The Manufacturing Myth

by Sal on February 8, 2011

in Economy

“U.S. Manufacturing is dead.”  “How can an economy survive that doesn’t produce any goods?”  “China and India are taking away all of the manufacturing jobs.”  These are comments that I have heard over and over again in conversations with various people over the state of the economy and our prospects for economic recovery.  The conventional wisdom is that the U.S. is moving towards a complete information / service economy, and away from manufacturing, and many worry that by no longer producing physical goods, our economic bubble will eventually burst even more than it did in 2008.  This line of thinking couldn’t be further from the truth.

First, America’s manufacturing outputs $2.5 trillion annually in manufactured goods, compared to China’s $1.48 trillion, a 40% gap.  America’s annual manufacturing output accounts for 20% of the world’s manufacturing, only 1% down from its share of manufacturing in 1990, and is nearly double (adjusted for inflation) that of our output in 1970.  In fact, the U.S. manufacturing output surpasses that of most major developed nations:

“The decline, demise, and death of America’s manufacturing sector has been greatly exaggerated,’’ says economist Mark Perry, a visiting scholar at the American Enterprise Institute in Washington. “America still makes a ton of stuff, and we make more of it now than ever before in history.’’ In fact, Americans manufactured more goods in 2009 than the Japanese, Germans, British, and Italians — combined.

Part of the reason that it seems like U.S. manufacturing is on a decline is that there are far fewer manufacturing jobs today. It is a mistake to attribute that fact to a loss in manufacturing.  In reality, manufacturing productivity has increased to record levels, and leads the world.  Our factories output far more with less, and allow our nation’s workforce to specialize in technology, services, medicine, and other highly specialized fields.

But it’s not only how much we manufacture, it’s also what we manufacture.  While the U.S. is not making toys, household goods, or other standard fare, the U.S. is making

To someone shopping for toys, shoes, or sporting equipment, it often can seem that way. But that’s because Chinese factories tend to specialize in low-tech, labor-intensive goods — items that typically don’t require the more advanced and sophisticated manufacturing capabilities of modern American plants.

A vast amount of “stuff’’ is still made in the USA, albeit not the inexpensive consumer goods that fill the shelves in Target or Walgreens. American factories make fighter jets and air conditioners, automobiles and pharmaceuticals, industrial lathes and semiconductors. Not the sort of things on your weekly shopping list? Maybe not. But that doesn’t change economic reality. They may have “clos[ed] down the textile mill across the railroad tracks.’’ But America’s manufacturing glory is far from a thing of the past.

America’s manufacturing sector is alive and well, and still accounts for a major portion of our economy.  So next time you hear someone decry the loss of the American production of goods, simply point out the facts.  Our economic fundamentals are still strong, despite what government and the Obama administration has tried to do, and the foundation of American manufacturing will again help lead our nation to unprecedented economic booms – provided that our government doesn’t muck it up first.

H/T: MrsSal

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