From: josh@Happy-Man.com (Joshua_Putnam)
Subject: Re: Before Buying Japanese.
Reply-To: Joshua_Putnam@happy-man.com
Organization: Happy Man Corp., Vashon Island, WA 98070-7399
Date: Thu, 31 Dec 1992 21:50:44 GMT

In <9212311846.AA07363@heartland.bradley.edu_> tquinn@heartland.bradley.edu (Terry Quinn) writes:

>2.  If we do not counter that sophistication with our own, and 
>continue to erode the manufacturing base of the United States, we 
>will be leaving our children a country where the standard of 
>living is lower than that we have enjoyed.  If you think that we 
>can maintain our standard of living with a "service economy", then 
>you do not understand the difference in the depth of the value 
>chain between service and manufacturing businesses.

If we keep eroding manufacturing at the current rate, we'll take
over the world.  Our erosion rate is negative, i.e. manufacturing
is growing.

In constant 1982 dollars, manufacturing grew substantially in the
'80s, which should not come as a great surprise.  For comparison
purposes, let's look at 1979 and 1989.  Starting in 1980 might
sound more up-to-date, but since that was a recession year it
would inflate growth rates unrealistically.

                          1979         1989   Growth
                       $million     $million

Total Manufacturing     712,184      919,042   29%
Durable Goods           433,149      583,684   35%
Nondurable Goods        279,035      345,358   24%

In worldwide terms, the U.S. share of manufacturing exports went
from 16.8% in 1980 (I don't have 1979 handy) to 17.1% in 1989 and
16.3% in 1990.  This relatively stable market share hides a
phenomenal growth in overall manufacturing exports, from $147
billion in 1980 to $275 billion in 1989 and $300 billion in 1990.

Manufacturing exports employed 3.6% of the civilian labor force
in 1977, growing to 4.9% by 1987.  

So while we may not be as dominant in manufacturing as we were
right after we blew up most of the factories in Japan and
Germany, talk of U.S. "deindustrialization" is greatly overblown.

Certain industries have certainly been hit harder than others.
This is especially true in employment, since previously inefficient
industries have become more efficient as well as smaller.  Steel
is a popular example.  Between 1980 and 1990, net shipments grew
only from 83.9 million tons to 85.0 million tons.  Exports grew
from 4.1 million tons to 4.3 million tons, and imports grew from
15.5 million tons to 17.2 million tons.  In themselves, these
data suggest stagnation.

The nation's total steelmaking capacity actually declined, however, 
as obsolete and overly expensive plants were closed.  Production 
capacity dropped from 153.7 million tons in 1980 to 116.7 million 
tons in 1990.  Note, however, that production capacity remains well 
above actual production, and is large enough to satisfy both the 
current demand for domestic steel and the demand for imported steel 
(ignoring specialty steels, unfortunately). 

The U.S. steel industry was forced to increase the productivity of 
its workers in order to compete with foreign producers.  Steel 
employment dropped from 399,000 in 1980 to 164,000 in 1990, 
representing a substantial increase in employee productivity.  This 
improved productivity has largely restored the competitiveness of 
U.S. steel makers.  

Birmingham Steel reports that its production workers, who earn an 
average $55,000 per year, cost less per ton of steel than the cost 
of shipping the steel from overseas.  In other words, Asian labor 
could be free and the shipping costs would still give Birmingham an 
advantage in the U.S. market.  Instead of being free, however, 
Asian labor costs are rising as industrialization increases 
workers' expectations.  

There's no denying some sectors of the economy have been hit
hard.  But to suggest America is deindustrializing or failing to
compete is selling the country short.
-- 
 Joshua_Putnam@happy-man.com    Happy Man Corp.  206/463-9399 x102
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