Questioning Common Knowledge—Part III
After exposing a few myths recently, this next one is going to shock you: "America remains the world's leading manufacturer by far. In fact, if U.S. manufacturing were a national economy, it would be the eighth largest in the world," according to Robert Turner, chairman of Turner Investment Partners in an article in Institutional Investor.
Turner explains that domestic manufacturing is not dying, it's changing. The U.S. is "making products that require a high degree of innovation and technological content," which is subject to less foreign competition. Inevitably, "some low-value-added commodity products like textiles, toys and TVs are being made in [other] countries" where workers earn lower wages.
The news of failed giants like General Motors overshadows the growth of small manufacturing companies in this country. "According to the Cato Institute, for every U.S. manufacturing industry suffering a decline in revenues and profits, two U.S. industries are growing."
Moreover, foreign manufacturers are increasingly making things in the U.S. for reasons such as "gaining marketing opportunities, earning tax credits and—brace yourself—exploiting cost advantages." For example, Turner cites a Chinese company that moved to South Carolina for much lower electricity costs.
Nevertheless, America still suffers from a huge trade deficit—we import significantly more than we export. While the U.S. can greatly seek to improve its ability to export manufactured goods, it still ranks third, behind Germany and China, in exporting merchandise. If you were to add services into the calculation, "the United States exports more than any other country" according to researchers at the Brookings Institution.
The Wall Street Journal reported that exports increased nearly 17% in 2010. (Of course, some of this may have occurred due to a weak U.S. dollar, making our goods and services more attractive abroad.) The huge trade deficit exists because we remain addicted to cheap foreign goods and the cost of importing energy continues to skyrocket.
If U.S. manufacturing is "not dead yet," then what explains the common belief that it is in such a dismal state? Turner suggests that a reasonable explanation is the substantial loss of jobs in the manufacturing sector due to technological advances. We will explore this concept next time when we discuss what machine workers, farmers, and lawyers have in common.
Words of Wisdom
I think it's wrong that only one company makes the game Monopoly.