American Manufacturing: The Picture Is Really Not So Bleak

Republicans and others who wish to impugn President Barack Obama and blame him for everything claim that he is responsible for loss of American jobs, especially manufacturing jobs. We see pictures of shuttered factories and impoverished areas in "Rust Belt" cities, and hear much about the rate of unemployment.

The peak year for employment in American manufacturing was 1979. Jobs declined continually since then—up until 2009, when they actually began to increase--and this turnaround point was, of course, during Obama's presidency.

Not that Obama gets all the credit for any increase, any more than he deserves the blame for 30 years of decline.

But let's look at some facts. The current number manufacturing jobs is quite a bit below its all-time peak; but, on the other hand, the value of American manufacturing has increased.

It's not simply a story of outsourcing of American jobs to China, Mexico, and other countries where labor is cheaper (although I have tended to feel that the American worker has priced himself out of the world labor market). Greater efficiency—automation, use of industrial robots, and so forth—has meant that the production of American factories can be achieved with fewer workers. So, if you want to, blame the robots for declining unemployment in American manufacturing.

But this means that American ingenuity has permitted goods to be produced with less labor—and thus lower labor cost, which of course is important in world competitiveness.

So, the situation of American manufacturing is much more salubrious than some people would have us believe.

Copyright © 2012 by Richard Stein

The "Buy American" Campaign and the Age of Global Trade

I was recently having a little dialog, via email, with a friend about Americans' buying products made in other countries. The ultimate inspiration behind this was a series on ABC TV news called "Made in America," which aims to make us Americans aware of how much imported merchandise we are buying and, presumably, stimulate us to look for domestically produced alternatives; that is, "buy American" and help the American economy.

There are a lot of reasons why so much of what Americans are buying and consuming is not domestically produced. Much of it comes from China these days, so we talk about the value of China's currency, which the government of China keeps artificially low, and low wages in China—both of which result in China being able to produce and sell its goods very cheaply.

But there is one reason that's possibly overlooked. At least I do not hear it mentioned. But I have occasion to see evidence of it.

If you look at freight trains, freight yards, or those yards where shipping containers are transferred from trains to trucks, you see just how wide-spread containerized shipping is these days. And the names on many of the containers show they're involved in the China trade.

Here is a quote from a Wikipedia article on "containerization":

The system, developed after World War II, led to greatly reduced transport costs, and supported a vast increase in international trade.

Therefore, items made in China (or in many other countries) can be shipped cheaply. Thus, starting with the items' original low cost and adding (as businesses must do) the cost of shipping and any tariffs, the items can still be sold cheaply because per-item shipping costs are low. Without this cheap means of shipping, it might not be profitable to sell much of the imported merchandise that we buy.

So a revolution in shipping has caused much more globalization and internationalization. No doubt it's not only Americans who are buying a lot of imported stuff of all kinds. In Europe, there is now more international trade: trade moves more freely within the "Eurozone" because of the removal of tariffs and other trade barriers, plus improved highways, tunnels, and bridges.

But to get back to the "Made in America" campaign: Actually, the whole idea that consumers need to go out of their way to support domestic manufacturing because American manufacturing has declined or is threatened is false. In fact, American manufacturing is thriving.* The value of American manufactures currently is greater than it ever has been, and is greater than that of any other country.
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*This information and the statements in the following sentence are based on assertions in an installment of the PBS television series "America Revealed."

Copyright © 2012 by Richard Stein