Perhaps some folks don’t know their history. At the beginning stages of the Industrial Revolution, Samuel Slater left England illegally and brought textile machine technology the to the USA. The United States could have taken the high road and deported his ass all the way back to England. We didn’t do that. Gee whiz, I wonder why?
And Charles Dickens (an English writer) was disgusted when he saw pirated copies of his books at the markets when he visited the United States.
Now, the USA wants to lecture the rest of the world about respecting copyrights and intellectual property? Interesting how history repeats itself.
IIRC, the issue is that the Chinese (or whoever) are making making goods that are in demand from the average consumer - coffeemakers, toys, clothing, etc. The manufacturers in America are making high tech industrial-type goods, mostly for sale to corporations and the military.
The trick is that the American jobs require a high-level of education and training - there are few “push button” factory left in this country. The good old days of Johnny bring able to get a job in the factory down the road are over, hence the concern over “manufacturing jobs”. They still exist, but they’re not accessible to the average high school graduate.
I don’t disagree with any of the facts cited by Tonelson. The Federal Reserve cite backs some of them up (e.g., that manufacturing output is now roughly where it was at the end of 2001), and you could probably find more agreement if you rooted through their data. I disagree with the context and interpretation of the facts. For example, then Tonelson says “as of 2007 (the latest available data), imports had taken over 90 percent of the U.S. market in plastics production machinery and in metal-forming machine tools. They represented between 60 and 70 percent of Americans’ purchases of goods like turbines and turbine-generator sets, computer storage devices, and miscellaneous electric components”, I notice that 2007 was also the year that US manufacturing output hit an all time high. If foreign companies moving into these areas was a major problem, wouldn’t it have showed up in the data as lower manufacturing output before the recession hit?
Similarly with the two problems Tonelson mentions, the VAT and currency manipulation. Both policies have been in place for years, but they have been unable to stop the growth of manufacturing in all that time. Why is this time different?
Not directed at me, but: I agree with the first part, that developing countries are attractive because of the lower wages for employees. The second part, however, is completely backwards. These regulations (environmental, work safety, etc.) are a product of wealth, not the cause of it.
The notion that any of these measures will lead to a radical change in manufacturing employment is not supported by historical data. For example, the total fluctuation in the number of manufacturing jobs since the end of WWII has been about ~7 million (cite, page 4, pdf). At the same time, the population of the US has roughly doubled, from 150 million to 300 million. As a percentage of all jobs, manufacturing jobs has decreased from 3.7% after WWII to about 1% in 2005 (same cite, pg 6). Simultaneously, manufacturing output has risen by roughly 300% (350% if you look at the 2007 peak) (same cite, pg 7; or the Federal Reserve cite posted above).
Now, the bad news is that the recession cost about 4 million manufacturing jobs. This is certainly bad news, but I see no compelling evidence that “this time, things are going to be different.” I suspect that, in the coming years, most of these jobs will be recreated as the economy recovers.
All this screams to me that we don’t have manufacturing jobs because we don’t need them. The US manufacturing sector does an enormous amount of work, and does so extremely efficiently. And, most importantly, this trend has been continuing for more than half a century. So what “problem” are these economic measures are supposed to fix?
The article is mostly protectionist nonsense. Cheap labour costs don’t constitute an unfair advantage. They are a flip side of the fact that the US has much better infrastructure and a large amount of capital stock per worker. Differences in labor costs are a good reason for free trade not an argument against it; it makes sense for the US to import labor-intensive goods.
Secondly there is nothing magical about manufacturing. A lot of “manufacturing” is really a service product anyway. For example designing, marketing and financing a car.
As for China’s exchange-rate policies they do create imbalances which are possibly harmful but the problem is a bit more subtle than protectionists think. It’s not a matter of China stealing jobs from the US. When China runs a trade surplus with the US it invests that money right back in the US economy. This means lower interest rates which creates jobs. The jobs lost in the export sector are balanced by other jobs in various interest-sensitive sectors.
[ul]
[li]Those countries didn’t build up their manufacturing capabilities yet.[/li][li]Their governments didn’t reform economic policies to start participating in the global marketplace (and actively courting USA manufacturers with favorable tax treatment and contracts)[/li][li]The information age and electronic technology wasn’t fast enough cheap enough to facilitate easy movement of capital.[/li][li]Transportation technology was primitive. No containerized shipping. Airplanes with jet engines for commercial use was limited.[/li][/ul]
… and a hundred more reasons I can’t think of at the moment.
You’re going to need to back this one up. Quite a few developing countries made fairly good economic progress over the past decade. See here:
I can’t imagine why manufacturing high-tech good would be seen as a problem.
The thing about jobs that anyone can just walk in off the street and do is that they don’t contribute much to society. In particular, they don’t contribute enough to justify a first-world salary. In order to justify a first world salary, workers need to be able to handle more complicated and difficult tasks.
I’m not sure what is going to happen to the current generation of low skilled workers. I’m in a steel mill area, and when my parents were young, you could go to the mill and get a job. That doesn’t exist anymore.
There is a growing gap between what’s available to low and high skilled workers. Some are just unmotivated, but there are some people that are just kinda dumb. They learn very slowly, and are unable to grasp complex skill sets. And the only jobs available in most cases are at McDonalds - low wage jobs with no real chance of moving up. I think that’s what behind this nervousness about “manufacturing jobs” - the low entry jobs aren’t available.
The fact is that you cannot make a $50 vacuum or a $20 castle playset in America, because the wages demanded are too high. It’s a symptom of living in a first world nation, and the low skill people are being left behind. I’m afraid that this is going to result in heavy taxation, as more entitlement programs are going to spring up to create a low-level skill class that cannot get the money they “need” to keep up with the Jones.
It’s obvious to anyone who gives it a moment’s thought that, if we’re going to buy things from other countries, then we also need to sell something to other countries. What could we sell? Services, sure, but most services are expensive to sell to the other side of the globe, so that’s only practical in a small number of cases. Non-manufactured products like agricultural produce are a part of it, but I’m not sure we can sell enough wheat and potatoes to make up for all the things we buy. So we’ll need to manufacture things for sale abroad, too.
Of course, we can also try to close the trade deficit by buying less things from overseas, but that doesn’t change the fundamentals: In that case, instead of making things to sell to other countries, we’d have to instead make the things we’re currently buying. No matter how you slice it, we need to make things.
There was a time when they did, and not so very long ago.
Of course, that time was the 1950s and '60s, when the rest of the industrialized world was still recovering from the devastation of WWII, and America had the global manufactures market almost to itself, and industry had not been substantially automated, and nobody had heard of “outsourcing.” Different ballgame now.
However, that game only works for a few decades before other countries wise up to the fact that USA can’t make good on its IOUs unless it inflates the currency.
This is true. In addition to the much of the world still trying to rise from its own ashes, there were enormous populations that were desperately poor in the 50s and 60s that are now clawing their way up to a high standard of living. But there’s more to the story than this. A factory worker’s salary would buy significantly less in times past.* The corollary is that today’s factory workers produce significantly more than they did in the past. A quick calculation from Dr. Robert’s pdf I liked to above (here) suggests that the average factory worker in the 60’s (or earlier) produced less that 1/4 of what is produced today. The difference comes from the use of automation, worker education, advancements in the theory and practice of designing manufacturing systems (for example, the statistical methods pioneered by Deming) and probably some other things I’m not thinking of.
*Here (the article Time Well Spent) is an extremely interesting (though now rather old) comparing the number of hours of work required to purchase various items. Worth opening, even if you only look at the graphs. Unfortunately, I’m not aware of anyone having reproduced this analysis more recently.
Big question I have is what is considered manufacturing in the US and has the definition changed overtime. When I ask most people what they think manufacturing means, they said building stuff in this country, and does not mean assembling parts made in china.
Also, did you know that fast food is now considered part of manufactering when it used to be considered service side? Think how many manufactering jobs that would represent when you have even 40 odd fast food jobs in a small town.
David Huether, chief economist for the National Association of Manufacturers, said he had heard that some economists wanted to count hamburger flipping as manufacturing, which he noted would produce statistics showing more jobs in what has been a declining sector of the economy.
*Manufacturing is defined by the Census Bureau as work involving employees who are “engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products.”
But, the president’s report notes, even the Census Bureau has acknowledged that its definition “can be somewhat blurry,” with bakeries, candy stores, custom tailors and tire retreading services considered manufacturing.
“Mixing water and concentrate to produce soft drinks is classified as manufacturing,” the president’s report reads. “However, if that activity is performed at a snack bar, it is considered a service.”*
So it appears the line is quite blurry and they can classify anything they want as manufacturing. Also, food packaging companies are considered manufacturing and with the millions of different types of eateries in the US would count as a considerable number of manufacturing jobs.
What the US Gov defines as “Manufacturing” and the average American seems to have a disconnect, since to me, it means making products we can use not consume, and not assembled here with parts from China either.
After searching around a bit, I can’t find anything that details how (or if) the definition of manufacturing has changed over the years. However, the FR has all of its data available for download. You can see it at here. So I looked at the data available on durable goods, from 1976 to present, which you should be able to download from this link. In particular, with this data I found the year of peak output for each type of durable good:
Wood Product, 2005
Nonmetallic Mineral Product, 2006
Primary Metal, 1978
Fabricated Metal Product, 2008
Machinery, 2000
Computer and Electronic Product, 2008
Electrical Equipment, appliance and component, 2000
Motor vehicles and parts, 2004
Aerospace and Misc. Transport, 2007
Furnature and related product, 2006
Misc., 2007
With the exception of Primary Metal, all categories reached their peak in the last decade. Primary metal reached 84% of its highest output in 2006. Electrical equipment and Machinery also had more recent peaks: Electrical equipment reached 87% of its peak in 2008, while Machinery reached 99% of its earlier peak in 2007.
So it seems clear that the positive numbers for manufacturing output aren’t the result of a shift away from “real manufacturing” in the official definitions.
Finally, it’s not clear to me why we shouldn’t count anything that is“assembled here with parts from China.” Some of the manufacturing done in China is final assembly. We complain when such jobs get moved to China, so why should we claim they don’t count if they get moved back?
Of course…and correct me if I’m wrong here or drawing the wrong conclusion…the issue isn’t really that our manufacturing has become more productive and efficient, the problem (to some) is that it’s shed jobs due to automation (and of course ‘outsourcing’).
I think the expectation (again, for some) is that jobs in the US will remain stable (while also continually increasing in pay rate, benefits, job security, stability and standard of living essentially ad infinitum), and the fact that this hasn’t happened has made a lot of folks really unhappy…especially those who believe that manufacturing jobs are ‘real’ jobs, and by us losing them (either through increases in productivity through automation or by shifting away from manufacturing directly here in the US and instead importing things like clothing) we have weakened the industrial capacity of the nation as a whole.
IMO, the fears about American manufacturing come from (1) the fact that we hear about outsourcing on the news every so often (as you said) and (2) they see “Made in China” on so many things that they own. So they draw conclusions like “America doesn’t make anything anymore”, or gonzomax’s “shipping our industry out ,lock, stock and intellectual property.” I just hope that as many people as possible know that this is completely wrong.