Tuesday, July 12, 2011

US: Still a Global Leader in Manufacturing

. Tuesday, July 12, 2011

As part of a back-and-forth in comments to this post, LFC (of the excellent Howl at Pluto) wrote:

But on US mfg not having declined in raw terms: are you saying e.g. that roughly as much steel is produced today in Youngstown, Pittsburgh, etc. as was produced in, say, 1968, just with many fewer workers and fewer plants? That would surprise me.


Surprise!



Via. I'm not sure about steel in Youngstown per se, but overall the US manufactures more now than it ever has. As a percentage of global manufacturing output the US hasn't declined too much either. Until the subprime crisis/Great Recession the US had stayed around 25% of global manufacturing output since 1975.



Despite that downtick, the US was still the largest manufacturer in the world in 2009 (more graphs and discussion at that link). The view that the US just doesn't produce anything anymore is common, but it's wrong. We still produce quite a lot, in both raw terms and as a share of global output, and we do it with fewer workers than ever before. That's bad for the unneeded workers in the Rust Belt, but not for the broader economy.

6 comments:

LFC said...

Thanks for the graphs (and for the kind words). I am surprised by the output figures. Also I'd have thought employment #s would have trended downward a bit more sharply before c.2000, which is when they really start to plunge.

I guess the only thing I'd be inclined to add is the (I think widely accepted) point that the decline in # of mfg workers is bad not only for the unneeded workers in the Rust Belt but in some sense for the larger society since the lost mfg jobs typically paid reasonably good wages, whereas a large proportion of jobs in other sectors (retail, hotel-rest. etc.) don't pay as well.

Kindred Winecoff said...

True. The other thing I didn't mention, which is related to your point, is that a lot of manufactured jobs now are non-union. I.e. we've shifted from UAW jobs in Detroit to non-union Toyota jobs in Indiana. I'm not sure what the percentages are of that and don't have the time to look it up right now, but it's an important part of the story of the past 30-40 years.

David Steinberg said...

I also was initially surprised that manufactured production has increased in the US since 1975. But isn't manufacturing/GDP a better (or, at least equally good) measure of whether manufacturing has declined? I was curious so I looked at World Development Indicators for this data. It turns out that manufacturing has steadily declined as a percentage of US GDP, from 27% in 1970 to 13% in 2008 (the latest year with data).

FYI, data are available here:

http://databank.worldbank.org/ddp/html-jsp/QuickViewReport.jsp?RowAxis=WDI_Series~&ColAxis=WDI_Time~&PageAxis=WDI_Ctry~&PageAxisCaption=Country~&RowAxisCaption=Series~&ColAxisCaption=Time~&NEW_REPORT_SCALE=1&NEW_REPORT_PRECISION=0&newReport=yes&ROW_COUNT=1&COLUMN_COUNT=51&PAGE_COUNT=1&COMMA_SEP=true

Kindred Winecoff said...

Hey David, great to see you.

This is a really good point, and it says a lot about how the US economy has changed over the past 40 years. Also probably has a lot to do with stagnating median incomes and the rise in income inequality that has occurred over the same period.

I think I'd quibble with your claim that manufacturing/GDP is a "better" measure. I'd say it's a different measure. It's better if you're concerned with how much manufacturing the US does relative to other things. It's probably worse if you are concerned with how much manufacturing the US does relative to its peers or past history.

The original discussion was about Strange's 1987 article on the "myth of lost hegemony" and what country (if any) controls global production in various sectors. For those purposes, raw production per worker and share of global output are probably the best measures.

David Steinberg said...

That's a good point, Will. I agree that the US's share of global manufactured production is the relevant measure regarding American control over global production. But, from what I can tell, the main reason why most people worry about the decline of manufacturing is the belief that the manufacturing sector has higher productivity than services (e.g. Rodrik's stuff). And if that is what worries you, then the manufacturing sector's share of GDP is the "better" measure. Maybe that's just my bias though. And while I agree that these two measures both tell us different important things, I don't think that the growth of US manufactured output itself (i.e. not deflated by GDP) tells us much.

Kindred Winecoff said...

Rather than commenting I just wrote another post:

http://ipeatunc.blogspot.com/2011/07/more-on-us-manufacturing-and.html

One clarification, tho: the graph above is deflated... it shows output in constant 2005 $.

US: Still a Global Leader in Manufacturing
 
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