The Decline of US Manufacturing. Not!

[Master Shake]

The United States has been hollowed out. It no longer manufactures goods. Once the factory of the world, the U.S. now manufactures debt. The high wage manufacturing jobs have been out-sourced to low wage economies. The demise of U.S. manufacturing is at the core of the decline of America, its chronic trade deficits and growing international indebtedness. It makes the world’s savers reluctant to be exposed to the U.S. dollar.

There is one problem with this widely held view: It is factually wrong.

The value of U.S. manufacturing output in real terms (adjusted for inflation) was a little more than $3 trillion in 2008. That is up from $1.2 trillion in 1972. If the U.S. manufacturing sector was a separate country, it would be the world’s 5

th largest economy (behind the rest of the U.S., Japan, China and Germany). The U.S. remains the world’s largest manufacturer. Full stop.

Although international comparisons are fraught with measuring problems, it appears that the U.S. share of world manufacturing is roughly the same as the combined total of the BRICs (Brazil, India and Russia account for a combined 11-12% share).

http://www.realclearmarkets.com/blog...2010.02.09.pdf

Comments?

[Spartacus]

Re: The Decline of US Manufacturing. Not!

Not Found
The requested document was not found on this server.

Web Server at realclearmarkets.com


__________________________________
Would not surprise me if true. Lots of new manufacturing has opened, especially in the southern US.

The main thing I would question is, are all the beans being counted the same way?

In other words,
1. are the same games being played with these numbers as inflation numbers
2. are the different countries trying to game the system in different ways? - some trying to make their numbers look good, others trying the opposite
3. are the dollar values of other countries' GDP artificially low
4. does this include housing? A big house in the US could easily be 5 times the dollar value of a big house in say China, even it's the same house.

The United States has been hollowed out. It no longer manufactures goods. Once the factory of the world, the U.S. now manufactures debt. The high wage manufacturing jobs have been out-sourced to low wage economies. The demise of U.S. manufacturing is at the core of the decline of America, its chronic trade deficits and growing international indebtedness. It makes the world’s savers reluctant to be exposed to the U.S. dollar.

There is one problem with this widely held view: It is factually wrong.

The value of U.S. manufacturing output in real terms (adjusted for inflation) was a little more than $3 trillion in 2008. That is up from $1.2 trillion in 1972. If the U.S. manufacturing sector was a separate country, it would be the world’s 5

th largest economy (behind the rest of the U.S., Japan, China and Germany). The U.S. remains the world’s largest manufacturer. Full stop.

Although international comparisons are fraught with measuring problems, it appears that the U.S. share of world manufacturing is roughly the same as the combined total of the BRICs (Brazil, India and Russia account for a combined 11-12% share).

http://www.realclearmarkets.com/blog...2010.02.09.pdf

Comments?

[sunskyfan]

Re: The Decline of US Manufacturing. Not!

The first question that I would have is "what is the definition of manufacturing?". Putting a bunch of parts from Taiwan does not a manufactured product make in my thinking.

[c1ue]

Re: The Decline of US Manufacturing. Not!

The US is still the largest manufacturer - I posted a graph a while back:

World manufacturing output 2005.bmp

In 2005, the US had around 34% of total world manufacturing. That percentage is definitely lower but still probably well above 25%.

The point isn't that the US doesn't have ANY manufacturing, it is that the US consumes more than it makes.

The US consumes 25% of the world's resources whether manufactured or not. From a resource standpoint, the US absolutely cannot supply its own resources, thus a significant portion of its manufacturing output must be used to offset imports.

The oil exporters, for example, manufacture effectively nothing but absolutely require payment.

Thus while the blanket statement which you refer to is incorrect in its detail, it is correct in its spirit.

The other point to consider is that the US has a clear trade deficit - something very odd for a nation which manufactures so much - and a big chunk of this deficit is exactly in manufactured goods.

[ricket]

Re: The Decline of US Manufacturing. Not!

Comments?

I compare this to famous musicians who are forced to declare bankruptcy (ie MC Hammer).

While the US makes 3 trillion dollars in income (manufacturing), we have quite a sizeable amount of debt. It's kind of like saying "Well he makes 3 million a year so he makes alot of money". When he owes 12 million comparatively, that's really not that much. Manufacturing is the only way in which we can pay off our debts because everything else is consumption driven and has no 'value' that can be resold multiple times.

[D-Mack]

Re: The Decline of US Manufacturing. Not!

So the US is spending half a trillion on arms, Wiki claims it's 4% of GDP. Would the US be still able to do that, without having the world reserve currency?
I guess the US is mainly buying it's own weapons systems.

http://en.wikipedia.org/wiki/Arms_industry

[jheis]

Re: The Decline of US Manufacturing. Not!

Two questions about this statistic:
1. How much of this so-called manufacturing is composed of military systems, which are primarily consumed by the U.S. military branches?
2. How much of this so-called manufacturing is composed of music and motion picture revenue?

I would imagine that percentage-wise these two sources would be a much larger percentage than countries such as Japan and China. Without knowing what percentage of manufacturing these two sources are, it is difficult to support a claim that U.S. manufacturing is not hollowed out.

[Starving Steve]

Re: The Decline of US Manufacturing. Not!

The US is still the largest manufacturer - I posted a graph a while back:

[ATTACH]2265[/ATTACH]

In 2005, the US had around 34% of total world manufacturing. That percentage is definitely lower but still probably well above 25%.

The point isn't that the US doesn't have ANY manufacturing, it is that the US consumes more than it makes.

The US consumes 25% of the world's resources whether manufactured or not. From a resource standpoint, the US absolutely cannot supply its own resources, thus a significant portion of its manufacturing output must be used to offset imports.

The oil exporters, for example, manufacture effectively nothing but absolutely require payment.

Thus while the blanket statement which you refer to is incorrect in its detail, it is correct in its spirit.

The other point to consider is that the US has a clear trade deficit - something very odd for a nation which manufactures so much - and a big chunk of this deficit is exactly in manufactured goods.

I think you have nailed-it-exactly. The exports from manufacturing are the key, and the U.S. does not export much in manufactured goods except for: pharmacuiticals (sp?), i-pods, and defence systems. So, the U.S. is living off of the labours of the world in a kind of confidence game (con-game).

Yes, GE does export its MRI machines, and its nuclear reactors, its locomotives, and its turbines. But GE is the exceptional company in America, not the rule. Most companies in America just manufacture for the domestic consumer economy.

[pianodoctor]

Re: The Decline of US Manufacturing. Not!

My understanding is that official "Manufacturing" numbers are about as trusty as unemployment or inflation. They jiggle the definitions to get the results they need to look good on paper.

In the instance of "Manufacturing", it is my understanding that as "making real stuff" has declined, our gubbermint moved categories like burger flippers, restaurant workers, and similar service jobs into the category of "Manufacturing". Now when you think of all those restaurants (fast food and otherwise) that have increased in number as "real stuff" manufacturing has declined, you can see why the stats don't look so bad- but neither do they reflect anything that that can realistically be defined as "manufacturing".

To echo some financial commentator whose name I can no longer remember- "It doesn't matter to the economy what the government SAY the numbers are- what matters is what they ACTUALLY are."

Maybe my view is more paranoid than a learned analysis would conclude. Or maybe not. I'm perfectly willing to be talked out of this view, using facts. But for now, that's how it seems to me to be.

[jheis]

Re: The Decline of US Manufacturing. Not!

You make a good point about the government broadening the definition of "manufacturing". Anyone who takes government statistics at face value is naive. All one has to go to see the decline in U.S. manufacturing is to visit their local K-Mart or Walmart stores and look at the small number of U.S. manufactured non-food or non-personal care merchandise for sale.

[flintlock]

Re: The Decline of US Manufacturing. Not!

The devil is in the details, as they say.

[Master Shake]

Re: The Decline of US Manufacturing. Not!

My understanding is that official "Manufacturing" numbers are about as trusty as unemployment or inflation. They jiggle the definitions to get the results they need to look good on paper.

In the instance of "Manufacturing", it is my understanding that as "making real stuff" has declined, our gubbermint moved categories like burger flippers, restaurant workers, and similar service jobs into the category of "Manufacturing".

That's what I was thinking. However, do you have any documentation of that?

Not trying to cross-examine you, just genuinely curious.

[pianodoctor]

Re: The Decline of US Manufacturing. Not!

That's what I was thinking. However, do you have any documentation of that?

Not trying to cross-examine you, just genuinely curious.

A while ago I was reading a Wiki page on "The Economy of the United States" and there was a link under "Manufacturing" to another article on "Manufacturing in the United States" and therein I saw the definition, including restaurant workers.

So to respond to you I tried to backtrack to that article. The link is still there on the U.S. Economy page, but it's dead. It says the article has been removed. Hm.

However I did come across this: http://www.freerepublic.com/focus/f-news/1087827/posts which is not official, but you'll get the idea.

If someone can confirm, deny, or clarify all this, that would be great, but I have to get back to work.

[thriftyandboringinohio]

Re: The Decline of US Manufacturing. Not!

You make a good point about the government broadening the definition of "manufacturing".

I'm sitting right now in a rather large factory that refurbishes huge utility scale generators. I'm bidding a job for a unit rated 187 million Volt-Amps. We'll bring the rotor into our midwestern plant, it weighs 92,000 lb. We'll take it all apart and make new components right here from raw copper and steel. I think this is good old-fashioned manufacturing by any definition. We aren't all gone yet!

[D-Mack]

Re: The Decline of US Manufacturing. Not!

A while ago I was reading a Wiki page on "The Economy of the United States" and there was a link under "Manufacturing" to another article on "Manufacturing in the United States" and therein I saw the definition, including restaurant workers.

So to respond to you I tried to backtrack to that article. The link is still there on the U.S. Economy page, but it's dead. It says the article has been removed. Hm.

However I did come across this: http://www.freerepublic.com/focus/f-news/1087827/posts which is not official, but you'll get the idea.

If someone can confirm, deny, or clarify all this, that would be great, but I have to get back to work.

it's archived

http://web.archive.org/web/200501120...fastfood.shtml