A Flawed Tale of the U.S. Manufacturing Sector

A review of Making It in America by Rachel Slade

By Colin Grabow of Cato. Excerpts:

"Claims that American manufacturing is “dwindling” and that producing goods in the United States is “almost impossible,” for example, are simply not true. We know this because Slade tells us.

On the book’s fourth page, the author states that manufacturing at the end of 2022 contributed $2.9 trillion to the U.S. economy. That’s of sufficient size to make the U.S. manufacturing sector the world’s seventh-largest economy. The United States accounts for a greater share of global manufacturing output than Germany, Japan, South Korea, and India combined.

It’s not only possible to make things in the United States but highly desirable to do so. In 2022 alone U.S. manufacturing attracted over $55 billion in foreign direct investment, more than any other sector of the economy."

"She’s not wrong — manufacturing employment peaked in 1979 — but this is a questionable gauge of the sector’s health. The point of manufacturing is not employment but production, and by that metric U.S. manufacturers are doing just fine. U.S. manufacturing output is only slightly off its 2007 all-time high, while the sector’s value-added — arguably the most important measure of manufacturing’s well-being — is at record levels.

American manufacturers have become more productive, generating more output with fewer people. That’s a cause for celebration, not concern."

"much of what Americans produce isn’t found on store shelves or is stamped “Made in USA.” The United States has the world’s largest refining capacity, is the world’s fourth-largest steelmaker, and is (by far) the world’s biggest aerospace exporter. But how many people check to see where their gasoline was produced or which country assembled the airplane flying them to far-flung locations?"

"Policy-makers, for example, would do well to consider Slade’s description of a zipper manufacturer — one of American Roots’ suppliers — that had to shutter some of its more labor-intensive production lines following a minimum-wage increase."

"There are currently over 600,000 open positions in manufacturing, which is a big reason why the sector’s trade association supports expanded immigration. For all the talk one hears about the need to promote manufacturing, often given less attention is the fact that many Americans have little desire for such work."

"Dollars sent overseas later return to U.S. communities via exports and foreign investment. Additionally, savings from lower-priced imports are invested or spent elsewhere in the economy and the added competition from foreign goods helps spur innovation and productivity gains. All of this benefits the U.S. economy."

"approximately half of all imports consist of inputs used by U.S. firms to produce final goods"

"Surveying the vast quantities of imported goods being offloaded in the ports of Los Angeles and Long Beach, the author comments that they reflect “how extensively Americans had exported their economy.” More accurately, the bounty is a tribute to American prosperity and significant increases in both median wages and median household income over the last 30 years."

"

The author’s analytical errors are compounded by factual ones. On page 4, for example, Slade states that the 13 million workers employed in manufacturing earned an average salary of $96,000. Government data place average hourly manufacturing wages at $33.39 as of last month, or approximately $69,000 per year assuming a 40-hour work week. Not bad, but a far cry from $96,000.

Other odd claims also crop up. Six pages later, Slade writes that when she was growing up in the 1980s, U.S. exports dropped. For a few years, they did. But over the decade’s entire span, U.S. exports doubled. In another chapter, she states that the Jones Act’s passage in 1920 “spawned a shipbuilding spree from which American manufacturing would benefit immensely.” In fact, shipbuilding went into a prolonged slump.

Some claims seem dubious — such as that Alexander Hamilton lobbied for a forerunner to the Jones Act — but checking their veracity is a frustrating exercise as neither footnotes nor endnotes are provided. (My own research into Hamilton turned up nothing to support the claim, while a query sent to the author on the matter elicited no response.)"