01 August 2009


You may be surprised to learn that the United States is still the largest manufacturer in the world, with about 20% of total output. While this may eventually be exceeded by the Chinese, as we close industries, that is still off. Interestingly this also roughly corresponds to the alleged carbon footprint of the US. When you here stuff like we are responsible for 25% of the worlds carbon emissions with only 5% of the world’s population, the answer really is that we are also correspondingly responsible for the same amount of the world’s output.

There are many who like to use terms like “rust belt” and “post-industrial economy,” as we move more and more to a “service” economy based upon knowledge. This is presumed to be a good thing, offshoring manufacturing and presumably doing the brain work and selling these “services.” I find a number of problems with this notion. First of all the services are malleable and intangible. Second they are often pirated abroad- and easy steal once you know how to copy something or find out the formula. Third they do not exist in a vacuum. They are dependent on some kind of underlying productive economy. Someone else must be making all the basic necessities of life cheaply enough for other people to provide services.

To welcome de-industrialization is insane. It reduces opportunities for the less educated and working class. Getting alternative or more skills is not always an option. I am fascinated by TV programs like How It’s Made, How Things Work, Modern Marvels, etc. that show the insides of factories in the US (or Canada) producing a bewildering amount of products with state-of-the art production machinery. For any of this to disappear would be tragic. The notion that labor costs are at the root of the problem is nonsense (outside of some labor-intensive industries that are more logically offshored) because with modern automation it takes only a relative handful of people to run an entire factory.

The truth is that manufacturing job losses are as much attributable to more efficient automation as imports, as evidenced by the fact that the same jobs are declining elsewhere in industrial countries. But that should make it simpler to set up shop in the US (apart from government red-tape) since labor costs are not the primary consideration, especially in capital-intensive industries.

We have every reason to continue to encourage domestic manufactures. Apart from the question of jobs it is a question of national survival and ultimately security. We must know how to make things. Loss of such knowledge is disastrous. We have no way of knowing whether current trends will continue, but suppose there is a really serious decline of order. Basic skills are going to be more valuable than ephemeral intellect. Basic material things will matter; real things- real estate, real products. Services are little more than air. The bottom line is that they are not real at a material level, which is the basic building block of everything else. The truth is the services, i.e. the government, lawyers, educators, bankers, clerical workers, etc. are all dependent on the underlying “real” economy. A strong manufacturing base continues to be vital to our national existence, and we should encourage its growth rather than decline.

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