Manufacturing Won't Save Our Economy

Submitted by Edgar T. Wilson

Shh—listen: right now, somewhere, someone, probably someone you know, is making an impassioned argument that if the government would just stop letting these corporations ship our jobs overseas and start investing in American manufacturing, the U.S. would return to its global leadership position with a singing economy.

Can you hear it?

Despite the popularity of blaming outsourcing and the decline of American manufacturing for all the country’s economic stagnation, the truth is, typically, more complicated.

For one thing, those who cry that manufacturing must be brought back to prominence in the U.S. have reason to take heart: there are already signs on the horizon that outsourcing is turning to insourcing, and that the money-saving opportunities in China and beyond have more or less dried up. Without the cost differential, the time lost on shipping and logistics eliminates any appeal of outsourcing, after all. And this trend began without any heavy-handed intervention from the federal government.

But the manufacturing on its way back to American shores is not the same industry that was shipped out. While China and India put their vast human capital to work in factories, engineers, inventors, and tinkerers from every trade have brought a determinedly 21st century methodology to the table that sharply reduces the need for vast human capital.

It is inarguably true that American factories helped build the country’s middle class; the same model is at work in BRIC nations today. Uneducated, unskilled workers suddenly have opportunities to make more than ever before, and a huge move from the countryside to the city permanently reshapes the nation. It happened in the U.S. following World War II, and it has happened in China since it opened up trade with the world in the 80’s.

But the technology that helps supply the world with tradable goods has changed considerably; assembly lines no longer represent lifelong career tracks, factories are not springing up left and right just to meet skyrocketing demand, and most importantly, these facilities are no longer destinations in unskilled workers.

The sorts of factories operating in the U.S.—and the only sort likely to be built anytime soon—require engineers and tech specialists, and in much smaller numbers than the factories nostalgically recalled by those demanding more “Made in America” products. The tools of the trade have changed, and robots—not foreign workers—are the ones stealing American jobs.

Efficiency today no longer means higher employment; it means better technology operated by a few highly educated workers. Robots are increasingly adept at assembly, while 3D printers are quickly advancing beyond prototype development and finding a new role as mass-production devices.

This move toward efficiency without the human element eliminates economies of scale, where lots of workers must make lots of widgets and make up the expense in sales volume. 3D printing levels out production costs so that one unit is as cheap to produce as one thousand.

Outside the factory, catchphrases and speechmakers have similarly missed the point with invectives to “Buy American” or boycott products “Made in China,” or both. Realistically, the international supply chain is too large and integrated for a consumer to make anything like an informed decision to buy from one country but not another. Raw materials from around the world are used to make various components of various parts that go on to multiple stages of assembly in factories all over—“Made in ___” labels are nowhere close to a straight line to a country of origin.

A new trick some companies are using (apparently, with good results) is labeling their products as “Made in PRC” to avoid the watchful eyes of consumers on the lookout for “Made in China”. Of course, China is shorthand for People’s Republic of China, so both labels are accurate and both pass muster at the border.

Rather than focusing on where things are being made and who gets the supposedly coveted opportunity to make them, policy-makers and average citizens need to turn their collective focus where it matters: on the what of manufacturing. What, ultimately, is in demand from the factories?

Neither America’s nor China’s factories have a secure position in the economy without unique, high-demand products to make; this requires innovation. At present, the U.S. continues to lead the world in innovation, but China is hardly unaware that, whether through global on-shoring of assembly and production, or the development of smarter factories, they can be replaced just as quickly as the traditional American factory worker.

Although “get smart” may not have the same patriotic, confrontational ring as “buy American!” or “bring our jobs back!” it is closer to the mark. Looking backward at how the country built its wealth and middle class is no longer helpful in drawing the roadmap toward preserving it; but investing in the areas America is still the world’s leader makes more sense than trying to regain an industry that is already obsolete.

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