The USA as a continuing global manufacturing powerhouse

It is always hard to maintain perspective and that is one of the roles of hard data. As much as data can be manipulated or misleading, it is also the only means to move beyond simple impressions.

For most my adult life, American manufacturing has been in crisis. From the Japanese invasion of the 1970s to the rust-belt of the 1980s and on to the present. And it is absolutely true that we have been hemorrhaging manufacturing jobs. Politicians left, right, and center decry unfair competition, promise adjustment programs for displaced workers, berate corporations for global outsourcing, etc. In 1980, about 27% of American workers were in the manufacturing sector. Today that number is 13%.

But there is a different perspective. Think about agriculture - a difficult, risky and challenging sector if there ever was one. At one time, more than 80% of the population were farmers. Today, 1.4%. Yes, we lost agricultural jobs, but what happened was two-fold. Better (less back-breaking) jobs were created elsewhere in the economy and at the same time, efficiency in farming shot through the roof. We do not go hungry because we lack food. We produce more than ever. Except we do so with far fewer workers.

The same has been happening with manufacturing as is shown in the table below. The fifteen listed countries account for 80% of global manufacturing. You would think that the US manufacturing base would be a shell of itself after all these years, hollowed-out from decades of underinvestment and unfair foreign competition. That's not what the data says.

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We are no longer the single largest manufacturer in the world, a position now occupied by China. But we haven't fallen off the map either. The US, with 4.5% of the global population, produces 17.4% of the global value of manufactured goods. We are almost larger than the next three manufacturers combined (Japan, Germany, and Korea).

It is a stark reminder that what you choose to measure has a disproportionate impact on perspective. Yes, we have lost millions of manufacturing jobs with all the attendant social and economic disruption attendant to that. On the other hand, we have retained an enormous industrial sector through improved productivity. The issue is not policy so much as improved global efficiency and competition. Politicians can bewail the facts, but there is little that they can do to reverse the tide. Everyone is producing more with less labor input. If you want more industry it will simply have to be a less labor intensive industry.

There are a couple of other interesting nuggets to be gleaned from the table.

Look at the next three countries after Korea. Hardly countries which most people would likely identify, unprompted, as global manufacturing powerhouses. Italy? Really? Easy to overlook, but there they are. Russia and Brazil? Yep. And where is the mother of the Industrial Revolution? Britain is now responsible for 1.9% of global manufacturing.

What else might be gleaned from this data? A sense of fragility.

Among the top five globally competitive manufacturers, (responsible for nearly 60% of the world's manufacturing), only the US has a balanced national economy. The others are major economies but also frighteningly dependent on the health of the global economy. They export what they manufacture. China (manufacturing 41% of the national economy), Japan (33%), Germany (74%), Korea (83%). The US, productive as its manufacturing is, only depends on 22% of traded goods for its national economic well-being.

It is not that we are immune to events in the global environment. Not at all. But where a global recession or events might slow our economy, it will tank all those others. They are incredibly exposed.