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Made in the USA

The Rise and Retreat of American Manufacturing

The MIT Press

INTRODUCTION

In 1899 Ransom Olds began to assemble his Oldsmobiles, essentially buggies with an engine under the seat. Two years later he marketed his Curved Dash, America's first serially produced car. Two years after that, Cadillac Automobile Company began selling its vehicles, and in 1903 David D. Buick set up his motor company. In 1908 Oldsmobile, Buick, Cadillac, and 20 other car- and part-making firms came under the umbrella of General Motors, established by William Durant, Buick's general manager. The company kept growing and innovating, and by 1929 it had passed Ford in annual sales. It survived the Great Depression and prospered during World War II, when it was the largest maker not only of military trucks but also of engines, airplanes, tanks, and other armaments and ammunitions.

In 1953 President Eisenhower named Charles E. Wilson, the company's president, the US secretary of defense. When Wilson was asked during his confirmation hearings about any possible conflict of interest, he answered that he foresaw no problems "because for years I thought what was good for the country was good for General Motors and vice versa," a reply that became known as an iconic, but reversed in retelling, claim that "what's good for General Motors is good for the country." By 1962, when its share of the US car market peaked at 50.7%, GM was the world's largest manufacturer, with an apparently assured prosperous future. But that was before OPEC, and before Honda and Toyota began selling cars in the United States.

By 1996, when GM moved its headquarters into the glassy towers of Detroit's Renaissance Center, its share of the US car and light truck market was less than 33% as the company became infamous for poorly designed models built with too many defects. A decade later GM was a hopelessly failing corporation, and when it declared bankruptcy, on June 1, 2009, its US market share of light vehicles was just 19.6%, its share of cars just 16%. The bankruptcy eliminated not only the preposterous Hummer but also a long-running (since 1926) Pontiac brand and Saturn, set up in 1985 as "a different kind of car company" to challenge the Japanese designs. Even after the company's stock was refloated, in November 2010, the government kept a 34% stake. This trajectory, from the world's largest automaker to bankruptcy and bailout, embodies the rise and retreat of American manufacturing—with one big difference. Unlike GM, thousands of America's electronics, textile, shoe, furniture, car parts, or metalworking companies were not too big to fail, and simply disappeared during the past two generations.

But the outcomes are not foreordained, and the GM story also carries an intriguing message of rebound: in 2011, helped by a partial economic recovery, GM sold more than 2.5 million vehicles in the United States and a total of just over nine million worldwide, reclaiming its global primacy (while Toyota, beset by its own quality and delivery problems, slipped to fourth place, behind Renault-Nissan and Volkswagen). And Ford rode out the economic downturn without any government help: in 2008 it had only 14.2% of the US market, compared to its peak of 29.2% in 1961, while in 2011 the sales rebound (2.1 million vehicles sold) raised its share to 16.8%.

But this is no return to the days of American automotive dominance. Deindustrialization has been a nationwide phenomenon, and Detroit has been the epicenter: the view southwest from GM's gleaming towers reveals a stunning cityscape where abandoned houses and lots overgrown with weeds and wild trees vastly outnumber the remaining inhabited houses (see figure 1.1). No wonder: even as recently as 2000 the US auto industry employed 1.3 million workers, but by July 2009 the total had been nearly halved, to 624,000. Post-2000 employment in the entire manufacturing sector followed a similar trend.

After World War II, manufacturing jobs rose steadily, reaching a peak of nearly 19.5 million workers in the summer of 1979. By 1980, in the midst of a recession, the total was still 18.7 million. By the end of 1990 it was 7% lower, at 17.4 million; by the end of 2000 it had hardly changed, at 17.2 million; but a decade later it was just 11.5 million (BLS 2012). Of course, many economists have promised that all those who lost jobs in manufacturing would be absorbed by the endlessly capacious service sector. But there was no net job creation during the first decade of the twenty-first century. Rather, there was an overall job loss: in January 2001 the United States had 132.5 million nonfarm jobs, whereas in December 2010 the total was 129.8 million, a 2% drop during a decade when the country's population increased by 9.7%.

The last time similar events took place was during the Great Depression of the 1930s, and as in the 1930s the loss of manufacturing jobs (a total of 5.6 million lost between the end of 2000 and December 2010) was the principal reason for this failure even to maintain the overall employment level. At the same time, between 2001 and 2010 the aggregate US trade deficit (mostly resulting from imports of manufactures) was nearly $4.4 trillion, adding to trillions of dollars in budget deficits ($1.4 trillion in 2010 alone) and making the United States the greatest debtor nation in history. These are the realities that led me to take a critical look at the evolution, achievements, failures, and potentials of US manufacturing.

I take a long-term historical perspective to explain the technical accomplishments and the economic, political, and social implications of the remarkable rise of America's goods-producing industries to global dominance, their post-1970s transformations and retreats, and the likelihood of their survival and expansion. I wrote this book because I wanted to narrate the great, and a truly nation-building, story of US manufacturing—and because I believe that without the preservation and reinvigoration of manufacturing, the United States has little chance to extricate itself from its current economic problems, meet the challenges posed by other large and globally more competitive nations, and remain a dynamic and innovative society for generations to come.

To write about manufacturing is to deal with fascinating stories of quintessential human activities that created modern societies and enable their complex functioning. But this truism is not a widely shared perception in a world long since labeled postindustrial, in economies whose added value is dominated by services and not by making things, and in societies whose attention is swamped by consumption and the exchange of sounds, images, and words belonging to a new, immaterial e-universe. The fact that all of this depends on an enormous variety of manufactures goes, inexplicably, unacknowledged; even more inexplicably, the entire realm of converting raw material inputs into a myriad of finished goods is seen as a relic from the industrial past that appears passé compared to modern virtual realities.

And then there is the archaic term of the activity itself: what, these days, is really manufactured— made (facio) by hand (manus)—in affluent economies? Only a shrinking variety of artisanal products—while the mass of consumer goods has been made by machines for decades as mechanization, robotization, and computerization have replaced even those functions that were thought of not so long ago as safe preserves of human skills. Going a step further, affluent countries have been doing less and less of any kind of manufacturing. As Adam Smith counseled in 1776, "if a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them."

But would Adam Smith, a rational man, approve of the fact that not a single fork or dining plate, not a single television set or personal computer is made in the United States, and that importing all these goods, and tens of thousands of others, has deprived the country of millions of well-paying jobs? Not likely, especially as he advised to "buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage" (Smith 1776). But trade statistics make it clear that any of America's comparative advantages fall far short of the aggregate value of those cheaper imported commodities, the situation that has brought, starting in 1976, chronically large trade deficits. Smith thought that "this trade which without force or constraint, is naturally and regularly carried on between two places is always advantageous." Would he still think so given these realities of mass unemployment and chronic deep deficits?

Virtually any mass production of goods now has some connections to foreign trade, much as it has social, political, and environmental consequences on scales ranging from local to global. And although manufacturing now receives hardly any public attention compared to the overwhelming focus on the virtual e-world, it remains the single largest source of technical innovation, and its advances transform every branch of the modern economy. The United States' outsized role in creating, expanding, and improving the world of manufactured goods easily justifies a retrospective appraisal of these achievements. The manufacturing sector's recent weaknesses, failures, and retreats—masked to a large extent by its continued growth in aggregate absolute terms—offer a timely (and sobering) opportunity to dissect some of its problems and challenges.
(Continues...)

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Excerpted from Made in the USA by Vaclav Smil. Copyright © 2013 Massachusetts Institute of Technology. Excerpted by permission of The MIT Press.
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