Despite misinformed mainstream media and urban myth, the facts reveal glaringly that the US is still the leading manufacturing nation in the world. by James Luko
Sunday, May 16, 2010
Despite mainstream media and urban myth, America remains the largest manufacturer in the world
It's amazing how much information is at our fingertips on the internet, yet MOST Americans continue to believe misinformation and myth about American manufacturing and how it relates to our "mythical decline" and China.
The biggest myth around- and one can easily observe from the majority of blogs and public comments following mainstream media stories- that America has "outsourced" "ALL" of its manufacturing. That China manufactures more than the USA, that America has NO industrial base to speak of, and ALL our manufacturing jobs have gone overseas. We have replaced our industrial jobs with burger flipping.
Here is just a recent example from a blog quote (May 16 2010) " America has virtually no manufacturing left, we are beholden to China for "all" our manufactured goods, we have no industry remaining."
NOTHING COULD BE FURTHER FROM THE TRUTH.
Even a cursory glance at manufacturing stats on the internet or the world almanac sitting on your shelf would reveal these statements as being as ridiculous and misinformed as the global warming garbage.
Here are some simple facts: America, by far, remains the worlds leading manufacturer- yes much bigger than China. American industry produces over 20% of our GNP (2.8 Trillion dollars) of which manufacturing accounts for 1.8 Trillion dollars (1) No one matches America's manufacturing base- not Germany not China not Japan. Manufacturing still accounts for 12% of employment (23 million jobs) which doles out high wages and excellent benefits. Manufacturing leads in R&D investment and most US manufacturing is American designed, engineered, materials, by American workers using American packaging and transportation.
If American industry was a countries economy alone- it would be the Fourth 4th largest economy in the world, if our manufacturing sector was a countries economy- it would be the Eighth 8th largest in the world.
The cheap and easily manufactured products are made overseas, they pay many times less wages, usually little to no benefits and are of much less value added to their economies. Workers in low wage countries produce the lowest quality, lowest productivity, least innovation and care of any workers compared to the industrial West. BMW even reported in 2009 that their vehicles produced in the US had less quality problems than those produced by BMW in Germany itself !
Americans seem to forget that we produce the high tech, highest value-added products, which require high quality manufacturing, state of the art design and ground breaking technology- ONLY America delivers this. For example, Americans don't realize the gigantic web of factories and suppliers that still exists throughout America. Look at John Deere, even in the worst year of 2009, they exported 16 billion dollars worth of tractors that were manufactured in the USA and this year they will EXPAND production in both their tractor and combine-harvestor plants in America !
People forget that high precision instrumentation and silicon industry (Intel, AMD, Cisco) and electronics of America are the most sought after in the entire world (Microsoft, IBM, Oracle, Apple), leading to increasing production and sales in that sector of American manufacturing.
America is the LEADING manufacturer of autos (2), precision instruments, telecommunications, software (Microsoft), chemicals (DOW), food processing (Tyson, Kraft, Pepsi) aerospace (Boeing, Mcdonnel Douglas, Honeywell, Bell, Lockheed) defense products in the entire world. The US simply remains, by far, the largest by unit volume, sales or value-added industrial and manufacturing nation in the world.
Is manufacturing on a slow decline relative to post-industrial services- yes, are we losing jobs in manufacturing relative to other sectors- yes- however, overall, in absolute numbers manufacturing CONTINUES to GROW in the US, doubling from 1987 to 2009 from $811 billion to the current $1.8 Trillion. In addition, don't get confused by manufacturing employment and manufacturing industry. Most factories in America have already long ago shaken out production which could not compete with low wage countries- sectors like clothes, shoes, cement, etc. Today, losses in manufacturing jobs are not, by majority, the result of outsourcing- but by increased productivity, better management, high tech lean inventory control, robotics and automation. In the long run that's GOOD ! It means stronger factories maintaining their "comparative" and "competitive" edge over other nations.
Leading manufacturing design, innovations, patents and industrial R&D investment remains in America by and for American workers.
Even though industrial output is only 20% of our economy, it's larger at $2.8 trillion than China's $2.4 trillion even though that represents 50% of their economy !
There is also a clear, apple and oranges analytical framework to be made when comparing Chinese and American manufacturing. Chinese production is at the bottom of the evolutionary scale of production, America is at the pinnacle ! As we all know, Chinese manufactured goods are of the lowest quality in the entire world- producing exploding tires, poisonous drywall, tainted baby milk and pet food, hazardous toys, etc etc. Chinese factory workers are uneducated drones living in stinking bunk beds under the fuming smokestacks, eking out a living like 18th century English hobbits ( I know, I've lived in China over 3 years and have taken many a tour of them in Southern China.) To make a given product, it takes several Chinese workers- because of low productivity (yes read lazy) and lack of education and initiative to produce what one western worker produces. These are just among many reasons why China lags so far behind in high tech and aerospace. China depends on foreign expertise in China to keep their manufacturing base going and stealing designs from the West even today- to be able to market their products. Chinese innovation in manufacturing is almost non-existent.
Another major factor to realize about Chinese manufacturing although large, second to America or Germany, is almost 65% of it still remains in government hands- and are usually loss making. In other words, much of China's old-economy factories of steel and white goods, etc. have no buyers, are bankrupt and kept alive on subsidies to prevent sudden, regional and or massive unemployment.
China is often considered today to be the "factory of the world." Hogwash, the USA, Japan, Canada, Mexico, Germany, France and Italy remain the "factory of the world" producing and exporting $3.8 Trillion dollars of goods versus $1.2 Trillion by China. It only "seems" that China now produces everything that people buy around the world because those products are highly visible consumer products like clothes and shoes, plastic goods, etc. People ignore the "comparative" advantage of America to produce goods no one else in the world can (read up on your Michael Porter to understand this better) and ignores the evolutionary chain and progression of modern production, i.e. China at the bottom, America at the top. Americans can't seem to get it out of their minds that we should still be producing such low-value products as T-shirts, tupperware bowls, cement, staplers, etc.
Many American products are not highly visible, think of your home- where almost all major elements are American made by American workers. The cost of a home weighs more in the economic formula than all your DVD players, shoes and T-shirts combined. Think of the lumber, re-bar, drywall, shingles, tiles, pipes, wiring, etc. etc. that are produced in America and then put together by American workers (including some illegals- but not for long in Arizona !) - but by and far- the tradesmen are Americans. Think about the majority of the cars that are produced in America- and don't' think about BMW, Toyota, Honda- most of those are produced in American factories not Japan ! Think about the jets you fly- American made, the elevator and escalator- (Otis) which are all highly engineered top of the manufacturing food chain products. Americans, writers on Nolan and mainstream media continually ignore these startling and glaring facts of the continued dominance of American manufacturing.
The myth of American manufacturing may continue in the media and even here on Nolan chart, but the facts will blow you away !
(1) Manufacturing is a subset category of industry. China's manufacturing numbers includes "activities" such as natural resources, extraction, transportation, which are not- by definition, manufacturing, therefore, even the manufacturing aggregate numbers posed by China is in reality- smaller because of this inclusion of non-manufacturing activities.
(2) China has temporarily exceeded "numbers" of autos produced, but by weight (tonnage) China is far behind. Almost half of their autos produced are so small and light weight, they would not even be allowed on US highways. And of this, most of these vehicles are purchased by the Chinese government or by SOE's State Owned Enterprise- so, it's comparing apples and oranges in terms of vehicle production.
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True. But for how long. One thing the Chinese are really good at is that they are EXPERTS at copying EVERYTHING. The cars that are produced in China are still far behind the quality of those in the USA or from USA companies. But they are trying really hard to copy them...and don't forget about India. They too are trying to get the high tech manufacturing too. Tata Motors already does Engineering for GM, Chrysler and Ford as outsourcing and they are supposedly bound by agreement to not share that with the Engineering division responsible for the Tata vehicles. Such agreement will probably be enforced by the government of India which of course will be biased for Tata Motors. and even if the management of the company do their best to not use the Engineering information from GM, what's there to stop the Individual Indian Engineer in India from not using the knowledge acquired by GM India for the India companhy. When GM opened plants in China to sell Buick, they were required by the Chinese government to exchange all of the know-how with all the Chinese counterparts and the Chinese Government also has to have ownership int their operations. So GM is sharing big time all of the knowledge in ecxchange for some market domination for Buick in China but at the same time, they are training their future competitors in China. The same thing goes for almos every industry. Now add to that the decrease in profitability of these high tech manufacturing companies.
With regards to re-bar and construction materials, they are heavy enough that their shipping costs from overseas far outweight whatever labor savings if any they may get.
In about 20 years or less, China would have already acquired the knowledge and copy all of the other high tech industries. They have no desire to innovate unless is innovation in copying.