Last time we noted that manufacturing news is increasingly being made in foreign countries. We mentioned India, in particular, but let us not forget China, about which I’ll borrow a succinct line from master storyteller J.R.R. Tolkien: “It does not do to leave a dragon out of your calculations, if you live near him.” In this ever-shrinking (and flattening, if you hold by Thomas Friedman’s book) world, we all live near the dragon.

China’s manufacturing base presents an immediate and large competitive challenge, the relative magnitude of which may be surmised by noting that China’s exports comprise 7% of global trade, compared to India’s 1%. We’ll write more about China in a future column, but the point for the moment is that there are, globally speaking, many manufacturing centers that are viable competitors – dragons, if you will – to North American manufacturing. We know who they are, and we also know that the answers to manufacturing’s woes on this continent, especially in the U.S., are still within reach.

One wouldn’t expect the most productive labor force in the world to have lost more than 3 million manufacturing jobs since 2000, yet one of every six American manufacturing jobs has disappeared. Given this, it should behoove American manufacturers to raise their individual and collective voices about the value of manufacturing to an economy. This is not only about the face value of manufactured goods and the jobs they provide, but also of the implicit, underlying values of the manufacturing process itself. These are values that buoy not only the economy, but the spirit and wealth of the nation as well.

Consider the following points:
  • Manufacturing creates wealth – This is the most important characteristic of manufacturing. A person flipping hamburgers creates income for himself and the restaurant owner, but the manufacturer of the grill is the one creating capital wealth. This happens through an economic process that American policy makers have lost sight of – the formation of capital. This is the mechanism by which economic inputs produce goods that add to the nation’s capital base and thereby its wealth.
  • Manufacturing breeds innovation – Innovation is not the exclusive domain of manufacturers, but because manufacturers have links back toward the extractive resource industries, as well as links forward into the service and transportation sectors, their innovations spread impact throughout the economy.
  • Manufacturing drives productivity growth – In the last 15 years, productivity in manufacturing grew 1.9% annually. This is impressive enough, but this number is supported by an even more impressive 3.1% annual growth rate in the productivity of labor. The bottom line is gains in productivity raise a country’s standard of living.
  • Manufacturing provides high-paying jobs – Average salaries and benefits for workers in manufacturing are typically about 18% higher than for private-sector jobs overall.
These are all important points in support of a strong manufacturing base. They should be kept in mind and regularly communicated to those who form or legislate trade policy.

Dean M. Peters,
Editor