Manufacturing: Good Riddance!

Two recent posts at The League of Ordinary Gentlemen have me intrigued.

Yesterday, Freddy, closed a piece arguing for stronger labor unions and better enforcement of (along with reform of) our immigration laws thusly:

This won’t come without cost. Goods and services, if produced here and for living wages, will certainly be more expensive. It will continue to be a struggle for these companies to compete with the dirt cheap labor available in foreign countries. These price increases, meanwhile, will certainly be passed on to consumers. But we have to ask if that is a worthy bargain. I certainly question whether the ability to buy clock radios for $9 or four and a half ounces of California blueberries for a dollar is really worth the shelled out economy we’ve created, where wealth has to be generated by shuffling paper rather than through the classic, tried and true system of people paying for goods and services that improve their lives. Would the American consumer be willing to pay more than they are used to for the things they need? I don’t know. I do know that the system of dirt cheap commodities, constant consumption and a almost nonexistent manufacturing base has left us with a financial crisis the likes of which we never thought we’d have to endure. At this point, I think any option is on the table.

His cohort E.D. Kain strikes a similar pose in a post musing about the definition of prosperity.

This is the fundamental flaw in modern economic theory.  It touts the creation of cheap goods via cheap labor and resources as the purpose of prosperity in and of itself.  Never mind that this requires shipping all our manufacturing jobs overseas.  The once well-paid auto workers will be able to buy such inexpensive goods from China that, if they are lucky enough to find them, jobs in fast food restaurants and retail outlets will be enough to subsist – nay, prosper – upon.

The pieces are both long and thoughtful and the excerpts aren’t necessarily fair summaries of their complex arguments.   But both Freddie and E.D. make a point that I hear time and again and simply don’t understand; namely, that the decline of the manufacturing sector and its substitution with a service economy is a horrible thing.  We have to make things, damn it, if we’re to sustain an economy over the long haul.

Why?

The classic professions to which all mothers of yore wanted their sons to aspire — doctors, lawyers, teachers, and such — are all service economy employees.  (So, for that matter, are cowboys, which certain commentators caution mothers to avoid having their babies grow up to be.)   Are these jobs no longer desirable?  After all, they don’t make anything?

The advantage of manufacturing jobs over the professions, of course, is that they have far lower barriers to entry and, for a relatively brief period, anyway, they paid salaries disproportionately higher than the demanded skill and training.  Things too good to be true seldom stay that way for long.  Naturally, capitalists sought to substitute the substitutable.  Unionized workers doing unskilled, repetitive tasks were gradually replaced by robots and/or non-union workers in other states or other countries.

I understand why many see this development as a bad thing.  Unskilled middle class wage earners suddenly become unskilled lower class wage earners or, worse, unemployed.  And many of them lack the abilities and resources to transform themselves into skilled middle class wage earners.

Still, most did. We’re still making all the cars we need — indeed, more than we need at the moment — and yet we’re now selling more goods and services to one another than ever before.  What have we lost as a result of the transition?   And why is making stuff more valuable than doing stuff?

E.D. gives one possible answer:

Individualism leads to the growth of the State because individualism denies the need for community and family; it abandons such antiquated notions as God and tradition and favors reason and wealth over history and modesty. In the end, however, individualism inevitably falls short; reason inevitably contradicts itself.  A nation of individuals is inherently chaotic, and will gravitate, sometimes consciously, oftentimes not, toward a bigger and stronger and more all-encompassing State.

The trouble is, I happen to like reason and wealth.  And, for that matter, one can have consumer excess and misplaced priorities in a manufacturing economy, too.  He continues:

Divorce rates are at unprecedented levels.  Depression is as common as the common cold.  We patch our sadness up with pills and purchases.  People are generally not made happier by their ability to buy cheaper goods, and pharmaceuticals have only mixed success.  Defining prosperity by our consumption instead of our work may be at the heart of much of this. Hard work is good for us.   It can stave off boredom; it keeps us fit and gives us purpose.  There is a reason we term it our calling or occupation.  But nowadays hard work is not something that is generally viewed as very worthwhile or necessary.  Ambition and entitlement make strange bedfellows.  Yet we are dropped into a culture of want, and told that we can do anything, and not only that but that we deserve it as well.

Frankly, if I had to work on an assembly line, doing the same task minute after minute, hour after hour, day after — well, you get the point — I’d need more than pills.  Granted, a job in a fast food restaurant isn’t particularly appealing, either, but I don’t see why it’s inherently worse.   In both cases, they’re a means of making a living rather than a career.

More of us than ever are doing relatively safe, comfortable, intellectually satisfying work.   That’s a good thing, no?

Photo by Flickr user harry-nl, used under Creative Commons license.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. James: Thanks for the thoughtful response to my brethren’s discussion. I hope you’ll keep an eye on this, because the discussion is not over. Suffice it to say that the free traders amongst us have not yet entered the debate!

  2. E.D. Kain says:

    James,

    Thanks for the response. I certainly understand the notion that more people are doing more satisfying work – or at least, that’s what we’ve been lead to believe – now that manufacturing and other industry has dried up here in the States. Then again, I’ve talked with foremen at Motorola plants who had to walk out on the floor and layoff their entire staff, often times middle aged men and women who had been doing this sort of work most of their lives. I’ve seen the effects of a good manufacturing base on local communities that would otherwise exist in two extremes: The service jobs that you describe, i.e. doctors, lawyers, etc. on the one hand, and the lower class service jobs on the other: fast food workers, waiters, clerks. (once upon a time a retail clerk could make living, but now that competition is so fierce and prices have to remain so low, this is no longer possible).

    In any case, I think there is a balance to strike, and I don’t think we’ve achieved that balance yet…

  3. James Joyner says:

    Mark: I look forward to it!

    E.D.: Obviously, it’s a personal tragedy for a middle aged man to lose a decent paying job for which he has no ready alternative. I’ve been unemployed more than once, myself, although I always expected to eventually land on my feet.

    But remember that manufacturing killed off several of the skilled trades, transforming entrepreneurs into wage slaves to the capitalist. Unions served the excellent purpose of balancing the scales but, like just about any cause, fell victim to the ratchet effect and ultimately sewed the seeds of their own destruction. So, there was a heyday of high wage manufacturing jobs that has mostly ended.

    We replaced that with a thriving service economy, including a great deal of semi-skilled middle class jobs in the financial and tech sectors. Some of those, too, have gone away.

    I don’t see an end to that cycle or pretend that creative destruction doesn’t include, well, destruction. But I think the general trend has been a good one at the aggregate level despite plenty of individual pain.

  4. mircroconcern says:

    Beware social engineers who takes refuge in “the aggregate” and the “macro”.

  5. Bithead says:

    But both Freddie and E.D. make a point that I hear time and again and simply don’t understand; namely, that the decline of the manufacturing sector and its substitution with a service economy is a horrible thing. We have to make things, damn it, if we’re to sustain an economy over the long haul.

    Why?

    One reason the argument gets repeated so often, I suppose is that Unions are harder to maintain in a service economy. Granted, that doesn’t meet their stated objection, but perhaps that’s the point.

  6. I am surprised by these arguments, as they largely seem to be settled issues. I think most of the concern over “free trade” is that it is not really wholly “free” in a situation where one side or the other manipulates industrial policy and exchange rates or fraudulently enters into trade agreements while having no inclination to live up to labor or environmental standards.

    That said… I think we all understand the nostalgia of the view in the linked pieces. Yes, we all aspire for our kids to be lawyers and doctors rather than steel workers, but unfortunately we can’t all be doctors (unless Steve Verdon and the CBO are right that 50% of GDP will be devoted to healthcare in 2040 (j/k))… which means that absent those manufacturing jobs our kids might end up as managers at McDonalds. Personally, I’d rather my kid be a decently paid, unionized steelworker than a McD manager if it came to that. Unfortunately, that is rarely the choice available.

    Anyway, short version: the “fair trade” argument is not always just a stalking horse for protectionism, though it clearly often is.

  7. E.D. Kain says:

    Bernard:

    Yes, we all aspire for our kids to be lawyers and doctors rather than steel workers, but unfortunately we can’t all be doctors (unless Steve Verdon and the CBO are right that 50% of GDP will be devoted to healthcare in 2040 (j/k))… which means that absent those manufacturing jobs our kids might end up as managers at McDonalds. Personally, I’d rather my kid be a decently paid, unionized steelworker than a McD manager if it came to that. Unfortunately, that is rarely the choice available.

    Exactly right. This is the fallacy behind the “service economy” myth. I think we’re witnessing some of the effects this myth has had in our current collapse, though a more depressing effect will be the class gap widening as more and more people are sequestered into good and bad service jobs with little left in the middle – save cops and teachers…

  8. PD Shaw says:

    Motorola received $43 million in subsidies from Illinois to build a new plant. That was $23,000 per job. And then it moved to Texas and Mexico. It is not a business that is exemplary in the field of non-state individualism.

    I think the balance should be struck that the service industry should be taxed less to maintain an idealized economy.

  9. Rick DeMent says:

    the question is how long will it take after all the manufacturing has left our shores before the service economy starts to unionize in order to command a larger percentage of the profits their labor generates?

    Will we simply be trading cheap goods for expensive services? hard to say. The larger the inequality in wage distribution gets the more pressure there will be for those at the bottom to start demanding more and the cycle begins anew …

  10. odograph says:

    I don’t think the unionization/manufacturing perspective is the most useful. It is more important that we are in the midst of a transition from a fairly stable American labor regime to something globalized and uncertain.

    No one knows what the jobs picture will look like in 20 years, which is why Tom Friedman can sell so many books to so many concerned parents of pre-teens.

    We certainly want well-paying jobs that don’t disappear from under us. That is true of the self-employed engineering grad as well as the union factory worker. The uncertainty is common though, and cuts across those kind of life choices.

    I work at a company where I am the only on-shore programmer. I start to think about how many more years this market has, and how many I really need to full retirement. That sounds like the story of a factory worker 10 or 20 years ago, doesn’t it?

    What should a kid do now? I’d say (a) study hard, as hard as an Indian, and (b) don’t expect to live like your parents.

  11. Brett says:

    I agree that a manufacturing economy is over-stated; the Service Sector of the American economy has been larger than the Manufacturing Sector since 1935, and yet we did quite well.

    I think what concerns people more is the idea of dependence. Basically, we’re the Big Dog in the political system, we have military commitments – so if we become dependent on trade for our manufactured products, what happens to us if the trade system breaks down? What if we have to import steel at exorbitant prices because we can no longer manufacture it, or (worse) there’s no steel available at all because the trade system broke down?

    Then, of course, there is the fact that all the other First World states are cheating to protect their own manufacturing sectors, including the EU and particularly Japan. Why not us?

  12. Drew says:

    Manufacturing employment as a pct of GDP: 1950 to 2010 E (rounded)

    1950 19%
    1960 18%
    1970 17%
    Oh, hell, you get the point

    2010? 13% 1% reduction per decade.

    So go in the bathroom and blame Bush while you masturbate if it makes you feel better. But this is a decades long phenomenon, people.

    All the same whoa and gloom arguments were made as we exited an agrarian economy.

    You can facilitate change………or piss up a rope.

    The latter is less rewarding and helpful to the common Joe. If you really care about them, that is.

  13. tom p says:

    I am short of time, and so can not read all the comments (tho I did read James post earlier today)….

    But can anyone say, “trade deficit”?

    My point is only, what do we sell China??? (the fact that they steal half of what we have to offer is for another thread)

    A “service” economy is great… but when do we begin to service China?

  14. PD Shaw says:

    I agree with Drew (except perhaps the sexual fantasies part), but he might understate the case. American manufacturing and mining historically average increasing productivity gains that require fewer employees year after year to produce the same number of widgets. All things equal, manufacturing employment shrinks. Service industry doesn’t generally behave thus.

    To truly expand manufacturing employment, I think you need a dynamic, consumption intensive domestic economy and an aggressive export side. You aren’t going to get there with shame-filled despair over our materialism or by starting trade was overseas.

  15. Drew says:

    Now, now, PD. Droll commentary bores. Hyperbole keeps the natives active.

  16. markm says:

    Frankly, if I had to work on an assembly line, doing the same task minute after minute, hour after hour, day after — well, you get the point — I’d need more than pills

    That’s rather short sighted to say the least James. To “manufacture” does not mean necesarily to be on an assembly line, nor does it mean to be in a union nor repetitive work. Sure, there is some of that but also much more. You have purchasing people, accountants, engineers, machinists, welders, etc. I work for a company that “manufactures” items for the military. We have no assembly line, we have no union and we employ people who’s income covers the spectrum from slightly above minimum wage to 7 figures. And frankly, i’d rather “manufacture” goods for our military than only purchase a piece of sh*t “equivalant” from China or Indonesia.

    Sure, being a doctor, lawyer or Injun Chief is all good and well but as I see it they are not going to hire the masses to fill the middle/upper middle class void if “manufacturing” goes away. If i’m making $10/hour I probably won’t keep and Injun Chief on retainer…

  17. markm says:

    …and not to mention trade in this great global economy….whatcha tradin’?. If you don’t trade manufactured goods what is the real international demand for intellects, lawyers, waitresses and dishwashers???. Prolly close to nill as the masses are affected or concerned. There are plenty of those here and abroad. So whatcha tradin’??.

  18. lighthouse says:

    I struggle with this. The base of any economy has to be wealth creation. All other activities are just re-cycling the wealth. If you belong to an elite guild like lawyers, you can set yourselves up to make a very good living re-cycling some that wealth into your bank account but you are not creating any wealth. Same goes for Wall Street, banking, you can get rich but you are siphoning off wealth in the form of fess, not creating any. To me, to create wealth you have to convert raw materials, potential wealth, into usable goods. Manufacturing is the last stage in that process. You may not want to work on a assembly line but if nobody works on an assembly line then we are re-cycling wealth and the inevitable friction means we will lose a little bit every cycle and the economy gets smaller.

    I think this is what has happened the last 10 years. Wages are stagnate, stock market is below 1997 in real terms. Have we not just marked time since we went global? Were is the real wealth growth the last 10 years? I know new people are rich but it has come at the cost of other people getting poorer. Re-cycling, not creating.

  19. lighthouse says:

    Michael Mandel of Business Week has got me thinking along this line. I know there is more money in the last 10 years but what if all the new money is just from new debt? How do we know when we are creating wealth and when we are just re-cycling existing wealth, now highly leveraged. If we can tell the difference between the two then we can tell if we really need manufacturing or not. But I fear we may have thrown away something fundamental to wealth creation without even understanding what the hell we were doing.

  20. lighthouse says:

    I think there has to be a lot of manufacturing that does not create wealth. And I think there may be traditional services like software that do create wealth. But I dont have a clean definition of what is wealth creation and what is re-cycling. And without that, I dont think we can say what we should hold onto and what we should let go to the lowest bidder.

  21. motokat says:

    You are wrong in the original article. If we lose the income generated by all those middle class factory workers, we lose a big chunk of disposable income that would be spent here. Cash is now flowing overseas faster than we can print it.

    How are we going to support a “service-based” economy if there is no one left who can afford the service?

    We can’t all work as Wal-Mart greeters for 15 hours a week at $7 an hour.