Jim Hanson isn't just one of the survivors. He's one of the thrivers.
Every day, he walks past abandoned factories to get to his job at a label plant where presses are working overtime to fill an order for 1 million "Made in the USA" labels.
Although U.S. Tag & Label Corp. has just finished its busiest year ever, the manager of the label operations sees constant warnings in the industrial decay around him in Northeast Baltimore.
Just three years ago, the company's employees were working short weeks to avoid layoffs.
And as for the "Made in the USA" labels: "We died making them."
"We sidestepped a bullet," he said. "But it is very easy to make a fatal mistake."
After a sharp retrenchment in the 1990 recession, America's surviving factories are busy again.
According to a monthly survey by the Federal Reserve, factories are working at the highest level in more than 15 years, using 85.4 percent of their capacity.
Acting on the theory that overbooked factories tend to raise their prices, the Federal Reserve last week raised interest rates another half-percent -- the seventh increase in a year -- in an effort to stanch inflation.
But the view from the floor of factories such as 70-worker U.S. Tag on Robb Street makes it clear that the real world is much messier than the one depicted by economic theory.
While factories are busy and are trying to raise their prices, the lessons of the recent recession and fears of losing business to competitors are making them cautious.
Each morning, Richard Modlin, assistant manager of the 30-person tag division, helps the eight tag presses on the first floor gear up for their daily dance.
On each tag press line, twice every second, there's a "ca-chunk" as a cylindrical press bobs up and down, stamping a design on a ribbon of thick paper.
Every six inches, a mechanical arm punches a hole in the paper. Then, automatic slitters slice out a finished tag: perhaps a blue baggage tag for a cruise ship, a pink inventory control tag for Hecht's department stores, or an orange mail tag for the post office.
Every few minutes, workers at the end of each press pack new tags into a cardboard box. Those boxes are a worry to Mr. Modlin.
Last month, each box cost U.S. Tag 75 cents. The ones he ordered this month cost 85 cents apiece.
That's on top of a 5 percent increase in the cost of the paper stock the company turns into tags.
Paper factories, having trouble keeping up with booming demand, have been passing along price increases to their customers for the past several months.
"Every month a paper salesman comes in and tells us one paper company is raising their prices," Mr. Modlin said.
And that fits in nicely with most economists' theories about how busy factories are and inflation.
"As you have to bring more and more capacity into utilization, the costs of producers go up" because they are using less efficient machinery and working their employees overtime, said C. Alan Garner, senior economist for the Federal Reserve Bank of Kansas City, Mo.
"As a result, they have to pass on their higher costs," said Mr. Garner.
In a study published by his bank in December, Mr. Garner argued that there is a very simple and clear-cut relationship between inflation and factory utilization.
Looking back at the U.S. economy since 1960, Mr. Garner found that inflation rose whenever the capacity utilization rate rose above 82 percent.
"Clearly, inflation seems to be coming," Mr. Garner concluded.
Or is it?
For although U.S. Tag is paying more for paper and recently boosted wages 5 percent -- workers now earn $6 to $15 an hour -- the company has succeeded in raising only a few of its prices.
Most of its tags are selling for about the same prices they were 10 years ago.
"Our margins are getting squeezed," said Tom Burdette, president of the tag operations.
"This theory about us raising prices is great in the classroom, but it doesn't translate into real life. We have to bid jobs. And we have to win the bid" with low prices, he said.
One reason the company hasn't raised prices across the board: U.S. Tag has improved productivity and lowered costs.
Mr. Modlin and his boss, Bruce Lambert, have improved and sped up the tag presses -- some more than 50 years old -- so that U.S. Tag can make more tags for less money.
Now, each machine can turn out as many as 10,000 tags an hour, and the company can produce about 40 million in a good year.
The ability to tweak their machines makes many plant managers skeptical of the economic theories that link high capacity utilization numbers with inflation.
Plant managers say they often don't know how to answer the Federal Reserve's biennial survey ask ing them for:
"The maximum level of production that [their] establishment could reasonably expect to obtain using a realistic employee work schedule with the machinery and equipment in place," assuming normal maintenance and downtime.
Bethlehem Steel Corp.'s Sparrows Point mill, for example, set a company record last year by casting 3.5 million tons of steel slabs on a continuous casting machine originally designed to make only 2.9 million tons of slabs a year.
Bethlehem engineers plan to widen the machine this year so it can cast even more tonnage next year.
"The capacity utilization statistics for the steel industry understate the actual operating rate of the industry," said Robert Wendt, manager of economic studies for Bethlehem.
"There is no magical formula" linking inflation with any particular level of capacity utilization, he said.
If plant managers have difficulty hitting the fixed target of just what their factories are capable of, they have a tougher time gauging just how busy they are at any moment.
Right now, Mr. Lambert tells customers who call with new orders for tags that there is a three-week backlog.
But depending on the order, Mr. Lambert can squeeze some in sooner, or run the presses longer.
After all, only two of the tag plant's eight presses are working more than 40 hours a week.
"We could be more efficient. . . . We could be a lot busier," he said.
Finally, even if manufacturers were as busy as economists think they are, many could not raise prices because of competition.
Although there are only about a dozen other paper tag makers in the country, there are hundreds of competing label makers.
And U.S. Tag managers say they've lost too many customers to forget the dangers of ignoring competition. "U.S. Steel used to use 20 million tags a year," Mr. Burdette said. "Now they use 1 million."
All this makes even some Federal Reserve economists doubt the usefulness of the capacity utilization statistics in predicting inflation.
Mary Finn, an economist for the Federal Reserve Bank of Richmond, Va., said a study she's about to publish will show that "there is no necessary linkage" between high rates of capacity utilization and price increases.
In general, higher factory usage rates have been associated with rising prices, but there have been instances in the past few decades in which inflation has dropped while factory use rates rose, she said.
"There is no evidence there is anything necessarily magical about 85 percent or 82 percent," she said.
Sometimes the two gauges move together, and "sometimes they don't."
As they have for years every lunch time, Mr. Modlin and three other workers wolf down their sandwiches and spend most of their half-hour break playing cards.
They kid each other about forgetting the rules and playing out of suit.
The rules of economic theory are also bendable at this 91-year-old company, which is the nation's oldest maker of paper tags.
Although the Federal Reserve raised interest rates to slow expansion, managers are sticking to their own game plan: They'll go ahead with an investment in a new label machine.
Though they've noticed a slight slowing in orders in recent weeks, business is still strong.
But, warned by the failures surrounding them, they'll be careful not to bet too much on growth:
"There will be ups and downs," said Mr. Hanson.
"We'll stay light on our feet."