in order for world trade to recover, there now had to be a steady supply of dollars.  The Marshall Plan created a strong US government emphasis on buying abroad and opening the US market in order to increase the supply of dollars circulating in the world.

In the post war era, with the evolution of the General Agreement on Trade and Tariffs (GATT), most favored nation status, and the concept of “national treatment”, US policymakers assumed that the US industrial and technological dominance would continue on into the future.

The “trade not aid” mentality that dominated at the time did not see the “aid packages” going to Europe and Japan as part of trade agreements providing an unfair advantage, but as strategic consolidations of a post war that could stand up to the Communist bloc and help rebuild the war ravaged economies of Europe and Asia.

Unfortunately, these trade agreements made the economies of scale of the U.S. market available to overseas producers while the US obtained no reciprocal market access.  Essentially US negotiators created a structure that increasingly put U.S. manufacturers at a disadvantage.

The United States saw a rapid increase in imports, cheap foreign imports had an adverse effect on domestic industries, and certain countries realized they could receive all the benefits of a trade agreement without paying any of the costs, and as a result, the US remains exposed to a flood of inexpensive imported goods.

During this time the United States lacked any overarching economic strategy.   Public policies designed to support U.S. industry were random in their application, ill-conceived and usually ineffective at helping domestic manufacturing become more competitive in the global market.  Policies designed to promote consumption-based growth combined with asymmetric trade relations led to massive imbalances in global trade.  As a result the United States has accumulated a colossal trade deficit with nearly every major trade partner since about 1970.

On Tuesday we heard President Obama give a State of the Union speech that signaled a reversal of the policies that lead us to where we are.  The polices laid out in prior State of the Union addresses of both preceding Republican and Democratic administrations laid out policies of unilateral free trade that were unconcerned with the structure of the U.S. economy and what it produces and provides.  There was a general disdain of industrial policy that supports specific economic sectors like the auto, transportation, and clean energy industries.  Prior to Tuesday all the emphasis of Presidential rhetoric focused on the service sector and financial industries as the future of the U.S. economy.

In my opinion the President’s vow to get tough on unfair trade practices is welcomed but it is also long overdue.  The United States should have put equal focus on enforcing trade laws as it has opening new markets. I am happy to see the President creating a new trade enforcement group that would use investigators and other federal resources to combat unfair trade practices.

The change in the rhetoric coming from the President is refreshing, now I just hope it can change the culture in Congress and translate into some action.

For any of you as wonky as me that likes to read the details, check out The Blueprint for an America Built to Last.

State of the Nation

I woke up this morning with this song in my head:  New Order “State of the Nation”

Its been on a bit of an infinite loop all day, much like the world inside the beltway concerning President Obama’s read on it, which we will be getting to hear at 9pm eastern today.

If you find yourself a little curious about what is going to be said you can check out some behind the scenes footage the White House has put up.

Expect a lot on building a better America, American manufacturing, and ensuring our energy future – all things I find myself talking about quite a bit.

I’m interested to see how much this State of the Union (SOTU) address is going to come out swinging with an eye on the campaign trail, however I’m more interested in seeing any favorable rhetoric backed up with sound policy decisions and the will to implement them.

More to come…