Tell me what you think of the following statement: “American manufacturing has been destroyed over the past 20 years? Going back further, it’s nothing like it was in 1960. Everything is made in China now.”
[mainbodyad]If you agreed with the statement, congratulations! You failed. Miserably. Start thinking for yourself and stop watching the news commentators who insist that America is on the decline.
Today, The United States of America manufacturers approximately 1/5th of everything made in the world, which is virtually the same percentage it was 21 years ago in 1990. Jeff Jacoby points out in a fantastic article called “Made in the USA” that United States manufacturing still tops China by 46% (they produce $1.48 trillion in goods whereas we produce $2.15 trillion in goods). You have to read it. Print it. Give it away at the office. Pass it out at church. Throw it off of highway overpasses. The few of us who actually pay attention to factual truth are getting tired of constantly pointing out that it is an illusion American manufacturing has declined in any meaningful way.
Even more stunning: Adjusted for inflation, American’s manufacturing output is twice – yes, double – what it was in the 1970’s.
We’ve already discussed in the past that American manufacturing profits are more than keeping pace with inflation compared to the 1960’s. The difference is, it requires far fewer people to manufacture what we make thanks to software and technology driving productivity increases. Oh, and manufacturing is a smaller percentage of the economy because other things, like the fancy toy we call “the Internet” came out of nowhere and blossomed into an enormous economic powerhouse, making our manufacturing base smaller by comparison but not in absolute or relative terms.
Why do people suffer from this economic delusion? It would be like you having $100 million and your sister having nothing. Suddenly, she builds a business, becomes successful and has $50 million. You are just as rich as you ever were. But now you are concerned about the “decline” of your wealth and staying competitive with your sister. That is because you are relatively less rich than you were but that isn’t because of anything you’ve done; she’s just pulled herself out of poverty. We are witnessing the contrast principle in action in the same way.
The United States of America manufacturers almost exactly what we did more than two decades ago with a 1/5th share of world manufacturing capability.
Reader Comments (2)
Comments are presented chronologically, with replies indented beneath the comments to which they respond.
Abc
December 19, 2011
When counted in $ american manufacturing may be same but % of total goods manufactured has probably dropped. Fewer expensive american goods vs cheaper 'made in china' goods. Less jobs in USA
Joshua Kennon
December 19, 2011
Replying to Abc
No, we still make the same percentage of the world's goods in value terms, roughly 20% to 23% depending on the year. Same profits. Same percentage of global market share. Substitute whatever you want and convert the prices - Euros, Yen, gold bullion. Add up the value of everything manufactured in whatever unit of measurement you want, and we (the United States) are responsible for making between 1/5th and 1/4th of everything produced in the world.
The total number of humans required to generate the same $1 in real, inflation-adjusted manufacturing profit has plummeted so that manufacturing is a much smaller percentage of the employment market. It's mostly computers and technology responsible for that. Have you been inside a factory that makes, say, packaged food? It's a whole different ball game than it was 50 years ago. Most of it is precision automated tools that bake, wrap, mix, and prepare for shipment the goods, overseen by a trained technician.
The mix of products has shifted. We now make expensive, hard-to-duplicate things such as locomotives and airplanes instead of cheap things, like plastic iced tea cups or stainless steel flatware. That's one of the reasons the gap between the high income folks and the low income folks keeps blowing apart, ever wider.