Just came across this interesting article on manufacturing productivity in the Washington Monthly by Michael Mandel - Chief Economic Strategist of the Progressive Policy Institute. He’s got some other articles on that site that link to his blog - which has some back channel discussion as well: Innovation and Growth Blog. He opens by talking about how mainstream economics thinks that manufacturing is going through the massive productivity growth that drove agriculture out of it’s once leading role in employment. His take is that they’re not at all the same because farm production happens in the US - “with US water, on US land, etc.”, whereas manufacturing is easy to move overseas - as we’ve seen. However, this seems more to me that he’s missing that the US has a great competitive advantage globally due to our attractive geography and water resources - we have a very productive bread basket - even before you get to our modern farming practices. This is the real reason why the US still is able to do farm production - great non-human resources that can’t be moved. The human resources have been optimized virtually out of the system. After this, the article focuses on how something he calls “Import Part Bias”. I usually like to link to a source for such terms, but even “Import Bias” isn’t widely used - which makes me wonder if he’s just making up authoritative terms. The term also strikes me as a little hand-wavy and loaded, but the point is that he’s trying to separate the productivity gains due to importing cheaper goods, what he calls “Supply Chain Productivity”, and “Domestic Productivity” labor productivity gains. Right here - I don’t think this is even fair wording because “Supply Chain” applies to competing companies within the US as well, and seems to me an attempt to hide the real distinction he’s making between foreigners and “domestic” producers. The following argument he makes is that only the domestic productivity leads to higher living standards - whereas the imported goods only help companies outside the US. The latter statement is true as far as I’m sure that it does others good outside the US, but if we’re getting cheaper goods that leads to higher living standard by definition assuming that these same people are able to get new work doing something more productive - outside of manufacturing perhaps. The broader point here is that he’s alluding to is that we have structural unemployment in the US, and that these people don’t have anywhere to go to get these new jobs in order to buy these cheaper goods. I can certainly agree with this assessment, however we needs to read the research presented my previous article: Unemployment: Structure or Demand?. That shows that structural employment is overstated in the short-term as a reason for the recession, which makes complete sense because it’s not like manufacturing just left the US during the recent recession it’s been on a steady path there for the past 30 years, and we’ve had the boom times of the pre-2000 era. That said - I think that, in the long term, we definitely have a problem based on our education, government mal-incentives, and growing corporatism and regulatory capture via groups from businesses to labor unions. This still doesn’t mean that manufacturing isn’t going the way of agriculture though - to say so is to ignore the engineering and physics of the machines themselves. It’s quite apparent that, again, automation systems can be used to remove people from everything but the creative process. On the latter point, he looks at Apple vs. HP and concludes that both of them have a supply chain productivity strategy, but that Apple actually puts a ton of money in R&D. This is perhaps fair enough, but doesn’t this illustrate that things are going towards commodity quite quickly when hardware is being commoditized? This just happened in the fast-moving world of internet startups, and we see the results of how cloud-computing, open resources, etc. make it so there’s an overwhelming demand for people who are now in a new form of production: fully digital. Overall, I can certainly agree with Mandel that structural problems are a big part of the future of the economy, however the idea that manufacturing is a special case is to assert something that’s already been proven false.