Skip to comments.The State of U.S. Manufacturing
Posted on 10/05/2009 4:25:24 AM PDT by expat_panama
The United States has been hollowed out. It no longer manufactures goods. Once the factory of the world, the U.S. now manufactures debt. The high wage manufacturing jobs have been out-sourced to low wage economies. The demise of U.S. manufacturing is at the core of the decline of America, its chronic trade deficits and growing international indebtedness. It makes the worlds savers reluctant to be exposed to the U.S. dollar.
There is one problem with this widely held view: It is factually wrong.
The value of U.S. manufacturing output in real terms (adjusted for inflation) was a little more than $3 trillion in 2008. That is up from $1.2 trillion in 1972. If the U.S. manufacturing sector was a separate country, it would be the worlds 5th largest economy (behind the rest of the U.S., Japan, China and Germany). The U.S. remains the worlds largest manufacturer. Full stop.
Although international comparisons are fraught with measuring problems, it appears that the U.S. share of world manufacturing is roughly the same as the combined total of the BRICs (Brazil, India and Russia account for a combined 11-12% share).
The data also suggests that the impressive rise of Chinese manufacturing has come at the expense of Japan and other East Asian countries more than the United States, which the UN data suggests actually saw a small rise of its global share in recent years.
China has largely injected itself into the production chain at the labor intensive stages, so that television or electronic good that may have been made in Japan or Taiwan or South Korea now says made in China.
(Excerpt) Read more at realclearmarkets.com ...
Interesting take on the decline of Manufacturing Jobs.
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All true. Eventually, about fifty million workers will be able to produce all the manufactured goods the world needs, and fifty million farmers will produce all the food.
When that happens, what will everyone else do?
GDP counts government spending as production. So lower manufacturing as a percentage of GDP is misleading since government spending has grown enormously since ‘46.
ANYTHING to encourage personal savings and capital investment staying in the USA would go a LONG way to reversing this situation, whether by a drastically simplified income tax that rewards personal savings and capital investment, a 4-6% no-deductions flat income tax, or the FairTax replacement for the income tax.
They will work a lot less and have a lot more. Just as you work a lot less than your grandparents and have a lot more than they did.
The dollar value is not adjusted for inflation, is it?
Much of our manufacturing tech has been sold and shipped overseas with nary a thought for consequence. Recall rare-earth magnets used in guidance systems?
Manufacturing employment is an important indicator of the economy’s health as it provides opportunity for those without MBA degrees to support their families and put their minds into a productive process. I’d like to see this number also adjusted for non-food manufacturing, because much more of our food is processed today than ever before. This is not to suggest restrictive trade policy but perhaps saner tax, enviro and reg policies which might help struggling small manufacturers who would like to keep things close to home.
Actually, I don’t, unless you look at new tech.
OK, if I read rather than scan...
Your post showed a percentage that came out level. The BEA didn't seem to show percent output numbers, do you have a link to the numbers?
Deficit spending has accounted for on average about 3% of GDP (until Obama), so it should not affect the mfg % by more than a small factor.
When my Dad was born half the nation worked on farms and everyone said farm employment was economic health. Now farm labor is half a percent. Simply deciding to like farms or to love factories doesn't make sense. It may be true love but it won't feed the family.
The actual concern here would be what happened to all those people who lost their jobs and their economic input.
That is not the thrust of my question.
Let me rephrase: if we all get rich, how will we prevent the Devil from finding work for idle hands?
In the past, grim necessity kept most people to the straight and narrow. How will this work in an affluent society?
I’ll look, but I might have to get back later (fixing to leave for work). My chart was based on % of GDP so it does not show how great the increase in GDP has been (especially during the last eight years.)
We rebuilt our enemies’ manufacturing capability with modern equipment, while neglecting the infrastructure we had all-but used up during WW2. EEverything we had was wearing from maximum usage, and those guys got shiny new steel. I believe it was a shot in the foot...
From Wikipedia, the free encyclopedia
U.S. Secretary of State George Marshall
The Marshall Plan (from its enactment, officially the European Recovery Program, ERP) was the primary plan of the United States for rebuilding and creating a stronger foundation for the countries of Western Europe, and repelling communism after World War II. The initiative was named for Secretary of State George Marshall and was largely the creation of State Department officials, especially William L. Clayton, George F. Kennan, and Robert Rosemont. George Marshall spoke of the administration’s desire to help European recovery in his address at Harvard University in June 1947.
The reconstruction plan, developed at a meeting of the participating European states, was established on June 5, 1947. It offered the same aid to the USSR and its allies, but they did not accept it. The plan was in operation for four years beginning in April 1948. During that period some USD 13 billion in economic and technical assistance were given to help the recovery of the European countries that had joined in the Organization for European Economic Co-operation.
By the time the plan had come to completion, the economy of every participant state, with the exception of Germany, had grown well past pre-war levels. Over the next two decades, many regions of Western Europe would enjoy unprecedented growth and prosperity. The Marshall Plan has also long been seen as one of the first elements of European integration, as it erased tariff trade barriers and set up institutions to coordinate the economy on a continental level.
I'm afraid that you are about 100 years too late.
We have had 40 years of trying to move the Nation towards a FIRE economy, with an accompanying subsidy of the vices of the underclass. You might as well write the inauguration speech of the second Obama term; you know, the one that lasts twenty years?
People need productive things to do. It is our nature. Trading stocks is not productive labor. Practicing law as it is done today is not productive labor.
Remember that John Galt built things.
Thanks for posting this article. Very interesting.
They can resell the real goods at several levels, speculate on and manipulate the raw materials supply, create regulations and taxes, Initiate class actions against the producers of real goods, and create IPOs based on other peoples' technologies.
Just as ever.
There's plenty of work, as long as it does not involve (eek) dirty hands.
Precisely! It's not "real" manufacturing unless I say it is! Has anyone ever removed those categories and calculated the number? If not, why not? Because it would still show a gain, maybe?
How we got to be where we’re at, huh?
Are you asking or following a point? The answer is pretty easy to get out because we as a nation tend to keep track of people and money.
my pleasure —cheers!
The Clinton Administration had the power to stop the Magnequench sale, and it didn’t, much like the Clinton EPA had the power to keep that rare-earths mine open in California, but didn’t.
All these percentages are basically meaningless. There have been such drastic changes in the denominators (Total World Manufacturing and US GDP) used to generate these percentages that the resulting percentages mean little.
For percentage comparisons to be meaningful, the denominator must have remained fairly consistent as to the ratios of the various elements which make up the denominator. The elements of these denominators has changed drastically over 60 or more years. Ex. the US had its first $100 billion budget under Kennedy. It’s now $3 trillion plus.
It would take a lot more analysis than a simple division of one element of GDP by total GDP to yield meaningful percentages because the denominators have changed so much.
What are we talking about here --do we want people in factories because you're saying it's 'natural' or do we want to actually manufacture things? We don't need more people in the factories no matter how happy factory smoke is supposed to make them. They just get in the way. Maybe you could set up some kind of factory theme park where they could go and get it worked out off to one side.
Trading stocks is not productive labor.
You know very well that virtually all US factory ownership is incorporated. No stock traders no factories.
Unions demanding to get what they deserve, usually get what they deserve.
Are there any numbers you like?
hmm, that would make a great tagline...
Why? Food processing is manufacturing.
One of the definitions of capitalism is the separation of the goods-making process into more and more increasingly complex steps. It's through that increasing complexity that capital is ultimately employed to produce more goods at less cost.
The food processing industry is a perfect example of that. Where food once went directly from the farmer to the consumer, it now undergoes several phases of refinement which increase its safety, shelf-life and distribution area.
This process can only be maintained -- as many above have pointed out -- by struggling against government policies that choke off the creation and free-flow of capital.
This article is correct that our manufacturing base hasn't declined as many seem to believe, but it could represent a significantly higher percentage of GDP if we hadn't diverted so much of our capital into non-productive ventures [read government] over the past several decades.
The transition to a service-oriented economy is not inevitable.
It's not a matter of what anyone likes, but whether or not it's valid to generate stats from denominators whose makeup has changed significantly over the time period used. Ask a statistician or mathematician about stats from inconsistent denominators.
Are there an applicable numbers that you can provide as being "valid to generate stats from denominators whose makeup has changed significantly over the time period used" or have you rejected all statistician and mathematician stats?
I’m not the one who introduced this topic and drew conclusions from very scant data. And why did you start the US % of world manufacturing in 1995?
An interesting stat would be dollar value of mfg. goods sold in the US compared to dollar value of mfg. goods produced in the US over several decades.
A big factor in these comparisons is that there are so many more products being produced now that didn’t even exist twenty and more years ago. How much has total mfg. grown worldwide and in the US over the decades? Mfg. as percentage of GDP doesn’t tell us very much.
The fact that people rarely take the last step is a strong indication that they can't challenge the new number on the basis of statistics or mathematics. Thus the simple, and transparent, efforts to create uncertainty without doing any work.
The question not discussed is exactly what products does the US manufacture now? And where are they manufactured?
The failure to do the 'simple' and transparent work to establish the validity of stats is on the front end, and lies with those who produce the stats. It's not the responsiblity of the general public to prove the validity of stats.
I recall the ridiculous graphs which plotted nothing but international trade as a percentage of GDP, and the conclusions that that proved Smoot-Hawley was some major factor in the Great Depression. In that case, practically any element of GDP could have been plotted against the total with the same result, or same trend line.
This practice of taking one element of GDP, and plotting it against the total over several decades, then claiming a definite valid relationship is nonsense. The relationship might be valid, but not because the statistical method was valid. There are far too many other factors involved.
Listen to yourself: the author of a study needs to anticipate all of the objections to it in advance, no matter how cockamamied they are? You have it backwards. The author presents his "evidence," and his challenger then presents his . . . one needs to follow the "yeah, but" argument with "here's why."
(And the reason you "recall" that graph is because it proves your premise wrong--you've never found anything similar to challenge it). Yeah but, yeah but, yeah but . . . but never proven.
All I'm saying is that, if you want to prove that Smoot-Hawley didn't contribute to the Great Depression, you have to show some numbers supporting the same . . . none of this, "yeah, but we all know the Earth is flat" (or "he was wrong about Mars") stuff.
I've been asking that for years.....
But I think the answer is obvious; go on the .gov dole.
You are far out in left field in all your responses. It is undeniable that when the elements which make up the denominator from which stats are generated are changing significantly, then the stats generated are of very questionable validity.
That is very much the case when any one element of years or decades because the various sectors of our economy which make up total GDP have changed so much since 1947.
And, you are trying to twist things around. I have stated, correctly, that these stats of one element of GDP compared to the total do not prove any valid relationship or causative factor. It does not follow, as you claim, that having proved a statistical method invalid, that I must also prove the claimed relationship to be invalid.
You must prove your claims to be valid by some valid method.
Why? Because food processing is notoriously a captive of the growing area, especially perishable items. Before the Feds cut the water off in the fertile areas of Cal there was a lot of ag mfg employment, from Napa to Bakersfield.
Not so much now, I think.
In addition, the national defense requires a strong base in “heavy” manufacturing, and these things don’t get turned back on in a day.
I agree that the transition is not inevitable. Too bad so many policy makers swallowed that crap over the last few decades. I think you make a mistake when you call our current system “capitalism”, which to me implies optimization rather than maximization, and an enlightened self-interest. In the “corporatist” world, profits must be maximized, and in the current permissive climate on M&A those who delay getting to the loan window end up bought and broken up by those who are swift. Creditors and employees end up paying the price, and control goes more and more to managerial elites.
I own a small manufacturing company. Here are my observations:
1. Regulation is killing our competitiveness. I spend 50% of my time meeting requirements from the Fire Dept., City, State, EPA, OSHA, et al. I have very expensive wallpaper (permits, training certificates, etc.) that covers an entire wall of my main office and costs thousands per year to renew.
2. Young Americans don’t want to do hard, hot, dirty work. My Foreman and I often bet on how many HOURS a new hire will work before quitting. All of my top workers are green card holders....Yes, we did get the BEST workers that Mexico had to offer. Don’t know about the recent immigrants.
3. Young Americans lack skills. I have never hired a high school grad who can convert fractions to decimals or multiply without a calculator. Nor can they spell or follow written process instructions.
4. We survive by our wits. Some of my competitors have massively automated to cut the labor out of the product cost. In my case, we offer very high quality and turn orders around in as little as 30 minutes. They cannot outsource that kind of service to China!