The Economist, in its June 14th issue, put national industrial policy – such as President Trump’s big, beautiful plan to revive American manufacturing (and by so-doing) Make America Great Again – in a different, more dyspeptic frame of analysis.
The magazine reported:
Politicians hope that boosting manufacturing means decent employment for workers without university degrees or, in developing countries, who have migrated from the countryside. But factory work has become highly automated. Globally, it provides 20m, or 6%, fewer jobs than in 2013, even as output has increased 5% by value.
Many of the good jobs created by today’s production lines are for technicians and engineers, not lunch-pail Joes. Less than a third of American manufacturing jobs today are production roles carried out by workers without a degree.
By one estimate, bringing home enough manufacturing to close America’s trade deficit would create only enough new production jobs to account for an extra 1% of the workforce. Manufacturing no longer pays those without a degree more than other comparable jobs in industries such as construction. As productivity growth is lower in manufacturing than it is in service work, wage growth is likely to be disappointing, too.
Another misconception is that manufacturing is essential for economic growth. India’s manufacturing output, as a share of GDP, languishes about ten percentage points below Mr. Modi’s target of 25%. But that has not stopped India’s economy growing at an impressive rate. In the past few years, China has struggled to meet its growth targets, even as its manufacturers have come to dominate entire sectors, such as renewable energy and electric vehicles.
As our modes of production change and with AI yet to release its full potentials in our economies, should we rethink the benefits of trying, yet again, to out-think markets by turning to managers and implementing their plans?