THE MANUFACTURING MYTH
WHAT THE DATA TELLS US
NOTE: US Consults has no specific “sweet spot” – whether within the private sector or public sector. That said, because of our founder’s background, manufacturing is our “soft spot” – one near and dear to our hearts.
The story of Man is quite distinct from the stories of men. The former is based in fact; the latter are acknowledged at best as embellishments based in a seed of truth and at worst as outright lies. Myths, of course, are a subset of the stories of men. There are famous myths from the past - such as that of Odysseus as told by Homer.
As much as the intent was to entertain, the purpose of the myth was to reinforce or instill values - much as one of the purposes of the stories from the Bible. In these stories recounting cause and effect (another Greek, Aristotle), the "cause" is based in a seed of truth - and is the virtue being reinforced in the myth.
Propaganda can be construed as myth because it shares one of the purposes of myths: to reinforce or instill values. There is a difference, however. A myth has a seed based in a truth. Propaganda is simply based in a lie. There is a difference between Goebbels and Homer, Stalin and Virgil. So propaganda is not a myth. It is the use of a lie to shape the values and actions of men. In the stories told of cause and effect, the cause is a lie.
It is arguable that if one casts a net far enough, some seed of truth can be ensnared by propaganda - and that facts or truths can be found much as loose glitter on a greeting card. For example, a group of citizens could have a higher average net wealth than the rest of the citizenry. That could be a truth. Propaganda then is constructed around that incidental truth - such as the cause of the accumulation of wealth is that the group has been using unlawful means or predatory practices. In other words: the wealth was the result of cheating and stealing from others. Yet the reality is that the value system of that wealthy group of citizens consists of a strong work ethic combined with a sense of responsibility for the generations to come - resulting in the accumulation of wealth rather than the squandering of income on petty personal pleasures. The cause is something completely different from that presented by the propaganda.
But the propaganda is then used to justify stealing from the group that has done nothing wrong. This is a pattern that has been repeated and repeated again and again throughout history.
There are those who could argue that the Manufacturing Myth is actually not a myth at all - it is propaganda. After all, it is not based in truth and history has demonstrated that there is no factual basis to the Manufacturing Myth. The past has completely contradicted its premise. Additionally, those perpetrating the Manufacturing Myth are working their own agenda, contrary to the interests of others and at the expense of others - a classic attribute of propaganda.
We won't argue with those who prefer to call it the Manufacturing Lie rather than the Manufacturing Myth. However, we prefer the alliteration.
WHAT IS THE MANUFACTURING MYTH?
Before the advent of robots, the mantra was that manufacturing jobs were being lost to automation. Before that, manufacturing jobs were evaporating due to the assembly line (specialization of work - think Henry Ford). Before that, manufacturing jobs were being lost to uniformity of materials (think Colt).
You get the picture. As manufacturing has evolved to remove non-value added costs, at each turn so-called "futurists" have predicted the end of jobs like the End of Days. At each turn those futurists have been dismally wrong (think Malthus).
They were wrong because increased productivity (lower cost per unit produced) resulted in lower prices to the customer resulting in increased demand that drove a net increase in manufacturing jobs. The Luddites were also wrong because machinery (including robots) doesn't spontaneously appear - thereby replacing employees. Machinery including robots must be manufactured - a process requiring employees occupying jobs that didn't exist prior to the automation/mechanization.
Yet, this Manufacturing Myth of the evaporation of manufacturing jobs (due to robotics) is being perpetuated by those working their own agenda.
BUSTING THE MANUFACTURING MYTH
One can rationalize anything. The less one knows, the greater the need to rationalize. It is popular to rationalize that manufacturing jobs are going away, anyway. The production floor employee is being replaced by robots and those with great vision have seen the future and it is filled with robots and devoid of workers.
These are the same seers who saw COBOL programming as the future a few decades ago. Their ancestors predicted the end of jobs as manufacturing evolved from one man / one product to specialization of roles and responsibilities, and from hand operations to automation. Yet as manufacturing evolved, relative affordability increased, demand increased and total manufacturing employment increased. The seers at each step of this process have had the clarity of vision of a stone.
Certainly, that vogue vision of the future – the vision filled with robots – then allows those who have failed to protect manufacturing jobs in their communities to justify their failings. After all, they haven’t failed. The jobs were going to go away, anyway.
But what are the facts today? Have the seers finally gotten it right? According to the World Bank, manufacturing jobs worldwide have INCREASED 11% since 2000. That experience, however, is not universal, as the following graph of World Bank and USDOL data shows:
Quite simply, in the United States manufacturing jobs have declined more than in any other remotely comparable country or group of countries. Even Canada and the EU outperform the U.S. This makes perfect sense when taken in the context of U.S. companies investing overseas:
Today, for every dollar of US GDP, US companies are making direct investments overseas equal to 30% of the GDP! This contrasts with 10% when George W. Bush took office.
And that investment growth abroad definitely includes manufacturing investment, as there has been a three-fold increase in such direct investment since George W. Bush became President:
So, US companies are growing manufacturing jobs – overseas. It isn’t that there is an absence of opportunity to attract manufacturing investment and grow manufacturing jobs – it is simply that certain communities have failed to compete. And the failure to compete is not consistent nor true across all states as the graph below clearly reflects:
It is important to note that the loss of manufacturing jobs has consequences far greater than the absolute loss of tax revenues and jobs from the business affected. The consequences have been studied and measured by the U.S. Department of Commerce with the results displayed in the table to the right:
The multiplier effect applies in each community, with the impact in each state shown in the table below:
EPILOGUE: SO WHAT?
Manufacturing jobs are not in decline worldwide; rather, they are increasing. And manufacturing investment worldwide is increasing as well.
Obvious questions are:
Can a manufacturing investment in the U.S. be competitive with one made overseas?
Can a U.S. investment have a competitive ROI?
Can the manufacturing cost in the U.S. be competitive?
Can a manufacturing investment in a high-cost state be made competitive with one in a low-cost state?
The answer to all of these questions is “Yes.” We’ve successfully worked with numerous companies and communities to keep manufacturing jobs in-place. And we’ve also successfully worked with numerous companies and communities to on-shore manufacturing jobs.
We serve as our clients' Sherpa – we know the mountain, the passes, the dangers and the preferred pathways. We’ve been on the mountain many times. We’ve lived on the mountain for decades. And we have the recommendations to prove it.
Upon request, we will provide access to several online documents (see link below). One is a post-mortem of the failed Texas bid for the Tesla Gigafactory created at the request of Texas officials. Another is an example of the econometric modeling we do in evaluating the financial implications of a pending business decision on government. The third is another example of the econometric modeling and extensive financial analysis we do in evaluating the financial implication of a pending business decision on that business. And the final document is a client summary (private sector) - something we create and use to communicate salient facts about our client to government.
To receive a password to access one of these documents, simply request same by chat, email, form or phone – or book a call through our online system.
In summary, manufacturing is not disappearing. It is simply moving away from places that either don’t care (yet another story) or don’t know what tools are available to retain and incent manufacturing.