The Return of American Manufacturing

24 Feb

3D-printing

During the 19th century, the United States was primarily an agricultural economy; then, industry swept the landscape in the late-19th and early 20th century and, by the 1950s, America was the industrial heavyweight of the world.  Things stayed this way until the late-1970s and 1980s, when we lost our advantage to the Japanese, then to the Chinese, and have now become a service economy and a consumer nation of other people’s “stuff”.  Our need to consume is so voracious that our trash gets sent halfway around the world just to be re-formed, re-packaged and re-sold to us.

To be fair, while manufacturing’s share of the American economy has declined from 20% in the 1980s to 10% in 2012, our economy is so large that the manufacturing sector in the U.S. remains the largest in the world.  It appears that manufacturing in the U.S. is poised to expand.  I recommend reading the articles by Charles Fishman and James Fallows in the December 2012 edition of The Atlantichttp://www.theatlantic.com/magazine/toc/2012/12/

The articles detail the rise and decline of American manufacturing – citing the explosive growth, slow death and unexpected resurrection of General Electric’s Appliance Park.  The return of manufacturing isn’t limited to industry giants like GE.  Small companies such as San Francisco-based DODOcase (www.dodocase.com) and New York City-based Quirky (www.quirky.com) are making use of new tools to rapidly convert ideas into products and jobs.  If you are not familiar with 3D printers – check out how the proliferation of these machines is transforming the industrial landscape (http://www.ted.com/talks/lisa_harouni_a_primer_on_3d_printing.html).

The authors proffer several reasons for the return of manufacturing to the U.S. (ironically, U.S. government policy is not one of them):

  1. Shipping costs (especially due to oil prices) can virtually erase any cost savings in labor;
  2. Labor costs overseas continue to rise as workers demand higher standard of living;
  3. Labor costs in the US have declined and productivity has increased resulting in lower manufacturing costs; and
  4. IP protection and enforcement overseas is almost none existent.

Granted, a few jobs here, a couple start-ups there, are not going to solve our current economic troubles – but they are a start.  “Any account of a region’s growth or decline at any stage of our economic history has indicated promise when the region is full of people optimistically starting small ventures, and decline when it is not,” states Fallows.

 

This topic serves as a good starting point to complete my review (in upcoming blog entries) of the last 5 of the top 10 economic indicators: 1) Retail Sales, 2) Consumer Price Index (CPI), 3) Manufacturing Sales, 4) Producer Price Index (PPI) and 5) the S&P 500 Stock Index.

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