May

13

The trend is in reverse-growth

May 13, 2008 |

There are any number of ways you can look at the particular historical moment you happen to occupy, depending as always on your perspective.

Living as I do in a small rural village that is heavily dependent on the two manufacturing plants here, I get to hear a lot of truly frightened people talk about globalization, outsourcing and job security. They’ve read the headlines and bought into the idea that large corporations, hungry for cheap overseas labor, are shipping jobs overseas and putting their livelihoods in danger.

But, as David Brooks pointed out in the New York Times a couple of weeks ago, that’s really not the way it is. Above and beyond the fact that, in general, manufacturing as a percentage of gross domestic output has been in decline for decades, there’s this:

Some Americans have seen their jobs shipped overseas, but global competition has accounted for a small share of job creation and destruction over the past few decades. Capital does indeed flow around the world. But as Pankaj Ghemawat of the Harvard Business School has observed, 90 percent of fixed investment around the world is domestic. Companies open plants overseas, but that’s mainly so their production facilities can be close to local markets.

Nor is the globalization paradigm even accurate when applied to manufacturing. Instead of fleeing to Asia, U.S. manufacturing output is up over recent decades. As Thomas Duesterberg of Manufacturers Alliance/MAPI, a research firm, has pointed out, the U.S.’s share of global manufacturing output has actually increased slightly since 1980.

So where are those jobs going that everybody is worried about?

It’s simple and you’ve read it here before.

I’ve said more than once that the technological advances of the last decade or two have increased productivity to the point that companies can reach scale at a much smaller firm size.

What that means for microbusinesses is that they can start micro and, if they choose, they can stay micro — without necessarily sacrificing their ability to increase revenues.

What that means for the manufacturing sector (as well as other industry sectors in the economy) is that manufacturing can be done with fewer people doing more highly skilled stuff.

It’s just like John Micklethwait and Adrian Wooldridge argued in their book, The Company: A Short History of a Revolutionary Idea, companies are getting smaller. That is, the trend is toward large organizations breaking into smaller units. Big companies, like microbusiness owners, are finding that they can do a bunch of stuff with fewer bodies … thanks to technology.

Of course, when people are frightened, it’s less … um … sexy to try to get them to use their brains and it’s often politically more expedient to let them feel victimized and help them to find an oppressor/enemy.

What’s interesting about that is that it is in the nature of the technology that is freeing so many people from traditional employment — in the manufacturing sector and elsewhere — that it is simultaneously empowering people to take control of their lives and finances back into their own hands.

From a political point of view, I’m wondering what would happen if, instead of stoking the flames of fear-enhanced resentment and going the rhetorical economic nationalism route, some politician somewhere worked to soothe those fears (especially among older workers) by coming up with a plan to help them transition into this new economy?

Less political fire and brimstone but, then, fire and brimstone is often precisely what keeps us as a nation from getting anything done.

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