Steve Keen highlighted a YouTube video on why the US manufacturing goose is cooked and will stay cooked. The points it makes are broader than the observation we have repeatedly made, that for the US to have any hope of resoring its industrial capacity, it will require way more than just tariffs but sustained industrial policy. But as we will explains, it also is romantically anchored in a past of manufacturing as a generator of many and good middle class jobs, when production is now highly automated and requires few if any workers.
How Superpowers Die: The 5 Stages of Industrial Collapse https://t.co/ZC0nL9Fzvm via @YouTube
— Dr. Steve Keen (@ProfSteveKeen) November 1, 2025
There are two obvious problems in the US with trying to implement industrial policy. The first is that the US is allergic to it and engages in it mainly on an a default basis, via subsidies and tax breaks to politically powerful sectors. See healthcare, the arms industry, banking, real estate, and higher education as some of many examples. Biden’s Inflation Reduction Act proved that rule, by trying to achieve a hodge-podge of objectives, none of them very well.1
The second reason is that the US (ex when on a World War II level war footing) is incapable of sustaining any economic policy over time. Effective rebuilding on a large-scale basis would take at least ten years, even assuming it could be done.
This video provides some useful high level history but is simplistic and at points, inaccurate:
While it makes some important points, such as the virtuous circle that results from manufacturing prowess and how it produces spillover benefits, for instance, to suppliers, it incorrectly implies that manufacturing still generates a significand number of high wage jobs. In fact, industrial kingpin China was reporting 21.3% reported youth unemployment when it suspend publishing the data in 2023 to review the methodology. Its revised, presumably more flattering methodology, showed a still eye-watering 18.9% in August and 17.7% in September.
The rise of highly automated factories, including dark factories that have no humans present during routine operations, has broken the connection between manufacturing and job growth. A summary from Engineerine:
1. What is a Dark Factory?
- A dark factory is a fully automated production facility that requires no human interventionduring normal operations.
- These factories run without lights, as robots and AI-powered machines do not need visual guidance.
- They leverage artificial intelligence, interconnected IoT systems, and robotics to manage everything from material handling to final product assembly.
2. How Do Dark Factories Work?
- AI-driven robotic systems manage production lines autonomously.
- IoT connectivity ensures seamless communication between machines, enabling predictive maintenance and self-regulation.
- Automated logistics handle inventory, supply chain management, and transportation of finished goods without human input.
3. Why Are Dark Factories Being Adopted?
- Increased production efficiency – Machines work 24/7 without breaks, reducing downtime.
- Lower operational costs – No wages for human workers and reduced energy consumption.
- Consistent quality control – AI-driven monitoring ensures precise manufacturing and defect-free products.
And a video showing one in operation:
Another video gave more technical detail but oddly would not embed properly.
Supposedly state of the art US factories are laggards. For instance, Hyundai opened a “factory of the future” in Georgia in 2025. It employed roughy 1,200 early on and expects that total to increase to 8,500 when it has ramped up production to 500,000 vehicles annually.
Consider how meager this level is by historical standards, Ford’s Rouge plant had 120,000 workers at it peak in the World War II. Admittedly, one reason for the large workforce was that Rouge was a fully-integrated facility, even making its own steel.
So even if the US could bring manufacturing back on a large scale basis, there is no there there in terms of job creation.
The Steve Keen video is also a bit simplistic as to the reasons for US decline. When I was in business school in the late 1970s, both the business press and Harvard Business School faculty criticized sclerotic US managements, particularly of automakers. They did concede that Germany and Japan had a perverse advantage, in that rebuilding after World War II meant they had new infrastructure, while the Big Three had huge investments in their installed base that they were reluctant to abandon or make less relevant by investing in entirely new (as in smaller) platforms. But this tendency was reinforce by the fact that all companies were headquartered in Detroit, where heavy, gas-guzzling cars were a plus in the snow, so it was too easy for the top brass to project, based on local conditions, that Americans would stay loyal to big cars. But even worse, the executives had their cars babied every day by company mechanics, so they had also set themselves up to be blissfully ignorant of product quality problems. But US exceptionalism and racism were also factors. Many manufacturing executives found it inconceivable that the Japanese could outdo them (the Germans, with their history of mathematics and engineering prowess, were more credible competitors) until they had decisively eaten their lunch.
While the decline of American car producers was baked in, a big accelerant was the big rise in the value of the dollar in the early 1980s after Volcker relented on his super-high interest rate policies. Japanese car makers made great market share gains due to their cars becoming even bigger relative bargains in the following 24 months which they never gave up.
The Keen video similarly misleadingly depicts US labor costs as a key factor in the decline of the steel industry. Steel is a continuous manufacturing process, meaning that capital and raw materials costs far and away dominate total product costs. Labor is not a major input. But the percentage of uptime is critical to profits. It was widely reported in the business press, again in the 1970s, that US steel mills were old and not competitive, particularly (then) compared to mini-mills. It was outdated plant, and not labor costs, that was the death knell for the steel industry. The same pattern has played out in the paper industry, where the productive life of machines is very long (older ones can be profitably redeployed to smaller run, fussier and high profit paper grade), where mills that should have been world competitive for another generation are being downsized or shuttered due to paper industry executives and now private equity (!!!) uninvesting and even skrimping on regular maintenance.
The Keen video gives no reasons as to why the decline and inability to turn things around are inevitable; the assertion basically is that once a country has lost the innovation race, there is no reversing course.
But it is not hard to make a list of reasons why the US won’t come back.
1. Decline of public education and US relative performance. From 2024 in The Balance:
The United States isn’t investing as much in human capital as other developed countries, and its comparative advantage is falling behind as a result—particularly with respect to education rankings.
U.S. students’ math skills have remained fairly stagnant for decades, and the country is falling behind many others that have greatly improved, such as Japan, Poland, and Ireland. Additionally, U.S. test scores are below the global average. Here’s how they break down.
Key Takeaways
- The U.S. placed 16th out of 81 countries in science when testing was last administered in 2022.
- The top five math-scoring countries in 2022 were all in Asia.
- U.S. students’ math scores have remained steady since 2003. Their science scores have been about the same since 2006.
- The IMD World Competitiveness Center reports that the U.S. ranked 12th in its 2024 Competitiveness Report after ranking first in 2018.
This comparison may understate deterioration on the ground. For instance, I have had readers tell me that they have found that young candidates for retail jobs too often can’t count change. On a completely different front, IM Doc has recounted that elite med school students who went to his hospital on a summer program were hopelessly AI/search dependent and seemed to lack independent knowledge, let alone the beginnings of clinical judgement.
2. Limited to no career paths for young technical degree/engineering grads. This has operated for at least 20 years. I have been told the only field where engineering grads have good career prospects is petroleum engineering; otherwise, the cost of degree acquisition versus earnings makes no sense unless the student continues and gets a law degree so as to become a patent/intellectual property attorney.
3. Lower status attribute to manufacturing management roles and living in non-major city locations. Some may be shrewd enough, or like outdoor pursuits so as to appreciate a possible improved cost/lifestyle tradeoff of living in what some might regard as the boonies. But this common predisposition is an impediment to attracting “talent” to manufacturing.
4. Active destruction of what advantage the US possessed via the Trump war on elite universities. One ranking by QS put Western institutions on top:
Another ranking comes to somewhat similar conclusions….
:
…but notes:
Oxford retains the number one spot for the tenth consecutive year, driven by strong research environment score
Princeton rises to joint third place, and is the only US university to achieve its best-ever finish this year
China has five universities in top 40, up from three last year, but top universities remain steady
Hong Kong occupies a record six spots in the top 200 as a result of improvements in teaching metrics
India now has the second highest number of ranked universities for the first time, behind only the US
To put it another way, the continued Western leadership in top academic institutions makes its decline in practical application (and the US decline in life expectancy) even more striking.
5. The US is unlikely to be willing to accept the pollution cost of being a major manufacturer again. All of the whinging about rare earths conveniently obscures the fact that the US had rare earths production but effectively got out of that business because it was too nasty, particularly in terms of water pollution, and is now in the process of reopening some mines. But people have an aversion to living near industrial operations. For instance, paper making produces a noxious smell even when the output is safe because the human nose can detect sulphur down to 4 parts per billion. A more dramatic and harmful example are the chemical plants and oil operations in the lower Mississippi, which activists correctly point out exact a health cost on those living nearby.
6. The increased importance of personal and family connections in economic and career success devaluing skill acquisition. Even as a young person, I was put off even when by the emphasis on networking, since it treats social contacts as assets to be mined for financial gain. Readers are encouraged to sanity check, but the greater importance of legacy admissions at Harvard and I assume other elite schools (recall that Larry Summers lost ginormous amounts of money to interest rate swaps speculation; my impression from a distance is that admissions took a more mercenary turn after that) points to a rise in clientelism/tribalism as income inequality rises and class mobility falls.
I am told (and seek input) that in the Middle East, young men don’t apply themselves to studying because all that matters is family connection. This is the dirty secret behind girls doing better in math than boys in that part of the world. Mathematical attainment is not valued among men, while it can help some women get ahead (think as teachers or in technical jobs, like nursing and in laboratories).
I am sure readers can add to this starter list of “Why we can’t get there from here” in terms of rebooting US manufacturing. Please pile on in comments.
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1 The title of the bill was already a big sign of hesitation to commit to robust government intervention in the economy, even though that happens on both an ad hoc basis and as a result of lobbying every day. From the White House website:
Two years ago, President Biden signed the Inflation Reduction Act, with Vice President Harris casting the tie-breaking vote in Congress. The Inflation Reduction Act is a key part of the Biden-Harris Administration’s Investing in America agenda, which has driven the fastest and most equitable recovery on record – creating good-paying jobs, expanding opportunity, and lowering costs in every corner of the country.
Already, the Inflation Reduction Act is transforming American lives by finally beating Big Pharma to negotiate lower prescription drug prices, making the largest investment in clean energy and climate action in history, creating hundreds of thousands good-paying jobs, lowering health care and energy costs, and making the tax code fairer. Visit the White House Savings Explorer to see how Americans are saving money on their annual expenses because of the Inflation Reduction Act and other Biden-Harris Administration actions.
“3. Lower status attribute to manufacturing management roles”
I’d extend that to all technical roles. Software engineers are portrayed as nerds, not helped that most seem to dress as scruffs. Young women playing a technical/scientific character in US made films are often/usually stereotyped to look unattractive, for example with ugly glasses
Obama told us that those jobs weren’t coming back. This year we hear that foreign and domestic companies are investing trillions in the US. Maybe Saint O was just talking his book, pace Keen.
We’re hearing that are we? What is the source?
That has been all over the news for months. Search engines are your friends.
FDI (Foriegn Direct Investment) in the United States has been in the trillions for quite some time:
The foreign direct investment in the United States position increased $332.1 billion to $5.71 trillion at the end of 2024…
It is not new.
What shape does the FDI take? Building new factories is quite a bit different from buying an existing American company or buying an existing real estate development. The former creates employment and economic growth, the latter mostly changes where the profits go.
“[I]n the Middle East, young men don’t apply themselves to studying because all that matters is family connection.”
It depends on what you include in the “Middle East.” If Turkey and Iran are in the picture, that doesn’t sound right. The Turkish side of my immediate family are engineers, and most of my undergraduate-day friends are engineers. They had to study hard, and have had proper engineering careers that had little if anything to do with nepotism.
A few of my friends are now engineering professors in Turkish engineering schools. I hear plenty of complaints about their students and their quality of preparation, but nothing about not studying because of family connections. And their complaints about Turkish students don’t seem all that different from my complaints about American students. (I teach physics at a US liberal arts university, so I get plenty of pre-engineers.)
With Arab countries, things might be different. I can’t speak with any deep knowledge about that, but my friends who have spent time in Arab countries on engineering projects have plenty of horror stories about dealing with technology work in an Arab environment. Mind you, Arab students I have had in the US have been decent enough.
Some articles about country in Middle East flouting norms:
https://www.bbc.com/news/world-asia-53182750
https://www.reuters.com/business/aerospace-defense/european-aviation-safety-agency-lifts-pakistan-airlines-ban-minister-says-2024-11-29/
Probably means the gulf states, and possibly Egypt/Lebanon.
Engineers (both sexes) are very highly respected in Iran and the quality of Iranian engineers is very high.
FWIW, I believe girls now out perform boys in mathematics in the US.
Another input is that companies are less vertically integrated.
After school, I went to Silicon Valley to work for a company.
Over 20+ years, I had jobs in manufacturing, marketing, design for manufacturing and product development.
And each of these jobs had multiple opportunities to learn about manufacturing and its constraints.
With the trend for “Designed in California, built in Asia”, I suspect few younger Americans get this experience, while Asian youth does.
Outsourcing to Asia took place over 40 years, it may take that long to bring a significant part back, particularly after the worship of finance continues.
If the UK experience is anything to go by, once you lose manufacturing, design follows in 1-2 generations.
I suspect without serious disciplining of finance/private capital, it will be impossible to bring it back. Profit rates of Chinese companies are fairly low because they reinvest heavily. You cannot have high profits and innovative industry.
Ian Welsh has long held that when the factory floor moves elsewhere, the technical/design advantage will follow a few decades later.
It’s really hard for me to fathom how cutting edge manufacturing could possibly come back to the US at this point. People with the hands-on know how (not just technical but also management) have long retired/died and in any case their knowledge is 40+ years out of date. The US has systemically way higher costs for all inputs except maybe energy and investment dollars. The post touch on the poor quality of US personnel but just as importantly, making money from financial manipulation is way easier and more lucrative than the hard work of setting up and running industrial production.
The Biden/Trump plan seems to be to force America’s still industrialized vassals in Germany and East Asia to set up largely automated turn key factories on US soil…except that ICE raid on the Hyundai battery factory probably dampened enthusiasm for such projects down a bit.
I’m very pessimistic about the future here in general, not just mfg but our steady decline, well, before trumps enthusiastic acceleration.
A periphery stat mentioned is high youth unemployment in China that dark factories can’t help. Imo they should shift to social services that encourage women to breed and workers to spend more and save less. I’ve heard there is powerful opposition, perhaps the export industry? Anyway, they’ve been able to overcome oppo to smart policies in the past, seems odd the ‘socialism with Chinese characteristics’ can’t be a bit more socialistic.
Forgive me for not mining our archives, but we have included in posts how Xi is fiercely opposed to social welfare programs.
The Chinese government is very reluctant to do direct transfers to a large portion of the population because they don’t want to foster dependence. They’re willing to put in a lot of money and effort into programs that help create jobs and livelihoods, but no direct transfers except for handicapped/elderly individuals who don’t have family to fall back in.
The other aspect is that while direct transfers are rare, pretty much anyone who is willing to work hard can get a low paying job that provide them with the essentials, especially if they stay within their hukou where they would have right to housing. Yes, these jobs are crappy and young college graduates will typically avoid them if possible, but work is generally available to those who really need it.
Until quite recently, China was quite poor and relatively young. Both are changing quickly and I expect policy changes to follow, though China is likely to continue to focus on keeping cost of living low and creating better opportunities, and continue to avoid direct transfers as much as possible.
Something not much discussed is why we would want the Glory Days of manufacturing to return in the US. Usually, when you strip away the rhetoric, the assumption by people across the political spectrum and class spectrum is that manufacturing jobs have practical advantages for the worker: better pay, better benefits, good retirement prospects, and strong union participation in the workforce. These things were certainly true in the World War II and a few decades beyond.
Of course, there are other ways to get these things. The US could have a program of paying people to dig holes in the ground and then fill them in, which offered good pay, good benefits and retirement prospects, and strong union participation. So manufacturing, per se, is not the only way to heal many of the wounds and indignities of the current US job environment.
Other reasons to have strong in country manufacturing are less frequently discussed but IMO more compelling. One is more compact logistics chains. Making things in country avoids frail and costly transport segments in the process of going from raw material to consumer.
Another is greater political control of one’s economy. As we are seeing now, heavy reliance on other countries for manufactured products puts your country in a weak position, subject to the whims and power grabs of overseas tyrants.
Another is fostering of an innovative environment. Manufacturing goes astonishingly hand in hand with other aspects of product development and if you can do everything in one place, you will find your country becoming a nexus of overall innovation in the product cycle and much faster cycles of innovation.
Another is efficiency: if everyone involved in making a product speaks the same language, and lives within a short drive of each other and in the same time zone, work will go much faster and more smoothly, and personal relationships will spring up that lead to new ideas and new companies.
Another is increased vertical integration. Instead of each company doing a tiny slice of the overall development process before shipping it off to someplace else to do the next tiny slice, companies and organizations can take on the entire process of making something from soup to nuts. This gives individual companies more expertise and more economic power in their domain.
I could easily go on adding to this list, but the point is there are excellent and powerful reasons to have a strong manufacturing climate in one’s own country. These may or may not have anything to do with the reasons we usually think of, but they are very compelling nonetheless. I don’t know if the people who are in a position to formulate industrial policy think about these things, or care about them, but it would be nice if they did!
great points. I recall Ian Welsh had a blog article with a similar perspective
having manufacturing leads to increased R&D, which leads to increased national economic power.
Manufacturing is worthwhile pursuing, even if the level of current and future manufacturing technology (“dark factories”, etc) potentially requires not many well-paid “good jobs” or jobs (of whatever job quality level).
Your comment: “the assumption by people across the political spectrum and class spectrum is that manufacturing jobs have practical advantages for the worker: better pay, better benefits, good retirement prospects, and strong union participation in the workforce. These things were certainly true in the World War II and a few decades beyond”
This is my whole issue with it, what makes people think these benefits will still be true even if it’s brought back. What is in place to ensure workers would not be receiving the same wages and limited protections as fast food workers get now? Even if it’s a bit more, I doubt they will pay a living wage.
Exactly right. Most likely even if lots of manufacturing jobs were brought back the oligarchs would use low wage illegal immigrants they could exploit even more than legal workers.
People who talk about it being a good thing forget the negatives. There was a reason so many people who worked in factories ensured their children got a good education so they could avoid it.
For a start large numbers of industrial accidents. Plenty of people from the heyday of manufacturing have miasing digits or worse. And that’s before considering the occupational illnesses. These factories involved the use of all sorts of nasty chemicals and materials and many of the former workers die from very nasty diseases as a result.
Not only qould new factories not usher in better wages, they would usher in worse safety conditions. Under the claim that it is necessary to be competative.
“Young people digging holes in the ground”. I assume you are disparaging the
WPA (and Roosevelt). That program actually did a lot of good, and accomplished
building a lot of useful infastructure. Blindness comes from within.
I think he’s riffing on Keynes’s illustration of paying people to bury money and then paying to dig it up.
I believe he was referring to statements made by Keynes in the Great Depression:
“The government should pay people to dig holes in the ground and then fill them up.”
People would reply. “that’s stupid, why not pay people to build roads and schools”
Keynes would respond saying “Fine, pay them to build schools. The point is it doesn’t matter what they do as long as the government is creating jobs”.
It actually matters a lot what you have people do–if they do something that enhances material productivity then the inflationary effect of the spending is much less. But I believe the point is that digging holes and filling them up is better than doing nothing and leaving large numbers of people unemployed. Both of those things can be (and are) true.
Where have you been? I can just see the resulting article on
“Red State”-‘ Lazy Dems get a free lunch doing useless work’ “
The US’ manufacturing capacity won WW2. National self defense is THE reason that a nation would want to maintain a high level manufacturing base.
Politicians today warmonger as if US manufacturing was still at WW2 capacity.
US manufacturing capacity beat Japan, Soviet manufacturing capacity defeated Germany.
Big Serge, who is a serious war expert, differs a bit. He depicts the US leadership in automobiles as enabling the US to provide large numbers of wheeled vehicles and tanks, which were instrumental. That does not disprove that it was the Red Army that beat Germany. But Big Serge effectively says the US would have prevailed if Russia had come up short. Forgive me for not finding his second piece that goes on about how US leadership in the auto industry gave the US critical advantages in a land war. This is from his post about the tank war: “It is one thing to say that the enormous power of America made its eventual strategic victory inevitable….Converting America’s astonishing latent power into fighting potential required bureaucratic and industrial organization, but it also required the men on the ground – from the grunts and NCOs, to the field grade officers, all the way up to Ike – to perfect the synergistic application of all that wonderful equipment. And this, as we shall see, was easier said than done.”
https://bigserge.substack.com/p/the-eagle-has-landed-america-meets
That is not to deny that the Russians absolutely beat the Nazis and paid a huge price too, but that the US would have eventually been able to defeat Germany had it had to do so.
Certainly Germany was (theoretically) way ahead of the US
in terms of technology, such as the Panzer tank, V1/v2 missiles, jets,
and even night vision. OTOH, Britain (not the US) invented radar.
Germany lost Russia through ‘General Winter’, and the willingness
of Stalin to sacrifice millions of troops. Also logistics…. Germany
expected a quick victory against ‘inferior’ troops and technology
in Russia, so, for example, they didn’t issue winter uniforms.
The vaunted Panzer was a technological miracle, but broke down
often due to the complexity of its design.
German A-bomb technology was almost ready, but Norway’s
willingness to kill its own citizens by sinking the ferry carrying
the essential ‘heavy water’ was one of the great tragedies of the
war…. and also a major turning point.
Stereotypes galore. For example, mythical panzers were not special in any way, shape, or form (just like today).
A competitive manufacturing sector accelerates economic growth through increased exports. The US has had about 50 years of consecutive trade deficits and the rate of real GDP growth has reduced by about half during that same period.
Manufacturing is also needed in order to pay for imports. Currently the US uses USD, which the country’s trading partners use to buy assets like debt instruments, US companies and real estate. The US would be much better off selling manufactured goods ans tradeable services than selling off assets.
Yes, I think our leaders seriously underestimate what would actually be required to resurrect America’s industrial base, and the level of government policy and direct involvement required is not going to be allowed short of some sort of national emergency which empowers government.
I’m slowly coming to the conclusion that America’s industrial prowess peaked as a result of WW2 industrial policy and national necessity and it’s been running on waning inertia since then. That’s not to say that progress hasn’t been made,but the whole mindset that was part of that world is gone. (I would clumsily use the word patriotism as a means to say that not all business decisions were based solely on maximizing profit, but ending up in a nation where it’s impossible to make critical weapons systems without relying on foreign input was pretty much a no go even when I was in the USN thirty years ago.)
I think that additional factors are in play. Culturally the idealistic peace and love of Woodstock quickly morphed into the violent and hedonistic nihilism of Altamont by the dawn of the 1970’s.
Self-indulgent greed and competitive consumption led to looting and rent extraction as a business model. The civil rights and antiwar movements ginned-up pre-existing caste hatreds. Plus, as mentioned above mines, refineries, and factories make toxic neighbors impinging upon one’s quality of life.
The increase in global population simultaneously made labor arbitrage inevitable. The world population went from 2.4 billion in 1950 to 4 billon in 1975 to 6 billion in 1998 to 8 billion in 2022 — and 8.25 billion today. Meanwhile automation further reduced demand for labor.
The under-supply of party-houses in the Hamptons doesn’t line-up with the over-supply of labor. Americans would have to set aside their deeply ingrained caste hatreds to have an industrial renaissance that promotes a decent quality of life for their neighbors. Plan instead for an escalating cycle of resistance and repression.
To revive manufacturing proper in a rapid pace would take something like Stalin did during the 30s. Not something any American wants to go through, I’m sure, and, furthermore, that political economy would be utterly impossible in the US. Who believes in the American Dream anymore? Without some strong belief to endure such suffering, why would anyone bother? Nowadays the country simply feels like it’s rotting to the core.
LOL. Stalin certainly did revive industrial policy in Russia, but he did it in a very
flawed way. In order for no one region to dominate industry, he put factories
as far away as possible from each other, thus creating a lot of inefficiency.
Also, since the workers got paid regardless of the quality and quantity of their
output, it was a highly inefficient system. The same went for agriculture. For example, a tomato farm was paid
to harvest the fruit, put it on trucks, and drive the produce to the end of the zone
where they were responsible for maintaining the road. And there the trucks sat,
the farm having legally fulfilled its mandate under the latest five year plan.
Also, in order to pacify workers, Stalin made vodka and cigarettes dirt cheap,
resulting in a lot of early mortality, but also ensuring that the farm or factory workers
produced their goods in a heavily drunken state. Rotting to the core? You have no
idea what that phrase means with regards to America!
How on earth did they make it to Berlin in 1945?
You can dislike and disagree with Stalinist collectivization and mass industrialization policy, obviously. I don’t think many people see it as a nice time. But the Russian Empire was mostly agricultural and weak (see: the results of WW1), and the USSR won WW2. You can hardly dispute that it worked. To do so is historical falsification and bad faith argumentation. As to whether it was as efficient as it could have been, probably not? This was the first time anyone had tried to do something like that and they didn’t exactly have the most lenient conditions to do it. If you’re going to criticize Soviet policy, do it properly.
Extreme efficieny becomes inefficient in the end. Consider if the soviets had concentrated industry in one or two regions. Come the war that would have had disastrous consequences.
Just as Just in Time supply chains are incredibly efficent right up until the moment something goes wrong and they have no slack to compensate.
Stalin and the Soviet leadership put those factories in the hinterlands because they had anticipated the German attack since the early 1930s. These inefficient factories and farms are the reason that the Soviets were able to fight back against the Germans after suffering devastating losses in men, materials, and landmass in the first 6 weeks of the German blitzkrieg.
In the United States, a company which does complex and necessary work at a reasonable profit cannot survive over the long run because it will be destroyed by big money that demands obscene profits. Recent example of roofing company in Minnesota: “BlackRock Shuts Down Minnesota Rusco After 70 Years — Overnight!” link: https://www.youtube.com/watch?v=dg4vc5AwqP0
You cannot resurrect a healthy economy (ie not just manufacturing) without a draconian tax policy that would wreck BlackRock and similar firms. The kinds of people who run these companies must be destroyed, and this cannot be done without a civil war. That kind of civil war is still many years away, though it is coming, hurried along by the predators.
Heavy industry is dirty. Older industrial manufacturing plants are dirtier. Do you remember acid rain? The easiest and the way to make the most profit was to off-shore the dirt and with the bonus of cheaper labor overseas. Check out the latest news from Hunter’s Point, the former naval shipyard in San Francisco. Head out and take a tour for a dose of plutonium-239. Steel plants, glass plants, nuke plants, rending plants, etc. all dirty and messy.
Yup! One of the reasons we de-industrialized is that we did not like being polluted.
The obesity epidemic is probably caused by industrial pollutants; the most fascinating fact about American obesity is that West of Appalachia, everyone living in the mountains is slim.
You left out the impact of Slave Labor Programs like H1-B and OPT.
These have pushed down the incomes of tech workers to around half of what they were in 2000.
So, the most talented go into Finance or Law School.
Just to clarify on, “…They did concede that Germany and Japan had a perverse advantage, in that rebuilding after World War II meant they had new infrastructure, while the Big Three had huge investments in their installed base that they were reluctant to abandon or make less relevant by investing in entirely new (as in smaller) platforms….” Along with, “… in the 1970s, that US steel mills were old and not competitive…”
Japan and Germany didn’t have a perverse advantage in my opinion, they just were forced to make the investments because of the destruction of WWII. The problem the US had and still has is that once the big investments are made it’s all about sustaining and maximizing the rent extractions. Germany and Japan had all sorts of other infrastructure issues to repair and rebuild. The US could have been a century ahead of them if we had just continued to invest and replace our capital stock as technology advanced. Instead, we chose to milk it to death in order to maximize extractable rents. And when those factories were really worthless, we disposed of them and the workers.
….Erm, does the name “Jack Welsh” mean anything to you? Shareholder value
over reinvestment in factories, research, etc? Greed conquers all.
The US funded a lot of the German reconstruction via the Marshall Plan.
That was West Germany (the article should actually use that name too). East Germany had to pay reparations to the Soviet Union instead. That were industry facilities, steel from ~12k km train tracks and manufactured products. The payment of reparations ended after the death of Stalin and the uprising of 1953.
The US was losing to German car makers way before the reintegration of Germany, as in the 1970s.
Some John Robb speculation (see his Oct. 31, 2025 report on his Substack) on AIs and possible future manufacturing growth.
He argues that the incremental arrival of social AIs (as agents and companions) that have potentially solved problems like hallucination will become more and more integrated into our economy as virtual workers, co-bots and companions.
Then he speculates that AIs could begin to incorporate as individuals and groups and, once incorporated, become corporate persons that can own property, enter into contract, and sue/be sued as well as gain free speech rights.
If such a dynamic were to occur, hundreds of millions, and possibly billions, of new economic participants would enter the economy as consumers and workers.
Corporate personhood would then allow AIs to earn and spend money, making them full participants in the economy.
John Robb, not for the first time, should put the crack pipe down.
The X link is not to a Steve Keen own produced video but an outsourced general introduction that covers the basics of transitioning to a post-industial economy and standard model of de-industrialisation.
It certainly is simplistic, makes some highly questionable generalisations, and I’m not sure why he would choose to recommend it. Very curious.
His own Youtubes are badged differently to the one linked, are more analytic, usually with talking heads, and real supporting data.
However, he has definitely critiqued the mainstream view that deindustrialisation is a natural stage of economic growth and just to be accepted.
He is in favour of an industrial policy, is against further de-industrialisation. and is in favour of innovation driven through linked production, with acccompanying per capita gains.
(Though he is very sarcastic about the 47 regime’s approach).
He definitely takes the view that health across the whole economy actually does require a productive sector, and has endorsed the main benefits as outlined in XXYY’s post above in his own Substack.
The YouTube channel that video comes from, Financial History Lessons, is new in the last three weeks, churns out a video like this pretty much every day, has extremely small audience (half have fewer than 100 views and only two over 1000), and doesn’t identify its creators. So I agree it is curious Keen would boost that video. Tbh I got a bit of an AI vibe from the video (script, images, voice) and from the channel.
I never said it was a Steve Keen produced video. I take umbrage at being straw manned
He endorsed it by tweeting it. And it is so simplistic as to be lame.
I am sure you’ll have encountered the continuing disputes within the MMT grouping about whether imports and exports are positive or negative, with Bill Mitchell and Steve Keen lined up on opposite sides of that debate. I don’t think either side has made an entirely, (or even particularly) convincing case, and they are not even presenting their arguments with the same basic assumptions, so I guess it will run and run.
Part of Steve Keen’s case for exports being a good thing correspond very closely with his arguments on whether the phenomenon of deindustrialisation should be accepted or resisted – moreorless those XXYY outlines.
Yet, oddly, these are not the same arguments or analysis referenced in that simplistic and dodgy Youtube video – which I wouldn’t ever have used with any Higher social or economic history/ geography class of mine, let alone linked – except as a basis for a critique. As I say… very curious…
This is more bad faith argumentation, by shifting grounds of the argument. This post was about manufacturing, and not about imports and exports per se. Japan has offshored a lot of manufacturing capacity, for instance.
Then we differ on relevance. I think the links between core MMT propositions / debates and the attitudes of its advocates on de-industrialisation are far from inconsequential or diversionary.
If its proponents are to present a believable analysis then MMT has to be coherent. To gain wider credibility and maybe even mainstream acceptance then it has to both encompass de-industrialisation and settle what appear to be internal inconsistencies which includes trade.
I am very much in the disbeliever camp when it comes to all economic theory, but had a forlorn hope that MMT might be more convincing.
So I find the way the key heterodox economists like Steve Keen put forward their differing positions, in this case evidently unconvincingly, as relevant to that discussion.
And IMO the recent practices and wider impacts of offshoring, as referenced, most definitely have to be included as it shifts the potential for political attempts to re-establish the productive sector in all post industrial nations.
This is off topic and you are digging in only to try to not lose an argument when you have ALREADY lost. We see this again and again commenters, resporting to bad faith argumentaion because they have to win.
The post is about the viability of restoring manufacturing, which is a non-starter due to the loss of skills, including, for starters, basic managerial competence. This has NOTHING to do with MMT. You dragged that in to try not to lose the argument over defending Steve Keen despite his touting a particarly simplistic and significantly inaccurate video.
Money is as irrelevant here as it is to the US’s and EU’s inability to magic weapons out of thin air to fight Ukraine. Different faces of the same problem.
On crossed wires…. an explanation…
My comments were clear that the Youtube referenced was highly questionable.
viz:-
“simplistic and dodgy Youtube video – which I wouldn’t ever have used with any Higher social or economic history/ geography class of mine”
I did muse on why Steve Keen had cited such a poor source..
Monty Python did a sketch titled “Summarise Proust” where contestants tried to distil “a la recherche du temps perdu…”. There could never have been a winner…
In an attempt to provide a better explanation, here is my equivalent “Summarise Keen” as this seems to be where wires have got crossed.
Keen is very much against financial capitalism and wants to see a return to industrial capitalism.
He is against tariffs as a means of achieving that and has suggested they will fail.
With this in mind he thinks national industrial strategies are essential to sustain, if not expand the productive sector, and the benefits of the productive economy (such as the multiplier effect, export revenues in trade balances, economies of scale, national skills retention, technological development, and especially GDP growth via innovation), can substitute for continuing financialisation.
Yet, I have not noticed, but may have missed, a specific commitment from him to re-industrialise traditional areas which have been in decline, some terminally so.
Keen also considers that precisely the same suite of benefits apply to exports of manufactures under MMT, so such exports are therefore a benefit – contrary to Mosler and Mitchell’s views. This lacuna within MMT is not about ‘money’ as such; but an unresolved debate as to whether imports and/or exports are negative or positive within national economies. This provides a large target for MMT critics, just as the equivalent policies for re-industrialisation do for those advocates. Successfully locating new footloose industry is fraught.
My observation is that there is a close link between the de-industrialisation debate and equivalent discussions on exports within MMT – and intended no more and no less than that.
And because de-industrialisation has long been predicated on much expanded international trade, especially involving outsourcing and offshoring, then there is a material link.
I see this association as interesting but not contentious, evidently mistakenly.
As well as studying locational analysis at Uni, I have lived in three traditional industrial areas, both during and post decline, including the Miners’ Strike, which was devastating, and actually do not endorse Steve Keen’s overall thinking – though regional and national industrial strategies are desirable.
Looking at South Korea and China, centralised direction (with added protectionism) offered opportunities for co-ordination that a belief in a self regulating market does not. I suppose even a tariff strategy might have pretensions as an industrial policy.
As a relatively recent follower of this blog I may well not have appreciated how closely comments are expected to match the post, or endorse its themes, without divergence.
Again and again on the multiple blogs I follow I have found the owner has their own Overton window.
TBH I had not even contemplated that commenting on this blog BTL was a zero sum game, at least, up to now.
And I have not regarded my observations on NC as an attempt to ‘win’ any argument, in any conventional adversarial sense.
I usually intend my observations to be discursive, such as on this particular post, opening up debate, but .. hey-ho. E for Effort..
I hope this clarifies and untangles. Hwyl fawr
For the present moment diesel fuel remains available although the price fluctuates. I do not believe that will continue to be true in the not so distant future … perhaps within my own lifetime. Localism makes a nice slogan but it will become a practical necessity as the availability of diesel diminishes. Manufacturing is the basis of most of the material goods our Civilization is built upon. Whether the Empire can regain manufacturing prowess in the world will prove of less importance than whether manufacturing can be revived or kept alive in the ruins of the Empire. Jobs, profits, worship of the rudiments of capitalism may prove of present concern. But we must adapt or become a footnote in some future history of failures like those sketched in Diamond’s “Guns, Germs, and Steel”. [Yes, though a pessimist at heart, I do believe Humankind will survive the coming crucible … though finding a new form and a new covenant with the other life on this world on coming out.]
The automated factories in China and Japan are truly wonders, but they rely on energy the future does not promise. Factories of the future will need more human physical power to run them and better automation designs to make use of that power [fifty bicyclists running an electric generator is not what I envision]. Early factories used clever but simple ways to improve production, things like standardized parts, and the specializations of their workers. They came up with other ways to make the same things or to make things that served the same purpose but did so better in some way. Consider building nails and their transformation from specialty products of a blacksmith’s forging to a modification of wire. I believe the invention of screws followed. Instead of rebuilding the manufacturing base of the Empire, something I see no serious intention to accomplish, the Empire should make efforts to restore the old sense of Yankee ingenuity that once served the nascent u.s. in its rise. AND it must be emphasized that the ingenuity is not Yankee ingenuity but HUMAN ingenuity. Before Empire, the u.s. was an Empire that allowed, even encouraged [or at least tolerated and provided fertile ground to grow from ingenuity] and enabled significant creativity and ingenuity from its people. Freedom is the basis of human adaptivity and invention. Preserving Freedom is not optional if we do not desire to join other relics of the grand project of evolution. We can and must evolve to the next stage.
One reason manufacturers in the US have difficulty competing with manufacturing from other countries is they have to help to carry the massive cost of the US military and security sector. This is both direct taxes and indirect costs.
Bright young people interested in making things can either choose a precarious career working for a company making things people want and competing with other companies around the world, or they can choose a cushy career working for Lockheed building F35s paid for by taxpayers.
and health care costs!
Ah. I think it’s fair to say that Boeing (for example) became the poster corporation
for how not to build an airplane due to it’s ‘corner cutting’ on the 737 MAX.
Typical business school thinking. However Boeing/McDonald Douglas has
made a ton of money off its military programs, and will continue to do so.
Jobs is the stupidest reason for wanting manufacturing. The idiots who have run the west for the last half century despised manufacturing and have pursued policies that have let their economies to be industrially hollowed out and therefore increasingly technologically less capable and innovative compared to their non western rivals (principally China), since technological innovation and industry have always worked together. But hey, the dominant ideology was always about suppressing workers bargaining power while profiting off rent seeking ownership of IP, and here we are….
I think the jobs part of this is overstated. Yes dark factories are a thing, but they are only appropriate for certain segments of manufacturing, where the cost of investment is justified. For all kinds of industrial processes (shorter runs, greater variation), the ROI isn’t there, machines still can’t do certain parts of the process, or you still need humans (often highly skilled) to adjust the process. The numbers are a lot lower than they were 60 years ago, but humans are still needed.
Secondly, there are a lot of jobs (many of them good jobs, often seen as white collar and even service jobs) that will disappear without an industrial base. R&D (as the UK has demonstrated) and design jobs tend to follow factories, as there are significant proximity advantages, and also you need knowledge of how things are made in order to be any good in those roles. There are also jobs in automation and manufacturing/maintaining the factories/machines, which also follow production.
I do not think the US can bring back manufacturing, but for different reasons than the ones outlined here. Manufacturing requires high levels of investment in order to remain competitive, and the US (much like Britain before it) is simply not willing to do that any more. Manufacturing is risky, and less ‘profitable’ than things like finance, real estate and the general US scam economy. We’re seeing the US (again following the UK’s lead) lose out in areas which it had research advantages, because US investors (including the much vaunted VC world) are simply not willing to provide the capital needed for these technologies to become viable, and existing companies would prefer to use their money for things like buybacks.
If the US really wants to bring back manufacturing then it needs to discipline the capitalist class – and this seems highly unlikely.
Perhaps AI will make humans irrelevant in manufacturing, but in that case humans will soon become irrelevant for everything….(?).
Barring that, you’re spot on, there are many jobs, and highly paid jobs still in manufacturing, just many of them are not on the factory floor like it used to be, though plenty of highly trained technicians and service staff are needed to oversee and tend those machines.
Manufacturing’s importance lies in the innovative basis it provides a modern economy, and that economy’s ability to adapt. The neoliberal model is epitomised by present day UK, with flat or falling productivity and wages, exploding inequality and where everything is built around blowing asset bubbles that benefit an ever shrinking proportion of the population and foments financial instability this brings to the lives of individuals, communities and the state itself; this is Thatcher’s true legacy.
….Or at least overhaul the lesson learned from our leading Business schools:
“Greed is Good”.
Your assumption is incorrect. The dark factories videos stress the ease of switching between model variants in a highly automated factory and how many some run now.
A key limitation on highly automated factories is inflexibility in cyclical demand. Once you borrow to invest in a factory your repayments are a fixed cost into the future. Labour costs are more inherently flexible – not just firing workers, but overtime, short time, etc. This is a key reason why the garment industry has been very slow to adapt automation. Experiments in highly automated factories (Fruit of the Loom in Ireland in the 1980’s, for example), generally failed for this reason. The worst businesses to be in are generally those with high initial capital investment costs relative to labour costs but wide fluctuations in demand – the airline industry being a case in point (both airlines and aircraft manufacturers).
Labor costs have never been a significant part of auto production costs for quite a while. one of the pet examples. They are only 3% to 5% of wholesale cost. They will be even lower for EVs due to the much smaller number of parts.
Came a cross a short video a while ago called ‘American vlogger realizes America no longer has a manufacturing base’ so bookmarked it as being illuminating. All the talk is about big industries and big jobs but here is how things look like in the weeds-
https://www.bitchute.com/video/0GG8RzZoAyiQ (2:51 mins)
Special guest appearance by Tim Cook dropping some truth bombs.
It’s my understanding that both Japan and Germany are still in the tool and die business which is so fundamental to manufacturing (though I imagine in Germany’s case that’s dying fast) So the USA shouldn’t undermine and piss off those countries if it doesn’t want to fall into complete dependence on China.
Excellent share. People don’t realize the importance of tool and die in the manufacturing process. A very close friend was a tool and die maker. He became a salesman for specialized grinding disks (used to shape the tools and dies). None of the companies were in the US. None. Another example is the Hyundai plant that was being built in Georgia and radied by ICE. All of the workers were South Korean. 475 of them. Many of the workers were engineers and equipment installers with specialized skills not available in the US. Hyundai had to bring their workers over to install the equipment.
Yves, there is something wrong with one of the ranking systems that you cite: https://www.timeshighereducation.com/world-university-rankings/latest/world-ranking
In the case of India, not a single one of the world renowned top 5 IITs (Indian Institute of Technology) in Bombay, Delhi, Chennai, Kanpur and Kharagpur is listed. These are the ones that produced literally hundreds of CEOs, VCs, tech execs and academics, who are now in the US. Instead it lists second, third tier and fourth tier Institutes and Universities, some of which are probably worse than any institution of higher learning in the US. It boggles ones mind that India has more Unis in that list than China! Or, am I missing something in the rankings on their website?
Also, while I agree with each and every one of your points regarding the state of higher ed in the US, may I say, that as a graduate of institutions from the first world, the second world (when that existed!), and the third world, that apart from the China challenge, I would say the state of US higher ed is unassailable for some decades…..primarily, because it is so far ahead.
Two different organizations came up with the same conclusions. I suggest you look at their methods or take it up with them.
I know IIT graduates who have gotten top jobs in the US. The ones I know did not make use of technical/engineering/math training in their early jobs in the US. It seems to be because of the credentialing (as in how hard it is to get admitted to IIT) and not the training.
I have also had 2 IIT grads in top US positions tell me cheating is so rampant at IIT that you have to cheat or you will lose out grade-wise.
The whole reason that list exists is to put Oxford on top.
Pray tell, how do you explain it being #4 on the first list, which looks to be more science/tech oriented and puts MIT on top and Harvard below Oxford?
It was the DEI hires that did in the USA’s manufacturing. I was ideally trained at several of America’s top universities and had considerable manufacturing experience, but when this DEI thing kicked in, I left the USA permanently. Now live in Australia, which has a bit of manufacturing for the mining industry, and also consult to companies in Asia.
Australia will ultimately lose manufacturing and design engineering also, not least because the universities here have a serious DEI and ageism problem. When I studied engineering nearly all the professors were semi-retired after having had long experience in actual working industry.
Normally I am more polite about this sort of thing, but this is complete and utter rubbish.
First, as the post indicated, America’s industrial decline was baked in the 1970s and already widely discussed in the US business press. When I went to HBS in 1979, only 9% of the class was female. Blacks and Hispanics were seriously under-represented. Being gay would have gotten you nowhere in admissions terms. So the causality is not there.
Second, you do not go to “top universities” to learn about manufacturing. My father, who was the oldest member in his HBS class in 1965 and had been in paper mill management roles his entire career, was VERY clear that you did not go to HBS to learn manufacturing, that they had nothing to offer on that topic. America business education became even more finance oriented in the 1980s.
Similarly, taking engineering or math courses does not teach you about manufacturing, although those skills are important in showing seriousness about a career path and are often key to getting hired in an entry-level role. Most of the skill acquisition takes place on the job. This is true in tons of other fields, notably finance.
Third, private equity, which has been the huge accelarant of all of the bad trends that undermined America’s manufacturing prowess, is utterly white male dominated, as is the asset management business generally. Ditto Fortune 500 CEOs, but not to as extreme a degree as asset management.
Forth, you have to be joking to try to sell the idea that women and out groups wnat to live in the boonies to manage manufaturing operations, which is what you need to do to move up career-wise as a production jockey. They would be fish serioiusly out of water in these often small and insular communities. We moved many times when I was a kid, so I know the type. The other variant is oil/mining boom towns, which tend to be socially hostile to out groups.
In other words, this comes off as whining by someone who found out he was not as good as he thought he was in the competitive corporate US job market.
It’s my understanding that both Japan and Germany are still in the tool and die business which is so fundamental to manufacturing (though I imagine in Germany’s case that’s going fast) So the USA shouldn’t undermine and piss off those countries if it doesn’t want to fall into complete dependence on China.
It is difficult to see that the financial elites running the USA will give up the make it in their sleep financial flows from the FIRE sector which has been parasitic upon its diminishing industrial output. Oh well, the MIC is still operating on its cost+ basis where everything is hugely priced as paid for out of a never ending flow of public money. Manufactures of luxury priced war toys where many are no longer fit for purpose (thank goodness) and look like they’ve been put in the shade by the technical advances of Russia and China.
While the US Empire has major control over energy supplies they are very much still around on world terms in controlling the life blood of all economic activity. No exergy = no economy. But even that seems to be slipping away so Venezuela is just a latest on the front page target again while looking at you Greenland and Canada. Have the evils of Bibi and Co taken Iran off the table or will that be his last gasp? The clown show in Washington is just the facade to distract from reality.
It looks like China is not giving up on fiat money realities as they have a central bank insider taking on the neoclassical BS https://www.chinabankingnews.com/p/chinese-economists-recruit-ray-dalio of all those, hopefully soon to be unemployable, US trained local economists. Anyone who knows even a little bit, surely can’t fail to be impressed by the wonders of China’s economic explosion.
As always, the problem of distribution of the real wealth remains. I’m not betting on the USA to get it fixed.
I think a large part of the confusion over this issue is lack of clarity on what people mean by deindustrialization. Is it to make the US the world’s workshop again, as it was during a significant part of the 20th Century? Or is it more a matter of import substitution and creating security through autarky. The first option is impossible if the US insists on a strong dollar and financialisation – you can’t have both. If it is about import replacement for security reasons then that is more achievable, especially through high tech manufacturing. But the latter requires a very strong industrial policy and mercantilism, which has its own issues. The US must also decide on its long term relationship with Mexico, as there has been a major shift in manufacturing to that country – much of it relocation from China. We are in fact in the midst of a very significant worldwide shift in manufacturing worldwide (hidden largely by the current Chinese export bubble), with the beneficiaries mostly mid sized nations such as Mexico, Vietnam and Indonesia.
The US has many advantages if it chooses to deindustrialise – apart from a vast amount of natural resources and excellent infrastructure (for manufacturing) it also has an almost unique ability to attract skilled immigrants at scale. Experiences from other countries indicates that it takes around 2 decades to build up a subset of mid-level technical workers – the foundation of any manufacturing economy. Shutting down a lot of universities and replacing them with proper vocational courses would do wonders (this includes STEM courses, which are very over rated when it comes to producing workers who can actually produce things).
The argument over industrial policy to some degree is moot. Every country has an industrial policy, the difference is between whether it’s implicit or explicit. Choices about currency, how open your capital account is, immigration policy, education decisions, banking regulations – these are all industrial policies. Countries which make the right ones tend to have the right balance of ambition, social cohesion, vision and flexibility. This is the difference between, say, a South Korea and an Argentina.
On the point of employment – few countries can successfully create full employment through manufacturing – Germany being a possible exception. Almost all manufacturing strongholds are based on a minority of truly productive workers making things – it is internal income distribution and a strong domestic economy (or, in the case of Japan, a deliberately labour intensive and inefficient service sector), that creates mass jobs. An industrial policy should be based on creating wealth and security, not employment.
Great comment! I sure don’t see much to disagree with here. I think America’s immediate goal should be to do a close examination of key sectors where a bit of autarky would be highly desirable such as defense, energy, food production, healthcare (drugs).
But as you allude to with the SK vs. Argentina (and how actual industrial policy is implemented), the systemic problems in America goes beyond that – America currently resembles a SK that got corrupt at the top/middle/bottom and has been on a bit of a downward spiral to Argentina territory. Even if American elites are able to address some of what is now perceived as critical missing sectors (rare earths) that had Xi owning Trump at the recent trade talks with an Operation Warp Speed, they don’t want anything else to get fixed. They don’t want to question how America got into this situation and implement systemic change.
Today i found a recent article about manufacturing in the US which I found interesting. It contains assertions and data which might be interpreted in opposite directions. It talks about the interconnection between products and services and how manufacturing in the US is heavily influenced by services which here is talked as a very positive outcome. I believe this is relevant to the issue of re-industrialization.
The Linkage between Services and Manufacturing in the US economy
If for instance we talk about manufacturing cars and vehicles, so it seems to me that in effect the emphasis is now on services. Driverless cars is being pushed hard by some companies in the US. Thought to be the future of the industry by some. For me the question is then whether this service-oriented push is the correct path for manufacturing or much of a fantasy. This might determine whether manufacturing in the US will hold as economically important or if it will decline.
The manner in which ‘services’ and ‘manufacturing’ have become so intertwined has made many traditional measures of development meaningless. It is very hard to quantify the value of economic networks when its so hard to know where hardware ends and software begins. Its not just the product itself, its the knowledge based that produces it and uses it. In many respects this is, I think, reinforcing advanced core manufacturing regions that by accident or design have the scale and structure to take full advantage.
This is one reason I think why Germany and Japan have struggled recently and may be entering long term relative decline. Their focus on hardware over software has become a limitation on what their traditional companies can achieve.
In the factory of the future, there will be a man and a dog. The man’s job is to ensure the machines are fed, and the dog’s job is to bite the man if he touches a machine.
-joke told by Kevin Walmsey
Seriously, for the US to have an industrial policy, it would have to have a unified idea of what the goals are; however, given the DC graft, there are rafts of policies pushed by monied interests – all contradictory – and ever-changing, primarily focused on short-term profits – rent seeking and vulture cannibalization. So I am going to blame campaign finance for leading to a lack of leadership.
Failing to plan is planning to fail.
I hesitate to counter the prevailing doom and gloom, but it is plain to me that products and services are continuing to improve globally. The world economy is not going to get less integrated. Best practices spread rapidly in the modern world, and all the friction and stupidity of political and plutocratic idiots is just slowing the dominant trend of a world that is getting smarter about making things and using them.
The notion that people need jobs to live is false. Keynes was talking about a 30 hour work week a century ago. A sufficiently productive world economy can support most people on a GBI. These people will live almost as well as today’s unemployed rich kids. AI is not going to stop improving, life spans will lengthen, and clean energy sources will become the norm. The only serious danger to civilization is nuclear war, the ultimate human stupidity.
it is plain to me that products and services are continuing to improve globally.
Go to a thrift store and buy a 20 y.o. t shirt for a dollar, then go to the mart and spend 35 dollars for a modern t shirt. Compare the two, and prove yourself wrong.
All this talk about industrial policy or a lack of it is pointless if something isn’t done about monopoly capitalism. Competition is what drives innovations in product qualilty and efficiency. But then again life is so much easier for investors when each industry category is reduced to a few major players that are allowed to dominate markets, thanks to enhanced access to capital.
“in fact, industrial kingpin China was reporting 21.3% reported youth unemployment when it suspend publishing the data in 2023 to review the methodology.”
As an aside, with so much youth unemployment, why is the Chinese gvt. so concerned with falling birth rates? I’d like to see an explanation for what seems to be a disconnect between demographic reality and a continuing drive to achieve economic domination.
Those who are interested in this topic might appreciate this documentary about the rise and fall of Bethlehem Steel:
“Bethlehem Steel, The People Who Built America”
https://www.youtube.com/watch?v=2QTGiHOZZFU
It’s about an hour if memory serves, with an additional 20 minutes of historical Bethlehem Steel corporate films following.
All right, I’ve got another reason for the decline of American manufacturing: the Manhattan Project.
The project hired over 1 million people at various points. Most of them were laborers. But some of those people were trained to become skilled technicians, engineers and managers. That trained cohort was directly responsible for American postwar prosperity. The post-WW2 economy through the 1980s would not have happened without the Manhattan Project.
For example, in a recording studio, there was always a guy who could field-strip a tape recorder or mixing console at 3am and make it better then before. Where did he learn? The Manhattan Project.
For example, logistics. Some guy spends three years moving uranium from here to there. Nobody will tell him what he is moving, and there are armed guards involved at every step. After the war, Ford hires him to move cars from here to there- a relatively simple task.
How big was this cohort of on-the-job trainees? Starting with a million people, you might have 50,000 managers and technicians. Another large-scale WW2 technical training scheme was the Signal Corps. Thousands of kids tested well for STEM and got shunted into the Signal Corps. My dad was chemical engineer before the war, was drafted into the Navy, and became a battleship’s radioman.
By the 1970s, this cohort was fading out of the workforce. Very important note: Uncle Sam paid to train these people. We stopped investing in free education.