The “accepted truth”

By Ilya Galak and Michael Califra

“Manufacturing is more than just putting parts together. It’s coming up with ideas, testing principles and perfecting the engineering, as well as final assembly” – James Dyson

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“Crony Capitalism today is an outsourcing of American jobs plus walmartization of the whole country” – IG

 

The “accepted truth”

For years, the accepted truth has been that American-made products cannot compete with products made in China or other low-wage countries. The “accepted truth’ is a myth. The true cost of any product or material is more than just the cost of manufacture; it also includes the cost of delivery, in addition to the added costs of middlemen as well as corrupt politicians and agencies along the way.

Hypothetical case example

As an engineer (Ilya Galak), I would like to tell you a little about how construction is done under the City of New York.

Consider the following example: A private developer using union labor, “Made in USA” parts and materials, meeting all NYC code requirements, erects a small building for a total of $1 million.  In the next example, a New York City Agency erects the exact same building, with the same union labor, but with Chinese-made materials — for total cost of approximately $1.8 million. Nearly twice as much as the private developer, yet the City uses Chinese-made materials.

Why is there such a big gap in the prices? Why does it still cost so much if Chinese materials are used? Where is that 800K going?

Photo credit: Ilya Galak

Photo credit: Ilya Galak

Where’s The Money Going?

For one, the specifications written for City agencies have gone unchanged for at least 30 if not 50 years. These specifications are ludicrously more demanding and costly than the general NYC building codes (which is already more demanding that U.S. federal building codes).

A lot of money and labor goes wasted on “Sisyphean” work, that is to say work that is absolutely not needed and serves no purpose. Why not instead let City agencies build according the same NYC codes private developers abide by and put the savings into purchasing American-made materials?

I think it has in large part to do with human psychology. No one in their right mind would want to make out city less safe by lowering building codes or safety standards. But bureaucrats and politicians often don’t understand much about construction; they wouldn’t know whether additional codes that add to the cost of construction actually bring anything in terms of safety – much less whether piling new codes onto of older ones is a good idea.

Crony capitalism

Another reason for the added expense of City construction is simply crony capitalism (i.e. simple corruption).There are groups who use their connections and friends in government to make sure they get lucrative contracts that cost the City much, much more than they would in a free market setting.

The City and its agencies keep lists of approved vendors; and the sad truth is that a lot of them are foreign. Let’s also not forget that the contractors who do the work also get the same favoritism. Many of these contractors belong to the Chinese government. Google it, and see for yourselves. Another sad truth: Our City government is paying extra for Chinese parts and services when there are plenty of American, and often LOCAL contractors right here in the City and State who could offer a lower price.

What to do?

What we at MCAP hope to do is cut down on that $0.8 million that is wasted. Not for just one hypothetical construction project, but for as many as possible across the city, state, country.

Imagine, all that money that is wasted on crony capitalists and Sisyphean labor can instead go towards our NYC economy and create good-paying jobs right here at home.

Enormous purchasing power

The truth is that the City , State and Federal governments have enormous purchasing power. If those dollars could be redirected back home, our manufacturers will not only get more business from public works, but the City, State and National economies would feel the effects of an enormous home-grown stimulus.

The State of MARS

THE MAIN GOAL of the Made in America Rating System (MARS) is to push the establishment of environmentally friendly assembly facilities in NYC / NYS.  A MARS rating is valid for one year only. The rating system can be changed each year, if required to bring more manufacturing jobs to NYC / NYS

With MARS of NY unique rating system could guarantee that the state’s consumers are getting what the product’s manufacturer is claiming.  It would use a 6-level grading system based on a domestic content percentage and place of assembly as shown below.

Rating:

“Empire State-AAA” Rating – the product is 100% “Assembled in NY” and 100% of raw material are American

“Empire State -AA” Rating – the product is 100% “Assembled in NY” and at least 60% of raw materials are American

“Empire State-A” Rating – the product is 100% “Assembled in NY”

“USA -100” Rating – the product is 100% “Assembled in USA” and 100% of raw materials are American

“USA 60” Rating – the product is 100% “Assembled in USA” and at least 60% of raw materials are American

“USA” Rating – the product is 100% “Assembled in USA”

 Important to remember:

  1. The true cost of materials = manufacturing + delivery + middle men + crony capitalism; not just the cost of manufacture alone.
  2. Construction: private developers using union labor, complying with all NYC codes, build much more cheaply than a City agency with its burdens of extra regulations and cronyism, even when the City uses foreign-made materials
  3. Main reason – many specifications for City agencies were written 30 to 50 years ago with new regulations simply piled on top of old ones creating complex and unwieldy building codes, which drive up the cost of construction while adding nothing to safety.
  4. MCAP (The Middle Class Action Project) proposes using the enormous purchasing power of New York City, New York State and federal Government to be directed toward American, and ideally local manufacturing, turning every taxpayer dollar into a stimulus that would ripple through every corner of the local economy
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