Manufacturing

I apologize for the fact I have not posted in a long time.  I moved to Concord, NH on the 4th and I began my new job on the 6th.  Most of the past two weeks have been working and settling into my lovely apartment here in Concord.

So, for my first post in a long time, I’d like to discuss some of the major myths surrounding manufacturing in the US.

Myth: China produces more than the US.

Fact: US manufacturing output in 2009 (the most recent numbers) was $2.15T.  Chinese manufacturing output in 2009 was $1.48T.  That’s a 46% greater amount of output than China.

Myth: The US doesn’t make “stuff” anymore.  We just make big things that cost lots, this the high values.

Fact: US manufacturing output accounted for 20% of all manufacturing in the world.  In other words, 1 in 5 of all the stuff made in the world was made in the USA.  This is also the largest percentage for any country.  To put it in some context, the US produced more than Japan, Germany, Britain and Italy-combined.

Myth: “These jobs are going, boys, and they ain’t coming back.”

Fact: Surprisingly false.  While US manufacturing employment has declined rapidly during the previous decade, a number of companies are bringing manufacturing jobs back from over seas, including Caterpillar and Wham-O (who make Frisbee) and Ford.

Most of the pessimism surrounding manufacturing comes from misleading and incomplete news reports.  Employment in manufacturing has declined rapidly.  However, our actual output is growing.  This means manufacturing is becoming more efficient and capital-intensive.  This is a good thing.  It means cheaper products and more resources that were tied up in manufacturing (such as labor) can now be used elsewhere.

If you want to hear some more on which I have been talking, I’d suggest you listen to the weekly radio show conducted by my bosses Alan and Brian Beaulieu.  You can find it here.  It is on Monday afternoon at 4 PM.

Jon

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3 Responses to Manufacturing

  1. John says:

    Are the “jobs coming back” because we have so many undoc workers here (the motivated workers) that there are not enough left in the home countries?
    With all due respect to your bosses, I doubt what you say is true. I’m sure they have access to numbers that I don’t but a brief walk through the marketplace will show that some or all of everything you see is made elsewhere.
    I guess I am one of many that didn’t buy Ricardos argument about it being good for our society to let labor intensive stuff be manufactured elsewhere while we stick to the high tech stuff. The American worker should not be put in direct competition with someone living in a cardboard box in Mexico, with no social safety net, and no workplace safety rules, and no chance of ever buying anything we actually still make here.
    But we have made our choice (or rather it was made for us): we prefer low priced goods to good paying jobs

    • Jon Murphy says:

      Unfortunately, I can’t give you specific numbers, as that isn’t available until we publish it. However, I can say that some manufacturing jobs are returning. It’s not the numbers we are used to, but it is happening.

      Uncle John, I’m sure you know the concept of specialization and it’s benefits. Why, then, should Americans spend our time making widgets when we are far more educated and skilled? The mere fact that we allow the Chinese to make our widgets allows us to use our labor for other things, like high tech manufacturing (such as medical devices and airplane parts), or R&D, or for us to become doctors or economists.

      As for your last comment, you are completely wrong. You know I love you, but really Uncle John? Americans are some of the richest people in the world. Our material lifestyles are amazing. Even the poorest among us are better off than most. I am considered “average.” I make about average wage for the US. Look what I have: an apartment to call my own, TV, Internet, Cable, electricity, an iPod, car, A/C, and countless books. We Americans made a choice: we chose Capitalism which, simply by the virtue that it is Capitalism, gives us both good paying jobs and low prices. If we resisted change, protected industries, and refused innovation, then we’d still be driving horse and buggies. After all, when the car came along, all the buggy manufacturers lost their jobs

  2. John says:

    You know I am a free trader, capitalist, and a Libertarian as well. Specialization is exactly the Ricardo theory I was referring to. Perhaps, in a world of theory, where one group of citizens was not working over 1/2 the year to pay taxes which, in part, are being used to prop up and defend the very countries that we are competing with. You know we have troops in 130 countries… And where much of the remainder goes to bureaucrats and other non producers in their own society. Perhaps, in that society, it may work. If I recall Ricardo used, as one example, an deserted island with a hut builder & a fisherman on it.

    Yes, we are some of the richest people in the world but also some of the most indebted. Examine your own debt to asset ratio before you compare having some electronic gadgets, an apt. (which in all likelihood even the landlord doesn’t own in the true sense of the word), or a bank owned home; with the real wealth of previous generations that actually took ownership of things.

    I am a firm believer in capitalism but I’m afraid that is not what we are practicing here now.

    The stale example is buggy whips… The buggy makers went on to be car makers. The whip makers became greeters at Wal-Mart.

    I sure hope you wanted a “devil’s advocate” on your blog…

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