Why Isn’t New Mexico a Manufacturing Powerhouse?

In a blog post last week, the American Petroleum Institute’s Mark Green noted:

Energy isn’t just used to keep machines running or factory lights shining. It also provides the heat necessary to shape metal and the building blocks to create chemicals, refined fuels, plastics and fertilizers. Energy is the lifeblood of what we make, and affordable domestic energy is now providing an important leg up for domestic manufacturers. Thanks to the U.S. shale revolution, this newly affordable and abundant energy is making U.S. manufacturers increasingly competitive, or even more competitive, than overseas rivals. The shale revolution has reshaped the playing field and has made the U.S. the place to be for energy-intensive manufacturing.

All true. Green cited a 2014 PwC study that estimated that “continued shale gas development in the U.S. could generate 930,000 new manufacturing jobs by 2030 and 1.41 million by 2040.”

New Mexico is a leading producer of natural gas, and the price of the fuel for industry was halved between 2008 and 2015:

indust_natgas

So manufacturing jobs boomed in the Land of Enchantment during that period, right?

Not exactly.

Here’s annual manufacturing employment in New Mexico (average of all months, seasonally adjusted, in thousands), as determined by the U.S. Bureau of Labor Statistics:

manufact

Corporate welfare isn’t boosting manufacturing jobs here. Neither is huge subsidies to government schools. And neither is cheap natural gas.

Maybe it’s time to consider tax simplification/relief, deregulation, school choice, and a right-to-work law?

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12 Replies to “Why Isn’t New Mexico a Manufacturing Powerhouse?”

  1. “Maybe it’s time to consider tax simplification/relief, deregulation, school choice, and a right-to-work law?”

    If that happened Bill Richardson would die of a heart attack followed by Sanchez doing head spins and back-flips.

  2. Somehow in the logic of the free market, cheap goods outweigh decent wages. It makes free market sense to send all our machinery, skills/ knowledge and work out of the country and expect manufacturing to continue. Cheap natural gas has no bearing on this industrial diaspora.

    Now cities like Albuquerque pull in a few dollars and then the citizens send the same dollars out of NM to buy our basic needs. Draining money out of the community is the problem and it is self-inflicted.

    There is no local market. Keep buying from Walmart and Amazon. A little longer term thinking is required along with a populace that would return to making things.

    1. Manufacturing is growing in the united states. Employment is shrinking due to automation.

      Natural gas is an input to many manufacturing processes. It does help. So does America’s relatively skilled and motivated work force. Nationally, problems include regulations and corporate taxes. In New Mexico, aside from a lack of water, New Mexico’s gross receipts tax and lack of a right to work law are serious obstacles. We can’t control water (could do better at distribution, but that’s a different issue). We need to address the GRT and “right to work.”

      Not sure what Walmart and Amazon have to do with any of this. How many non-food consumer items do you know of that are (or were) made in New Mexico?

    2. Manufacturing is growing in the united states. Employment is shrinking due to automation.

      Natural gas is an input to many manufacturing processes. It does help. So does America’s relatively skilled and motivated work force. Nationally, problems include regulations and corporate taxes. In New Mexico, aside from a lack of water, New Mexico’s gross receipts tax and lack of a right to work law are serious obstacles. We can’t control water (could do better at distribution, but that’s a different issue). We need to address the GRT and “right to work.”

      Not sure what Walmart and Amazon have to do with any of this. How many non-food consumer items do you know of that are (or were) made in New Mexico?

      1. An industry I know well is the solar panel world. Albuquerque once hosted three PV module manufacturers. They left or gave up, not because of GRT or right to work, but because they could not compete against the artificially low cost of Chinese panels. Before that there were several companies making hot water and hot air systems. It’s now cheaper to buy systems on Amazon than it is to produce them locally.

        The problem is that there is no term in the simple cost equation for the benefit of keeping money in local circulation. We have the skills and know-how to make almost all of our needs from soap to socks and shoes. In the Walmart model, all the money leaves the city except for the slave wages paid to the clerks and property taxes. The wage money is sucked away before it can even circulate.

        It’s like water. If you let it seep into the ground, the aquifer will benefit. If you drain it all straight to the river, it’s gone.

        1. Your analogy implies we should build structures to help redirect flows to feed the aquifer.

          I agree – what do you envision?

          1. On both sides of the analogy we could build solutions but nature is pretty instructive. Using the water that comes out of the snowpack grows food. Keeping money in the community grows small business, local wages and demand for goods. Water, like money, is an enabler or it just something to consume and waste. It’s up to us.

        2. There is always work to do as long as the government does not stand in the way through misguided public policies. This is not about solar or any other industry, what you seem to oppose is free trade. (Economists from Paul Krugman who won a Nobel for his work on free trade and has long supported free trade to Milton Friedman), believe free trade is a good thing. You are taking a more Trumpian approach. I get the concerns people have with jobs seemingly leaving certain industries, but free trade ultimately helps everyone — otherwise they wouldn’t do it.

          1. Please, Paul, no name calling 🙂 “Free” trade is the best way to trade and trade is good, but what has slithered into place in the name of free trade is just a race to the bottom. Comparative advantage has come to mean dirt wages for everyone and unwinding environmental progress. Toward what end? Beijing stateside?
            Why not grow and prosper communities by making them more self sufficient, more capable, more robust, less dependent on multi-national corporations and centralized government? This must begin with local economic activity that rightly fulfills the needs of the people. If the citizens want to export surplus or want an imported luxury item (or bananas), fine.
            We don’t need to run Walmart out of town, we just need to see the economic sensibility in never shopping there.

          2. How specifically do “free trade” and the “race to the bottom” differ in your opinion? In “my” view of free trade, trade is a good thing inherently as long as the people engaged are voluntarily entering the transaction (except for nuclear secrets or something). This can be applied across state and national borders. I’m not sure I understand what specific objections you have to that view, but I’ d like to hear them.

  3. “How specifically do “free trade” and the “race to the bottom” differ in your opinion?”

    One is a hammer and the other is the nail. Free trade, as it is called, is not a voluntary engagement. When your work goes away, you hope to find similar work, but if there is none you must settle for less. The workers who got your job are happy to have work even at dirt wages. The hammer makes out with the blessing of Wall Street investors, the banks and the government. This does not sound like the people who are actually doing the work are even part of the free trade “engagement.”

    We need to build economic activity that is impervious to the scoundrels; that would begin at the local level.

    1. I think you have a fundamental misunderstanding of the world around you and how trade benefits everyone. Comparative advantage is the key. If it were all about low wages Silicon Valley would all be outsourced to Bangladesh or Beijing…or New Mexico for that matter (where wages are much lower). The fact is that high-skilled Americans do more of the design and research behind a lot of products (including cell phones and solar panels) and much of the manufacturing goes to China and other places.

      There are kinks in the system, most notably our poor education system that cause some people to get left behind, but taken as a whole free trade is good for everyone. And, if you want solar technology to be widely-adopted, shouldn’t low-cost manufacturing be part of the equation? The industry can’t rely on government subsidies forever.

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