For those suffering nostalgia

For those suffering nostalgia for the ideal of secure, high-wage manufacturing in the rust belt – it’s not going to happen. On one hand, manufacturing automation is not about to be reversed, while on the other, the US has lost the capability to feed, run and maintain many modern factories.

The most commonly-given reason for Trump’s “bringing the jobs back” chant being a lie is that most of the jobs weren’t “stolen” by China and Mexico in the first place and they therefore can’t be “brought back”. There have been various studies attempting to allocate responsibility between automation and cheap foreign labour. The highest score I’ve seen for automation’s role is a massive 85 per cent, as summarised by the Financial Times:

“The US did indeed lose about 5.6 million manufacturing jobs between 2000 and 2010. But according to a study by the Centre for Business and Economic Research at Ball State University, 85 per cent of these jobs losses are actually attributable to technological change – largely automation – rather than international trade.

The US has lost the skills, the support services, the supply chain and talent for much of the manufacturing it hungers after. It’s simply too hard, too costly, too inefficient to try to rebuild it. It’s what Harvard Business School Professor Willy Shih likens to the “tragedy of the commons”, the loss of common grazing land that supported all the village. The US has witnessed the loss of much of its industrial commons.

As long ago as 1997, he found at Kodak that, despite a highly-automated production line, the company could not make digital cameras in the US because there just weren’t the people with the knowledge to make the parts. In 2009, he co-authored a paper showing the Amazon Kindle could not be made in the US, even though the core technology was developed there.

“This is especially true when the resources upon which a company draws (the supplier base, the workforce, and even the company’s own internal product design capabilities) have atrophied.”

“Once you allow those (manufacturing and engineering) skills to dissipate, throw away those capabilities, a lot of those decisions are very expensive or impossible to reverse,” he wrote. “My counsel is to be more thoughtful about that.

“I just wrote a case on a large multinational that has its engineering centre in India, with thousands of engineers and an average age of 27, and its home engineering operation in the US, where the average age is 47. The guys in India said the US operations hadn’t hired anybody in the past half-dozen years, so they don’t have fresh skills. Do you retrain, or start with the younger generation and try to keep their skills fresh? That’s a huge problem. I saw people at Kodak in film manufacturing who had amazing skills, but as technological substitution happens, those people can’t take their skills anywhere.”

Local protectionists and President Trump can make a song and dance about a few token jobs, but slapping tariffs on imports, making consumers pay more for goods, undermining comparative advantages and endangering world trade won’t achieve the impossible.