Advanced economies must still make things, but there's no rule that says that those things have to be made by <i>people</i>. In inflation-adjusted dollar value terms, the value of US manufacturing has never been higher. In employment terms, it's never been lower. While there are those who blame outsourcing for that, the vast majority of manufacturing job losses have been due to automation, rather than competition from abroad.<p>For example, look at this video of a MillTurn M60: <a href="https://www.youtube.com/watch?v=81UjjSH2iFw" rel="nofollow">https://www.youtube.com/watch?v=81UjjSH2iFw</a>. This one machine replaces an entire shop floor of lathes and mills... and all their operators, too.
Amen to that. In general, I think successful economies should strive to be pretty balanced sector-wise, for two reasons:<p>1. Like with outsourcing, if you have enough people to be experts in a given thing, it will probably cost you more to outsource than to keep local expertise, due to additional transaction cost (transport, culture barrier, outsourcer profits, corruption..). And nations typically have more than enough people to be experts in some basic economic production infrastructure.<p>IMHO, it only pays off to outsource high-end stuff, like microprocessors, to other nations. It is also good for a nation to be expert/leader in some area like that. Switzerland is a good example of this.<p>2. There are network effects when you have mixed economy. How can you produce any good, say, agricultural machinery without agriculture? You may be the best machinist in the world, but without trying it out you don't know what problems you're solving. IMHO, this adds up very quickly. Similar with computing - you cannot solve manufacturing problems without having manufacturing industry in the same place you have the people who know computers.<p>It may seem that in today's connected world it wouldn't matter, but I doubt it. You need to get people from different fields to know each other, to talk over lunch or beer about problems they have. I think (in the U.S. at least) there is also social stratification issue, which is partly resulting at people poking at startups (sometimes rightfully so) for stupidly catering to middle classes instead of solving real problems.
Why do we have to make things? Or why tangible things?<p>Take for instance the financial sector. They make allocation decisions in essence and sell service around management, consulting, and financial engineering. A large chunk of our economy is based around resource allocation, not actually turning resources into products more efficiently than the last guy.<p>As an economy progresses, it moves further and further away from things and towards ideas. We went from hunters and gatherers of food and clothing, to agriculture, to machining things, to primitive banking, all the way up to modern financing.<p>At each step we became further and further removed from actually putting iron-to-iron and producing this. We become more involved in how to efficiently allocate resources for those that did produce.<p>And that population of those that do produce continues to fall as automation comes along and we become better at making more with less. Finance has really put productive resources to amazing efficient use though capitalism.<p>We will get to a point where almost nobody does machines or sits on an assembly line anymore, and their jobs will give way to a larger and larger pool of people who work in the meta-market, the mental-based market that really drive the physical-based market.
I find the whole discussion of what "economies must" and what "economies should" baffling.
Economies don't have wills of their own. Economies describe the voluntary economic activity of millions to billions of people.
Economies end up doing what is profitable, and possible (given skills, capital investment, infrastructure).
When someone says "Economies should" what they're actually saying is: "I wish the government would spend a lot of money or pass a lot of laws to force the economy in the direction I want".
<i>"manufacturing is still important for the health of a country’s economy, because no other sector can generate nearly as many well-paying jobs"</i><p>This is a tricky starting point. Economies have all sorts of side effects that are important. But ultimately, economies are supposed to produce stuff that people consume. We have plenty of pots and pans, furniture, cars, etc. The price of manufactured goods has been dropping for centuries and the quantity has been rising. As the article states, manufacturing is still growing. Wanting manufacturing to keep pace and maintain a proportion of the economy well... We don't need that much manufactured goods.
This has been known for some time (and proven with some good examples) but still is a shock to people who believed somewhere in '90 that the next stage in the economy is the shift to services instead of industry.<p>I recommend this book from Ha-Joon Chang that has a nice chapter on that (a very pleasant read with references):
<a href="http://www.amazon.com/Things-They-Dont-About-Capitalism/dp/1501266306" rel="nofollow">http://www.amazon.com/Things-They-Dont-About-Capitalism/dp/1...</a>
I didn't feel this article was clearly thought out. If just manufacturing things, whatever things are, were important then possibly replacing (magically) the industrial sectors in the US with those from China would be a good thing. If that came about then of course the US would be much poorer, possibly as poor as China. Its also not sufficient to say manufacturing is a source of good paying jobs. Highly skilled manufacturing sectors provides good wages and benefits (say, semiconductor manufacturing), piece work in say the garment industry provides sub subsistence level wages.
A better title would be - "it matters what an advanced economy produces".
I used to work in manufacturing (all over the world) and here a few impressions based on my experience. In the factories, today, where people in advanced economies would want their children to work, there are more robots than people. The ratio of automation will increase over the next 10 years as the machines become smarter. In advanced countries it is more and more common for manufacturing facilities to require the skills of people with PhD's, Masters degrees and highly trained vocational workers to function. There are going to be very few jobs in 10 years for people who can just contribute muscle power. Even in the far east, manufacturing is going to be a sector of falling employment (like agriculture in the past) and at the same time of rising output (like agriculture).
And lastly, here is a thought, based on my experience running a business. There is lots of competition out there in the world. One cant make a good living producing any "Thing". One has to find a product that is differentiated, valuable to others, and not easily reproduced by thousands of other businesses all over the world. And then one has to sell it. That's turns out to be a difficult job -- much more complicated than a slogan like "manufacturing".
There is not much if anything in this article to support the headline claim. I'm not saying it isn't true, but the article doesn't provide any evidence of that.<p>Yes Toyota employs more people than Facebook. What does that tell us exactly? The film industry employs more people in the U.S than the auto industry.<p>If the numbers in this article show anything, it is that the most advanced economies vary hugely when it comes to the size of the manufacturing sector.<p>I think the case for a manufacturing sector that isn't 0% of the economy can absolutely be made, but this article doesn't even start making it.
With the same argument, agriculture is important for advanced economies, because no other sector can generate as many jobs. Remember, not too long ago a large majority of the people were farmers.<p>Eventually we'll have to move away from the notion that everybody needs a job that contributes to GDP.
Oversupply and stagnation were solved in the past by wars or new worlds' colonisation. Considering that Planet Earth is full and that we do not want a nuclear war, the best opportunity for mankind is Moon or Mars colonisation. Exploration has always been the distinctive trait of humans and still will be.
the statement " no other sector can generate nearly as many well-paying jobs" would mean more if they showed loss of jobs due to automation and projected how future automation would effect the ability of manufacturing to produce so many well-paying jobs.<p>Because maybe the argument is Advanced Economies must still make things for the next 15 years after which it's not really worthwhile.
I have predicted this for a long time (not just me, but a lot of people).<p>The demand for human labor is going down on average, so wages are going down - and have been on a decline since the 70s. Capitalism relies on employers to value their employees for the money to trickle down and the system to work. Our grandfathers used to work for the same employer for decades and got a pension. Today, that loyalty is unheard of from either side. We have the rise of temps and the contractor economy and unemployed living with parents.<p>Yes, the cost of mass produced consumer goods is going down. So the wage repression is mitigated. With the explosion of consumer credit in the 80s and 90s, the unsustainability of consumer spending was also masked. Now it has come to the fore, in exactly the areas where costs are not going down: rent and real estate. In every major city including NYC and SF, the costs of rent are sky high relative to wages. Wonder why? Look at the rest of the country and it's true too -- the rents are slightly lower but the wages are lower too.<p>So the predictions are borne out... automation has reduced demand for human labor, reduced wages for the average worker (or they got laid off / became temps), reduced the prices of mass produced goods, but the cost of real estate keeps rising.
A few notes about the shift from manufacturing to a service based economy:<p>- Services take a larger share of GDP by staying flat while prices of goods fall. You pay less for most manufactured goods than you did 20 years ago, while your haircut cost about the same.<p>- Services are generally harder to export. You can ship a physical product, it's hard to export a haircut.<p>- Goods can be stockpiled/scaled if needed, services cannot.
It's kind of obvious that no one can live if we only have services and money printing.<p>Someone must produce something (and preferably something with a high price / cost ratio), this applies to manufacturing as well as agriculture.<p>The biggest news (and very sad at that) is that "making things" is so far away from the mainstream economic models that formerly common sense rules are worth a headline.
> And yet manufacturing is still important for the health of a country’s economy, because no other sector can generate nearly as many well-paying jobs. Take Facebook, which at the end of last year had 12,691 employees, versus the 344,109 that Toyota had at the end of its fiscal year, in March 2015. Making things still matters.<p>There are so many assumptions in this article but especially here. Author assumes people are required to make things, they are not. Author assumes factory jobs will pay well, they often don't, and there's no reason they will. And the employment disparity between IT companies and Manufacturing is showing that you can create a ton more wealth with a small number of IT people than a huge number of manufacturing people, which is why Wall Street values those companies higher these days.
>Take away manufacturing and you’re left with...selfies<p>It's not true. Take for example Jersey, Luxembourg and the like. In those places there is insignificant manufacturing and the main business is banking. That's the whole thing about trade - one place can do one thing and one can do another.
This inference of "making implies jobs therefore make things" is just short sighted. Is making things really the _only_ option of making providing jobs?! It's not realistic when there's nothing more we need to make and consume!
Great article, terrible site design. Seriously, who limits their content to a single 300px wide column when there are 3 other columns with only links to other parts of the site?
noteworthy that the author is Vaclav Smil: <a href="http://www.wired.com/2013/11/vaclav-smil-wired/" rel="nofollow">http://www.wired.com/2013/11/vaclav-smil-wired/</a>