Play-Doh Returns

Well, it certainly isn’t the type of manufacturing activity that will ever employ thousands of American factory workers. And yet it is expected to create twenty new jobs for blue collar workers in the United States.

What is this activity? Hasbro, the Rhode Island based toy company, has decided to return Play-Doh production to America. The firm recently announced that it will contract with a foreign owned Massachusetts based facility to fabricate the goopy toy.

That’s not to say that Hasbro is actually shifting any of its existing Play-Doh supply stream away from its overseas vendors. Instead, it plans to utilize its new American made goods to supplement its Chinese and Turkish made inventories.

Should Americans be proud, or be embarrassed, that their nation is now competitively positioned to compete with China and Turkey for Hasbro’s Play-Doh manufacturing business? On the one hand, some may believe that any growth in production work will inevitably boost the national economy.

But on the other hand, others may believe that this business is precisely the type of simple-technology and limited-employee activity that more comfortably fits an emerging economy than an advanced economy. Indeed, at a time when China is striving to shift its economy towards the production of more advanced technological products, the return of Play-Doh to the United States may represent a portent of a backsliding nation.

Cruise Ships, Airlines, and Flags of Convenience

It’s been a rough few years of sailing for the ocean cruise industry, hasn’t it? From time to time, hundreds of passengers have become violently ill, basic sanitation services have ceased to function, passengers have fallen overboard, and a vessel has capsized while its captain fled in a life boat, leaving guests and crew members behind to fend for themselves.

Why do such ghastly events continue to plague the industry? Some attribute this track record of catastrophe to the common business practice of registering ships in small nations and flying their “flags of convenience.” There’s a reason why Panama, Liberia, Malta, and the Marshall Islands lead the world in ships registered; some suggest that their business friendly regulatory policies attract shipping companies to their shores but then contribute to the lax internal controls that enable crisis after crisis.

If you’re relieved that this practice of “flags of convenience” has been restricted to the cruise ship industry, you might be concerned to learn that the airline industry is now considering its implementation as well. The budget airline Norwegian Air Shuttle (NAS) has applied to register its Operator’s Certificate in Ireland even though it intends to maintain European bases in Scandinavia and Britain.

The Air Line Pilots Association is vigorously opposing NAS’s plan, calling it an “attempt to dodge laws and regulations …” According to the ALPA, “If NAS is permitted to pick and choose the countries in which it establishes its subsidiaries … U.S. carriers will be put at a severe competitive disadvantage because the United States has one set of laws and regulations for all of its airlines …”

Of course, the practice of business registrations in small, industry friendly locales is not confined to the transportation industry. In the financial services industry, regulatory tax havens have sprouted in nations like Andorra, Cyprus, Monaco, Panama, and Switzerland. And even within the United States, tiny Delaware dominates the other 49 states in public corporation registrations.

Interestingly, however, the Norwegian Cruise Line is currently operating a single vessel with a United States registration and an American crew. The ship, known as the Pride of America, is attempting to offset the significant costs of U.S. regulations by attracting the interest of patriotic American passengers.

The Pride of America is the only large cruise ship in the world that flies an American flag. If you were the President of Norwegian Cruise Lines, would you consider registering additional cruise ships in the United States?

Look Who’s “Committed” To American Manufacturing!

Can you guess which corporation hosted a summit last week to discuss its “commitment” to leading a renaissance in American manufacturing?

Boeing, perhaps? Or Exxon Mobil? Or General Motors?

No … it was Walmart! The world’s largest retailer gathered 500 suppliers and numerous government officials in Orlando to promote and coordinate its current “Made In America” initiative.

Can you detect any irony in Walmart’s announcement of this project? The retailer, after all, arguably bears more responsibility than any other firm for the shift of American industrial capacity to China, particularly in the consumer product sector.

It would be wrong to dismiss this conference as corporate propaganda, though. In fact, several global economic trends now favor a pronounced shift in production from China to the United States.

The first trend involves energy. America is poised to become the largest producer of energy on earth. Although the advent of fracking invokes significant environmental risks, a large and growing market of locally produced energy can dramatically reduce the cost of domestic production.

The second trend involves technology. Noteworthy advances in robotics and other industrial sciences have minimized the need for human labor in production processes. Thus, although American wages remain higher than Chinese wages, United States manufacturers are “getting by” with fewer and fewer labor hours.

The third trend involves labor supply. Whereas Chinese manufacturers are grappling with immense labor shortages that are driving up wages, American manufacturers are operating in a business environment with high rates of unemployment and stagnant wages.

Thus, although American manufacturers are “making do” with far less human labor and far more technology than in the past, the rate differential for the work hours that cannot be eliminated is narrowing between the nations.

In other words, several explicit economic trends are driving the new competitiveness of America’s manufacturing industry. As a result, although Walmart’s Made In America campaign may be immersed in patriotic overtones, it is actually based on a strong fundamental business strategy.