Annapolis Institute Overview


Manufacturing fancy and facts

by Phil Burgess, Unabridged from the Rocky Mountain News, June 5, 1992

Last week speaking at the NAACP convention in Nashville, presidential hopefuls Bill Clinton and Ross Perot addressed economic policy and problems with the national economy. Both wannabees talked about an America in decline and used the “decline” of U.S. manufacturing as one of their indicators.

Here’s another example, in the immortal words of Will Rogers, of “things we know that ain’t so.” Let’s review the facts as compiled by the Washington, D.C.-based Manufacturing Institute.

Myth: The U.S. is losing its manufacturing base.

Reality: Manufacturing accounts for more than 20% of the U.S. economy. It has been about 20% for the past 80 years, as the economy has grown from less than $1 trillion to nearly $6 trillion.

Myth: Employment in manufacturing is declining.

Reality: Manufacturing employment increased to more than 20 million in the 1970s, up from 15 million in 1950. Manufacturing employment now cycles between 18 and 22 million ‹ toward the high end in good times and toward the lower end in recessions. What has decreased over the years is the percentage of the workforce in manufacturing. The U.S. has added more than 50 million new jobs since 1965. Result: Roughly the same number of manufacturing employees are producing increasing wealth from the manufacturing sector. This is a success story not a failure story.

Myth: U.S. manufacturing is not globally competitive.

Reality: U.S. global market share in manufacturing in 1991 is about the same as it was in 1938. U.S. global share increased significantly during the 1940s and 1950s, but every industrialized nation except the U.S., Canada and Australia was in ruins or recovering from World War II. U.S. manufacturing exports continue to do well, having doubled between 1986 and 1991, helping to reduce the U.S. trade deficit. Because $1 billion in exports produces about 20,000 jobs, manufacturing exports have saved about 4 million jobs since 1985.

Myth: Manufacturing is plagued by low productivity.

Reality: Overall manufacturing productivity is higher in the U.S. than any other country in the Group of Seven: Canada is 81% of U.S. productivity; France, Germany, Italy and Japan range between 69% and 76%; the United Kingdom is lower (64%). U.S. manufacturing productivity growth is brisk, averaging about 3% a year for the past 10 years.

Myth: Manufacturing is low-tech

Reality: Nearly 75% of research and development spending in the U.S. is performed by the manufacturing sector.

Myth: A post-industrial, information society doesn’t need manufacturing.

Reality: Most jobs in the service economy are linked to manufacturing ‹ everything from janitors in manufacturing plants to raw materials production, wholesale and other intermediate transactions. The Manufacturing Institute estimates nearly half (44.7%) of all economic activity in the U.S. depends indirectly on manufacturing ‹ and manufacturing’s direct share of the economy accounted for 22.5% last year.

There is incredible misinformation at loose in the land about the strengths and weaknesses of the U.S. economy. Our economy has problems to be sure, but those who would presume to lead the nation would do well to understand its assets so they can marshal resources to attack our real problems in education, health care and irresponsible taxing and spending.

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