The Irrelevance of “Manufacturing”

It’s not uncommon in economic policy debates to hear people rending their garments over the supposed decline of America’s “manufacturing base.” There has never been much factual basis for these concerns; our manufacturing output has been steadily rising for decades. But Ryan Avent makes the more fundamental point:

Economic activity isn’t about satisfying the demand for objects, it’s about satisfying demand, period, and people demand many things that have little to do with assembly lines and smokestacks — hair-cuts, mixed drinks, financial advice, dentistry, and so on. These activities are important. If they weren’t important, people wouldn’t be willing to pay lots of money for them. Economic growth, meanwhile, is about figuring out how to do more with less. There’s no reason why “doing more with less” ought to be associated with manufacturing rather than services. It’s true that some service sectors that are among the fastest growing in terms of employment — like education and health services — have experienced slow productivity growth. But I think people are far too quick to conclude that this has something to do with the nature of the services provided, rather than with the institutional environment of those sectors and simple cost constraints.

Goods and services are, to a large extent, interchangeable. They constantly replace each other. A whole range of household tasks — services, fundamentally — that used to fall to family or hired help was replaced by manufacturing — off laundry machines, dishwashers, and so on. An entire range of a clerking and administrative services has been replaced by manufacturing — of computers and related hardware. And then there’s the programming; is that production of a good or a service? These days, some of my work finds its way into physical form in the weekly print edition of The Economist. Am I a manufacturer? No, you’ll say, but the printer is. The internet threatens that printer’s job, but it increases the value of my writing (while also making it more difficult for a private firm to capture). In this world, the idea that “manufacturing” is something worth protecting for its own sake makes little sense.

This is exactly right. Matt Yglesias has more.

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7 Responses to The Irrelevance of “Manufacturing”

  1. cryptozoologist says:

    many of those rending their garments are not doing so because of the effect of diminished manufacturing capacity on economic output. many of these folks are concerned for our military readiness. if we are no longer making cars in this country (heaven forbid!) then it is much more difficult to ramp up tank production in the event of war.

  2. Jess says:

    if we are no longer making cars in this country (heaven forbid!) then it is much more difficult to ramp up tank production in the event of war.

    lolWUUTT? Have you not heard of something called the military-industrial complex? The Raytheons, Boeings, Lockheed-Martins, etc. that actually produce our staggering volumes of military equipment (as well as the shady penumbra of defense contractors that simultaneously provide cushy “retirement” jobs for the officer class and campaign finance for the legislative class) are constantly ginning up new conflicts NOT because our stock of military equipment is somehow dependent on car factories, but because their business model depends on conning the brass into constantly paying them to build new factories.

    When did you stop paying attention? 1942?

  3. quanticle says:

    if we are no longer making cars in this country (heaven forbid!) then it is much more difficult to ramp up tank production in the event of war.

    That assumes that you can make cars and tanks on the same assembly line. That may have been true in 1942, but is most certainly not true today. A modern M1 tank weighs over 10 times as much as a car and has lots of specialized parts (like the composite armor, or the firing computer) that no car will ever have. At this point, to build a tank, you’d be better off building a new factory rather than trying to convert an existing car plant.

    Frankly, I think the whole “manufacturing is necessary for national security” point is overblown. We’re not getting our tanks from China. We’re not getting our aircraft from China. Our military manufacturing is largely American, with a little bit in Europe. Unless you see us going to war with the EU within the next 50 years or so, I don’t think there’s anything to be worried about with regards to military production.

    Frankly, I think many branches of the US military are massively overbuilt, and overbuilt with obsolete weapons to boot. Look at the Air Force, for example. It has been twenty years since any adversary has even bothered to field aircraft against the USAF. It has been nearly thirty years since the USAF’s total air superiority has even been threatened. However, we continue to invest in new manned fighters and interceptors, often at great cost.

    Future adversaries aren’t going to bother with trying to field manned fighters and bombers. They know that the USAF can destroy any other conventional air force before it even gets off the ground. The next air war will be fought by UAVs and missiles, where numerical superiority and swarms of individually weak aircraft will overwhelm smaller, more sophisticated forces. In other words, they’re going to fight bottom-up, rather than top down. In this sort of struggle, speed and sophistication will win the day over numerical superiority.

    World War 2 was a war of industrial infrastructure. The next conventional war will be one of communication structures.

  4. Tim Fowler says:

    Tim Lee – I totally agree that what is important is producing something that meets demand, not necessarily objects that meet demand. Another important point is that manufacturing in the US hasn’t declined (except recently and temporarily as a result of the recession), only manufacturing employment has declined which is a very different thing. Higher productivity is a benefit not a loss. The fact that we can produce as much or more with less workers, means those workers can produce something else and total production and wealth can increase.

    quanticle – The main reason that no one has bothered to challenge us with air to air fighters is because we are so powerful in that area. If we devoted a lot less resources to producing fighters, training pilots, etc. then we would likely have faced a more serious air to air challenge, and also we wouldn’t be as able to use those fighters in an air to ground role.

    So far UAV’s are not up to the task of being the main air to air weapon. That might change, perhaps even in the not to distant future. If it does we should change in response to the new conditions, but our current force structure rationally reflects the current conditions in this area about as much as a military force structure, is likely to rationally reflect in a nation not currently engaged in a major war.

    Your paragraph about air to air battles in future wars seems self-contradictory. You say “numerical superiority and swarms of individually weak aircraft will overwhelm smaller, more sophisticated forces”, and then in the next sentence you say “In this sort of struggle, speed and sophistication will win the day over numerical superiority.”

    Right now, in terms of air to air, we have both superior numbers and speed and sophistication. If one of those become relatively more important than the other, than the other will become less important, but you alternatively talk about them each becoming more important.

  5. Anonymous says:

    If you made a list of countries in the world, in order of who should be most concerned about potentially losing their military manufacturing capacity, the US would be last on that list.

  6. Timon says:

    One troubling “bottom-up” implication of not manufacturing anymore is that we may lose touch with the real grass-roots of innovation. It may be that our shop floors and industry owe their success to our universities — but it could also be the other way around. It wouldn’t surprise me if the next battery innovation, for example, comes from some guy in China who lives and breathes the stuff, rather than an American who has read a lot about them. Also I think it is fair to question whether metrics that currently say an American architect who makes 100000 dollars a year remodeling lawyers’ houses is more productive than a Chinese one who makes 10k and has a crew of 40 guys in flip- flops building towers with bamboo scaffolding. If we ever get to the point that we have to build cities efficiently and densely, it won’t even matter if we want to – we won’t know how.

  7. Barry says:

    IMHO (this is from various readings, so I apologize for factual errors), the major concern is that the lost of manufacturing jobs leads to shifts to lower-paid employment, both for those displaced, and newer workers.

    If people could go from highly-paid manufacturing work to highly-paid service work, there’d be far fewer problems.

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