What Economists & Academics Get Wrong About US Manufacturing

US manufacturing isn’t healing as fast as we’d like or as quickly as we deserve. On that, most of us can agree.

But it sure seems like we’re seeing a steady stream of misguided understanding among much of the economic & academic elite. They often seem to miss what a strong manufacturing base really means to us. Or any country, for that matter.

Recently, a young man named Brian Jencunas wrote a piece entitled ‘Trying To Revive American Manufacturing Is A Fool’s Errand.’ It is a perfect example of this lack of awareness of the values of a well-managed, inclusive industrial base.

It – and articles like it – make me wanna throw a baby turtle in a blender.

Now, I don’t mean to pick on or discourage Brian. He’s young – a college senior, his bio says. He’s learning. I’ll bet he’s a fine young man. But his is the most recent in a line of similar tripe. They all deserve to be called out. So I’m using this one. Sorry, Brian. Nothing personal.

The overall premise of Brian’s article follows similar paths to ‘logic’ as the others:

  • US Manufacturing has continued to dwindle, and its recently trumpeted ‘renaissance’ is way overblown
  • Cheaper imports are good for everyone because when goods are more affordable it amounts to a ‘raise’ for the middle class
  • Skilled labor is gone – and not only is it not coming back, it shouldn’t
  • Our destiny is to become middle managers, working primarily with computers & in services
  • These shifts are comparable to the shift from agriculture to manufacturing in the last century

Now here’s a kick in the head for you – I agree with most of what Brian says, as it’s presented. It’s a well-stated-but-marginally-lucid argument.

Facts are facts. For example, reshoring of production to the US isn’t approaching meaningful levels – take a look at our rising trade deficits and anemic job growth for proof of that. Sure, it’s happening – but primarily among small or medium manufacturers without the resources to absorb the costs of managing extended supply chains.

And emerging & maturing technologies must and will bring disruptive elements to how we work, design, create, and innovate. They always have.

But it’s not what Brian (and the leagues of academia and economists like him) says that bothers me; it’s what he and they leave out. It’s as though going from where we are (were?) to where we’re going contains a moment of ‘and then a miracle happens.’

This glossing over of things like the need for a sound, extensive manufacturing policy that deals with trade, education, immigration, (meaningful) patent reform, IP protections, US defense – all acknowledging small businesses as well as large – irks me terribly. It’s as though the decimation of our industrial base happened by accident. (Brian, it didn’t. I was there. It was the pursuit of cheap labor and the lack of protections like a policy. And in case you bristle at the word ‘protections’ like I bet you are, a budget is a form of protection. Chew on that one for a while.)

Also, there is rarely (if ever) any acknowledgement of the loss of the ability to innovate. That happens when ‘unskilled labor’ is no longer exposed to the chain of ‘fundamental-to-expertise’ that can only be synthesized in a manufacturing environment. Some of the smartest cats that you and I know were able to actualize themselves by growing up around and within manufacturing ecosystems. These people – wired to master the natural world – will never become the techno-savant via a classroom that Brian and those that share his ‘vision’ believe. What are we going to do with these people? Leave them to forage for survival?

Leaving these sorts of things out of the equation is intellectually lazy. I believe we’re denying those parts of every generation the ability to contribute extraordinary things to the world. And I’m convinced these omissions will have the unintended consequences of putting these folks behind a fry cooker or waiting in line for scratch-off lottery tickets. Or worse.

In general, what’s lacking is balance. I’m just as skeptical of anyone with a pure, gung-ho US manufacturing sentiment without considering the roles of government and sound economics in those solutions. But the only way for us to fill those blank spots is to combine all of those things. And articles like this lack that balance.

They drive a wedge between two sides that should be working together for a solution.

Bean-counters only see what’s happened. They have very limited – but powerful – influence on a business organism, be it micro or macro. I see the measurement of what is and has been to be invaluable. But to only consider one side and not play the tape all the way through to the end will result in Brian having few – or no – beans to count later on.

One last thing … there are voices of balance and reason that support this balance from the economics front. For example, check out this article from a Nobel Economics Laureate that says the US has gone too far in regard to outsourcing.

And there are others that bring that balance to the US manufacturing debate. Alan Tonelson. Clyde Prestowitz. Michael Mandel. Check these guys out.

They are, to me, the best antidote for the one-sided myopia that could spell disaster for an economy that doesn’t need another one right now.

AJ Sweatt
  1. Thanks AJSweatt for very well written and educational blog.

    The only argument that may need a little more clarification is that we did not protect the US manufacturing against cheap products from China.

    That argument raises the question is free trade good or bad?

    That was a major issue at the beginning of the United States and it was settled by prohibiting all trade barriers between the states

    Even at that time we had some of the states with very low labor rates (slaves worked for nothing) but that did not cause off shoring problems for the industrialized North.

    For them cheap imported cotton was today’s version of Wal-Mart their middle class got pay raise.

    By extension, can we blame all our problems on cheap Chinese imports and our industrialists chasing cheap labor?

    Ask what happened to US while Wal-mart became largest retailer of Chinese imports.

    1. We built the world’s largest commercial export aircraft industry
    2. Became the largest exporter of agricultural product (thanks for illegal Mexicans).

    Then came the beginning of the downfalls:

    1 We created the world’s largest and most expensive welfare system.
    2. Gave everybody, including the government, credit cards.

    Even that did not cause immediate disaster

    We had enough illegal Mexicans to build huge quantities of idiotically large, expensive and non productive residential houses for everybody who could find his/her way to the nearest bank.

    Prosperity was all over the place, therefore why to waste time learning new skills and trades, student loans were readily available for everybody who wanted to get a BS degree in the science of the Global Warming. BSGW

    Then came just a tiny hick- up and that got Obama elected, from here on the solutions to all economic problems will be expanding welfare.

    Predictably that will make things even worse especially if we stop cheap Chinese imports. The result will that even our poorest with the BSGW will no longer be able to shop at Wal-Mart..

    Just because we stop cheap Chinese imports does not mean that our manufacturing begins to boom. Lack of STEM skills stops it cold.

    And the root cause for lack of STEM skills is that the university degrees in BSGW are more popular.

    Is it really fair to blame lack of trade protection and Chinese for all our problems.

    May be we are the problem.

    The The system quite well as long as the illegal Mexicans did all the hard work.

  2. Well said.

    The fact is that we must be more innovative than emerging countries in manufacturing in order to restore fiscal balance. Presently countries accumulating US dollars are using them to buy into the north American infrastructure.

    We cannot compete in mundane routine processes – we can only outstrip global contenders by higher technology on ALL fronts – but particularly manufacturing because our skills base is high.

    Many business schools like to imagine a new generation of administrators can magically inject new ideas into commerce and recover our standard of living – not so. We need innovative technology from skilled engineers and scientists – but equally important we must change investor capability of evaluating new technology – presently lacking. Mention “new technology” and everyone runs for the hills. Our society has reached new depths of timidity which is hurting.

    We need to create a financial infrastructure and an environment which ensures innovation in all its variety is respected and restored.

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