Interesting Graph: Decline In Manufacturing Is Not Just An American Thing


This is really interesting:

The chart above shows manufacturing output as a share of GDP, for both the world and the U.S., using United Nations data for GDP and its components at current prices in U.S. dollars from 1970 to 2009. We hear all the time from Donald Trump and others about the “decline of U.S. manufacturing,” about how nothing is made here any more, and how everything that used to be made here is now made in China, etc. An underlying assumption here is that if the manufacturing base is shrinking in the U.S., there is an offsetting manufacturing gain that is captured elsewhere in the world. In reality, the decline in U.S. manufacturing as share of GDP is a really a global phenomenon as the entire world becomes increasingly a services-intensive economy.

This graph and data brings up an interesting question, if global manufacturing is dropping as a percentage of GDP worldwide, why has our economy been moving sideways over the last decade?

Part of the problem facing us is the issue of our economy sending $48.2 billion out of the country every month in the form of our trade deficit. And the biggest contributors to our trade deficit is oil.

And to lesser extent, other raw materials are contributing to our trade deficit. For example, steel.

Via the U.S. Commerce Dept.

U.S. imports of steel mill products have fluctuated in the past few years, while exports have remained relatively stable. The February 2011 steel trade deficit narrowed to -0.81 million metric tons, 15.5% less than the deficit in January 2011.

  • Compared to the trade balance one year ago, the February 2011 steel trade deficit increased 31%.
  • From January to February 2011, the volume of exports and imports decreased 10% and 13%, respectively.
  • February 2011 exports are 6% more than February 2010 exports; February 2011 imports are 17% more than the level a year ago and 41% less than the most recent import peak of 2.8 million metric tons in October 2008.

Imagine if our government decided to get out-of-the-way (and remove all the onerous regulations) and let us retrieve our natural resources and began to export them to the world. Our economy would skyrocket rather than energy prices.

You know what they say… “The United States is the ‘Saudi Arabia’ of coal.” Imagine if we were serious about coal exports.

Returning back to the manufacturing graph, a lot of our economic problems are rooted in raw materials (mining, oil drilling, rare earth elements) rather than the old political saw that we don’t manufacture things here anymore.

Comments
  • Christopher May 15, 2011 at 8:16 pm

    Steve,

    While there is no argument to your post (on my part), you mention government regulations on basically energy extraction and usage. These regulations actually follow what the rest of the world prescribes. Looking at the time period given in the first graph this goes all the way from “global cooling” in the 1970′s to “global warming” lie of today.

    This info you present is not only interesting but also very informative as it illustrates just how backward we have become by following rather than leading.

    I would argue that if we as a nation do as you suggest and I agree, ridding ourselves of these onerous regulations, not only would we be a top exporter of energy but also return to the top manufacturer far out-pacing other nations by leaps and bounds as was in the past thus creating not thousands but rather million’s of job’s on both front’s.

    • steve May 15, 2011 at 8:32 pm

      Great point about leading from behind…. Sorry, “following” the rest of the world in the foolish global warming prescription.

      I agree, if we did this, the economy, with our manufacturing efficiency and energy reserves (real energy, not the solar and wind nonsense) would take off in a hurry.

  • geek49203 May 16, 2011 at 6:01 pm

    I have to tell people that China was losing manufacturing jobs, especially during the last election when the Dems were trying to run on “China steals jobs” platform.

    The reality is that, akin to agriculture in the 20th Century — when the percentage of the population in the USA living and working on farms went from 90% to 5% — the number of people needed to do manufacturing has declined worldwide.

    This means that Michigan’s attempt to keep (or gain) manufacturing jobs is a rear-guard action against the tides of history. Worse yet, our laws make it virtually impossible to compete for what will remain.

    • steve May 16, 2011 at 7:29 pm

      Very true about China losing manufacturing. Many areas of China are becoming expensive to manufacture and they are losing jobs and industry to Vietnam and Malaysia. Likewise with Mexico. They are losing manufacturing to places like Honduras.

      Good point about Agriculture. We have become so efficient at it that it takes much less labor to produce our food.

      The government should get out-of-the-way and let the markets settle at its own equilibrium (high value manufacturing) and let us use our own natural resources. This is where our economy is getting clobbered.

      • geek49203 May 16, 2011 at 8:03 pm

        Steve —

        My concern is that “someone” needs to find places for “idiots” (“les incompetents”) to work. You know — the ones with no real smarts, no job skills, no ambition? In the past they could work a factory job, and do okay — but those are gone now. They can’t work on a farm now either. Construction is iffy, and scarcely needs unskilled labor.

        Heck, in the past someone could muddle through 4 years of college — majoring in “partying” or “getting laid” or Journalism or something — and end up with a middle class job! Now, they end up moving back in with parents, and taking a job that doesn’t require a college degree in actual practice.

      • steve May 16, 2011 at 8:27 pm

        This is a real problem. Job are becoming more specialized and require real training and not blowing off four years of college. One area that need people is skilled trades. This requires training and ambition.

        http://www.job.com/career-advice/celebrity/dirty-jobs-mike-rowe-champions-skilled-trade-careers.html

        Other than that, people will soon be S.O.L.

  • geek49203 May 16, 2011 at 9:02 pm

    I have a BA from a fancy elite college. I have 90 semester hours of grad work, with a graduate degree. I make my 6-figure living from my courses that I either self-studied or took at the local community college.

  • Tony Fernandez May 18, 2011 at 12:52 pm

    The service sector is growing as a percentage of GDP. This is not a problem, though. Losing our competitive edge to other countries because of over-regulation, however, is.

    • steve May 18, 2011 at 7:10 pm

      Good point about the service sector and I agree that the government’s over-regulation is a big problem.

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