The Sunday New York Times headline (Feb.13,2011) reads, “When Factories Vanish, So Can Innovators”. With the closing of the last spoon
and fork (“metal flatware”) factory, in Sherrill, N.Y., the US lost an industry that traces its roots to Paul Revere. Just as Sherrill Manufacturing succumbed to less expensive Chinese imports, so have the sardine cannery, stainless steel rebar, vending machine, incandescent light bulb, cellphone, and laptop computer industries.
Less noticeably, says The Times, the imported portion of components that go into American-made products has risen from 17% to 25% over the past 13 years. For example, the wings of many Boeing jets are now made in Japan. With the inclusion of these imported components, manufacturing’s share of the GDP is actually 10.5%, not the government-reported 11.2%. (This, of course, is down sharply from 14.2% a decade ago and 30% in 1950). Moody’s chief economist states: “I think there is a growing recognition that a diminished manufacturing sector will undermine our economy”.
The US has long appreciated that low-wage workers abroad would cut consumer costs on a wide array of manufactured products. But the theory was that US producers would be the world’s best innovators, developing (and at least initially, producing) sophisticated new products here at home. Somehow, though, Apple’s spectacularly designed iPad and iPhone are being made in Asia, not here. Likewise, Maglev (high-speed rail) was invented here, but the technology and production has transferred to Japan.
Many experts believe that the engineers and factory workers in Asia may become the next innovators. One economist is quoted as saying: “The big debate today is whether we can continue to be competitive in R&D when we are not making the stuff that we innovate. I think not”.
Discussion questions:
1. Do we need to worry that “young people stop thinking about making things” in the US?
2.If consumers have benefited from unrestricted lower-priced imports, what is the negative of the equation?
3. Is innovation falling in the US? Rising in Asia?