The necessity of manufacturing

Vaclav Simil, professor emeritus of environment and geography at the University of Manitoba, is said to be Bill Gates’ favorite author.  Simil was recently interviewed by Wired, and I was interested in his remarks about manufacturing.

Let’s talk about manufacturing. You say a country that stops doing mass manufacturing falls apart. Why?

Vaclav Simil

In every society, manufacturing builds the lower middle class.  If you give up manufacturing, you end up with haves and have-nots and you get social polarization.  The whole lower middle class sinks.

You also say that manufacturing is crucial to innovation.

Most innovation is not done by research institutes and national laboratories.  It comes from manufacturing—from companies that want to extend their product reach, improve their costs, increase their returns.  What’s very important is in-house research.  Innovation usually arises from somebody taking a product already in production and making it better: better glass, better aluminum, a better chip. Innovation always starts with a product.

Look at LCD screens.  Most of the advances are coming from big industrial conglomerates in Korea like Samsung or LG.  The only good thing in the US is Gorilla Glass, because it’s Corning, and Corning spends $700 million a year on research.

American companies do still innovate, though. They just outsource the manufacturing. What’s wrong with that?

Look at the crown jewel of Boeing now, the 787 Dreamliner.  The plane had so many problems—it was like three years late.  And why?  Because large parts of it were subcontracted around the world.  The 787 is not a plane made in the USA; it’s a plane assembled in the USA.  They subcontracted composite materials to Italians and batteries to the Japanese, and the batteries started to burn in-flight.  The quality control is not there.

Can IT [information technology] jobs replace the lost manufacturing jobs?

No, of course not.  These are totally fungible jobs.  You could hire people in Russia or Malaysia—and that’s what companies are doing.

Restoring manufacturing would mean training Americans again to build things.

Only two countries have done this well: Germany and Switzerland.  They’ve both maintained strong manufacturing sectors and they share a key thing: Kids go into apprentice programs at age 14 or 15.  You spend a few years, depending on the skill, and you can make BMWs.  And because you started young and learned from the older people, your products can’t be matched in quality.  This is where it all starts.

You claim Apple could assemble the iPhone in the US and still make a huge profit.

It’s no secret!  Apple has tremendous profit margins.  They could easily do everything at home.  The iPhone isn’t manufactured in China—it’s assembled in China from parts made in the US, Germany, Japan, Malaysia, South Korea, and so on.  The cost there isn’t labor.  But laborers must be sufficiently dedicated and skilled to sit on their ass for eight hours and solder little pieces together so they fit perfectly.

But Apple is supposed to be a giant innovator.

Apple!  Boy, what a story.  No taxes paid, everything made abroad—yet everyone worships them.  This new iPhone, there’s nothing new in it.  Just a golden color.  What the hell, right?  When people start playing with color, you know they’re played out.

Click on This Is the Man Bill Gates Thinks You Absolutely Should Be Reading for the Vaclav Smil’s full interview in Wired Science.

An end to progress? Arguments pro and con

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An economist named Robert J. Gordon, and Erik Byrnjolfsson, director of the MIT Center for Digital Business, had an interesting debate at a TED forum on whether the days of rapid economic growth are over.

Gordon said improvements in world living standards are the result of two historical events that may not be repeated—the first industrial revolution, based on coal, iron and steam, beginning in the late 1700s in Britain, and the second industrial revolution, based on oil, electricity and the internal combustion engine, beginning in the late 1800s in the USA.

Both these revolutions have run their course, he said, and there’s no reason to think that the current technological revolution in information technology will have the same impact.  The i-phone is nice, but it will not change society in the same way that Alexander Graham Bell’s telephone did.

Byrnjolfsson said computer and information technology are in their infancy, and will have as great an impact as the earlier technological revolutions.  Human beings haven’t as yet learned how to work most effectively with the new technology, he said.

Much depends on which one is right.  With rapid economic growth, it is possible for all classes of society, rich, middle and poor, to improve their condition without hurting the others, except maybe in relative terms.  With flat or declining economic growth, the struggle for economic and political power becomes much more of a zero sum game, a sorting of society into winners and losers.

I think the videos are interesting and worth watching, but I also think both speakers fail to emphasize an important thing—that improvement in the material standard of living requires not only progress in science and technology, but public policies that make the fruits of science and technology available to the wider public.

Improvements in public health, for example, are based not only on discoveries about vaccination, antiseptics and antibiotics, but also from public water and sewerage systems, food inspections and mass vaccinations of school children.   Universal telephone service is based not only on a technology, but also on a commitment by AT&T as a condition of maintaining its monopoly position.

Advances in technology don’t automatically abolish poverty.  George Orwell, in The Road to Wigan Pier, which is about unemployed British coal miners in the 1930s, pointed out that every miner’s family owned a radio, a technological wonder unavailable to kings and emperors 50 years before.  And yet these same miners had difficulty putting food on the table.  Not having radios would not have enabled them to pay for it.

Brynjolfsson could be right.  Factory automation could produce a world of leisure and well-being for everyone.  But, depending on who is running things, it could produce a world like that imagined by Kurt Vonnegut Jr. in his 1952 novel Player Piano.

I can easily imagine a future USA with amazing information technology, communications technology and virtual reality entertainment technology, not to mention science-fictional war-making and surveillance technology.  And along with this, growing shortages of affordable housing, medical care and higher education, and a deterioration of public services and the physical environment.

I’m neither foolish enough nor brave enough to attempt to predict the future.  I don’t think decline is inevitable.  But all it requires is for us to continue on our present path.  We’re halfway there now.

The mystery of the Great Stagnation

We’re not as innovative as we think we are, according to Tyler Cowen, a respected right-of-center on the faculty of George Mason University.  American innovation and American income growth are both slowing down, he said in a talk to a TED conference.

The great age of American innovation was the first half of the 20th century, not the second half, Cowen said.  During the early 20th century, electricity, the telephone, the automobile, broadcasting and aviation revolutionized American life.  Nuclear power, the space program, xerography, the personal computer, the Internet, the cell phone – these changed American life much less.

I think what he said is correct.  I could, without much discomfort, go back to living as I did in 1961.  I don’t think many Americans who were 74 in 1961 would have willingly gone back to living as they did in 1911.

Cowen said 20th century American innovation was based largely on inventions and discoveries of the late 19th century – the electrical generator and the internal combustion engine.   Most of what came after is based on a realization of the possibilities in these two things.  The main exception that comes to mind is antibiotics, also an innovation of the early 20th century.

But Cowen does not really address the question of why this is so, and nor does he connect it with the slowing of income growth.