The Chinese economy has thrived as a low cost producer of almost everything for the global economy. Everyone seems to have benefited. China had a vast resource of low cost labor. The world benefitted with low cost products. Trade flourished. China provided jobs for millions of workers transitioning from rural, agricultural areas, to urban, more financially rewarding manufacturing jobs.
After WWII America became a manufacturing powerhouse, supplying goods to a world devastated by the war. US labor costs grew, other countries developed manufacturing capability with benefit from low cost labor pools. With the growth of the global economy entire industries moved from the US to other countries, most notably, China. There are many examples such as steel and electronics. The US economy has become a services dominated economy. Today the service sector of the economy is about 80% of labor, the manufacturing sector about 20%, agriculture is very small. Back in the 50’s, the service sector was about 25% of labor, manufacturing and agriculture combined about 75%. It is interesting to note, however, that the value of manufactured goods from the US has increased enormously from the 50’s to today. Why? Technology and automation.
As we look to the future, there may be an opportunity for the US. As economies have grown, labor costs have increased, and countries like China are becoming less competitive in the global market. The US has a proven technology portfolio directly applicable to manufacturing, including AI, robotics, software, computer vision, speech recognition, and networking. This technology could be leveraged to low cost manufacturing capability. The job density would certainly be less than with traditional manufacturing, but the jobs would be knowledge/skill based and high paying. With investment and government policy support the US could rebuild its manufacturing sector and be a global supplier. Could it be that the US and China could exchange roles in the future global economy? The US being the manufacturing powerhouse and China with its growing economy be more focused on consumption and service?
There is one critical implied assumption in this proposition – education. Technology enabled manufacturing creates high quality, high paying jobs, but it require a well educated workforce. Universities must offer the enabling curriculums and education must be made much more accessible and affordable. Education is a critical pillar for a healthy democracy, however. So this challenge must be addressed.
Bottom line: this is a potential opportunity that deserves serious discussion.
Photo by ste3ve