A prominent economic commentator tells why manufacturing, not the information economy, is the key to the future prosperity of the U.S.
From the book In Praise of Hard Industries by Eamonn Fingleton. Reprinted by permission of Houghton Mifflin Co. All rights reserved. You can hardly pick up a newspaper these days without reading yet another glowing account of the golden prospects supposedly in store for the United States in the so-called postindustrial era. If media comment is any guide, almost everyone these days is convinced that new information-based businesses and other postindustrial activities have superseded manufacturing as the font of prosperity. This euphoric cast on America's so-called New Economy has been subjected to remarkably little reality checking. But the truth is that America's steady retreat from manufacturing cries out for close scrutiny. For there are major holes in the case for postindustrialism. Not only do those who advocate postindustrialism overestimate the prospects for postindustrial services, but they greatly underestimate the prospects for manufacturing. A major problem with the argument of postindustrialists is that they do not understand how sophisticated modern manufacturing truly is. The economic merits of postindustrial activities must be weighed against those of what might be called hard industries. This term is intended to denote capital-intensive, technically sophisticated forms of manufacturing. This distinction needs to be emphasized because postindustrialists implicitly define manufacturing as merely labor-intensive work of the assembly type. In so doing, they set up a straw man, for there is no question that, in an increasingly integrated world economy, many kinds of consumer products can no longer be assembled economically in high-wage nations. What the postindustrialists overlook, however, is that assembly is only the final, and generally by far the least sophisticated, step in the making of modern consumer goods. Earlier steps such as the making of components and materials are typically highly sophisticated. Advanced nations clearly need a judicious balance of manufacturing and services. Apart from anything else, many postindustrial services are necessary to support and enhance a nation's manufacturing base. The point, however, is that postindustrialism should not be embraced blindly just because it is fashionable. Nor should nations lightly allow their manufacturing prowess to drain away. Postindustrialism entails many hidden drawbacks. Of these the most important are:
- An unbalanced mix of jobs.
- Slow income growth.
- Poor export prospects.
- Boost the nation's savings.
- Channel a larger portion of those savings into industrial investment, particularly productivity-enhancing production engineering.
- Ensure that manufacturers earn a reasonable return on their investment.
- Upgrade workers' skills.
- Stem the leakage of world-beating production technologies abroad.