Time will tell.
Not mainstream consume items but several limited-demand goods that feature high quality, even traditional hand-fitted quality, have been cranked out locally in the US at a steady profit. Less than 50% of the products are contracted out.
Pretty much the same thing has been happening here. Go into most people’s houses in the UK and look at their things, and you will see that the low-tech stuff like kids toys is mostly made in China. The TV and audio equipment will be manufactured in S Korea and the textile goods will mostly be from Asia.
It is also more than possible that their car will have a Japanese badge, although it will have been manufactured in the UK from parts largely manufactured in the EU. Our economy is doing fairly well and the GBP is pretty high (good for British tourists - not so good for importers - bad for American tourists visiting us).
When I go down to my old employer’s freight yard, I see a big sign saying “Driver’s Wanted” (and they are not the worst payers). I also see a yard that is bursting at the seams with traffic, both domestic and EU wide.
This is so true. I am trying to get a significant amount ( money wise) of high tolerance parts machined. The US is the only place that can do it. Canada ,nope, Germany and the UK possible but even more expansive. High tolerance machine shops have a special invoice generator that adds a couple of zeros to the bill directly related to the number of zeros to the right of the decimal point on the tolerance spec.
The capital investment required to buy the 5 axis CNC machines that are capable of doing the work, is significant, finding someone suitably educated and diligent to run them is also pretty tough. Saving a few hundred bucks on labor cost to get a screwed up $35,000 part is not good economics.
Consider manufacturing in a series of waves that flow out from the most advanced nations. Not only does a nation need cheap labour, they also need the expertise to maintain the equipment that produces that product.
Clothing? Sewing machines are the simplest technology going for mass manufacture, it seems. The expertise needed to maintain in good repair a machine that can stitch as fast as finger can feed a pair of cut cloth pieces through a sewing machine - pretty minimal.
The plastic toys and crap that China makes is s step higher up - needs injection molding machinery with precision temperature and pressure controls, refineries that produce relatively pure feed chemicals, colour dyes, etc. Printing presses and ink production to print the fancy boxes. Assembly may still need cheap labour, to snap Barbie’s arms and legs on, glue on her wig and tie her into the display box.
Steel requires metallurgists and chemists to ensure the product meets the quality necessary to do the specialized jobs demanded of modern metals; engineers and millwrights to maintain the rolling mills and monitor quality control.
Automobiles require designers and precision machining, heavy equipment assembly best done by robots that need their own maintenance techs, etc. Then there’s electronics factories.
China has been busy creating a modern first world workforce that once it has the expertise, is able to do higher precision and higher quality manufacturing. Design engineers and robot technicians do not want to work for barely subsistence wages 12 hours a day, 7 days a week.
the whole society has this “uplifting” effect. As more people drive cars, there is a greater demand for mechanics. Someone fixing BMW’s will not work for minimum wage (and there is likely no glut of factory-trained technicians). A rising tide floats all boats.
As for China - several factors at work there. Yes the Yuan has been going up… slightly. It’s gone from about 15 to about 17 cents over the last 5 years. that’s hardly significant. The Chinese government has been adopting a policy of deliberately keeping their currency low, to encourage exports. China is large enough to contain the demand, but as Chinese want more and more foreign goods (or services) they will start paying out the monies that will tend to equalize this, and the pressure will be (already is) on the Chinese government to bring the exchange rate more in line with reality.
If a Chinese BMW repair guy realizes he can make three times as much overseas - or an engineer, or a robot repair technician, or a metallurgist - you either permit wage inflation, or lose your best and brightest. People want expensive beef from overseas, then the locals realize they are selling beef for below the world price and jack their price up to match. Sooner or later, edicts and iron curtains can’t even stop pressure to equalize prices. The laws of economics are like the laws of thermodynamics - you can’t win.
the danger is that China has an unspoken agreement with its people - “we will let you have good jobs and get richer and enjoy life, and in return you don’t object to the system of government.” I suspect, like the Shah of Iran discovered, when the economy slows down and the government can’t deliver, the people will get restless. Then… watch out!
the other possibility is the “peak oil” issue. (But fracking seems to have delayed that for a decade or two) We will not run out of oil; it will just be like in 2008 before the crash, as prices rise inexorably until it costs two to four times what it does now for a gallon of fuel. Super-cheap shipping from halfway around the world is built on cheap fuel. Change that equation, and maybe some things it will be cheaper to make locally than to ship.
the problem with the OP’s plastic wrap - my educated guess - the cost of the machinery investment (and ongoing maintenance) is big enough that the manufacturer would need a huge market to keep the equipment running to justify the cost. As such, it must match production costs worldwide. China still pays equally well-trained techs and operators a lot less than the USA, so can undercut the US prices, even if it had to buy the equipment and ship it from the USA or Europe. it already supplies a huge market - China - so any export capacity is just gravy. Until shipping costs balloon or wages rise, a Chicago plastic wrap plant is probably a bad investment.
I think there is already a backlash against cheap Chinese junk. It just takes a few web reviews about things breaking and people quit buying them.
There are five manufacturing plants in the little city of less than 20,000 people I work in. I think manufacturing is doing just fine.
The problem is - Walmart is still full of plastic junk, as are all the dollar stores. It’s not going away any time soon. If you need a spatula, or a toy car, or a bucket for the beach - odds are it’s made in China because the stores cannot find a different source.
Consider the problem of clothing. How do you automate that? Cloth is remarkably uncooperative to handle compared to other materials. If you can invent a way to make it more amenable to being handled by machines, to speed up manufacture of clothing, then maybe the USA could compete with Bangladesh or Vietnam.
I’m trying to imagine the technology - maybe starch the pieces so it’s like handling cardboard. Maybe vacuum tables that use suction to hold cloth pieces tight while feeding through a sewing machine. maybe use space-age fabrics and weld them with lasers so they melt together…?
For now, a person can easily pick up and feed a pair of cloth pieces through a sewing machine; but you can only feed them so fast to produce reliable results. Therefore, it takes a certain amount of man-hours to produce a finished garment. This used to be done by immigrants in places like New York; then moved to more remote places (North Carolina, I think was a textile area). Then even those areas could not match wages in Mexico, then further abroad.
The net effect is that until the method of producing garments can be automated like automobile production - it’s not coming back to the USA until the cost of shipping goes through the roof, or the man-hours required to produce the garment can be substantially reduced… or we’re willing to pay a lot more for the clothes we buy.
(I’ve seen suggestions that the next step is “automated custom tailor”. A device scans you and produces a specially fitted garment - shirt or pants, suit, whatever - that is exactly your size. You select the fabric, a laser cuts the correct shape of pattern on the selected bolt of cloth… but then someone has to sew it. Once that step is automated, you could pick up a custom tailored suit in a matter of hours after standing in the scanning booth, and millions of Bangladeshis will be out of a job. You’d probably pay two to four times the cheap garment price for a perfect fit in exactly the colour and fabric you want. )
Capital investment for manufacturing in the US will continue to rise…primarily because US energy costs are some of the lowest in the world. No one anticipated the amount of cheap energy that would come from the fracing process that has resulted in extremely low cost natural gas and crude oil in the US. Those advantages combined with the logistics savings of manufacturing products for domestic consumption vs. importing from Asia, more than offsets the labor disadvantage in a number of markets.
The U.S. has one of the highest levels of energy consumption in the world, e.g., less than 5 pct of the world’s population using up to a quarter of world oil production, part of which is used to power up over 250 million passenger vehicles. All that is part of an economy with something like 70 pct dependent on consumer spending, and 70 pct of the work force in the service industry, needed to prop up a middle class and significant levels of spending and debt across the board.
The loss of cheap oil will definitely change the situation. Just recently, the EIA cut the estimated amount of recoverable oil from Monterey by over 90 pct. The shale oil bubble is unraveling, and if it is so that shale oil technology cannot be easily replicated elsewhere, then U.S. shale oil will be needed by the rest of the world as well. While China and others are willing to purchase oil at higher prices, the oil industry is facing increasing capital expenditures.
Thus, given a combination of the effects of peak oil (which includes high prices and production costs), countries will be forced to lower oil consumption and localize. In the long term, the manufacture of necessities can only be assured if middle class conveniences (such as EVs for personal travel and electronic gadgets) are sacrificed. In which case, manufacturing will return to the U.S., but not in a way that many expect.
Don’t want to turn this into a peak oil debate but… The sad fact seems that a lot of distribution especially in the USA is done with relatively high cost inefficient trucks, often going cross-continent. If transportation becomes expensive, then manufacturing might just be replaced by just-in-time custom manufacturing, like custom clothing booth I describe above. Instead of trucking a container of assorted sizes across the world so that Hali of them can be moved to the bargain rack, just make what you need where you need it. DVDs CDs, and print on demand books were supposed to be part of this wave but have been supplanted by electronics and the Internet.
Likely, transportation will be expensive because of peak oil.
The world started with local manufacturing, but as more people moved to white-collar jobs and professional work, manufacturing was outsourced. The money earned from higher-paying jobs were then used to purchase a middle class lifestyle. In time, those who received outsourcing work (such as China) in turn outsourced them to other countries given a growing global middle class.
Meanwhile, energy and resource demands grew significantly worldwide as more people wanted more consumer goods.
That’s why automation is important: white collar jobs are maintained while machines do much of the manual labor. Manufacturing will no longer have to be outsourced as labor costs are lowered significantly.
The catch is that in capitalist systems efficiency through automation means more energy and resource consumption, not less, as underutilized resources are used elsewhere for more profits and returns on investment. Peak oil will definitely be a critical point as all sources of energy do not have sufficient quality and quantity to meet the demands of a growing global middle class.
With that, the U.S. will certainly end up localizing manufacturing, but it will involve significant reductions in energy and resource consumption. As the middle class weakens considerably, more will return to tailoring, etc.
Peak oil is a myth.
However, total capacity of oil production is not. Nor is the exhaustibility of supply. There is simply not enough energy in the world to provide a middle class lifestyle to China (maybe halfway there) and also India (just getting going) the way Japan, then Taiwan, and now South Korea have moved tens of millions from feudal peasant to middle class in a matter of a few generations. When the USA has to bid against 3 billion new consumers for the oil it needs, the price will go up. We’ll never really run out - but are you prepared to pay $10 or $15 a (US) gallon for gas? What would that do to your lifestyle? To USA commerce in general, and international trade, so dependent on cheap shipping to deliver cheap goods from overseas? Electric batteries, solar cells, etc. may replace some auto use, but for heavy trucks, nothing beats diesel.
But, of course, if a rising tide floats all boats, there will be no Vietnamese or Bengali working so cheaply they undercut even Chinese labour. What happens when the labour cost to make those goods now becomes much closer to local wage rates - say, a dollar an hour instead of a dollar a day? A pair of slacks from Old Navy will cost $80 instead of $25; a T-Shirt will cost $30 minimum instead of being virtually a give-away item.
As pointed out, automation reduces the manpower needed for labour but raises the energy requirement. Nowhere is this more obvious than agriculture - in a century, the USA (and most western nations) have moved from a society where 50%-plus worked on farms, to one where less than 3% do so, but they drive massive tractors and harvesters, use center-irrigation and spread fertilizer and chemicals regularly. If energy becomes expensive, this will have an enormous impact. people used to spend the vast majority of their income on food and housing, and a decent amount on clothing. If/when this comes about again, manufacturing may shrink simply because people will have less disposable income for “toys” - big TVs, computers and tablets, cellphones, cars, etc.
The upside may be that people will demand more durable, more repairable goods - like the Volvo ads, cars that run for 20 years, not traded in after 5. Longer product cycles, less obsolescence. Perhaps a big local industry once again will be repairing failed items… You don’t toss that electronic toy just because the power supply or screen died.
You’re accepting that peak oil is myth, but you think that production has a maximum?
As long as you can drill more wells and build more refineries (both technologically feasible - I mean like we’ve been doing that for a hundred years - it’s just the politics and being ALLOWED to do it that’s the hard part) you can create more fuel and petroleum products
What? It was my understanding that most Target- and Wal-Mart- type very cheap clothing is actually produced with MORE automation and machinery, in first world countries (namely, America), and the name-brand stuff is the ones that need the human touch. I’ve seen the shows on TV showing the factories, and it’s freggin nuts how much these huge batteries of machines can do. When they create thread, they don’t even need to use a bobbin anymore, it’s done in a continuous process using a vortex created by a fan! And then there are hundreds of super-fast sewing machines, and the workers just lay the pieces flat and quickly run the pieces through them to create the stitches. However many times you can move your arm back and forth in an hour is how many shirts you can make. And I’m betting these modern machines break down or get tangled very little.
I mean really, you think a shirt that costs a measley $8.50 could have been done by hand and shipped half way across the world? I find it hard to believe, only super mega machines could make that quantity (people buy a hell of a lot more of an $8.50 thing than a $25 thing) at that low cost.
I think part of the problem is that America currently has scores of people dependent on government and thus underutilized. Our labor laws has made labor super expensive in effect, and the ruling class doesn’t want anyone to “suffer” working in factories because they imagine the whole world can be some sort of eloi class, nothing but doctors, lawyers, accountants, and starbucks baristas who are working their way to become a lawyerdoctoraccountant. Where they accept that maybe not everyone can be that, they still expect that everyone should at least have a skilled trade job.
By that last part I mean that that’s WHY the ruling class doesn’t care if there is no manufacturing and that a lot of people depend on various forms of welfare and labor is super expensive - they think everyone can be an eloi.
Of course, the whole thing will come crashing down when the federal government goes bankrupt within the next 50-60 years (I know it’s going to happen in my lifetime). People won’t have the government to give them money, so they’ll need to work the fullest they can, but also they’ll finally be ALLOWED to.
Because the fact of the matter is in a true, real, NATURAL free market economy, a lot of people will be factory workers. Maybe 15-20% of the labor force. And that’s just fine, regardless of what any stuck-up technocrat says.
When we buy clothing in the USA and bring it back to Canada, the customs people want to go through it to find anything made in the USA or Mexico - duty free due to NAFTA. Guess what - almost nothing is. It’s a tour of the third world- Vietnam, Cambodia, Indonesia, Malaysia, the Philippines, Bangladesh, India, Nepal, Pakistan, … everywhere except here.
If that sort of manufacturing is coming back here, good, it proves my point that at a certain level of wages, it becomes cheaper to automate. Then, the manufacturing shifts to the (more advanced) country better able to support the automation technology. And… automation costs can be spread over a longer working day for the same price.
Consider a lowly job like restaurant dishwasher. Instead of having half a dozen people lined up at sinks, most places nowadays have one person loading a tray and feeding the tray into a mechanical dishwasher. That one person can now go and prep another tray load, or put away a finished tray. The machine can work 2 or 3 shifts, 7 days a week, for the same price. It’s become cheaper due to the cost of labour. Same with auto assembly lines. A robot can spot weld a car body, or bolt on the wheels, faster and more efficiently than a crew of humans, and for the same price, that robot can do two or three shifts.
It’s not a matter of disdain for factory work. Or are you seriously saying that sweatshop labor under dangerous conditions and poverty-level pay is something that only stuck up prigs object to?
The free market dictates where manufacturing is found. Most commodity items (clothing is high on that list) will be produced in countries with low costs, especially low wages. Differentiable items, items up the luxury or technological complexity scale, will be produced where quality predominates. That’s always been true, even in antiquity. Exactly which products will become commodities and which countries will have the lowest costs and where luxury goods are made vary continuously and will continue to vary in the future, but the general principle always remains.
People are very good at forgetting today how much disruption the technological revolution caused. All they see is the successful technologized world that resulted, a world that is now making its way into Asia and will soon lift hundreds of millions into the middle class. When China and India each have far more people in their middle classes than the entire U.S. population why would any economist think that the needs of our economy will continue to dominate that world? We’ll take what we can get, and that includes enormous disruption. The information revolution will produce a new economy and nobody today has a clue to what that will mean for 2074.
That’s internal disruption. External disruption is likely to be greater. Wars, ideological disputes, class and racial differences will start affecting larger and larger swathes of the world as movement grows easier. Climate change is already happening, it’s not a prediction. That will greatly increase migration and immigration and cause huge internal damages. Peak oil is a myth in any case, but the pressure to limit carbon will be the single most important imperative for the rest of the century so the move into alternate technologies will make oil a secondary resource.
Can the world sustain all of this? At some point there has to be a limit. Almost every extrapolation from the past put this limit at 7 billion people. Instead the 7 billion people alive today are far better off a whole than at any point in history. We don’t know where the actual limit will be.
We live in interesting times.