The State of Manufacturing

From Walter E. Williams:

How about statements like these: “The United States got to where it is today by making things.” “There’s nothing made here anymore.” “One-third of the nation’s manufacturing jobs have vanished in the past decade.” These statements suggest that we are no longer the world’s top manufacturer; we have all but turned into a nation of “hamburger flippers.”

According to data assembled by Dr. Mark Perry, in his article in The American (12/23/2009) titled “Manufacturing’s Death Greatly Exaggerated,” “For the year 2008, the Federal Reserve estimates that the value of U.S. manufacturing output was about $3.7 trillion.” If the U.S. manufacturing sector were a separate economy, with its own GDP, it would be tied with Germany as the world’s fourth richest economy. The 2008 GDPs were: U.S. ($14.2 trillion), Japan ($4.9 trillion), China ($4.3 trillion), U.S. manufacturing ($3.7 trillion), Germany ($3.7 trillion), France ($2.9 trillion) and the United Kingdom ($2.7 trillion).

U.S. manufacturing employment peaked at 19.5 million jobs in 1979. Since 1979, the manufacturing workforce has shrunk by 40 percent, and there’s every indication that manufacturing employment will continue to shrink. Because of automation, the U.S. worker is now three times as productive as in 1980 and twice as productive as in 2000. It’s productivity gains, rather than outsourcing and imports, that explains most of our manufacturing job loss.

U.S. manufacturing is going through the same kind of labor-saving technological innovation as agriculture. In 1790, farmers were 90 percent of the U.S. labor force. By 1900, only about 41 percent of our labor force was employed in agriculture. By 2008, less than 3 percent of Americans were employed in agriculture. What would you have had Congress do in the face of this precipitous loss of agricultural jobs? Should Congress have outlawed all of the technological advances and machinery that cost millions of agricultural jobs and made our farmers the world’s most productive? Also, had Congress done something to save those agricultural jobs, where would we have gotten the workers to produce the millions of things we enjoy that weren’t even around in 1790? We would have been poorer.

Let’s not stop with agriculture. In 1970, the telecommunications industry employed 421,000 workers, in good-paying jobs as switchboard operators, handling 9.8 billion long-distance calls yearly. Today, the telecommunications industry employs fewer than 60,000 operators, and they handle more than 100 billion long-distance calls yearly. That’s an 85 percent job loss. The spectacular advances in telecommunications, which raised productivity, made the cost of long-distance calls a tiny fraction of what they were.

What we’re witnessing in many of our industries is what economic historian Joseph Schumpeter called “creative destruction.” The adjustment to it can be painful, but to stand in its way will make us a poorer nation.



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