The "Post-Industrial"Theory
It has recently become fashionable to talk about the U.S. as a "post-industrial" economy. The essential argument is that as national economies mature they move from making things (i.e. industrial economy) to designing things and providing the services necessary to support the making of things (i.e. post-industrial economy). Any pain felt in the older sectors of the economy, so the theory holds, is only temporary, as capital moves to newer economic sectors, and older workers are retrained and likewise moved into growth sectors. Under this theory, the economy's wealth never disappears, it just changes from one form into another (e.g. like energy).
Not All Economic Sectors Are Created Equal
Historical trends show that manufacturing is the economic engine. Since the advent of the first industrial revolution in the late 18th century, begun in England and driven largely by coal, the wealth of a nation has been determined by the vigor and competitiveness of its manufacturing sector. And since the time of the second industrial revolution, in the mid-19th century, driven largely by steam and other emerging energy technologies, the U.S. has been the leader in manufacturing technologies and production. History has clearly shown that nations which export manufactured products tend to generate higher rates of growth in GDP which supports higher individual incomes and produces the tax revenue necessary to produce a better quality of life for a nation's citizens.
Trends of American Manufacturing Under Fire
As a manufacturing engineer, I have come to discover that much of America's manufacturing sector has moved abroad to foreign markets. But I am not just talking about the making of products. I'm talking about the ability* to make products. Industrial equipment needed for manufacturing production, such as CNC Laser Cutters (used to process sheet metal) are now made in other countries and imported. What happens when America's economy depends on other nations for its manufacturing infrastructure? For starters, foreigners begin directing warnings to America's president, protesting Protectionist activities. They do not want America to "Buy American." They want America to buy European or Chinese products. That's because they know that the engine of an economy is manufacturing. And they want America's manufacturing sector to remain in their country rather than here.
Wealth Producing and Wealth Consuming Sectors
A national economy begins to decline as its wealth-producing sector shrinks. Wealth-producing sectors of the economy include manufacturing, agriculture, and mining. Manufacturing is traditionally defined as the process of transforming raw materials into new products by the application of physical, chemical, or mechanical processes, and includes many separate industries: aerospace, textile, computers, automobiles, pharmaceuticals, steel, printing, etc. When it comes to investing in the American economy, a distinction must be made between wealth-producing and wealth-consuming sectors of the economy, such as government, banking (yes, banking), information services, hospitality, education, insurance, health care, and consumer services. These sectors maintain and use physical wealth, but they do not create it. They depend on manufacturing and other wealth-producing sectors of the economy for their growth.[i]
Conclusion
American manufacturing is historically responsible for the relatively higher standard of living enjoyed by Americans compared to other countries, and a thriving manufacturing sector is necessary to allow that trend to continue. Manufacturing drives the engine of the US economy: this sector is responsible for 90% of new patent applications, annually. Manufacturing drives growth and innovation, investment in technology, new products and processes, and provides Americans with some of the best consumer products ever created.
If the manufacturing sector continues to move overseas, so also will the wealth previously enjoyed by Americans.
[i]. See David Friedman, "No Light at the End of the Tunnel, "Los Angeles Times, June 15, 2002; reprinted on New America Foundation web site.
Joel Barrett is a Manager and AutoCAD Engineer for a metal fabricating company in Buchanan, MI.
Berrien Metal Products, Inc.
Phone: 800-978-5300
Fax: 269-695-5300
Email: joel@metalfabrications.com
Website: http://www.metalfabrications.com
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