If our mainstream political discourse is to be believed, the U.S. ‘doesn’t make anything anymore.’ We should all become ‘knowledge workers’, constantly reinvent our personal brand. Manufacturing–and the engineering it takes to support efficient manufacturing processes–are anachronisms. Hell, everything these days in made in China, right?
But like most popular economic bromides, this is utter bullshit that is completely contradicted by those damn facts. From the SF Fed:
The market share of foreign goods is highest in durables, which include cars and electronics. Two-thirds of U.S. durables consumption goes for goods labeled “Made in the USA,” while the other third goes for goods made abroad.
Chinese goods account for 2.7% of U.S. PCE [personal consumption expenditures], about one-quarter of the 11.5% foreign share. Chinese imported goods consist mainly of furniture and household equipment; other durables; and clothing and shoes. In the clothing and shoes category, 35.6% of U.S. consumer purchases in 2010 was of items with the “Made in China” label.
…of the 11.5% of U.S. consumer spending that goes for goods and services produced abroad, 7.3% reflects the cost of imports. The remaining 4.2% goes for U.S. transportation, wholesale, and retail activities. Thus, 36% of the price U.S. consumers pay for imported goods actually goes to U.S. companies and workers.
This U.S. fraction is much higher for imports from China. Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. Thus, on average, of every dollar spent on an item labeled “Made in China,” 55 cents go for services produced in the United States. In other words, the U.S. content of “Made in China” is about 55%. The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services…
When total import content is considered, 13.9% of U.S. consumer spending can be traced to the cost of imported goods and services….Imported oil, which makes up a large part of the production costs of the “gasoline, fuel oil, and other energy goods” and “transportation” categories, is the main contributor to this 6.6 percentage point difference.
The total share of PCE that goes for goods and services imported from China is 1.9%…
The import content of PCE has been relatively constant at between 11.7% and 14.2%. Import content peaked in 2008 at 14.2%, which was probably due to the spike in oil prices at the time.
I don’t want to be pollyanish about this, but, as I’ve noted before, manufacturing still employs a lot of people–and much of our consumption of manufacturing is U.S. made products. We still make a lot of things–we’re not just a ‘Burger King’ service economy. This has two implications.
The first is educational: we still need to training engineers–real ones, not ‘financial engineers’ (who are nothing more than looting rioters protected by the aegis of law). Our economy is dependent on this, and will continue to be dependent on manufacturing. The other point is political: given the manufacturing sector’s importance (along with transportation of said goods as well as sales), unions still matter. An economy of latte-sipping idea ‘workers’ is hard to unionize (and might not be as productive). But we can unionize workers in industry and their auxiliaries. The 40 million Americans who want to join a union probably don’t work at JPMorgan. As long as we labor (so to speak) under the myth that we’re all either serving burgers or shuffling emoticons (“What do you do for a living?” “I email”), we deny the reality many American workers experience, along with their economic needs.