A friend from the finance world wrote in about the various comments on the death of US manufacturing:
Remarkably, US manufacturing dwarfs everyone (and this doesn’t include things like agriculture, movies, utilities, etc.., where we dwarf the world).
Non manufacturing = real estate (yes, non-manufacturing), arts and entertainment, retail trade, finance and insurance, utilities (these are in order of their size).
Basically, manufacturing we make what the next two combined make (the next two = china and japan). Check out this link, granted the data is from 2004 (it shows that the US manufacturing sector is about 60% larger than any other country’s — Japan is second).
Honestly, US manufacturing is a f-ing beast. It’s how we won WWII. Our non-manufacturing, with movies/tv/entertainment, finance, and agriculture is huge.
Also, our percentage of gdp that is manufacturing is about 14%. That’s the same as (drumroll please), India. Yes, India.
Now, could the US do more? Of course, but American mentality is not just to be “first”, but it’s to be so freakishly in first place that everyone else is in awe.
Punchy
Yes, but what do we manufacture cheaply?
C Nelson Reilly
@Punchy:
the manufactured outrage costs next to nothing
Dork
So the dwarf owns….us?
Dustin
More importantly, how many jobs does our manufacturing produce? Sure it’s great to make everything under the sun, but when the only people that benefit are the company shareholders and the guys doing robot maintenance it’s not sustainable.
The fact is we’ve filled factories to capacity with automation and now don’t seem to understand why people can’t afford the things we make. It’s a no brainer: no good job = no ability to buy our crap. It’s no wonder everyone’s looking for cheap Chinese everything, it’s all they can afford since the boss laid off 3/4 (or more) of the company and brought in the articulated robot stations.
DougJ
Sometimes you own the dwarf, sometimes the dwarf owns you. (That an eastern thing? Far from it.)
And I fixed it.
spudvol
Maybe it “dwarves everyone”.
TR
I heard this is the plot of the next Mike Myers and Verne Troyer film.
John S.
Pay close attention to all the gains made in “productivity” which roughly measures how many other people one employee can do the job of.
Martin
Yeah, this is the main problem as I see it. We’re stratifying the labor base by pushing more jobs down the pay scale as automation makes workers more productive but less skilled and on the other side, pushes the pay scale up as they require more management and engineering talent (which we aren’t keeping up with on the education side and now have to bring in from overseas on H-1Bs)
Greater productivity means less need for workers which means that an ever wider swath of the country can’t afford to be consumers. I think we’re now at a point that we just can’t support the traditional labor base for 40/wk without constantly pushing wages down to the bottom. I don’t think we’ll see a sustained job recovery unless we find a better way of distributing the workload – fewer hours per week, etc.
kid g
No offense, but this is bunk. The manufacturing of goods in this country probably costs 3 or 4 times that in developing nations and China. If you look at it in those terms (such as man hours employed or # of factories or some other more normalized measure), then China probably comes out at least on par and probably significantly ahead of the U.S. The simple fact that Japan is within spitting distance of this country despite being 1/4th the size is rather embarrassing as well. That being said, I’m admittedly not doing much to help matters.
anonevent
@Dustin: Although I would be OK with the automation if that meant that more people here were getting trained in robotics maintenance. The problem is that they move the factory to a place where we don’t get the benefit of learning a new skill.
Dan
Take manufacturing for the military out of this and let’s take another look.
CalD
Don’t believe everything you hear. This strikes me as a cherry-picked number that’s probably worse than it sounds in any case. I do know that manufacturing as the percentage of the US GDP is at a 50-year low. Also, we’re a hell of a lot bigger than Japan and have a lot more potential capacity for manufacturing, in terms of infrastructure and education, etc., than China — China seems about maxed out that this point whereas we obviously have a lot of idle capacity. And India is still way behind China in developing their potential as a manufacturing economy.
Also, I suspect there may be some smoke and mirrors here along the same lines as how productivity statistics get so over-inflated. That is, if a US manufacturing company closes a factory in the USA and starts having their stuff built by a contract manufacturer in China, the government doesn’t reclassify them as a trading company, even though they can’t even own the factory in China that actually makes their stuff. As far as the government is concerned, they’re still making the same number of widgets as they ever did, just more productively (i.e., with fewer people).
Surly Duff
I am curious as to how much of that American manufacturing is actually performed in the United States. Do the countless Fords produced outside of the United States – about 1/3 of the total production I believe – count towards the manufacturing total cited by your friend?
And the agriculture point…god, I don’t even know where to start with that. Subsidies, government purchases for food unused or unsold goods, the purchase of commodities that are distributed as aid overseas; the amount of agricultural production in this country does not indicate prosperity, but subsidy.
cleek
up until very recently, we were the world’s largest exporter, too. now we lag China and Germany.
DougJ
Japan is a little over 40% of our size. They’re 127 million, we’re 303 million.
comrade scott's agenda of rage
How about a computer “assembled” here in the US but made entirely from foreign-manufactured components?
On second thought, I’m not even sure we’re even assembling pooters here anymore.
PeakVT
In terms of raw manufacturing output America is still huge because, well, the country is huge compared to any except China and India. But the problem is in the balance of trade. The exports of foodstuffs and industrial goods don’t come close to matching the imports of consumer goods and energy.
Comrade Dread
I’d be curious to know exactly how much of that ‘manufacturing’ Defense Dept. contracts makes up.
gex
@spudvol: Is the verb form the same as the plural? I guess it would be.
El Cid
But that was the point. As free-trade defender Paul Krugman noted when he set out to show how beneficial ‘free trade’ (investor protection) agreements had been, he discovered that an enormous amount of ‘trade’ was really U.S. companies shifting outside the U.S. their lower technology but higher labor aspects of the manufacturing process.
So we basically decided that it was okay for us to ship lots of the less ‘efficient’ manufacturing jobs offshore and we could call it ‘trade’ even though the significant portions were within U.S.-based corporate conglomerates.
But those were indeed good jobs, they were labor-intensive manufacturing jobs and the very same types of jobs of small manufacturing which really worked well in Bill Clinton’s targeted inner-city manufacturing projects, which brought the unemployment rate up more quickly among inner city minority young men faster than any other project in years.
So it isn’t some sort of natural progression of industry to greater automation, etc. — what has also simultaneously happened is that the lower tech processes requiring more labor were shipped out of the U.S. to the vastly cheaper 3rd world, which often did just as much harm to local industry and employment as it did good to the U.S. investors who were the focus of the policies in the first place.
This is the difference between just focusing on how much stuff is produced and how it is produced.
Sorry for the lack of links, take it as a rant, have to head out for an appointment.
gex
@Martin: And don’t even get me started on H-1Bs. There’s a lovely little niche market of people who go to companies and train them on how to post jobs in such a way that qualified Americans can’t find them, thus allowing them to get an
indentured servantH-1B worker.I don’t know how these people sleep at night.
Zifnab
I’m not sure why we’re bemoaning the loss of American jobs to American robots and automated equipment. Last I checked, an automated factory in the United States still requires us to employ US Citizens. The jobs within said factory are more complex and specialized and thus higher paying. And, better still, they’re safer. No one ever lost an arm reaching through a sewing machine at a white collar office job.
Do we really want to go back to the assembly lines of the 1800s? Is it really preferable to have 18 year olds working in textile mills and coal mines, than getting college jobs?
I’m not a big fan of exporting labor overseas. The way I see it, picking up virtual slave labor in emerging markets like India and China is downright criminal and really horrible for the domestic economy to boot.
But automation is – from a quality of life standpoint – a good thing. One guy making technician pay working a 9 to 5 fixing the widget that waters fifty acres of corn fields is vastly preferably to fifty guys hauling buckets on their backs from sun up to sun down on minimum wage.
Aaron
@Dan:
My first thought on this, much like Dan’s, is what the number would be with the defense and military production taken out? We are the world arms dealer, and surely that inflates our manufacturing stats . . .
harlana pepper
I am not getting that AT ALL. Here in upstate SC, textile mills provided lots of good paying jobs for ordinary folk. All those jobs are gone. Many other manufacturing plants have shut down as well. Most of the people who worked in these various plants had no more than a high school education. They have been displaced and their lives ripped asunder, it is very sad indeed. Nobody even talks about or cares about them. If we are the biggest manufacturer in the world, pray tell who is doing the manufacturing here within our borders?
I realize this is all anecdotal, but this area of the state is highly developed and there were still lots of jobs just a few years ago even after all the plants had closed.
Now? Dry as a bone.
CalD
Interesting article.
http://www.manufacturingnews.com/news/07/1017/art2.html
Billy K
@Dan:
This.
comrade scott's agenda of rage
#22: Spot on. I have a friend who’s a pointy-haired mid-level manager at Microsoft. Screaming librul leftly like me except when you get on the H-1B visa issue: then he spouts the corporate line with a complete straight face.
He spouts off job listings in Seattle that he claims “nobody applies for”. I know guys all over who would give their left testicle *and* relocate to Seattle for a chance to work for M$ who are totally qualified for the job. M$ won’t hire them cuz they cost too much.
Another way a company like M$ gets around this is by setting up a subsidiary across the border in Canada. They then pull in as many indentured servants as they can scare up around the planet and effectively get the same thing. It’s also another way how they can advertise a job that Americans can’t apply for.
dr. bloor
@Dan:
Serious question-why? Do you imagine the Pentagon is going to suddenly decide to cut back on its budget? It seems to me they’re manufacturing’s wet dream: Big spenders who aren’t ever, ever going away.
Throwin Stones
Slightly O/T:
After 125 years and the exodus of GM, Delphi, Airborne, ad nauseam, NCR is now added to the list of companies leaving SW Ohio. NCR is moving its World Headquarters to Duluth, GA.
Mr. Nuti, the current CEO, did not move to Dayton, Ohio since he took over.
Is this how any publicly-run company operates today?
John Patterson is turning in his grave.
gex
@comrade scott’s agenda of rage: A recent report estimated that the number of H-1Bs in IT now exceeds the number of American IT workers who are unemployed. And to really rub salt in the wounds, those IT workers are now considered “takers” by the Galts who put them out of work in the first place.
Bill H
@Zifnab:
Tell that to the 49 guys who are unemployed.
El Cid
@Zifnab: It’s not either or — they’re doing both. That was the point of Krugman’s findings — U.S. companies are keeping the high tech, high wage manufacturing over here (frequently) while exporting the lower tech, lower wage manufacturing involved in the same product labor process. There are a whole helluva lotta products which combine both, and under the rubric of ‘trade’ the lower-wage, lower tech yet still necessary aspects of manufacturing are sent abroad as if it were really ‘trade’, which it’s not.
Xanthippas
Well yeah, but the downgrade to just awesome instead of “freakishly awesome” still means a bunch of lost jobs for somebody else.
cleek
@harlana pepper:
same in NC. textile is nearly gone. furniture is vanishing. we still have pharma and software, but there’s no real reason that will always be the case.
adamchaz
The question is not rather we have unskilled manufaturing jobs. Manufacturing jobs is just a synonym for unskilled worker. The question is how do we find jobs for unskilled workers that pay a middle class wage and how do we get unskilled workers to become skilled workers.
To fret over the lost of manufacturing jobs is a battle that has already been lost.
Steeplejack
@Zifnab:
I don’t think anyone is arguing that automation is bad per se. But what do the other 49 guys end up doing? Automation often means, at least initially, fewer jobs in the “pool.”
DougJ
Sure, but that’s not the point he’s making.
El Cid
BTW, since I cited it, and my appointment was delayed, here’s a segment of the Krugman paper to which I was referring. Link is to the PDF (not huge though).
**************************************************
From TRADE AND WAGES, RECONSIDERED
Paul Krugman | February 2008 | Brookings Panel on Economic Activity
A useful overview of the seemingly anomalous nature of some developing-country exports can be obtained by using a technique suggested by Romalis (2004). Romalis provided impressive evidence of the continuing relevance of Heckscher-Ohlin trade theory based on an analysis of the sources of U.S. manufactured imports. He showed that the United States does tend, systematically, to import skill-intensive goods from advanced countries and labor-intensive goods from developing countries, although the relationship is far from perfect – an imperfection he ascribed to the interaction of product differentiation and transport costs, as modeled in Krugman (1980). An alternative interpretation, of course, is that the evidence is blurred by measurement error…
…it is easy to find qualitative information suggesting that there is a division of labor between skill-intensive operations and less skill-intensive operations within each industry.
This is obvious in the case of computers. First of all, there is a clear division between the types of computers produced in emerging Asia – primarily relatively low-end, standardized products – and those produced in advanced countries. Probably even more important, computer production involves many stages, which are commonly split between advanced and developing economies in a way clearly related to skill-intensity. This paper was written on a Lenovo notebook computer. Lenovo, which took over the ThinkPad line from IBM, is famously a Chinese firm whose headquarters and design operations are in North Carolina, and many of whose components are produced in advanced countries. These operations help make the computer industry look highly skill-intensive, if we rely on data from the U.S. Census of Manufactures; this is not a good representation of what the industry looks like in China.
There is also extensive vertical specialization. For example, Intel’s manufacturing facilities are of two kinds, because production takes place in two stages. First, circuits are printed, using photolithography, on large disks of silicon at ―wafer fabs‖. Then the wafers are sent to assembly and test facilities, where, according to Intel’s fact sheet, ―each wafer is cut into individual silicon dies, placed within external packages, and tested for functionality.‖ 4
Where are these operations located? Intel has wafer fabs in the United States, Ireland, and Israel. All of its assembly and test sites, by contrast, are in developing countries: they are located in China, Costa Rica, Malaysia, and the Philippines, with a new site under construction in Vietnam. In other words, within microprocessor manufacture, which is just one piece of the 6-digit semiconductor sector, one stage of production is largely confined to advanced economies, while another is largely confined to very low-wage countries.
All of this indicates that data showing a rapid rise in developing country exports, and Chinese exports in particular, within sectors that are skill-intensive in the United States need to be taken with large doses of salt. As Jin (2006) puts it, ―The kind of gap seen in the electronic information industry between the rapid expansion of the scale of the industry coupled with a low value-added structure is evidence for China’s role as an assembly base that is dependent upon overseas parts, intermediary goods, and capital goods.
The caricature of the computer industry is that Japan and the U.S. make the innards, then China adds the plastic shell. While it isn’t actually that simple, Dean, Fung and Wang (2007) estimate that imported inputs account for 52 percent of the value of Chinese computer exports. Similarly, imported inputs account for 41 percent of electronic device value, 46 percent for electronic appliances, and 59 percent for communications equipment.
And there is little question that in each case the imported inputs are much more skill-intensive than the Chinese component of the process.
Semiconductors might seem like a more homogeneous product. But even the semiconductor industry is marked by an international division of labor that places skill-intensive operations in advanced countries, labor-intensive operations in developing countries.
As in the case of computers, there is clear horizontal specialization, with developing countries producing standardized commodity products – the manufacture of ―standard chips,‖ which are used in many devices, is dominated by emerging Asia, but much higher-end production remains in advanced countries.
…It turns out that Chinese goods imported by the United States have substantially lower unit values than goods within the same industries imported from OECD countries – e.g., the shirts we import from China are cheaper than shirts imported from advanced countries. Furthermore, the gap in unit values has been rising over time, suggesting that the relative sophistication of Chinese exports within any given industry has been declining.
The broad picture, then, is that the apparent sophistication of imports from developing countries is in large part a statistical illusion. Developing countries in general, and China in particular, are probably specialized in very different niches within industries than the United States. But how does all of the bear on the question of whether rising trade with developing countries has led to rising wage inequality in the United States?
…much of the content of the new imports from developing countries is actually skill-intensive production from advanced countries [in the current version of the example, 90 percent], so that not as much unskilled labor is displaced as the raw import figures seem to suggest. If the United States imports computers from China, and China assembles computers largely from components made in Japan, only the assembly share of the sales price reflects labor-intensive imports – the rest is indirect importing from a country whose factor prices are similar to our own…
…the surge in developing-country exports of manufactures involves a peculiar concentration on apparently sophisticated products, which seems at first to put worries about distributional effects to rest. Yet there is good reason to believe that the apparent sophistication of developing country exports is, in reality, largely a statistical illusion, created by the phenomenon of vertical specialization in a world of low trade costs.
How can we quantify the actual effect of rising trade on wages? The answer, given the current state of the data, is that we can’t. As I’ve said, it’s likely that the rapid growth of trade since the early 1990s has had significant distributional effects. To put numbers to these effects, however, we need a much better understanding of the increasingly fine-grained nature of international specialization and trade.
Montysano (All Hail Marx & Lennon)
@Zifnab:
It concerns me when I find myself in agreement with Cruel Crazy Patrick Buchanan: “On Bush “Free Trade” policies, the Republican Party has signed off on economic treason.” Of course, the Dems under Clinton share much of this responsibility as well. But the forces of the global economic meltdown, coupled with Peak Oil, may serve to solve that problem for us.
adamchaz
Transfering work overseas raises the living standard of people in other countries.
Interrobang
Another way a company like M$ gets around this is by setting up a subsidiary across the border in Canada. They then pull in as many indentured servants as they can scare up around the planet and effectively get the same thing.
Uh, what? You realise that Canada has even stricter regulations about “guest workers” than the US does, right? (Granted, it is easier to get landed immigrant status here than in the US, but at least we don’t have slave visas.)
Also, speaking as someone who used to work a nearshored job that I’m sure could have been done by Americans just as easily (but without the 30% currency-exchange discount at the time), your economic nationalism is not going to stop people in other countries from taking jobs they need. After all, what is the functional difference between a Canadian in an office working a telephone all day and an American in an office working a telephone all day, except maybe one language?
If you really want to do something about the problem of vanishing US jobs, cancel NAFTA, and go after the employers. Close a lot of those tax loopholes. Back it up with real penalties, like dechartering.
schrodinger's cat
What about exporting products? Is it OK for the US to insist that other countries open up their markets to our products, while we erect trade barriers so they can’t export what they can make more cheaply than we can?
I do see your point that the loss of manufacturing jobs has been devastating to many. I think what we need is a capitalist economy where the government is a regulatory watch-dog and provides a better social safety net to people who have lost their jobs and are making the transition.
gex
What we are all talking about here is a severe distortion in the market place. Capital and goods are free flowing but labor is not due to immigration issues. This is being used against workers. And no one, even said workers, really like any of the fixes (protectionism or more open immigration policies).
DanSmoot'sGhost
@CalD:
There is nothing more useless than half a statistic. Which is not necessarily to pick on you, but this whole thread is a collection of little bits of information with no unifying connections.
I feel like I know less about the real posture of US manufacturing, WRT the economy in general, than I did before I saw the thread.
Would it be asking too much for Doug’s “friend” to dig down and get some answers to the various questions raised here?
Anyone who has driven through the rust belt in the last 15 years can’t help but notice that there is something pretty negative going on out there. “We’re Number One” doesn’t seem to feed the bulldog right now.
jcricket
Welcome to Balloon Juice, where knowledge enters and BS leaves. It’s like Thunderdome, but where the loser is declared victorious.
donovong
“A friend from the finance world wrote in about the various comments on the death of US manufacturing..”
Sorry, but I no longer accept the input of anyone who is willing to admit that they are in the finance field, and also has an opinion on something with which I am considered to be very professionally knowledgeable.
Manufacturing in this country is on the decline and has been since the 70’s, when we started shipping all of our machine tools to the Far East. With that decline comes a decline in (drumroll, please) manufacturing employment.
grimc
@dr. bloor:
Can money spent on military manufacturing be seen as an absolute benefit to an economy? Considering costs due to waste, deadline misses, etc. that are now a matter of course for military contracts–inefficiencies that aren’t taken for granted in other manufacturing sectors–I wonder if military mfg. can be put in the same category as the rest.
El Cid
I hear a lot of references many times to making sure we have a social safety net as people’s traditional decent earning jobs seem to be shrinking, but I would like to know if anyone has any ideas on what we will transition to, and if we need national policies to somewhat be working on that, or if there seems to be some new economic sector arising that people will transition to, or if it’s better to just wait and see what develops. Because it won’t work too well to have a social safety net assist displaced workers and those earning far less than before if it so happens that something else doesn’t come along.
Zifnab
@Bill H:
Unemployed from doing what? Manual labor in the blistering sun for which they are being underpaid? I’ll take my welfare state over your wage-slave’s paradise any day.
@El Cid: And I agree that the second half of the equation is a problem. You shouldn’t be free to pay a Chinese worker pennies on the dollar and import the result just to dodge US Labor Laws. It’s ridiculous.
@Steeplejack:
More automation often means more products at a cheaper cost and a higher rate of growth. That means you suddenly start needing more skilled labor – more accountants, more salesmen, more managers, and more technical personal fixing more of your automated machines.
Where as before it would cost you $10 paying ten guys to produce one widget, now you can spend $10 to pay one guy to produce ten widgets. But that doesn’t mean you’ll want to produce the same number of widgets. You’ll want to expand your business and sell your widgets to more clients. Which means hiring more guys to build more widgets. And it means widget prices can come down since you don’t have as much overhead.
If I need widgets to operate my business – and, for clarity, we’ll just call widgets “calculators” – I can now buy more calculators for my accountants which increases their efficiency and in the short term may cause me to lay off a bunch of number crunchers. But, in the long term, as my cheaper products begin selling more rapidly, will require me to hire them back again. Which means I’ll need more calculators. Which means my supplier will need to produce more. Which means he’ll have to hire more guys.
So, in the end, automation is generally a good thing because it brings down costs. Over the short term it hurts employment. Over the long term it benefits the economy as a whole.
Dan
“Take manufacturing for the military out of this and let’s take another look.”
Why? Because we used to manufacture things that people wanted/needed/used. Which were not only sold in the US, but worldwide. Fine, some defense contractors make a fortune on the latest bomber-predator-laser-whatever. But that doesn’t help the economy as a whole and does nothing for our trade deficit.
El Cid
@Zifnab: This is not just about automation versus not-automation. This is also about systematically exporting the higher labor / lower wage portions of the manufacturing process in the same products being made by higher tech, higher wage automation. This is really a false analogy.
DanSmoot'sGhost
Very good question. I once read a discussion of this topic which said, basically, that you could spend a billion on an aircraft carrier, but when you got done, you had an aircraft carrier. Not a factory, not a business, not a chain of stores, not a university, not something that long term would add value to the economy.
You had a machine, a weapon. So the value represented by the billion sailed off to sea to show off our might, but was otherwise just gone.
Another thought that flashed through my mind when I read your blurb was memories of the vast military airplane graveyards that existed out here in the desert when I was a kid. I mean, oceans of aluminum so big that from the air they looked like bodies of water. It looked to me like defense spending was just … spending. Not investing.
SBW
This link goes to the annual Census surveys on US manufacturing (up to 2006):
http://www.census.gov/mcd/asm-as1.html
The 2005 report (last one available in pdf — which I skimmed) is fairly detailed on the employment breakdown in the various manufacturing areas — and there are quite a few areas I would not have considered manufacturing (i.e. burger flipping is the best known example). Those government statistics can obviously be manipulated, I prefer them to personal anecdotes.
Karmakin
The root of the problem, I think is that the general view of labor is a bit disjointed. How most jobs are arranged, is to meet business needs, X units of labor are needed. The general goal has been to reduce that value over time, which is your productivity increase. The problem is that as that number lowers, the less number of jobs that are available goes down, meaning wages overall go down. What was supposed to happen was that new high-paying jobs would pop up to fill the gap, but that didn’t really happen.
Why?
First, because it’s not a competitive market for labor, it’s a buyer’s market. This forces wages, especially in new industries down. Second, most existing business expansion more makes use of existing operational slack rather than labor expansion, especially in the service sector. I’ll give you an example.
Running a supermarket, if you have something that increases business by a good bit, that doesn’t mean that you hire more people, it’s just that the people you have need to work faster/harder/more constantly. Where you used to hire 3 people when 2 were needed in case something happened to one of them or you got busy or whatever, now you hire two people, make it their responsibility if they are sick/tied up/whatever and are unable to come to work, eliminate any real possibility for time off, and when it gets busy, it’s their responsibility to work faster/harder/more constantly.
There’s no easy solution to this problem. The reality is that most people view workers who are not them, in quite a bad light, and that they should be exploited for various reasons. My guess is that the eventual end-game solution will be mandatory job-sharing tied to true unemployment rates and pro-worker laws.
But that’s just me.
Anonny
We do need to break this down.
First, the military manufacturing (euphemism: “defense”) probably is about 1/10th of the total of what’s left in the U.S. I’m basing that on the stat that manufacturing is 14% of GDP and total military expenditures are in lower single digits. Why this is significant is that if your point is that the U.S. is strong in manufacturing then you have to take military out of the equation, since that won’t be outsourced.
Second, there is the problem of how to account for goods manufacturered in multiple places. The obvious example is the auto assembled in the U.S. out of parts predominantly made overseas. How much of the auto’s value goes toward that “14% of GDP” statisitic — if it is 100% then that statistic may be relevant in terms of figuring out the different kinds of industries that comprise the overall economy, but it doesn’t do a good job of showing how strong American manufacturing is.
Third, then you have to figure out what portion of manufactured goods are simply not practical to export. For example, walk through your average Home Depot or Lowe’s and you’ll find lots of products made in the U.S.A., although they might not be what we typically think of when we think of manufacture. Oh, the textiles, like work gloves, and the electronic tools will all be from east Asia, but a pre-assembled fence, or concrete-based products, or anything else which is bulky and heavy (and hence yields significant transportation costs) will be “manufactured” in the U.S.
Those types of construction goods inflate the numbers for the “U.S. manufactured goods” category, but they aren’t relevant to the discussion, for several reasons. (A) these industries aren’t relocatable, so of course they stay on shore. (B) The size of these industries forms a large part of the American economy precisely because the American economy is very affluent. (C) These industries, by definition, have no potential for export. (D) While these industries qualify as “manufacturers”, the tools and skillsets required aren’t transferable to other manufacturing industries.
So, when we break it down I think we’ll find that except for military, non-exportable industries, and autos (where much of the manufacturing is kept in the U.S. due to political forces), there isn’t a lot of manufacturing left in the U.S.
And as for that author’s comment about U.S. industrial might helping the U.S. win WW2 — well, that’s the whole point that he’s missing. In WW2 the U.S. was full of factories that could be quickly converted to military use (similarly, in the Civil War the north had almost all of the factories and had the same advantage). Now the U.S. doesn’t have that ability anymore, should the need again arise.
Zifnab
@Dan: I agree that military manufacturing is something of a dead end street. But to be fair, I think you’re putting a little too much weight on the trade deficit.
Take as an example miner town A and farmer town B. If miner A pulls $50 of ore out of the ground and sells $5 to farmer B, then farmer B grows $20 in corn sells miner A $10 in corn, the trade deficit is clearly in favor of the farmer. But the miner is clearly more wealthy.
You can replace “miner” with “auto manufacturer” or “investment banker” or “coke-a-cola syrup chemist” or whatever you like. The bottom line is that if the United States produces a large amount of wealth and distributes it internally, the trade deficit becomes a less pressing concern.
Now, if all our production goes overseas, and we stop generating wealth at home, then you’ve got a problem. Part of the issue with the housing bubble was the assumption that, because housing prices were going up, we were “producing” something at home. Had Americans been developing their real estate then, by the end of the bubble, we’d have had something to show for it at least. But we just used the houses like credit cards and – worse yet – we blew our money on overseas goods. So here we are… :-p
Still, the problem wasn’t rooted in a simple trade imbalance. It was rooted in the false assumption that Americans were producing more money internally than they were spending externally.
El Cid
@DanSmoot’sGhost: It kind of depends on the level of development as military-prompted industrialization began. For example, for FDR to diversify military manufacturing out of an easily bombable zone in the Northeast to the South where he could get the cooperation (buy off) right wing segregationist Democrats, it required the development of a technological infrastructure just to get to the point of building an armament factory. This can happen to some degree (though not necessarily better than a similar civilian investment) if military manufacturing is sufficiently technologically advanced to require its own infrastructural (physical and human) upgrades.
Zifnab
@El Cid: Right. All I’m saying is that there’s nothing bad about automation in the long run and, whatever you do about imports/exports, don’t go around discouraging domestic automated labor.
El Cid
@SBW: Those are very useful charts. Thanks for the link. Seems like production line workers went down by 600K from 2003 – 2006; does this reflect longer patterns? I’d like to see, but work apptmts finally call.
LV-426
I’ll go with David Simon’s take on this, our economy simply does not need most of the people living here in order to function.
We are tools, a means to an end and that end can be achieved using other labor in most cases and those cases are increasing. Business has evolved and we’ve been left behind.
http://www.pbs.org/moyers/journal/04172009/profile.html
Llelldorin
@DanSmoot’sGhost:
I’m not sure that your last point follows. An enormous number of obsolete computers are junked every year. That’s not a sign that the money originally spent on them was wasted, merely that capital investments have a finite life span. (That’s why accountants keep track of depreciated values.)
The bigger problem with military spending is that it can abruptly fall off, and military construction can hide problems. When I was a kid in Los Angeles, the collapse of our manufacturing sector was partially hidden by Reagan’s huge increase in aerospace spending, until the Cold War ended.
El Cid
@Zifnab: Yeah, but it’s just a waste of time having that discussion, because no one’s really opposed to it, and no amount of discussion would alter that. What I’d like to insist on is that we at least try to figure out what the hell we (and maybe everyone else) are going to do in order to have a healthy economy and not just punt the question with hand waving about safety nets or, like back in the 1990s, just flat out propagandize about how we were all gonna switch from those old luddite manufacturing jobs to our new spiffy high tech service jobs and our awesomely innovating financial industry. We can’t not answer the question, except that’s what we spend all our time doing.
Woody
Marx (iirc; or Engels, you never really know with those two) noted that one of the immanent contradictions of Kapital was that it REQUIRES a permanent class of un-employed people to exert “worker discipline,” by posing the risk that a worker could easily be replaced by some other worker willing to work, even if for less. Hence the steady, 3-5% level of so-called ‘structural’ unemployment. Kapitalist economists regard that to be “full employment.”
ChrisZ
I like being so freakishly in first place that everyone else is in awe.
donovong
@DougJ:
Do us a favor and ask your friend in finance if he or she is quoting the value of manufactured goods produced by American owned companies, regardless of the country produced (e.g., textiles, furniture, appliances, machine tools and cnc equipment, automobile parts imported by US firms), or the value of goods actually manufactured in the US. I suspect the devil is in the details.
TimmyB
We need to stop shipping good jobs overseas. Just look at imports vs. exports. We import hundreds of billions of dollars more than we export. Go to the Port of Los Angeles and watch all those containers get off loaded.
Those containers don’t go back empty. Instead, they are full of American jobs going to China.
We have more manufacturing than other countries? Not for long. Our industrial policy is to ship jobs overseas, and have U.S taxpayers pay for it. Owners get richer by exploiting workers overseas, and still charging as much as they can. Did the price of Nikes go down as it went to cheaper and cheaper countries? Nope. Phil Knight and the other stockholders got richer instead.
America is now all about making the rich richer, at the expense of everyone else in this country. We will soon have third world status the way things are going.
PeakVT
Employment by sector and industry in pictures.
Not really since a many of those jobs have been lost to other industrialized countries. That wouldn’t be the case if 1) we had a national health care system, and 2) our secondary education system (9-12) did a better job of preparing those students who don’t attend college for technical jobs. Many other industrial countries have craft or trade programs that turn lots of “academically poor” students into high value-added workers; in our system it’s basically college or bust.
bvac
That’s where I stopped reading.
DougJ
I will ask him.
But regardless, I think it’s important to distinguish between “manufacturing is headed in a negative direction” and “manufacturing is dead.”
And I see this from another –more anecdotal — perspective too, from a friend who works in a shop that produces some highly specialized piece used in hydroelectric. The shop only employs a few people, but it is manufacturing, and the shop is doing well.
Look, I think it sucks that people are losing jobs. I think it sucks that we may not make cars anymore. But just because the future of American manufacturing may be different — and much smaller — than its past doesn’t mean that it’s dead. And it doesn’t mean that Americans don’t make things anymore.
Tsulagi
I dunno, did the Bush admin ever get the manufacturing job reclassifications they were seeking? When an economic report noted 2.7 million manufacturing jobs vanished during the Decider’s first term they sought to reclassify putting a burger or taco together as manufacturing rather than service sector. Now that’s leadership solving a problem.
Dork
OT:
I have seen evidence of swine flying and parkas being purchased in Hades
So-so no mo’ no-no with Limbo
InflatableCommenter
@Llelldorin:
I’m not sure that you got the point. In your computer example, computers are tools that can be used to aid commerce, or start a business, or get work done in a more productive way.
Im my aircraft carrier example, a billion dollars worth of artifacts is out there on the ocean making a statement, but not being used to generate commerce, start businesses or make something more productive. It’s a weapon.
The point was that a weapon is a weapon, and tool or a factory or a school or even a road is a resource that can contribute directly to commerce.
They aren’t the same, and therefore, it is not necessarily a good idea to say that the money spent on them is equivalent in those ways. See North Korea for an example of what happens when you tilt an economy so far to the military side of the dial that there is nothing left for the people. For that matter, see the former Soviet Union. They’d spend zillions on bombers and ships and didn’t bother to pave the roads they used to bring produce into the cities from the farms. Trucks would bog down in the mud and food would rot on the trip.
It matters what we spend on.
Martin
Actually, over the long term it hurt employment unless the state intervenes. Rounds of industrialization are routinely countered by child labor laws, minimum wage, mandatory work-week, and extended school requirements.
So every gain in productivity has been countered to some degree by a reduction in the defined size of the work force (kids in college, for example, aren’t considered unemployed, but they reduce the potential work force by 5-10% by being there) or by the entitlement programs you refer to that allow people to retire, etc.
Those things haven’t continued since 1980, however. There has been no real progress in minimum wage and few new programs to trim the edges of the work force. We’ve had a decent increase in college enrollment, which has helped, but the rest of the labor force has been sucked up in one kind of bubble economy or another. Either we need to make another structural change to the workforce or we need to make another bubble to stuff workers into.
donovong
@DougJ:
I get your point. However, I would tell you that there is a heavy price being paid by this country in the decline of the manufacturing sector. Yes, we do still have manufacturing and always will. I did not say it is dead. However, manufacturing is very closely akin to a large “organ” in the “body” of the US. It is in decline, and while the effect is not necessarilty going to be fatal to the patient, it is going to be debilitating overall. Let’s call it the diabetes of the of our national body. It can be controlled, but in the long run, it is bad for the overall system. And while the pancreas may only be smaller and is yet still functioning, it does not bode well for the long term.
Excuse the attempt at analogy, but I think you will get the picture.
Little Dreamer
@InflatableCommenter:
Kim Jong Il is a Republican?
;)
DougJ
I do. And I think that the data here actually underlines the point — manufacturing is still a very important part of our economy, a vital organ, not something we can live without.
Martin
Llelldorin
@InflatableCommenter:
I think that’s oversimplified. Aircraft carriers aren’t just fashion statements–they can be used to protect cargo vessels from piracy, for example. We also used carrier groups successfully for years to discourage a resumption of war between the PRC and Taiwan (before Bush screwed up “strategic ambiguity”, our standard tactic was to say nothing at all about Taiwan, but to instead stand around looking inscrutable and sail a carrier taskforce through the Taiwan strait.)
If you’re trying to argue that we’re inefficiently spending far too much on weapons, while spending far too little on infrastructure and health care, you’ll get no argument from me at all. I just think that calling them “a statement” is too strong.
arguingwithsignposts
Truisms nobody in economics or finance wants to be honest about:
1. There is NO SUCH THING as “free trade.” Every country has tariffs, import/export restrictions, ownership rules, etc. Besides which, “free trade” actually equates to “screw the worker” trade (both the worker from the industrialized country and the serf from the second/third world country).
2. And, not everyone can become a highly skilled worker. Unlike Lake Wobegon, not all our children are above average. And for everyone to keep peddling that “more education retraining” bullshit is a fairy tale, especially for a 45-55 year old plant worker.
grimc
@Martin:
It’s not like US companies don’t. See Chevron in Nigeria, for example. Granted, they’re paying Nigerian government soldiers so it’s not a private army in the strict sense, but they’re still paying.
Bender
Easy! You wait for these new third-world workers to become unionized, whereupon they will eventually get sufficiently overpaid and inefficient that the manufacturer will have to look elsewhere for cheaper, more productive labor. Of course, they won’t come back to America right away. They’ll go to India first, or South America, or Indonesia, or Eastern Europe… but eventually, in 100 years or so, it will be our turn again, baby!
One thing the US Congress can do to help is to allow existing firms to work when that work would a) create jobs and b) help the US in strategic ways. Drilling for and refining oil creates jobs and the product it produces can make us less dependent on foreign oil. Yet Congress has allowed special interest groups and pet government projects stand in the way of economic progress. Building nuclear plants would also work.
tc125231
cosanostradamus
.
I wonder how much of this is actually made in the USA, and how much is made by American companies in Canada, Mexico, the Caribbean Basin and other places? Also, how many of the companies reporting are actually owned or controlled by foreign firms? And what percentage are union, and pay a living wage?
I’m hoping Obama is asking questions like this in formulating his policies. Up to now, it looks more like the same old trick of inviting the CEO’s in and letting them pull the strings, even if it means less jobs and a lower standard of living for Americans.
That’s the sort of thing that could lead to a Republican comeback in 2010 or2012.
.
Shell Goddamnit
Boooshwa. Drilling for oil can happen right now; there’s unused oil permit thingies out there waiting for drilling. Nobody standing in their way, most of the time. Go, and drill. Just not in the big preserve in Alaska, sorry.
As for oil refining, it’s my understanding that it’s all refined here, no matter where it comes from; and iirc we are still lacking in refinery capacity post-Katrina. So jobs in refining are by no means dependent on new drilling in the US and that sector can go forth & prosper. Except for that whole “keeping the refining capacity down to keep the price of the finished product up” thing that is…
Following the lead of El Cid, no cites, I gotta get in the shower.