by davelandryjr on September 28, 2013
Clothing has long been as much personal item as trading commodity, and its manufacture has shaped world systems, trade movements, and even pan-regional balances of power: English wool and Flemish mechanical looms directed flows of capital in the thirteenth and fourteenth centuries, and these in turn drew Europe’s political map accordingly.With the ‘discovery’ of low-cost East Asian manufacturing in the last few decades and the resulting offshore outsourcing (in reality, long a feature of world system theory and tracked by the likes of Ian Morris and Jared Diamond through the longue durée), the apparel industry followed where others led. Today world apparel exports total $200 billion per year.
Apparel Manufacturing Centers
It is significant that, were a map drawn according to the price point of manufactured apparel, cheaper options would cluster in the Far East (China, with 31% of the world’s apparel exports, dwarfs the US at 1%, according to the International Trade Center, while Bangladesh, Indonesia, Vietnam, and Hong Kong each command a significant share), while the more expensive manufacturers are led by Italy, France, Germany, and Spain and normally sell at considerably higher price points. Of the top 25 firms in “apparel, accessories, and luxury goods” in 2012, these European firms comprise 68% of sales and 77% of gross profits.
The demarcation by price point, then, superimposed upon a cluster distribution spread of luxury brands, maps in a relatively straightforward manner the two possible responses to the rise of offshore outsourcing: the first, taking advantage of the increased profit margin from the convergence of low-cost skilled labor, low-cost raw materials, and reliable transportation to move their manufacturing abroad, while the second calls for re-trenching and, on the one hand, relying on significantly higher price points that allow for higher profit margins, while, on the other, making their artisanal processes a principal part of the brand’s story. Hermès, in particular, comes to mind, though a number of initiatives (including the Made in Italy and Save the Garment Center campaigns) continue to re-assert the value of this Marxian approach to labor and production.
Though apparel manufacturing in the US has grown to more than 2% market share–yes, that is an export penetration of more than 97% of the apparel market–the jury is still out on the so-called demise of offshore outsourcing. Certainly, rising costs in China continue to make offshore manufacturing less attractive: predictions at The Economist, the Financial Times, the New York Times, the Huffington Post, and private firms all point to the inevitable demise of offshore outsourcing, at least in China. Meanwhile, complex trends in globalization continue to erode the local/global dichotomy that marks the analytic frame favored by economists; ‘reverse outsourcing’, for example, more than an ironic turn, is actually a shrewd strategy to profit from the very branding campaigns that seek to valorize ‘Made in Europe’ products against their foreign-made competitors.
Apparel Manufacturing in Los Angeles
While the Garment District in New York continues at the center of a real-estate/local manufacturing controversy, the apparel industry in Los Angeles now accounts for the largest manufacturing subsector of its kind in the country. Even as apparel manufacturing has taken on a 43% decline since 2001, that hit pales in comparison to the 63% downturn the industry has taken throughout the United States.
In fact, a location quotient study suggest that the 52,000 apparel-related jobs located in Los Angeles, which mostly comprise sewing machine operators, and account for nearly 10% of manufacturing in the region, has been steadily increasing due to factors of pay, location and popularity of the industry as a whole. In short, L.A. has 7.8 times the national average of apparel industry jobs compared to 4.9 times the national average. This surprising trend follows recent findings on metropolitan manufacturing centers: according to a recent Brookings Institute study, 79.5% of all manufacturing jobs in 2010 were located in metropolitan areas.
Some Positives, Some Negatives
This is impressive, particularly as many apparel jobs have moved overseas. But as the apparel industry continues to bring large economic resources to Los Angeles, the average worker–who makes $44,859 yearly–is less than $1,000 above the national average. Even so, apparel still searches out new workers as it continues to increase its workforce in manufacturing and other sub-industries like textiles. As of 2012, there are approximately 19,900 jobs in apparel manufacturing in Los Angeles, comprising 1.4% of total private sector industry employment.
Despite the increase in jobs, however, apparel lags behind other industries in Los Angeles, both in job creation and pay scale. According to a recent EMSI article, industries such as scientific and technical consulting services, port harbor operations and surgical and medical instrument manufacturing have, in most cases, doubled its workforce while provides much higher pay. The caveat to this, however, is that those employed in these industries are diverse and highly-skilled, with job performance requirements that far surpass the credentials, skills, and training required from a worker in apparel manufacturing.
The American Apparel Story
American Apparel is a unique clothing manufacturer with production facilities exclusively in Los Angeles. With a campus downtown and its flagship store up the Coast Highway in Malibu, California, the company has built a vertically integrated business model in which manufacturing, distribution and creativity is all found in-house.
Like many other US manufacturers, American Apparel is both cognizant and proud of the cost of local labor: much like European luxury goods manufacturers have turned labor costs into a value-proposition for their brand, so has American Apparel built their brand upon their vision of a ‘responsible capitalism’. The company pays its workers a minimum of $30,000 a year with benefits, as opposed to workers in Bangladesh who make $600 yearly and are, as you may know, at risk of horrifying catastrophes; the outlook is certainly grim. By contrast, American Apparel insists on training their workers for careers, not jobs.
The result has been a yearly profit projected to be in the $1 billion range, all centered around its production facilities in Los Angeles: by their estimation, the largest apparel-oriented manufacturing facility in North America. Not bad from a company whose principal selling point has been, for quite some time, its status as “Sweatshop Free” and “Made in Downtown LA.”
Their so-called ‘vertical integration model’ in particular deserves attention; at heart it is basically the time-tested manufacturing truism that, first, ownership of the entire manufacturing chain of production is a means to maximize profit margins, and second, that geographic concentration makes this both tenable and profitable. The key, however, is in the branding probabilities: the rhetoric through which this truism is communicated looks to the green movement, to environmentalism, and, quite explicitly, to responsible capitalism as a justification for its price point:
”When you buy a t-shirt from American Apparel, a smaller portion of the margins goes towards fuel, trans-ocean container ships, middlemen, boxes, pallets and entropy. Instead we’re able to spend that money on paying living wages to our workers, higher-quality materials for our garments, and investing in the future of our company.”
The rhetoric is gorgeous in its simplicity: environmental responsibility leads to responsible capitalism which justifies the product’s quality and, in turn, allows for the perpetuation of the model. The relationship is causal, and the implied result is a growing movement, a shift toward a better world, happier workers, happy customers, and so on.
This time, with a happy ending. Though apparel manufacturing will never re-capture a significant share of the US domestic or export market, in this case we find a happy merging of circumstances: in the midst of the offshore manufacturing crisis, a committed and savvy entrepreneur made a virtue of adversity. In the process, the resulting company contributed to make apparel manufacturing one of the top competitive industries in California (fourth, according to the LA Economic Development Corporation), that came to employ 19,900 individuals and participate not only in a movement toward responsible capitalism, but also contribute to the economic well-being of Los Angeles.
In collaboration with: Sebastian De Vivo, David Dorion
by davelandryjr on September 19, 2013
As policymakers continue to scramble in order to help along economic recovery, exports have been targeted as a key element in fueling this recovery. This insight–which Jean-Baptiste Colbert transformed into its own artform in Louis XIV’s France–has lately been targeted by the Brookings as central to their ‘Next Economy,’ which they describe as “one that is driven by exports, powered by low-carbon energy, fueled by innovation, and rich with opportunity.” Like Colbert, they suggest an increase in domestically-manufactured goods and the opening and development of new foreign markets for these goods.
As part of the Brookings-Rockefeller Project on State and Metropolitan Innovation, the Brookings targeted Los Angeles (along with Portland, Minneapolis-Saint Paul, and Syracuse/Center State) as a partner in developing a Metro Export Initiative, here a model to achieve the federal National Export Initiative’s goal of doubling US exports within the next five years.
Los Angeles is an obvious choice: not only does it have strong a strong manufacturing sector, it is also the nation’s top metropolitan export region and biggest port center. It is, in addition, highly diverse, well-situated, and a natural draw for a talented workpool (see RiFLart).
The Brookings’ Market Assessment found the following:
LA’s strength as an exporter is clustered in 10 industry sectors, which account for 82.8% of the region’s exports
LA-based companies show limited awareness of export potential
Assistance to exporting companies is required for customs and compliance, distributors, intellectual property protection, financing, and language barriers
Based upon these findings, they identified three core strategies for the program:
Establish the LA Regional Export Council
Focus upon industry sectors with high export opportunities
Market LA to the world
Though the strategies themselves seem to have suffered from ‘approval by committee’ (the first creates an intermediary agency to manage local initiatives, and the third to manage potential export markets, both of which are important but should hardly stand as cornerstones of the project), the program not only identifies ‘export-ready’ small- and medium-sized enterprises as key targets in this initiative, but it identifies specific industries as well. These are crucial:
Computers and Electronics
Energy and Green Technologies
Medical and Dental Equipment/Instruments
Chemicals, including Pharmaceuticals
Apparel and Fashion
Professional, Scientific, and Technical Services
Royalties from Intellectual Property (including Film and Television)
Travel and Tourism
by davelandryjr on September 18, 2013
When Marx first sought to conceptualize Capital as such, I always found it fascinating that so much of his focus rested upon labor as a central element: from raw material through labor to capital, this is the movement that he sought to decode, and, from there, de-mystify. It is understandable, certainly, that his focus should have fallen upon the individual cogs in what was already a formidable machine, but I always wondered whether he could have, for a moment, predated the early futurists and simply marveled at the scope of this machine. Capital, after all, somehow organizes every nook and cranny of our existence, and has done so, to my direct knowledge, from tribal social structures on (please do pardon the evolutionist tinge).
That this should be the case is not surprising; capital as value is ingrained in the human condition.
My project, these days, my interest, is to disentangle the various threads that comprise business, capital, labor, entrepreneurship, valuing, and humanism to gaze into the skeleton of the machine. I realize this is hardly feasible: it’s like thinking about thinking. Nonetheless, it’s worth a shot.