Virgin on Business: Pondering the Manufacturing Question
Who has the right answer? Well, maybe both sides do.
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There’s a fight going on. Then again, when isn’t there one at the intersection of business and politics over the past woes, present condition and future prospects for American manufacturing? On one street corner are those who contend there’s nothing wrong with American manufacturing that wouldn’t be cured by vigorous assertion of pro-U.S. policy against China, Mexico and whoever else has used currency manipulation, disparities in operating costs and trade barriers. Renegotiating or scuttling existing trade arrangements, the argument goes, would enable American manufacturers to reclaim domestic market share, boost sales abroad and increase employment in this country.
The camp on the other side of the street likes manufacturing, too, but it contends that trade hasn’t been the reason American manufacturing has shed tens of thousands of jobs during the past few decades. This argument lays the blame on automation — the robots and other tools that allow factories to produce more goods with fewer bodies. Even if production work comes back to the United States, more automation is the reason jobs won’t.
The two sides have been flinging studies and think pieces at one another to make their cases because there’s a lot at stake in who wins the debate. “Why trash trade agreements if they’re not really the problem?” “Why write off a valuable industry because of the wrong diagnosis of what ails it?”
The consequences of decisions driven by whichever argument prevails are huge not just for those workers and communities pinning their hopes on manufacturing’s resuscitation. Even in Washington, where aerospace has provided a vital buttress to the sector, manufacturing employment remains well below prerecession levels. Other industries stand to feel the consequences, planned or unintended, for good or ill, of the investment and policy decisions made about manufacturing.
The quantity of verbiage and paper being catapulted back and forth tends to make deciding who is right a tough proposition. Here’s something to consider that makes it an even tougher question: Maybe both sides are right.
The two quarreling camps tend to acknowledge that trade or automation might have played a small role in manufacturing’s decline, but only a small one. Reality may lie somewhere in the middle, and may have a lot of company there. Complacency, lack of investment, energy-price shocks, labor strife, China’s industrialization, financial abuse (in the form of debt-laden acquisitions and the slash-and-burn tactics employed to pay for them) and likely a few other factors conspired to set up American manufacturing for failure. Offshoring and automation were, if anything, the second-stage reactions, not the first-stage drivers.
But they happened, and they’ll keep happening. The pressure to cut costs will be relentless, and so will the pressure to develop technologies (robotics) and tactics (offshoring) that slice one big component of those costs — labor.
That scenario doesn’t sound very promising for those who have or might want jobs in manufacturing, unless you happen to land one in the design, production, operation, maintenance and repair of robots, drones/autonomous vehicles or whatever the next big thing of automation is. And some of those jobs can be done somewhere else that’s cheaper.
This, in turn, is why the debate isn’t of concern just to the endangered factory-floor worker or truck driver. The tech industry, for example, is a robust generator of jobs now, but how long does that last if much of the work can be done at much lower cost overseas? Or here, but by artificial intelligence (AI) systems?
If AI proves to have even a portion of the capabilities and powers current hype suggests, perhaps it can untangle the trade-vs.-automation snarl and come up with some ways of addressing the factors squeezing job creation. Today, it’s a manufacturing issue. Tomorrow, it’ll be in your occupation.
Monthly columnist BILL VIRGIN is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News.