Tuesday, 07.22.08
Cities of Industry
Photo by Nancy Davenport courtesy of flickr user we-make-money-not-art under a creative commons license
China Makes, The World Takes
July/August 2007
James Fallows takes a look inside China's manufacturing boom.
One-Dimensional Growth
January/February 2003
David Friedman argues that we need an industrial policy that produces real growth.
Is American manufacturing making a comeback? Yes and no. Because of the weak dollar, U.S. exports are increasing at a fast clip. High oil prices are making it more expensive to ship goods over long distances. And so we've seen increases in the domestic production of steel and in bulky, low-cost, "freight-sensitive" goods. A number of European firms, burdened by the strong euro, are ramping up U.S. production, and that trend is likely to continue. But this hardly represents a structural shift. The U.S. still seems to be losing more manufacturing jobs than it is gaining. China is still on track to become the workshop of the world, thanks not so much to its relatively low (and rising) wages, as to its dense concentration of manufacturing talent, which James Fallows vividly described in The Atlantic last year.
So does it make sense for the United States to contest China's still-emerging role as the world's leading manufacturer? Some have suggested that the U.S. pursue an aggressive industrial policy designed to increase the number of manufacturing jobs, which would include a sweeping program of large-scale infrastructure-building, training programs, seed capital for manufacturing ventures, state-sponsored industrial facilities, and more. But the really important question is: to what end? The case for industrial policy rests on the specious grounds that manufacturing jobs are superior to other jobs. Or, in somewhat more plausible form, that manufacturing jobs represent a way for less-skilled workers to get ahead economically, as opposed to the low end of the service sector. Even if that were the case, and it is by no means clear that it is, manufacturing jobs are going the way of agricultural jobs around the world. China, lest we forget, is also losing manufacturing jobs as its productivity increases. It is easy to imagine more production happening on U.S. soil in facilities that are fully automated. That wouldn't be a bad thing, exactly. But of course it is hard to see how it would be a much better thing than importing the same manufactured goods from China, assuming they cost the same amount. It is worth noting here that China's environment has suffered considerably over the course of its export-driven manufacturing doom. As we import Chinese goods, we've been, in a manner of speaking, exporting not just low-wage work -- we've been exporting pollution, along with the attendant health consequences. That is one small, significant reason why the American economy is cleaner and more energy-efficient than it was two decades ago.
This isn't to say that we shouldn't invest in our infrastructure. That's one thing champions of industrial policy get right. But we ought to do it in a more creative, open-ended way. We don't know exactly what our economy will look like in a decade, but we do know that the combined impact of rising hydrocarbon prices and climate change will have an uneven impact on the population. Rather than rebuild a 1950s economy, with green-collar jobs taking the place of blue-collar jobs, we ought to make our cities and suburbs -- and more importantly, our citizens -- more resilient. That means spurring innovation across a number of different areas, from agriculture to urban planning to product design. As Mao said, we should "let a hundred flowers bloom," not follow a rigid 5-year-plan.
Westward ho!Joel Kotkin argues that manufacturing is still a vibrant force in the US economy, but its nexus has shifted from the rust belt to small, younger communities in the West. |
A manufacturing rennaisance?Pete Engardio fears the US will fail to capitalize on a prime opportunity to bring manufacturing jobs back from overseas. |
Fixing the national networkBurt Solomon takes a look at what economic fine-tuning is needed to address the infrastructure crisis. |
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One pressing issue that I do not see in this article is the debt load that America carries as it looses its manufacturing. A biblical proverb says that, "the borrower is servant to the lender". Think about the implication of having to borrow an additional $750 billion or so every year from foreign countries--that current account deficit (or trade deficit, whatever is most relevant here) amounts to well over $2000 for every man, woman and child in the U.S. That means for a family of four, the debt to foriegn countries is increasing at over $8000 per year on average! That gives people outside the country tremendous buying power--to purchase U.S. companies, land, and even highway toll roads.
Think of the implications. For example, TMC is replacing GM as the premier auto manufacturer. When you see the list of executives at TMC, they are mostly Japanese. Will there be the gradual formation of a new "glass ceiling" for Americans in the corporate world? Manufacturers are huge buyers of information technology, aren't we loosing the home-field advantage in that game also? What about its effect on the financial sector of the economy? My point is that the deindustrialization of America will not just affect unskilled workers; it will affect the college educated population also.
Whoever wins or losses, the trade deficit seems irresponsible and wholly unsustainable. Just as the housing bubble had to burst, so must the retail sector contract. Our middle class was created by a high-wage, high-output economy, which some have called Fordism. The middle class made the retail industry possible. Even the lowest-class Walmart shoppers need to own a car. But have we not become a high-consumption, so-so-production soceity? This cannot go on. Eventually, consumers will be wrung dry completely. The accumulation of dollars in foreign currency markets will put an untractable downward pressure on their value. The pendulum must swing another way--but which way? We must either stop buying so many products, make them "onshore" again, or sell the soil under our feet to foreign investors just to maintain our high-consumption lifestyle. That last option is the default. Are we going to manage our assests responsibly, with a long-term strategy, so we do not have to take the last option?
Posted by Barry Fisher | August 3, 2008 10:06 PM