Brewed Fresh Daily

A lot of conversation in the current discussions on the auto bailout focus on labor cost comparisons between union and non-union plants. The labor rate issue should not absorb too much of our attention. It likely represents less than 1/3 of the cost difference between U.S. and Japanese manufacturers.

The real challenge comes confronting the different business models followed by the US manufacturers, compared to the Japanese. Generally speaking, in a U.S. plant, contracts define job security. In a Japanese plant, job security emerges from a continuous commitment to learning.

This difference explains why, in Indiana, U.S. manufacturers are in trouble, while Toyota, Subaru and Honda are not as severely damaged by the economic downturn.

Take a look at U.S. auto contracts.

Compare practices at Toyota’s Princeton, IN plant.

My friend Larry sent out this email. Even though we’re friends, if you’ve been reading BFD for any period of time, you’ll know that this is an important message that people like Ed Morrison and Holly Harlan of E4S have been talking about for years. It’s especially poignant today:

Remember that it is many of your local merchants who donate to or sponsor events with organizations that you are familiar with. Studies show a large percentage of dollars stay in a community when you BUY LOCAL vs. leaving the state with an online or big box purchase. Sadly, if a local store closes, it not only becomes an empty storefront (in this economy, they’re not lining up to rent spaces) but the trickle down from this loss affects many – the local accountant, lawyer, insurance broker and printer to name a few. So you really know many who are or would be affected by the closing of a local “Mom and Pop”.

PLEASE during this holiday season… try to spread the “Good Gospel”… support your local bookstore, record shop, boutique, hardware store, coffee shop, and toy store. Shop at the galleries and support local artists. Go out and support the small music clubs that hire local musicians. Eat at independent restaurants. Put the word out on the street. Forward this email. Tell your neighbors, friends and coworkers. Teach your kids about the importance of supporting local businesses. It’s all about education and awareness. Buy multiple gift certificates in small amounts to give away this holiday season…

City Buddha: Consider Supporting Local Independents Retailers this holiday/a>

This is a big deal. TiE is the type of network-based organization that Cleveland needs to move ahead.

Also, if you have not done so already, invest a minute of your time and vote for CLE in Start-Up Weekend. (These two initiatives go together well, and it might be the most consequential minute you’ll spend today.) Props to John McGovern for his leadership.

From Richard Herman:

In yesterday’s Plain Dealer, Columnist Bob Smith had this to say about TiE and its historic 50th chapter, TiE Ohio, which is being celebrated this upcoming Monday, December 8th, from 4 to 8 pm at the House of Blues, Cleveland.

Prestigious trade group TiE starts chapter in Cleveland

Thursday, December 04, 2008
Robert Smith
Plain Dealer Columnist

A rust belt city just gained some impressive, high-tech credentials and folks with a global view plan to celebrate.

Cleveland is home to the newest chapter of TiE, The Indus Entrepreneurs, a trade group that represents many of the people driving the new economy.

Founded 15 years ago in Silicon Valley, TiE gatherings became the place for Asian Indian immigrants to meet and mentor one another as they founded companies like Sun Microsystems and Hotmail.

This fall, Cleveland became home to the 50th TiE chapter and the only chapter in Ohio. The people who made it happen expect the prestigious trademark to stoke new energy and jobs.

“The TiE brand is a beacon for entrepreneurs,” said Eddy Zai, a local entrepreneur who will co-chair the Cleveland TiE chapter with Baiju Shah, president and CEO of BioEnterprise.

They and other charter members, including Ohio Lt. Gov. Lee Fisher, will launch the chapter in festive fashion Monday, Dec. 8, at the House of Blues in downtown Cleveland. All globally minded business people are invited to a reception from 4 to 8 p.m. Learn more at ohio.tie.org/. ”

Source

The Milwaukee Journal Sentinel has an excellent series on the Great Lakes.

The latest installment looks at the challenges posed by more oil production from the Alberta tar sands:
Little city is at center of a great debate

Ohio’s higher education report card released this week.

Education and innovation are the key drivers of economic development. Ohio makes it hard to afford a higher education.

Ohio’s $7 billion budget deficit will likely worsen the trend. Ohio’s budget problems are the worst in memory. And higher education will face major pressures.

Learn more about the National Report Card on Higher Education: Measuring Up 2008
See NYT article here.

Parts of an email from Carl @ Blue Pike Farm:

RALLY for the Chickens and the Bees.

Join your friends and Chicken Little, Henny Penny, Cocky Locky, Ducky Daddies, Goosey Poosey, Gander Pander, the Bee Babe and her friends for as rollicking good time in support of the proposed Cleveland legislation to relax the building code regulations restricting Chickens, Bees and other small critters. (Tom Turkey will not be available due to a death in the family).

Time: 2:00 P.M.
Day: Sunday
Date: December 7th, 2008
Location: Blue Pike Farm, 900 E. 72nd St. Cleveland (Between I-90 and St. Claire)

Bring your petitions, copies of your emails and your positive energy. We’ll collect all the support material and present it to Councilman Joe Cimperman on Monday morning, December 8th before the hearing on the legislation before the Cleveland City Council Committee of the Whole.

Bring the kids to play on Holly Hock Hill. Refreshments for the early birds.

After rewatching The End of Suburbia last night, these arguments (which I’ve emailed to Councilman Polensek) make sense:

Economic security; in these lean times raising your own food, veggies, chickens for eggs or meat, bees for honey etc. help stretch your families food budget. Maybe you could make a $ or $$ by selling some to your neighbors.

Food security; raising your own food helps insulate you and your loved ones from the contaminants in the industrial food chain (see i.e. this one about antibiotics in the U.S. meat supply; A direct relationship exists between food consumption levels and poverty. Families with the financial resources to escape extreme poverty rarely suffer from chronic hunger; while poor families not only suffer the most from chronic hunger, but are also the segment of the population most at risk during food shortages and famines. Or this about food scarcity:

Passage of the ordinance will help support local food initiatives.

Nothing could be safer than growing your own food, or purchasing locally grown foods.

One of the scarier points made in EoS is in our neighborhood, there’s about a 3 day supply of food. What can we do to increase the survivabililty/thrivability of North Collinwood? FYI, if you’d like to get together and watch The End of Suburbia let me know. I’ll put a party together.

Jill Miller Zimon passed along this post to me.

It underscores how far Cuyahoga County public employment is out of whack.

One of the best ways to compare public employment levels is to evaluate the number of public employees per 100,000 population. When you do that, you can see that Cuyahoga County has higher than the national average in public employment in most categories.

You can view a spreadsheet here.

Where is Cuyahoga County heavy in public employment overhead?

Hospitals: (Most places don’t have a public hospital like Metro Health)

Public Health

Public Welfare

Transit

Water and Sewer

Judicial and legal

Firefighters

Housing and Community Development

Elementary and Secondary School Administration

It’s not chump change

Here’s how you can use these number to get a ball park of the additional costs from a relatively inefficient public sector. Let’s take the Judicial and Legal employment in Cuyahoga County. Compared to a national average the county (all units of government) employs 148 employees per 100,000 population more than the national average. That’s equal to a head count of 1,919 above the national average. (Cuyahoga County’s population is 1.3 million.)

If we assume that the average wage is $50,000 and the payroll burden is 35%, the additional overhead in the judicial and legal function of government is costing county taxpayers about $130 million a year. The water and sewer inefficiencies impose a bloat tax of about $80 million a year. That’s about the same bloat tax we pay for inefficiencies in our fire department. (This includes only head counts and not the costs of duplicate, expensive equipment.) A top heavy school system costs about $36 million a year. Inefficiencies in regional transit cost us about three times that: $110 million a year.

Inefficiencies in housing and community development cost us $50 million a year. (These inefficiencies may be offset by the benefits every neighborhood having a community development corporation, but these corporations can also act as fiefdoms or “door keepers” closing down innovation.)

The lost benefits of scale

We should expect Cuyahoga County to realize some savings from scale. The county is one of the largest in the country. But that’s not happening.

(You can see the slightly downward sloping line on page 14 of the REI report listed below. There’s not much of a scale advantage — government is a service business, after all — but there are some. Cuyahoga County falls way above the line. Our “leaders” are self-dealing and leaving a lot of productivity penalties for the rest of us to pay.)

More on the cost of government

Here’s the web site developed by The Fund for Our Economic Future’s consulting team (data through 2002).

You can read through their report here.

You can read through the report we prepared a few years ago at the Center for Regional Economic Issues here.

Finally, there was a recent report on reorganizing Cuyahoga County government, but that report does not really address the underlying cost of government in the county. Their web site is here. You can view their report here.

The conclusion: We are paying too much for the government we are getting

The iron triangle: Map the Mess

In my view, this situation reflects the insular politics of Cuyahoga County. There’s an “iron triangle” that has allowed this situation to get out of control. The business community, led by the Greater Cleveland Partnership, turns a blind eye to political excess (and the corruption potential of patronage out of control) in exchange for public sector support of leading real estate developments, such as the the Forest City’s relentless steering of the convention center/Med Mart. These connections have led to a lot of speculation about the connections.

But don’t forget Browns stadium, the goofy Cleveland casino “learn and earn” initiative, the Juvenile Justice Center land deal with Forest City, the Jacobs deal on the Ameritrust Tower. The list goes on. Roldo and otehrs have chronicled the abuses.

It’s a convenient quid pro quo and a sad consequence of a business leadership controlled by commercial real estate interests. (The shift away from manufacturing leadership started in the 1970’s with the collapse of the steel industry.)

The Plain Dealer, meanwhile, has largely turned a blind eye to the abuses, bowing to pressure and too close connections to the business community under the previous publisher. (Weak-kneed editorial decisions have not helped the PD’s reputation.)

That might all change now that the PD editors get a brief whiff of a Pulitzer for their coverage of the county corruption scandals.

Bloat taxes power the corruption in the county. The best antidote is transparency and an aggressive corp of professional journalists focusing on big issues.

Meanwhile, we’re steadily putting together the connections over at Map the Mess. We welcome your contributions.

The University System of Ohio is soon to be a global hub for online medical education and videoconferencing following a decision to fund the creation of a resource center in Columbus…

Telehealth is the practice of using telecommunication equipment and computing technology to support long-distance clinical health care, patient and professional health-related education, health care administration and public health interests.

Center Established To Offer Online Medical Education And Videoconferencing To World’s Physicians

How will Cleveland+ participate? How will the Med Mart connect? (See the proposed NYC center’s plans here.)

My colleague at Purdue, Scott Hutcheson, has written “an essential guide, recipes included, to the foremost sources of local foods in Indiana.”

What’s Hot: ‘Home Grown Indiana’

Visit the web site here.

Meanwhile in Lexington, KY, a new study focuses on consumer attitudes toward local food.

Local Food Study Highlights Universal Concerns

Here’s an update from the web site Save National City Bank.

Kudos to Dan Moore for showing some business leadership. For background, read his PD OP-ED here.

The Greater Cleveland Partnership seems invisible on this one. It’s self-absorbed leadership seems too busy with an obsession to save Tower City with the Med Mart scheme.

Why doesn’t the business leadership mobilize, as they did with Cleveland-DFAS?

(Tip of the hat to Terri Martin.)