“Decline of Manufacturing” is Global Phenomenon: And Yet the World Is Much Better Off Because of It

Post de 29/04 do blog do Prof. Mark Perry (http://mjperry.blogspot.com/):

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“Decline of Manufacturing” is Global Phenomenon: And Yet the World Is Much Better Off Because of It

The chart above shows manufacturing output as a share of GDP, for both the world and the U.S., using United Nations data for GDP and its components at current prices in U.S. dollars from 1970 to 2009.  We hear all the time from Donald Trump and others about the “decline of U.S. manufacturing,” about how nothing is made here any more, and how everything that used to be made here is now made in China, etc.  An underlying assumption here is that if the manufacturing base is shrinking in the U.S., there is an offsetting manufacturing gain that is captured elsewhere in the world.  In reality, the decline in U.S. manufacturing as share of GDP is a really a global phenomenon as the entire world becomes increasingly a services-intensive economy.

As a share of GDP, manufacturing has declined in most countries since the 1970s.  A few examples: Australia’s manufacturing/GDP ratio went from 21.3% in 1970 to  9% in 2009, Brazil’s ratio went from 24.6% to 13.3%, Canada’s from 21.7% to 11.3%, Germany’s from 35% to 19%, and Japan’s from 35% to 20% (I’ll maybe create a chart with a more complete list).

Bottom Line: The complaints about the “decline in U.S. manufacturing” are really a somewhat misguided acknowledgment of the global shift in production that has taken place since we entered the Information Age with the commercial introduction of the microchip in 1971 and gradually left the Machine Age behind.  When we complain that “nothing is made here anymore,” it’s not so much that somebody else is making the stuff we used to make as it is the case that we (and others around the world) just don’t need as much “stuff” any more in relation to the overall size of the economy.

The standard of living around the world today, along with global wealth and prosperity, are all much, much higher today with manufacturing representing 16-17% of total world output compared to 1970, when it was almost twice as high at 26.7%. And for that progress, we should applaud, not complain.

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