How do you seriously measure whether manufacturing has a current success story or not? Is US Manufacturing a success? How can they be a success when they have lost millions of jobs. If the numbers are to be believed anywhere between 5 to 6 million jobs have been lost since the year 2000. The trade wasn’t the only factor. Automation also took a sizeable blame for this. We are getting to be acquainted with scrutinizing the basis on which the contribution made to the economy by manufacturing is calculated. Growth rate simply states that when a sector in the economy experiences higher than the average demand and it shows characteristics of consistent and quickly growing sales figures along with influx of investments.
Make no mistake that when we talk of manufacturing in the US and its challenges, we are already referring to high rates of cash burn, lack of profitability despite consumer and investor excitement, coupled with technological setbacks that has obstructed progress. Let’s try and simplify the impact manufacturing has on a economy by adding together its direct value-add, its indirect value-add through services such as logistics and its induced value-add through the money spent by employees in the local and wider economy, The SME contribution etc. You now get a very different picture to the narrow view taken by some in government agencies clearly omitting manufacturing’s importance.
In the last year’s Presidential campaign in the US, the blame was squarely put on China, that they had grounded the US manufacturing industry. The US administration is now working on opening the coal mines, to salvage some numbers to increase employment among mine workers. The challenge still exists as two of the largest Coal manufacturing companies, Contura and Arch Coal, emerged from bankruptcy only recently. Another giant, Peabody Energy, recently filed a restoration plan for its path out of bankruptcy.
It was therefore something of a jolt to read an article on the online American news service Quartz that questioned the real health of the American manufacturing sector, which we have been led to believe has been doing very well in recent years.
Now this is what the article has pointed out. Countries looking to increase manufacturing trade, might want to look elsewhere for new businesses.
- President Donald Trump, was more than ridiculed for saying the Chinese stole American jobs. What he said as the data shows is actually correct. The people who voted for him, by and large, are the ones who lost their jobs or were affected by someone in their family losing a job. They knew the truth. Although as stated earlier, they have just begun the herculean task, the results have a different story to say though.
- It’s surprising that not many noticed the degradation of the US manufacturing, almost went unnoticed. You don’t worry about a drought, when the urban business does well. Somewhere centre’s of American financial and political power were possibly riding a wave of prosperity in areas such as law, accountancy, consultancy and financial services, all of which benefitted from growing economic power in Asia.
- Government policy in the 1990s, that led to China joining the World Trade Organisation, opened US manufacturers up to relentless competition that they couldn’t meet, except by exporting their factories, jobs and, crucially, R&D to China, excavated out their manufacturing base. The deliberate, strategic weakening of the yuan by the Chinese government was a strategy to showcase America’s ability to compete or the lack of it.
- Now where did the boom in the US economy come from in the last 20 years? The boom was so huge, that manufacturing industry went unnoticed. Computers. Booming computer production, and leaps in computing power, disguised a dangerous slide in the manufacturing sector. When they are stripped out, output figures pretty much flatline.
- As stated that over 5 million jobs that experts said were displaced were into those area that were automated in a manufacturing set up. The coal industry wants to open up mines and have them operated by a small workforce, skilled in automation.
What does this mean for Asian countries, who are relying on SME’s & MSME’s to revive their manufacturing sector. The bigger question is how have the industries calculated their growth. How about if we remove the data from Aerospace, Defence Manufacturing, what would we find then? We will then in our estimate be able to find the right picture. So that we would know our real productivity and competitiveness.
The bigger worry is that, a lot of countries are following the American method of collecting data. That could be far from the real picture. Government economists have somehow persuaded bureaucrats, to downgrade the importance of manufacturing to the economy by taking far too narrow a view of its impact. But again make no mistake again, that are we also in danger of fooling ourselves about the health of our manufacturing sector by not questioning some of the potentially distortive factors behind our assumptions.
Our eyes are out looking for real answers, but the truth is that the picture is altogether more complicated than some would have us believe.
For the folks sitting and enjoying the wave of computer boon, Remember we built those benches you are sitting on! We will pursue this like we always have……
