Bad Times for Plant Closings

By Margie Burns

Nowadays Plant Closing News, a newsletter on the closings of manufacturing plants that comes out twice a month, reports on 30 to 35 plant closures in each issue. Thus there are about 700 to 800 plant closures per year, a sad statistic but not too surprising for economic hard times when one would expect plants to be going out of business. Surprisingly, however, the rate of closures was much greater in the seemingly good years: In 2007 and 2008, the newsletter reported an average 50 to 60 plant closures every two weeks and sometimes as many as 75 per issue, according to the publisher. Thus in the last years of the real-estate boom there were nearly 1,600 to 1,700 plant closures per year. As Jon Clark, who publishes the newsletter, has observed, the US had more plant closings in the boom years than there are now, in a struggling economy.

In June 2011, 58 plants were closed by 57 companies. Metal products led off the endangered-category list, with 17 plants closed in June, followed by food products and paper/pulp products, each with nine plants closing. The first issue in July reported another 33 plants have closed, including seven plants for metal products and six for food products. California tops the list of states with the most closings recently, with 17 plants closing thus far this summer. Tennessee and Texas tied for second with five plants closing in each state in June and July.

These are sad numbers by any accounting. Clark, who is non-partisan but concerned about the fate of the working people involved, has a hypothesis on why more plants closed in good times: “I suspect this has to do with having money available to close plants and take [tax] write-offs in good times” and not wanting bad PR in bad times.

Other hypotheses are tenable. The grimmest is that so many plants have already closed that a slowdown in numbers is inevitable. There are proportionally fewer plants left to close.

A related possibility is that plant closings are part of the larger trend of consolidation of wealth at the top and ownership in fewer and fewer hands over the years, and again much of that consolidation has already taken place. One could also hypothesize that some of the same factors driving the mortgage-derivatives boom drove the decline in manufacturing. The feverish speculating and rapacious practices unleashed in the financial sector never did translate into Wall Street purchases of dying plants to revive them. Quite the contrary: Hundreds of billions of dollars that could have gone into American manufacturing, info technology, engineering, research and development, arts and music went, by and large, into purchasing subprime mortgage-backed bonds or bonds backed by those bonds. The fortunate few who benefited were either CEOs who received golden parachutes from the companies they ruined, or large investors who purchased insurance against the subprime derivatives.

There are no golden parachutes for laid-off workers. American business too often copies former GE CEO Jack Welch’s philosophy of being #1 or #2 in a market or getting out of it — and letting the bottom 10% of your people go every year to upgrade your work force. That may work for GE, but it’s lousy policy for the USA. It puts way too many people out of work and we end up having a large built-in unemployment problem.”

Clark adds, “I just don’t think anyone is doing the overall economics of what it costs us as a nation to export manufacturing jobs from 10,000 closed plants.”

If the plants averaged 100 employees, then the closings leave one million out of work. Paying each of these workers $10,000 per year in unemployment, in turn, costs “the US taxpayers and business $10 billion per year - -just so GE or Wal-Mart can have a bigger profit, larger market share or leaner employment figures!”

In this context, it is significant that Wal-Mart now employs some 100,000 Chinese in manufacturing, doing jobs mostly exported from the US. Ironically, our (taxpayer-funded) Supreme Court handed Wal-Mart a windfall in the billions in June. Thus the company can continue to sell Chinese-made goods, on the cheap, to unemployed and underemployed Americans, with a profit margin undented by either equitable taxes for the public or equitable salaries for its employees. There is no credit default insurance for the failed manufacturing policy of exporting jobs.

It is also significant that the project of compiling data on which US manufacturing plants are closing their doors in which industries, and how many, with what loss of employment, fell by default to a private entrepreneur. Many countries would gather that information as part of the social contract that is legitimate government.

In this country, where the mass media sometimes dismiss information-gathering as bean-counting and sometimes hype it as next thing to communism, the information has fallen by the wayside — except for people who happen to know someone who has been laid off, or who happen to live near a factory that has been closed and abandoned. But then, we have a major political party that is keeping its well-funded leadership in office by screaming about “protectionism” (or “socialism”) any time an administration actually tries to keep working people in their jobs.

Margie Burns writes from Washington, D.C. Email margie.burns@verizon.net.

From The Progressive Populist, August 1, 2011