Opinion

The Edgy Optimist

The real future of U.S. manufacturing

By Zachary Karabell
January 17, 2014

Few topics have been more fraught than the fate of U.S. manufacturing. The sharp loss of manufacturing jobs since 2008 has triggered legitimate concern that America’s best days may have passed.

Even as recent leading indicators suggest more economic momentum, job growth remains at best sluggish and manufacturing has seen only marginal gains — having shed more than two million jobs in 2008-2009, and millions more since the peak in the late 1970s. Manufacturing accounted for slightly less than 20 million jobs at the peak in 1979. Now it’s barely 11 million.

The picture is even bleaker considering the population, since the labor force is considerably larger today. This has led to a widespread conviction that the core of the potent U.S. economy is being hollowed out.

So it is not surprising that Washington’s latest highly-touted initiative seeks to rejuvenate American manufacturing and restore lost jobs. President Barack Obama unveiled an initiative Wednesday in North Carolina designed to foster high-tech manufacturing for the long term.

With money from the Energy Department, the Raleigh-Durham area — already home to several leading universities that are part of what is called a research hub — will develop an innovation institute to foster high-tech manufacturing, such as semiconductors. The promise is that such manufacturing and its attendant jobs are vital to competing in today’s global economy. Though the administration can fund a number of these without Congress acting, the White House has called on the legislature to pass funding for an additional 45 such centers around the country.

The assertion that the United States, or any nation, requires continued investment in the technologies that will drive future production is indisputable. On that score, at least, the Obama White House is fighting the proverbial good fight.

The contention, however, that these technologies and the factories that harness them for production will be sources of well-paid, solidly middle-class jobs, is flawed. In our political debates, we maintain the comforting fiction that a manufacturing revival can and will go hand-in-hand with a jobs revival. Yet, as Obama’s initiative shows, the two can be — and increasingly are — uncoupled.

The issue is not the hollowing-out of manufacturing as defined by less production. Yes, many less expensive, simpler products are now made more cheaply elsewhere and are unlikely to be made in the United States anytime soon — even with the “on-shoring” of manufacturing. Though China ceases  to be the place of low-cost production, Vietnam, the Philippines and who knows where else (even Mexico) will be more attractive for apparel, furniture, electronics and anything plastic for a long time to come.

The high-end production that these new U.S. innovation hubs seek to promote is indeed in demand around the world. It is something where, as yet, China and other low-cost manufacturing centers have not excelled. This is why China actually imports considerable billions of higher-end equipment – particularly from Japan and Germany. So it is true that the United States could have a competitive advantage, especially given the plethora of research universities and the wealth of highly-educated talent that can be used for just this type of production.

But all this is not the same as a job creator for a workforce of at least 120 million and counting in nation of more than 320 million people. These high-tech factories might employ hundreds of people in conjunction with industrial robots, using sophisticated software systems for design and production. These factory workers bear little resemblance to the 1950s line workers doing rote tasks. They are more like Silicon Valley engineers or lab technicians. These are high-skill jobs — and not nearly as plentiful as the factory jobs of the past.

That is, of course, no reason to dismiss the importance of cultivating these centers. Promising that they will be job engines, however, is dicey at best, and disingenuous at worst.

Even hundreds of centers of innovation that focus on 3D printing, bespoke semiconductors and technology-laden products will not spell a revival of the manufacturing workforce commensurate with what many hope or expect.

It is instead likely, even with the reinvigoration of American manufacturing, that job creation is almost non-existent. It is likely as well that output as measured by gross domestic product goes up along with the revival — without producing a job renaissance.

Again, this is not an argument against these endeavors. They will indeed generate income and revenue and enhance productivity in the U.S. They will not, however, solve the conundrum of our structural unemployment challenges.

Over time, of course, as more people develop the skills required for this new wave of manufacturing, it is possible that the economic system overall generates a next wave of prosperity. Education and innovations, tethered to products, ideas, services and even entertainment, has no clear limit to growth.

In the interim, however, a generation ill-prepared for that change is likely to continue to struggle mightily.

So we should embrace these endeavors, absolutely. But we should do so with a clear sense of what they can do long-term and what they cannot do in the short term.  They cannot bring back lost jobs or industries. They also cannot solve the employment challenges for millions who have been displaced over the past few decades.

Obama’s plan can solve those for the next generation — but not for portions of an older generation now adrift. We should not fool ourselves about what can be done.

A lost generation may require years of support before the next is ready to carry the weight of the future. This is only a negative, however, if we pretend that an easy fix is on the horizon.

 

PHOTO (TOP): Workers assemble Motorola phones at the Flextronics plant that will be building the new Motorola smart phone “MotoX” in Fort Worth, Texas September 10, 2013. REUTERS/Mike Stone

PHOTO (INSERT): An abandoned steel blast furnace in Pittsburgh, Pennsylvania, April 8, 2011. REUTERS/Eric Thayer

Comments
16 comments so far | RSS Comments RSS

our prosperity has been outsourced…Unions are nothing but voting blocks…and Zach..you have definitely been sipping the Kool-aid.

Posted by rikfre | Report as abusive
 

The new face of U.S. manufacturing (a robotic face) was visible 30 or 40 years ago. The difference between then and now is that the workers losing their jobs to new, automated U.S. factories are not American workers. Instead, they are workers in low-wage countries to which manufacturing was outsourced beginning 30 or 40 years ago, when it first appeared that automated manufacturing was inevitable. So the workers losing their jobs today are not American workers.

That does not mean that the future is jobless. Or, at least, it does mean that the future is jobless for the highly skilled. It may also mean that types of businesses that were lost during the industrial revolution could make a comeback. For example, clothing was custom-made before the industrial revolution introduced standard sizes. Imagine an economy in which a clothes shopper picks out a style and then is measured using laser technology similar to that of laser range finders. The data could be provided to assembly-line manufacturing equipment so that the clothing could be made using processes that are indifferent to whether an item being manufactured is standardized or customized (the data be used for the settings, and the equipment would not care what the settings were). Because the trend of technology is for automated equipment to become constantly more powerful and less expensive, such manufacturing could be done on a local level, just as custom cabinet shops use PC-based CNC (computer numeric control) equipment to make customized kitchen cabinets today.

Posted by Bob9999 | Report as abusive
 

This kind of stuff is a drop in the bucket, dreamed up by some 20somethig college person. The kind of people that come up with ideas like this, are the kind of people that would rather mess around with an iPad for 20 minutes, to do what a person with a pad and pencil could do in 20 seconds. They think tech is the key to everything.

A few major things need to happen for things to change significantly…

Most importantly… The American public needs to quit whining about everything being somebody else’s fault, and start taking responsibility for their own actions. They need to quit acting like anybody who has a business and/or makes a lot of money, is evil and should be punished. They need to buy stuff made in the US. Yes, that will cost more. No, it’s not because companies are greedy… it’s simple math. If you have to pay people ten times what other countries pay people, then obviously it costs more. Duh. The public needs to stop buying into all the Michael Moore type conspiracy BS, and just get over it. Buy less junk that you don’t need, and put that money into a smaller number of quality products that will last longer, which are made in the US. If everybody did this, then things would change dramatically. As long as people keep buying cheap crap at Walmart and trying to blame somebody else, nothing will change. I tried to purchase all US products for the holidays this year. There’s some great stuff out there if you just give it a chance. Buy less quantity, and buy more quality. But if you’re one of those grumpy people that is waiting for the government to fix everything, then you’re going to have a long wait.

Second… Businesses do have to make the effort as well. I manufacture products made in the US. I try to buy as many of my materials and parts from US makers as I can. But in some cases, it is almost impossible at this point. There’s something like, one maker of wood nails in the US now. That is pathetic. I’m on numerous business forums, and virtually everyday, you will see business owners whining about the “bad economy”. Yet, when I try to do business with companies in the US, they will often look for any excuse NOT to do business with you. I’ve lost count of how many times I’ve called US manufacturers with money in hand, and never even received a reply. A lot of US companies need to pull their heads out, big time. I personally built my business across the last ten years, and grew it each one of those years, making more money… This during what was supposed to be one of our worst economic times. If you’re a business owner… Quit spending so much time complaining, and quit waiting for the government to help you. Just get to work, bust your butt and make it happen. That’s what made this country… Not constantly whining and complaining.

That’s what it takes to make a successful economy… Hard work and discipline. Something that we as Americans are extremely bad at these days.

Posted by dd606 | Report as abusive
 

Neoprotectionism is one way. Relatively easy to reach.

Another way: a more serious socio-economic reshaping and setting Unconditional Basic Income.

Either way will be difficult as we observe a nation with the wealthiest 10% (who actually rule) and the miserable 90%.

Other options? We try to find them at our international forum:
http://outpost2012.net/discussion/130/ne w-economic-theories#Item_6

Posted by OUTPOST2012.NET | Report as abusive
 

Mr. Karabell,

For once you had me with you right up until your last two sentences. These read as words/ideas in a draft perhaps intended for deletion before posting. I’ve done that.

“A lost generation may require years of support before the next is ready to carry the weight of the future. This is only a negative, however, if we pretend that an easy fix is on the horizon.”

Things of this nature are never as simple as “a lost generation”. If older workers forced from employment in the last five years (and before) are counted together with degreed burger-flippers and those unemployed or underemployed with advanced degrees we might have an economic burden comparable to TWO “lost generations”.

The cost for a reduced-in-number “current work force” to provide “years of support” (or, in essence, permanent) for so many would be the financial equivalent of trying to swim a fast river carrying two anchors. More than a few could reasonably be expected to drown (financially) in such attempt.

Is THAT not a HUGE and essentially indefinite negative remaining LONG after we accept “…that an easy fix is [not] on the horizon…”?

Posted by OneOfTheSheep | Report as abusive
 

@OUTPOST2012.NET,

I’m confused. How is your “…more serious socio-economic reshaping and setting Unconditional Basic Income…” different from the socialism with which we are familiar in which income is taken from the productive and redistributed to the unproductive?

And what nation are you observing? Is Russia your “…nation with the wealthiest 10% (who actually rule) and the miserable 90%…”? America’s malls have been absolutely jammed throughout the holidays (and even now), so it sure isn’t these United States.

Posted by OneOfTheSheep | Report as abusive
 

@OOTS
We are not talking about Russia at the moment.
The sets of ideas for US; EU; East Europe; Middle East and so on – they should be all different.

Inequality in Russia is huge.
However, the main battle in Russia is between the oligarchy and state. It is a completely different subject.

Posted by OUTPOST2012.NET | Report as abusive
 

Mr. Karabell’s analysis is spot on. However the idea is not really new and has been going on since the industrial revolution after the invention of the power loom in the early 1800s (not that it shouldn’t be discussed). Interesting as well is the source of term ‘robot’ which was first used to denote fictional automata in Karel Čapek’s 1921 play “Rossum’s Universal Robots”. Since then there has been a slow and steady mechanized take over of labor and a disproportionate distribution of productivity gains away from the 90% Eventually there will probably be a necessity to enact laws that require dividends be paid to everyone as a share in robotic productivity in converting earths resources to food and products.

Posted by pantathalos | Report as abusive
 

@OUTPOST2012.NET You may be interested in some experiments done with negative income schemes.

Effects of automation on the labour force have been studied and discussed for decades. As globalization takes root and higher education permeates the global population, many prior pontifications are materializing. Like it or not, frightened or not the basic needs and comforts of life are being provided by fewer labourers spread across a global work force. I agree with Karabell to the extent that Obama’s initiatives are not going to ‘fix’ the employment situation in the USA. However I do not see employment as a generational problem rather it is a systemic global problem. Globally, humankind requires structural changes to the distribution at least basic necessities and likely to the whole concepts of work, productivity and value as a human.

As restructuring continues over the coming decades there will be setbacks with reversions on archaic models such as isolationism, religious fanaticism and wealth by plunder. But the knowledge genie is out of the bottle with education and technology advancing globally.

Humans have now surpassed millennium old shackles of work to survive conditions. Hopefully the next several decades are the epoch advancing new beliefs for human value of work, productivity and participation in society.

Posted by Spruce_gum | Report as abusive
 

Nothing will change for the Americn citizen until the certified Fascist Congress decides to put the American worker first. Most favored trading status for the Military Communist Chinese who suppress wages and manipulate their currency and dump product to kill US business has decimated manufacturing in the USA. Your children have NO FUTURE in America under the current corporate controlled corrupt = FASCIST American Congress.

Posted by UScitizentoo | Report as abusive
 

@Spruce_gum, very well said sir. I agree completely and will definitely look into the negative Income schemes you mentioned. OUTPOST2012.Net is just beginning a conversation on the topic. We are looking at a handful of ideas, starting with Basic Income as the Swiss are actually voting on it. I would see it as one of those transitionary moves to a new economic system. In a way though, I do see the problem as generational. Our friend and respected commenter @OneOfTheSheep (affectionately known as OOTS) is a great example. He see all of the problems very clearly, and knows where things are leading, but cannot see new theories as answers. He continues to stick to his generations social training. He will resist anything that looks like government programs that provide a living but do not require a forty hour work week. @UScitezentoo is another example. Many others call for traditional 20th century solutions like tariffs and immigration control. I think it will take another generation before the United States and Europe are ready to truly look at new solutions. So for the next 20 years I see misery in those nations. The following 20-50 will be unsteady and transitional. Somewhere after 2050 or 2060, things should start looking good again.
Social changes take generations. Economics can’t change without social change.
Thanks again for your comment.

Posted by tmc | Report as abusive
 

I suspect some of us are having a difficult time accepting our quality of life is of no concern to the decision makers we have elected. The systematic flooding of over one million immigrants annually. The systematic destruction of living wage jobs. The path of this nation’s Global economic immersion on behalf of the Multinationals is unstoppable and with it comes the promise of more austerity from the middle down, the bottom up.

Live lean. It’s coming.

Posted by SaveRMiddle | Report as abusive
 

@tmc,

You are most kind.

There are many things unclear in my crystal ball. I am as the person putting together a puzzle, eagerly trying each piece from the box hoping it will fit. It might be more accurate to say that I cannot yet see many answers in untried theories.

Like that puzzle, as one progresses and more an more pieces fit, the easier it becomes to complete it because there fewer and fewer places and fewer and fewer possible “solutions”. It is obvious that any economic system dependent on increasing population for prosperity is at a dead end.

The steps necessary to meaningfully address stabilizing and reversing the number of humans on Earth are anathema to radical fundamentalist Christians AND radical fundamentalist muslims. If my generation’s “social training can be distilled down to the simple concept that a majority must in some manner produce and a minority live as oysters on such surplus as floats by I would agree.

I cannot envision a future in which the challenges and rewards of productive work are sufficient without direct monetary correlation that the necessary few would do all that is necessary (or desirable) for an unnecessary majority of human sponges. But just because I cannot “see” such a future does not necessarily mean it can not come to pass over time.

Like you, for the next 20 years I see misery in most nations and I expect to be dead (even if I live to be one hundred) before “good times”. Hope I’m wrong.

Posted by OneOfTheSheep | Report as abusive
 

the govt is so oversozed it has caused our only 2 major problems with the US: the federal govt and the state govts are not doing its constitutional job.

the federal is not placing tariffs at the border on imports to balance the wage differnce between us and slave labor countries and instead is predatory against hard working americans inside the country to make up for its damage.

the state govts are taxing us too much as well.

both levels are regulating us out of business by the extreme costs.

good examples are minimum wages increases may destroy my business. the govt has already taken away 1 out of 8 jobs at my medical equipment manufacturing company. it has also taken 1/4 with the excessive costs of health insurance. the govt sets those rates.

we have the best and brightest in the us, but we are being strangled by our govt being too big. many well intentioned regulations and taxes. but the total amount is ten times what is reasonable.

Posted by RogerNas | Report as abusive
 

I believe the entire notion of a “country’s” economy is obsolete. Countries are creations of Nationalism, which is based on a political entity reflecting the overwhelming ethnic / racial group inhabiting it. This no longer describes the territory called the U.S.A. The economy here has a greater resemblance to a conglomerate corporation than a “nation”.

Why should anyone here be concerned with the future of a collection of global economic entities who call themselves “American”? These organizations, including the one that calls itself a democratically elected government of the whole shebang, no longer have any commitment to any identifiable “People”. People who live in the USA are looked at in a very similar way to the way employees are looked at by employers. The organizations do not give a fig about the individuals here. We are all of us “replaceable”, in HR-speak. To the extent we are indeed a “nation” we are not self-governing, not are we free.

Worry about your money, not “your” country. It does not care about you, unless you are very rich indeed. The era of nationalism and self-determination is over.

Posted by usagadfly | Report as abusive
 

@usagadfly,

The “We, the people” of the United States are, to be sure, no longer a cohesive consensus of common interests. The culture of “Protestant white male” domination gave way to “white males, which gave way to “whites”, and has now collapsed into a “free-for-all” at the crossroads of “values”.

The battle today is not one of purity or ethnicity but to determine the culture that will steer America and where. The America of today is still the America of a huge majority able and willing to work for their living and their future and their children’s future. But this is an endangered America that perhaps cannot endure mush longer.

Since just before WW II, Franklin Delano Roosevelt laid the foundations of what would transform America from a democratic republic into a bureaucracy. Since that time countless alphabet agencies have been created that are essentially immortal. Today these “agencies in concert” together control the ebb and flow of the vast majority of capital, the measure of which we call the “American” economy.

Such agencies, administered by and staffed by unelected and relatively unknown bureaucrats, have increasingly assumed, usurped or unilaterally created powers without meaningful limit. Such powers are then wielded without effective restraint and with an astonishing lack or individual accountability.

It should therefore come as no surprise that agencies of government believe themselves an anointed elite free to conduct themselves so as to favor their own growth and power over mere citizens. It is these interests I rail against when I oppose “big government”, whether federal, state or local.

The great majority are UNIONIZED so as to even to further advance their entitlement over “the rest of us”. Let us include all of the above in “special interest group A”.

An underclass of the uneducated and the unskilled as well as freed slaves over centuries have sustained increasingly disproportional birth rates. In the most recent seven decades the increasing porosity of our southern border has attracted unending hoards of the dregs from every society south that can walk to it to jump over and squat.

These people LOVE “big government” because such patronage is too often the only lucrative “local jobs” where they came from. Let’s call the preceding “special interest group B”.

They are a natural constituancy of “special interest group A”. becauses sloth, and mediocrity progress in pay and influence through seniority and patronage over those of greater productivity or skill. By and large these are the uncivil people Americans have to deal with at the Post Office or highway projects that obstruct travel of the productive for years on end where you see five people leaning on shovels or sitting while one actually works.

The only thing in their way to taking complete control of America right now, today, is that they don’t MAKE anything. Their contribution to GNP (gross national product) is a drip in the bucket. The “movers and shakers” of America remains private enterprise. Private enterprise is “where the money is”. For that very reason it cannot be ignored.

Private enterprise is “special interest group C”. This includes businesses of all forms and sizes, corporations (including multi-nationals), non-profits, partnerships of all kinds, limited liability companies, and sole proprietorships. It is these entities, and the people that work for them, that are the engine of prosperity…the very life’s blood of commerce and capitalism.

The great majority of our politicians come from the legal profession and/or private enterprise, and so predictably “feather that nest” well before peddling their remaining influence to the highest bidder. These people cannot ignore the interests of private enterprise, the “ engine of prosperity”.

But with all that in flux and up for grabs, including the very real spectre of amnesty and open borders, there remains one absolute certainty. Once those voting but not producing can and do raise their benefits at the ballot box at will there will be a flight of “movers and shakers” the like of which is unprecedented, most likely to Alaska and such other “sovereign states” as will remain economically viable, and Canada.

THAT may well be the final significant exercise of American self-determination, making the “least-bad” of bad choices.

Posted by OneOfTheSheep | Report as abusive
 

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