Friday, October 30, 2009

The Importance of Manufacturing

There is an excellent analysis over at New Geography titled "Yes, manufacturing matters." This echoes an argument that I have made for some time that you can't give away all your manufacturing capacity and maintain a vibrant economy. We cannot be a nation of burger flippers and software programmers if we wish to continue leadership, or participation in, a global economy. Despite the duress that American manufacturers have been under from environmental kooks to cheap labor abroad, our productivity has soared. According to the article, manufacturing output has risen 81% since 1987, but the jobs involved in manufacturing have fallen below 9% of the workforce.

Some see this as the inevitable evolution of a developing economy - we start out on the farms, we move to the cities and become manufacturers, then we all become accountants and consultants. The reality is different though. Productivity has its limits and we may be approaching them, with frightening consequences:
Offshoring of production means that the United States is not generating enough wealth to pay its mounting and massive debts. The mindset among America’s economic elite – that the country does not need an industrial base – has put the country and the world economy in a ditch.
This is a far more serious problem facing the very structure of the American (and global) economy than climate change or health insurance; it just hasn't been trumpeted as a CRISIS yet. Oh but it will...

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