America has the world’s largest and most dominant
manufacturing economy. Every industry and every person depends
on manufactured goods and yet, domestic manufacturing is in a
state of transition. Between 1965 and 2000, net job creation in
non-manufacturing sectors of the economy was more rapid than for
manufacturing, giving rise to the notion that the United States
was becoming a service-oriented economy. This is all true, but
until 2000 the phenomenon was more about growth in the service
sectors, and not about the decline in manufacturing, whose level
of employment never slipped below 16.5 million workers during
this period and whose share of GDP is currently about 14
percent.
In recent years, and particularly since the recession started
in mid-2000, we have seen much in the media about job losses,
job exports, and the growing concern that we are losing our edge
in manufacturing. This concern is well founded. American
manufacturing lost 3million jobs between 2000 and 2004, a 17
percent drop. During that same period, our trade deficit in
manufactured goods rose by 42 percent, meaning that Americans’
appetite for manufactured goods is being satisfied increasingly
by foreign rather than domestic producers. Unquestionably,
American manufacturers have lost some battles in the recent
past, but that doesn’t mean the war is lost, nor is it ended.
To understand where to go from here and how to fight back, a
thumbnail history of manufacturing’s role in the fabric of
American culture may be helpful. The manufacturing ability and
capability of the United States have combined, even since
colonial times, to form the underpinnings of the political,
economic, and military platforms that have made this country the
superpower it is today.
Since the Revolutionary War, when the colonies’ foundries,
forges, and furnaces produced the arms necessary to fight the
British, manufacturing has been central to the preservation of
American society. In the Civil War, the manufacturing
superiority of the North kept the Union from falling apart. At
the turn to the 20th century, new inventions and new
technologies were rapidly being converted into consumer
products. People like Henry Ford were devising ways of mass
production and using more interchangeable parts to make them
affordable. Affordability and consumer spending, in turn,
created more jobs, which created more incomes, and so on through
the cycle. In World War II, the men were sent overseas to fight,
so Rosey the Riveter took off her heels, put on her work boots
and fought her war building airplanes and tanks. And without her
heroic efforts the materiel that empowered the Allied forces
would not have been available.
In the post war economy manufacturing, through the goods it
produced and the jobs it created, made the “American dream”
something almost everyone could achieve. But slowly along the
way, America’s elevation to the pinnacle of world economic
superiority has been allowed to diminish. This country has,
collectively, pursued policies that have eaten their way into
the cornerstone of our way of life. The legislators, the
administrators, the regulators, the judges and juries, the labor
unions, the tax men, the environmentalists, the importers, the
exporters, the bankers, the lawyers, the accountants, and others
have all taken a bite out of manufacturing’s hide in the past
fifty years.
Unfortunately, those in the legislative and executive
agencies of government understand little about manufacturing and
its importance to our economy. They’re better informed than they
used to be, but they have a long way to go. Even worse, the
average consumer knows and cares even less about where the goods
they consume come from or how they are made.
So how do manufacturers reverse the perception that theirs is
a dieing industry or that American products have lost their
competitive edge?
In a report submitted by the U.S. Department of Commerce in
early 2004 called Manufacturing in America the following
statement is made: “Manufacturing is crucial to the U.S.
economy. Every individual and industry depends on manufactured
goods. In addition, innovations and productivity gains in the
manufacturing sector provide benefits far beyond the products
themselves.”
Given this statement by the federal government, it is
incumbent on manufacturers to make sure all those who have
feasted at their expense are made aware that manufacturing in
America must remain as a cornerstone, and perhaps even the
keystone, to our economic future.
In doing so the following points need to be stressed:
Manufacturing creates wealth. The service
sector in America is growing, but even it requires
manufactured goods to do so. But the single most
distinguishing feature between services and manufacturing is
that only manufacturers participate in the formation of
capital. A producer of machine tools, for example, makes a
capital asset, which can then be used to manufacture other
capital assets – like airplanes, trucks, cars, industrial
machinery, rolling stock, and much more. It is capital
formation that keeps wealth in this country and, by extension,
keeps foreign powers from holding too much of our national
debt.
Manufacturing and innovation are inseparable.
Although innovation is not the exclusive domain of
manufacturers, they are experienced and efficient in
commercializing their innovations. Because manufacturers have
direct links to other industries, backward toward the
extractive industries and forward into the transportation,
service and trade sectors, their innovations spread impact
throughout the economy.
Manufacturing is the major driver of productivity
growth, leading all other domestic economic sectors. Gains
in productivity raise a country’s standard of living. In the
last 15 years, which includes years of both recession and
expansion, productivity in manufacturing grew at an impressive
1.9 percent annually. This was led by the productivity of
labor, which grew at an even more impressive 3.1 percent
annual rate. This acceleration in productivity increased
manufacturers’ ability to compete in global markets. Although
productivity gains have resulted in some manufacturing job
losses, this is an economically benign phenomenon when
compared with job loss associated with soaring trade deficits.
The U.S. doesn’t need to fulfill all its domestic consumption
by domestic production, but economic policy makers must become
informed that a better balance between manufactured imports
and exports is vital to manufacturing’s future.
Manufacturing provides steady, high paying jobs. In
2001, average salaries and benefits to workers in
manufacturing totaled $54,000. Compare this with $45,600 for
the private sector overall. Workers in durable goods
industries fared better than their counterparts in
non-durables, but both still exceeded the private sector
average. Additionally, manufacturing offers the added benefit
of employing workers across the educational spectrum, offering
more opportunity to those with only a high school diploma than
the economy as a whole.
A strong manufacturing base is vital to America’s
national security interests. There are thousands of
products, domestically produced, that are essential to keeping
our armed forces and other national interests strong and ready
to respond as required.
Consumers benefit from the variety and quality of
manufactured goods. Given the sector’s innovation and
productivity gains, especially since the mid-90s, consumers
benefit from competitive pricing as well.
Keeping the preceding points in mind, proponents of a
manufacturing economy need to educate stakeholders of the crisis
that would exist if America lost its ability to make things.
People in government, consumers, workers, and even young people
need to understand what is at stake – nothing less than a way of
life and a free society.
If asked, no single group would advocate the demise of
manufacturing in this country. Yet as a society we speak of
manufacturing as if it were a four-letter word. It is not. We
have, at times even unwittingly, failed to strike an equitable
balance between the economic needs of our socio-economic society
and those of its special interests.
This needs to change for manufacturing to thrive in this
country once again.
