I have read people say taht Germany engages in protectionism. How true is this? if this is true, then why don’t we do it here in the US?
Good question. I was going to ask that too. I’m very interested in the forthcoming answers.
What exactly do you mean by heavy industry?
Also, I read your post as a statement that Germany has maintained their heavy industry while the U.S. hasn’t therefore do we need to engage in practices that they have done to do so such as protectionism. Is this a correct reading?
If so, I believe it starts from a false premise that the U.S. has not maintained heavy industry as I believe the U.S. is still the world’s largest manufacturer particularly so for large industrial machinery and equipment? Although I may be completely off on what you consider heavy industry.
Before we can ask WHY a phenomenon occurs, we must first establish that the phenomenon actually occurs.
In other words, has America in fact lost its heavy industry? Has Germany in fact maintained it?
Bear in mind that Germany can’t engage in protectionism to the degree most countries can; it is heavily constrained by EU free market rules (at least as to other EU states).
OK so what does this mean? How are we doing? How is Germany doing? Is it just a myth?
It is a myth, caused by confusing industrial employment with industrial output.
Of course, a decline in industrial employment is a pretty serious problem in and of itself, if the unemployed cannot immediately find equally remunerative non-industrial work.
They are niche manufacturers who produce high priced/high quality goods…a lot of it is hand crafted and hand tooled, though they have also done what most other modern industrial countries do, which is to highly automate and outsource stuff that it doesn’t make sense for them to make.
I think the confusion here (wrt the assertion that US manufacturing is in decline or dying) is that the only stat folks making that assertion are looking at is total numbers of jobs. The trouble is, US manufacturing today relies more and more on smaller numbers of vertically skilled workers. Germany (and other modern manufacturing nations) are much the same…less workers being increasingly more productive.
Think of it like agriculture. A century ago, it might take hundreds or thousands of farm workers to do all the stuff a few people can do today. That’s why food (in the US) is so cheap and plentiful…a few workers can do the work of hundreds or even thousands. The anti-trade/anti-outsourcing people of today were the same folks a century ago who were fretting about where all the agricultural labor would go, or a century before them about where all the cottage industry workers would find work since mass production was kicking in. Every one of those groups thinks that their worries are new, and that THIS time it will surly be different, as we are so much more modern than than those times in the past, and we’ve pretty much invented everything useful that will ever be manufactured again. 
-XT
I’ve been impressed at the amount of German, French and Italian material-handling and processing machinery imported for installation to the last couple big projects (casement window manufacturer, flour mill) I worked on. There is industry around here, but the heavy equipment, the stuff used by industry, is increasingly coming from elsewhere. Judging by what I see in older plants, a generation ago that would have been entirely American-made equipment.
Part of the reason for Germany’s success is the fact that they decided long ago, NOT to compete at the bottom end of the market. That is why VW makes its low-end cars in Mexico and the Czech Republic. In optics, the Germans realized they could not beat the Japanese and Koreans-so they focussed on the high end, medical, and professional market. Leica doesn’t make $300 cameras-theirs start at $1500.
Also, they have a very efficient public sector, and good union relations (strikes are rare).
All is not roses, though-they have an ageing population and high energy costs (which they have made worse by deciding to shut down their nuclear power plants). The educational level of the German workforces is high, so they can make higher-value products.
Ve have vays of making you buy our products!
Overall industrial output in the United States rose a bit 2005 to 2007 (somebody has to make all these bombs). For the past three years, it´s been shrinking. The past year it shrank by almost six percent.
The only reason it´s not much worse is because the production of computers and electronics has increased dramatically.
Computers are not heavy industry. Intel chips and iPod Nanos are, in fact, quite light. Even the iBrick counts as light industry.
Heavy industry is stuff like:
[ul]
[li]Chemicals[/li][li]Steel[/li][li]Oil[/li][li]Mining[/li][li]Industrial machinery[/li][li]Trains, planes and boats[/li][/ul]
So how are these sectors doing?
Boeing isn´t doing all that great. To put it mildly.
Steel production was down to 25 million tons in the first half of last year - a pitiful amount. China produced ten times as much.
The auto industry, which includes some heavy industry and keeps a lot of local equipment manufacturers alive, is in the dumps.
Oil: flat. Until it runs out.
Mining: no big surprises here.
Chemical industry: not doing all that great. Hit hard by recession, may or may not recover.
Shipbuilding: The United States is unable to compete on the global market, with only one percent of ships being sold to other countries. What shipbuilding remains is almost solely for the dwindling Navy fleet, an institution which has outlived its military if not its political usefulness.
Trains: Please don´t make me laugh.
In other worlds, the outlook for the United States heavy industry doesn´t look all that chipper.
As for the overall industry, it´s going to work all right until the Chinese decide to stop paying licenses and start churning out $500 iMacs and a patched version of Windows that actually works.
Shouldn’t your last bullet have been: planes, trains and automobiles?
But hey, if the Chinese can make Windows work, they’ve got my business!
Outsourcing in the sense that manufacturers moved parts of their production to Asia, the Americas or Eastern Europe has been a strong trend for 15+ years but we have also seen a growing tendency lately to return production to Germany. Quite a lot of Mittelstand-businesses have become disillusioned with the reliability of Asian business partners, the just-in-time system, especially the reliability of deliveries, the quality of the craftsmanship and the hidden costs involved that are often much higher than expected.
Eastern Europe is in some ways a more reliable and, of course, geographically closer partner but the bureaucracy seems to be difficult to handle after the production had been moved there. Middle Europe is a much better option, especially Czechia, Slowakia and Poland: the work force is better trained and educated, the infrastructure is modern and reliable, many people understand and speak German and the countries are stable and very interested in keeping good relations with their direct neighbour. But the costs are getting closer and closer to the German level, so more manufacturers are inclined to invest their money at home where they know the system in detail and have all the advantages that comes from manufacturing in one of the most modern economies and best educated societies in the world.
The global players see more advantage in the globalization of their production – but it’s not always as easy as expected. When BMW built its much needed manufacturing platform in the USA, they were at first dismayed by the poor production quality till they found out that the workers a) followed a different work code and b) that a good portion didn’t have the education to understand the processes as well as was needed (the written guide-lines, for example, were too complicated). They restructered their vocational adjustment and it seems to have worked well.
But their plants in Germany are still – or rather, once again - the most efficient and cost-effective ones they own. Though they are also the ones that are almost totally automated, they resemble robot facilities from a science fiction movie.
After a period of spineless admiration for the “Asian model”, we have started to return to some traditional virtues in manufacturing, added a new level of automation in production to reduce costs and are finally more inclined to invest money in newly discovered inventions (one of our biggest failures in past decades). Though we also already see the shadow of totally new problems that arise from this stance - but this is true for America too.
Sometimes, you just have to accept that you’ve been beaten.
So, what you are saying is that manufacturing production in the US rose until the world wide recession started going strong, then it fell…right? And it hasn’t risen again because, well, that recession is still going on…right? Or am I missing something here?
Correct me if I’m wrong here, but aren’t iPods/Iphones and IPads manufactured overseas?
Well, that’s one manufacturer…what about the whole sector? How does it compare to overseas air craft manufacturing? Are they doing substantially beter, or is the whole industry world wide in a bit of a slump due to lack of new purchasing of air craft by air lines based on the recession we are in?
And do you have cites to backup your assertions? Not that I doubt, but it would be nice to see some figures to backup what you are asserting in this post and see how they compare.
The US steel industry has been in decline for a long time, so this isn’t really a big surprise.
What about other sectors like heavy machine tools and equipment? How are over seas auto manufacturers doing over all…comparatively better, or selectively better (IOW, are ALL Japanese manufacturers doing well, or just a few…how about German auto manufacturers? SK? etc etc?).
Again, it’s not a big surprise that during a large recession that is impacting just about every level of the economy that people aren’t buying as large a volume of automobile as they have in the past, right? So, this doesn’t necessarily reflect that manufacturing is leaving the US so much as that the market has shrunk due to the recession, and people are being much more selective in their purchase choices and in deciding whether or not to wait on making a new purchase. Anecdotally, even though I have a strong and stable job I’m not buying a new car this year, even though I had intended to do so…I’m going to wait a year or two and will most likely buy a used car instead of new when I do make a purchase.
What does this demonstrate? AFAIK, US oil reserves have been in decline for some time now, so why shouldn’t it be ‘flat’ or even declining as a US industry? What about manufacturing related to oil exploration and exploitation as an export? What about engineering services exported from the US? Are those ‘flat’ as well?
What does this mean? What sectors of mining are you talking about? Across the board? Certain commodities?
Define ‘not doing all that great’. Why wouldn’t it recover after a recession?
:dubious: The Chinese do this already and it hasn’t seemed to effect the market too much so far. Eventually this sort of stealing of intellectual property and pirating is going to come back and bite the Chinese on the ass, IMHO.
-XT
One way is through a robust trade school and apprentice program. German teenagers are tested (Lebensprufung) and either placed on an academic track (Gymnasium) or a trade school track (Hochschule). Top gymnasium graduates are expected to continue to University, and most Hochschule graduates move into apprenticship programs.
While most parents want their children to end up in the white collar oriented Gymnasium system, there is not huge shame for those who end up in Hochschule. Blue collar jobs are pretty much like what we in the US think of as Union Jobs: Secure and pay enough to support a family, but beyond this the Hochschulen tend to instill great pride in craftsmanship and professionalism in their students. You really have to work with a German tradesman to appreciate the pride and care they take in not only the work itself, but keeping a neat workplace and maintaining and caring for their tools.