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There's an important debate going on within the Democratic Party: whether or not the future of the American economy lies in manufacturing.

The decline of American manufacturing sounds tedious, but it contains all of the central issues and tensions of the modern economy. To understand our future, first we must understand what's been happening to American manufacturers, as they were the engine of U.S. economic growth and equality throughout the 20th century. Recently, the Great Recession has accelerated several macroeconomic trends and laid bare the issues the US has yet to confront. That trend initially included the collapse of manufacturing, already at its lowest level in decades before 2007 accelerated its decline.

There are two central issues: whether we can return to the blue-collar, manufacturing centric, American economy of the past and whether we should. The President, in his most recent budget proposal and on the stump, has defended policy solutions that support and encourage growth in American manufacturing. This envisions an American future that looks a lot like the 20th century American past. Obama correctly intends on making fairness the central theme of his reelection, drawing distinctions between himself and his Republican rivals on his support for the auto bailout. On its face, Obama's pursuit of manufacturing growth seems apt, as Reuters reports that U.S. manufacturing grew by 50,000 jobs in January, the largest growth in over a year.

The decrease in unionization, driven by the collapse of manufacturing, has been a huge contributor to the US' anomalously high income inequality. That alone makes pursuing more blue collar jobs compelling. However, there are reasons to be skeptical of this unrestrained nostalgia. Leaving aside the question of whether we can retrieve outsourced manufacturing jobs, economists have been questioning whether we should. Echoing Christina Romer, Obama's influential Chairwoman of the Council for Economic Advisors, Walter Russell Mead explores whether the 20th century manufacturing economy is overrated and whether policymakers should chart a different trajectory for the new century.

The main problem Mead has with the manufacturing economy was its emphasis on consumption rather than production. Mead coins this economic theory the blue model, in reference to the centrality of blue-collar workers, and envisions Homer Simpson as its embodiment. The blue model, which lasted throughout the 20th century, saw the growth of an American middle-class driven in large part by the steady and relatively high-paying jobs in the manufacturing sector. While operating under the blue-model, the US dramatically changed the structure of its education system, relying increasingly on highly skilled workers. Mead sees this as driving several meaningful problems. He takes particular issue with young adulthood:

In the absence of any meaningful connection to the world of work and production, many young people today develop identities through consumption and leisure activities alone. You are less what you do and make than what you buy and have: what music you listen to, what clothes you wear, what games you play, where you hang out and so forth. These are stunted, disempowering identities for the most part and tend to prolong adolescence in unhelpful ways. They contribute to some very stupid decisions and self-defeating attitudes. Young people often spend a quarter century primarily as critics of a life they know very little about: as consumers they feel powerful and secure, but production frightens and confuses them.
Mead argues that this period of young adulthood, in which learning is emphasized over doing, makes people less able to contextualize what they learn and less able to participate meaningful in society. This period of learning is characterized by Mead as a period of unnecessary and extravagant consumption. Instead of defining themselves meaningfully by work, young adults define themselves by what they consume. Mead also draws the line between this passive consumption and a decrease in political participation. As the state grew it allowed a greater period of isolation from work through its pursuit of universal, and prolonged, education. The result is that just as the state became more powerful, and voting therefore more important, voters disengaged. Why? Instead of being active and involved, citizens were passive and consumptive.

This challenges a central premise of mine, that equality always makes a society happier. This theory is predicated on seeing the period known as the Great Compression, which lasted roughly from 1940 to 1970 and contained the highest level of recorded American equality, as the happiest in American history. The happiest countries tend to be the most equal (See: Denmark, Sweden, Norway, Finland, Germany, France). But, Mead rightly throws wrenches into the reductionism of this theory. Inequality may be correlated with unhappiness, but there are other factors at work. Mead argues that the Great Compression was driven by a shift from a savings economy to a spending economy. The rise of credit, which stimulated the economy particularly for overpriced goods provided by American manufacturers, made society more equal and more happy. Having a washing machine, car, and refrigerator improved the average American household. But, this model was inherently unsustainable. A line of credit doesn't last forever. It's predicated on debt and consumption, rather than production. Mead criticizes the society of consumption as "rich in stuff but poor in soul."

So, although the collapse of the blue model of development has ripped up "the social fabric identified with progress and stability," Mead believes that the future could be brighter. Mead's analysis provides a welcome corrective to the nostalgia of liberal economists, who rightly see the collapse of unions and manufacturing as dangerous and damaging. The US needs a new model for its economy. Mead hopes that this model will combine production and consumption. This entails another shift like the one that happened in the mid-20th century. Credit is not the answer to a stronger long-term American economy.

The question remains: How can the US economy continue to support a vibrant middle-class?

One piece of recent economic news gives a clue as to where jobs are moving. A recent survey shows that there is a shortage of skilled workers in the manufacturing sector. An article in the Wall Street Journal quotes Ed Hughes, the CEO of a community college, as having correctly identified the trend:

"In the 1980s, U.S. manufacturing was "80% brawn and 20% brains, " but now it's "10% brawn and 90% brains." This new trend, widely known as "advanced manufacturing," leans heavily on computation and software, sensing, networking and automation, and the use of emerging capabilities from the physical and biological sciences.
Manufacturing has moved beyond the blue model without consulting anyone. Now, policymakers must try to identify the new model and adjust our expectations according. Providing tax benefits to traditional manufacturers won't stymy the decline of American manufacturing in a meaningful way. Providing education to workers to fill jobs in higher-skilled job has potential to increase income equality.

This presents a challenge has emerged for the middle-class: become producers rather than consumers, whether by choice or by necessity. This has the potential to not only preserve the middle-class, but improve it. Thinking more and spending less is a better model than mindless consumption.

The task of economists and policymakers is even more daunting: figure out where the economy is going. Mead's analysis provides useful food for thought as we consider what model for government should pursue. This requires adjusting the expectation that the economy will behave like it did during the 20th century and finding a new path that represents sustainable prosperity that will make our economy more equitable.

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Comment Preferences

  •  Advanced manufacturing also needs much fewer (4+ / 0-)
    Recommended by:
    Renee, Pluto, Rich in PA, Roadbed Guy

    employees. The remaining jobs are likely to be in service.

  •  Hi. You have hit a topic that interests me. (1+ / 0-)
    Recommended by:

    But I have some questions. You say:

    While operating under the blue-model, the US dramatically changed the structure of its education system, relying increasingly on highly skilled workers.
    and then you also say:
    "In the 1980s, U.S. manufacturing was "80% brawn and 20% brains, " but now it's "10% brawn and 90% brains." This new trend, widely known as "advanced manufacturing," leans heavily on computation and software, sensing, networking and automation, and the use of emerging capabilities from the physical and biological sciences.
    But those seem to contradict each other.

    Also you are talking about the collapse of manufacturing in the beginning of the diary, and then at the end you are saying that there is still manufacturing but that it is different model?

    Poverty = politics.

    by Renee on Thu Mar 08, 2012 at 10:38:42 PM PST

    •  I might be unclear in how two different trends are (2+ / 0-)
      Recommended by:
      Renee, MKSinSA

      operating: there's a decline in the amount of manufacturing jobs total, including advanced manufacturing, but those that are left require more education. It looks like a bunch of these "advanced manufacturing" jobs are being unfilled because of a lack of skilled workers, which is why technical and community colleges are crucial to the recovery. But that won't change the long-term trend of declining manufacturing jobs.

      •  Ok. Thanks. I wish I could write more, but (1+ / 0-)
        Recommended by:

        I have to get to bed. The intersection of our educational model and the disappearing jobs and how to support income equality is a fascinating place at which to think.

        Poverty = politics.

        by Renee on Thu Mar 08, 2012 at 11:25:50 PM PST

        [ Parent ]

  •  Things we can manufacture (1+ / 0-)
    Recommended by:

    I get that we don't have much of a future in manufacturing box fans, sneakers, and picture frames; but we should be at the forefront of new technologies.

    - high efficiency, on-site electricity generation technologies
    - a full size, all electric car engine, that goes 100 mph+, can be "charged" for < $50, and can go 350 miles on a charge

    I'm sure there are other technologies we should be making here, but I'd doubt we get any of that rolling properly with team R blocking anything new or innovative.

  •  First off, I think you (1+ / 0-)
    Recommended by:

    have confused your generations.  The baby boomers are the ultimate consumer society.  High school education, get a job at the factory, buy a car, house and new everything to keep up with the jones, send the kids to college so they can have a better life.  The generation of kids coming up through the education system today are tech savvy with out going to college or even to a community college.  Quite frankly, I know a few 12 year old kids who could run and probably program most of the manufacturing computers that operate our factories today.

    It is the worker who is in their late 30's and older that can barely figure out how to operate a windows computer that need the help.  These high school educated folks have no tech ability and so are not qualified to operate the computers that run our factories.  Unemployment may be high in the 18 to 25 year old category but they will find work eventually, the unemployed over 45 will have more trouble finding work with out retraining.

    As far as the premise of production versus consumption and the concept that during the great compression consumers bought inferior over priced products, I find that ludicrous.  The entire premise that american manufacturing during that time period was inferior and overpriced feeds the republican meme that union workers are overpaid and under performers.  That is just simply not consistent with the facts of the time period.

    The problem with the US model of manufacturing is one of ownership and responsibility.  If Union workers were allowed by law to invest their retirement funds in the corporations they work for and then allowed to vote the shares as a block, the workers would have a seat at the table when making the decisions about outsourcing and who should get what part of the income pie.  Income inequality would be much reduced if the worker unions represented a 20 or 30% ownership block of the corporations for whom they worked.  We would not see CEO's getting millions of dollars a year for outsourcing as many jobs as possible in order to show as high a profit as possible in the short term with out regard for the long term heath of the company or the overall economy.

    Education and blue collar pay have been a major issue for over 40 years now, while the top 20% of income earners have increased their share by 50% or more, blue collar workers incomes have been stagnant and in some situations have even gone down.  This entire situation has been brought about by our own laws preventing workers from being able to buy into and exert control over their own livelihoods.

    To sum it up, all you have to do is look to Germany and how they handle the relationship between the workers, management, owners and government.  They all have a seat at the table and they don't seem to be having a mass exodus of manufacturing jobs.

    "If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy" James Madison 4th US President

    by padeius on Fri Mar 09, 2012 at 05:01:59 AM PST

    •  Germany faces the same secular trends but (0+ / 0-)

      has been able to use policy instruments to compensate.  But they will have increasing difficulty as the EU internal stresses multiply.

      Where are we, now that we need us most?

      by Frank Knarf on Fri Mar 09, 2012 at 08:55:21 AM PST

      [ Parent ]

      •  What nonsense, (0+ / 0-)

        "secular trends" what do you mean by "same secular trends"?

        If you had said, "Germany may have increasing difficulty based on potential EU internal stresses", it would be a more plausible statement.  Of all the advanced economies, Germany was affected the least by the global meltdown and has had one of the best recoveries.  

        If the EU were to completely fold up and the Euro were to disappear tomorrow, Germany would come out of it with little or no harm, IMHO.  They could float the Mark back onto the world market overnight, convert their limited debt and move on as if nothing happened, why do you think they are calling the shots right now in the EU?  It is certainly not because they want to or because every other country in the EU is comfortable with them taking the lead, it is because they have one of the only viable economic models in Europe.  Along with a modern and a very disciplined government.

        "If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy" James Madison 4th US President

        by padeius on Fri Mar 09, 2012 at 10:01:37 AM PST

        [ Parent ]

        •  Textbook secular trend. 39% to 21%, 40 years (1+ / 0-)
          Recommended by:

          Almost monotonic for 40 years.  Or were we on some topic other than manufacturing employment?

          Title:               Percent of Employment in Manufacturing in Germany
          Series ID:           DEUPEFANA
          Source:              U.S. Department of Labor: Bureau of Labor Statistics
          Release:             International Comparisons of Annual Labor Force Statistics (Not a Press Release)
          Seasonal Adjustment: Not Seasonally Adjusted
          Frequency:           Annual
          Units:               Percent
          Date Range:          1970-01-01 to 2010-01-01
          Last Updated:        2011-04-01 11:02 AM CDT
          Notes:               For more information, see

          DATE       VALUE
          1970-01-01  39.5
          1971-01-01  37.4
          1972-01-01  36.9
          1973-01-01  36.7
          1974-01-01  36.5
          1975-01-01  35.7
          1976-01-01  35.2
          1977-01-01  35.1
          1978-01-01  34.8
          1979-01-01  34.5
          1980-01-01  34.0
          1981-01-01  33.4
          1982-01-01  32.8
          1983-01-01  32.2
          1984-01-01  32.1
          1985-01-01  32.3
          1986-01-01  32.3
          1987-01-01  32.0
          1988-01-01  31.6
          1989-01-01  31.6
          1990-01-01  31.6
          1991-01-01  30.7
          1992-01-01  29.5
          1993-01-01  28.1
          1994-01-01  26.6
          1995-01-01  25.2
          1996-01-01  24.3
          1997-01-01  24.0
          1998-01-01  24.1
          1999-01-01  23.8
          2000-01-01  23.9
          2001-01-01  23.7
          2002-01-01  23.6
          2003-01-01  23.3
          2004-01-01  23.1
          2005-01-01  22.2
          2006-01-01  22.0
          2007-01-01  22.2
          2008-01-01  22.2
          2009-01-01  21.4
          2010-01-01  21.2

          Where are we, now that we need us most?

          by Frank Knarf on Fri Mar 09, 2012 at 11:28:53 AM PST

          [ Parent ]

          •  Thank you for expanding on your comment (0+ / 0-)

            with actual facts.  It is nice to see.

            I find the information even more interesting, less than 3% loss of manufacturing by percentage in the 12 years since 1998, during 2 major downturns/recessions here in the US brought on by large fabricated US investment bubbles and Germany loses a total of 2.9% in relative manufacturing jobs, I would say that proves my point pretty well.  What would be even more interesting would be the comparison of the percentage of manufacturing to population growth and actual employment numbers, my guess would be they have actually increased the number of manufacturing jobs while diversifying into other employment types.  I will have to pull that info up and take a look.

            Again thank you for the information.

            "If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy" James Madison 4th US President

            by padeius on Fri Mar 09, 2012 at 12:56:06 PM PST

            [ Parent ]

            •  Losses in US manufacturing are worse, to be sure. (1+ / 0-)
              Recommended by:

              I certainly agree that an effective industrial policy and rational labor relations would be of tremendous help in maintaining important manufacturing capabilities here.  The Germans have done as well as anyone but the robots will keep the pressure on.

              Where are we, now that we need us most?

              by Frank Knarf on Fri Mar 09, 2012 at 01:19:09 PM PST

              [ Parent ]

  •  It depends on what's being manufactured. (0+ / 0-)

    One area in which we can see the return of unexportable, sustainable, middle class and working class jobs is in rooftop solar energy.
    Even if the panels are manufactured elsewhere, there will be a demand for installers, repairmen, retail outlets, etc.
    This also helps empower the working and middle class by making them less enslaved to the utility companies.
    It also reduces stress on the grid, during periods of peak demand, and makes the grid less vulnerable to weather, sabotage, etc.
    Another area is high speed rail, and mass transportation in general.
    Energy efficiency holds a great deal of promise for future growth of middle class jobs.
    Adapting to climate change itself will require the working class. Unfortunately for them, the Mitt Romney's of the world are barely able to wipe their own asses.
    The survival of capitalism requires a correction in income inequality. There is currently a decline in demand, because the middle class cannot afford to buy "stuff".  Without a robust middle class, there's no room for the poor to rise up out of poverty. An intractably poor class becomes a millstone around the neck of our system, and lowers the quality of life for everyone, except the few super-rich.
    Wall Street has become a massive tumor on the American economy.

    I'd rather have a buntle afrota-me than a frottle a bunta-me.

    by David54 on Fri Mar 09, 2012 at 05:20:00 AM PST

    •  Panel install is service, not manufacturing. n/t (0+ / 0-)

      Where are we, now that we need us most?

      by Frank Knarf on Fri Mar 09, 2012 at 08:49:55 AM PST

      [ Parent ]

      •  I know that. That's why I use the term (0+ / 0-)

        "other areas".
        We do have a chance, even though we're late to the game, to gain in manufacturing solar panels, ( China has to stop dumping their products on us), in the general area of energy efficiency (according to the Arthur Rosenfeld Symposium for Energy Efficiency) and in high speed train manufacture and other 21st century transit manufacture.

        I know that we need a lot more energy than just rooftop production for lights, heating, etc, but if you take the oppressive hand of the market connected utility company (remember Enron) off the average homeowner, school district, hospital, etc, you have given a boost to their bottom line and make it easier for them to maintain their quality of life. This should be extended to renters as well.

        If we're just making I-doodads, manufacturing is not really going to bring back our middle class, and we won't be able to compete with cheaper labor elsewhere.

        I'd rather have a buntle afrota-me than a frottle a bunta-me.

        by David54 on Fri Mar 09, 2012 at 11:58:51 AM PST

        [ Parent ]

  •  Using Mead's definition of adolescence (1+ / 0-)
    Recommended by:

    With his conspicuous consumption, undeserved grandiosity and sense of privilege, and never having produced anything worthwhile - Mitt Romney must still be a teenager.

    If liberals really "hated America" - We'd vote Republican

    by Anthony Page aka SecondComing on Fri Mar 09, 2012 at 09:51:41 AM PST

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