The economics and politics of manufacturing fetishism

As politicians vie with each other to express their love of manufacturing industry, John pulls together thoughts developed over three decades on what he has come to call the 'manufacturing fetish'.

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Donald Trump will bring ‘millions of manufacturing jobs’ to the US. Ohio – a key swing state – will become ‘a manufacturing behemoth’.  Hilary Clinton has promised $10 billion for manufacturing investment, and told her supporters ‘we need to get back to building things’.  Theresa May may have sacked George Osborne, who pledged a Britain ‘carried aloft by the march of the makers’, but ‘the makers’ are at the centre of her new industrial strategy.   And Jeremy Corbyn has promised that promoting manufacturing will be a priority for his national investment bank.

Steel is the archetypal manufacture, and politicians have long been obsessed by it. The future of Tata Steel, the last remnant of Britain’s steel industry, now owned by the Indian conglomerate, has been a matter of political debate and a dominant issue for the Business Secretary for the last six months. The steel industry, nationalised by Labour in 1951 and 1967, privatised by Conservative governments in 1953 and 1988, was the totemic ‘commanding height’  of the British economy. The central derangement of Mao’s Great Leap Forward was the backyard furnace, with peasants urged to melt down their pots and pans to put the metal at the service of the nation. When the Soviet Union collapsed its steel-making capacity far exceeded that of the United States although Soviet GDP was far less.

I first encountered manufacturing fetishism in 1980, when I wrote an article observing that a decline in UK manufacturing was an inevitable consequence of the growth of North Sea oil output.  Since in the long run the trade balance balances, a surge in one category of exports or import substitutes would necessarily squeeze other export sectors, particularly less differentiated commodity products such as steel.

The article received wide publicity, much of it hostile. The nature of the criticism was exemplified by an encounter with the late Lord Kaldor, the architect of the 1960’s Selective Employment Tax, which taxed service sectors in order to subsidise manufacturing employment. ‘I haven’t read your article’, he told me, ‘but it’s rubbish, absolute rubbish.’ The objectors were less concerned to dispute the logic of the argument than to claim that the conclusions ought not to be true, or if they were true ought not to be disseminated.  I started to understand that for many people the role of manufacturing industry was an emotional, perhaps even a moral, issue rather than an economic one.

Manufacturing fetishism – the idea that manufacturing is the central economic activity and everything else is somehow subordinate – is deeply ingrained in human thinking.  The perception that only tangible objects represent real wealth and only physical labour real work may have been formed in the days when economic activity was a constant search for food, fuel and shelter. Man hunted, fished and made primitive implements. If he was good at these things, his wife and children prospered; if not, they died. The women also worked hard – perhaps harder – but what was seen as economically productive activity was male.

From these primitive times, we have inherited the notion of a hierarchy of needs in which food and shelter rank ahead of chartered accountancy and cosmetic surgery.  Along with the hierarchy of household needs comes a perception of a hierarchy of importance for productive activities – agriculture, primary resources and basic manufacturing rank ahead of hairdressing and television programming.

But such thinking ceased to have economic relevance once technology and economic institutions advanced enough for it to be unnecessary to hunt and till all day in order to get enough to eat – a state of affairs which was reached many millennia ago. Once primitive tribes achieved this level of economic progress, they started to add discretionary activities to the fulfilment of their basic needs.

The services they craved then remain representative of the services we buy today.  The priest would ward off evil; the political leader would organise the looting of the resources of alien tribes; the repair man would sharpen stones and knives; and eventually the insurance agent would organise a scheme of mutual support for unlucky villagers whose cow died or whose house burnt down. With the rise of this market economy came Adam Smith’s division of labour.  Specialist tasks were assigned to those best qualified to fulfil them.

“Surely you don’t think that an economy can survive on hairdressing and hamburger bars.”, my critics raged. No, I didn’t; any more than I thought it could survive on steel and automobile production. Modern economies are necessarily diverse. But the diversity of consumption need not correspond to the diversity of production. As Smith noted, the division of labour was limited by the extent of the market, and the growth in the geographical scope of markets has steadily increased the geographical division of labour. Switzerland and Denmark are among the richest countries in the world but neither has ever manufactured a single automobile.

Along with ever more extensive division of labour has come ever more extensive differentiation of products. You can buy a business suit by George at Asda for £29. It will be practical; ready to wear, polyester blended; ideal for a gangland funeral, and machine washable so that your moll can pop the bloodied trousers in at the laundromat and they will come up as good as new.  You can pay ten times as much at Marks and Spencer for Italian tailoring and good quality wool fabric.  And you can pay ten times as much again for a bespoke suit from Savile Row. You need to decide whether you want a stylish suit, or just a suit:  a customised suit, or just a good-looking suit. You need not pay much for a suit but you will pay a lot for style, and a lot more for personalisation.

You – or your government or insurer – will pay a pound or two for a pill, and many times that for a specialist drug, such as a modern cancer treatment.  Generally, the ingredients will cost at most a few pence. You might pay up to £10m for an aircraft engine.  Such an engine would fit in a box the size of a small sofa.

The rear cover of the iPhone tells you it is designed in California and assembled in China.  The phone sells, in the absence of carrier subsidy, for around $700.  Purchased components – clever pieces of design such as the tiny flash drive and the small but high performing camera – may account for as much as $200 of this. The largest supplier of parts is Apple’s principal rival in the smartphone market, Samsung. ‘Assembled in China’ costs around $20. The balance represents the return to ‘designed in California’, which is why Apple is such a profitable company.

When you buy a drug, or an aircraft engine, or an iPhone, you are not paying for the materials. Nor for the manual labour that put it together. You are paying for the research and the design. When you buy the suit, or the aircraft engine, you are paying for some labour – but the highly skilled labour which (at Rolls Royce) controls the machine or (on Saville Row) cannot yet be matched by machine.

Many of those who talk about the central economic importance of manufactured goods do so from concern for the trade balance and employment.  Where will exports and jobs come from in a service-based economy, manufacturing fetishists ask?  Britain’s leading  manufacturing exporters are British Aerospace, Glaxo SmithKline, and Rolls Royce. Jobs in export activities in Britain and America come from doing here the things that cannot be done better elsewhere because of the particularity of the skills they require. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services.

As economies passed beyond the basic and all-consuming requests for food, fuel and shelter, rewards became divorced from the place activities enjoyed in the hierarchy of needs. You only got paid for producing goods that people wanted, but it soon became apparent that insurance and priestly services were among the things people felt they needed. The earnings from different activities reflected the availability or scarcity of the talents needed to produce them, and your position in the power structure of the tribe.  The first explains why the insurance and repair men did well, and the second accounted for the prosperity of the political leader and the priest.

Those who are lucky enough to possess these rare talents or occupy positions of authority have often felt embarrassed by earning more than those who work to satisfy more basic elements in the hierarchy of needs. Often, they also enjoy occupations that are less arduous and more fun. Such embarrassment at their good fortune is rarely very great, and does seem to have diminished recently, especially in the finance sector. But emphasising the importance we attach to these other supposedly more necessary, but less well-remunerated activities, is a means of assuaging our guilt.

So where will the jobs come from? The value of the manufactures exported by developed economies is mostly derived from the talents of organisation and design we associate with services. Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world.  But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. Few who work for British Aerospace, GlaxoSmithKline or Rolls Royce are engaged in arduous manual labour, and those few are typically engaged in the provision of ancillary services to the activity of manufacturing rather than the manufacture itself.

But however far globalisation advances there will remain personal services which can only be performed close to home. And low skilled jobs in an advanced economy will mostly be found in these activities. Workers in China can assemble your iPhone, but they cannot serve your lunch, collect your refuse, or bathe your grandmother.

At this point, the manufacturing fetishist denies that these are ‘real jobs’. This is above all, a gender issue; when you ask for a definition of a ‘real job’ it is one that has traditionally been undertaken by a man. Mining and manufacturing are ‘real jobs’; cooking and caring are not.  Thus the decline of manufacturing is associated with the emasculation of the work force. The manufacturing sector which employed a majority of women – textiles – was of course the industrial analogue of the traditional female activity of making clothes for the family, and barely acknowledged as a source of ‘real jobs’.

The manufacturing obsession has no economic basis, but considerable social and political significance. Manufacturing was once a principal source of low-skilled male employment.  But this can no longer be true in advanced economies. And much manufacturing was undertaken in large plants which dominated their communities, many of which have closed. The few service activities which are undertaken in large institutions which similarly dominate their communities – such as hospitals and universities – have shown more permanence and in any case employ high-skilled professionals. The decline of manufacturing is associated with the emasculation of labour. And the destruction of male social bonds and units of political organisation.

Some of the roots of the white working-class resentment which supports Donald Trump and voted for Brexit are found in these gender-related consequences of the structural consequences of economic globalisation. It would be an absurd response to look back longingly on pictures of men with bare torsos covered in sweat working in the light and heat of rivers of molten iron, or heaving coal as they spent half their day working underground; these may have been real jobs, but they were awful jobs, and our society is better off for no longer needing them. But there is a solidarity and stability that has been lost, and consequences of that loss which will not go away. But I am already past the point at which the economist must pass the baton to the sociologist, the anthropologist – and the politician. But what sort of politician?

 

Picture: Brazing at the Gary Tubular Steel Plant (Wikipedia)

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11 COMMENTS

  1. This is a very thought-provoking article. I am one who believes that something is lost when a nation loses its manufacturing base. There is a, perhaps minor, national security argument; moving all the production of manufactured goods to cheaper places presupposes lasting world peace, or at the very least that no major disruptions will occur due to political instability. The even stronger argument to me is a nationalistic one. As much as I might wish my fellow countrymen are all capable of prospering by learning advanced skills, I know that a substantial portion are what they must be: average or below average. Economic globalization allowed us to lower their value to the economy very quickly, simply because we had such easy access to a few billion more people who can perform their duties and are willing to do it at a lower cost. I don’t dispute the economic equations that show global output is thus maximized, but I also believe a substantial portion of my countrymen do much worse while the world taken as a whole does better. Maybe this is why the article ends by handing the baton on to politicians.

    • I believe that Prof Kay would reply that a services economy caters equally well to those with lower capabilities as a manufacturing-based economy: for every globalised metal-basher there is a localised hairdresser/barman /cleaner/road builder. The issue is not that the less capable or educated should not have work, but that the nature of the work should not be immutable. The twin forces of technology advancement and globalisation have pushed this process forward, but perhaps too quickly for society to adjust. Our leaders should be assisting in this adjustment process, rather than opportunistically seeking gain by offering false hope to those having difficulty adjusting.

  2. This article articulates a long-felt frustration for me. In the 1980s and 1990s I was raising my two sons, making every cent count that my husband would bring home from his 40-hour a week job. When his day was over, I was on my “third shift” at home: cooking, cleaning, seeing our sons were in course with their homework and other activities. I’d drop into bed and do it all over again — 24/7, as they say. I loved it, and found it rewarding. And have two great sons today for the effort. But the 40-hour-a-week job was considered the most important.

  3. Normally I am a victim of “truthiness”, reading arctiles that reinforce my firmly held views

    This article has done a rare thing, it has actually made me reconsider my own prejudices.

  4. What a load of bunkum. Have you no forethought? Manufacturing can mean many many types of jobs. And with technology many of those awful jobs you mention could be made far less hazardous. Manufacturing basically means ‘making/crafting physical items’. This gig economy you clearly worship has come to naught. It employs virtually no one. The ‘caring’ jobs of homemaking and child rearing have always been unpaid. As they should be because they are the stuff of life not something to quantify. I have always been a homemaker since becoming pregnant with the first of our two children. They have just graduated from graduate schools recently. I will remain a homemaker as I think this is the my important job a person can do- foster a rich and social environment for family development. Commodifying it with your disingenuous lip service is disgraceful.
    My husband is highly degreed and works in a career profession that takes him into manufacturing facilities regularly – many extremely hot, cold, dirty and noisy. He talks often about the pride in crafting that the workers he deals with have as opposed to the ones who sit in offices in their department store or bespoke suits and push papers all day and who complain constantly about everything
    . Maybe author you ought to get out of your sheltered world and visit some manufacturing facilities and find out the reality of the situations there and what the workers actually think about the importance of the their crafts their value to society and to their own personal sense of self worth.

  5. Perhaps there has indeed been to much fetishization of manufacturing and the gender bias is certainly worth reflecting on. But it does seem to me that on the whole this article is tilting at windmills. Much of the uproar about the disappearance of industrial capitalism from core western countries is not fuelled by a critique of too much “research and design” or too many “cooks and nurses”. The core issue is the overall dominance of financial capitalism and the fact that a parasitic financial elite has managed to find numerous ways to extract profits from the productive economy without reinvesting those same profits into labour expansive activities that generate employment. GM today makes just as much money from derivatives as it does from actually selling and making cars. There may be high demand for corporate lawyers and creative accountants but only to facilitate the smooth functioning of the financial industry and the flow of rent extracted capital from one tax haven to another. The author has decided to entirely disregard the role of finance and the creation of wealth extracting bullshit jobs in order to attack an imaginary “redneck” who thinks anything short of burly men hammering glowing iron does not constitute a “real job”.

  6. Well sure.
    US share of labor in manufacturing: 9.9%
    Japan: 16.8%
    Germany: 19.8%
    Any explanations why Germany has double the workforce in manufacturing compared to the US? While the Germans were focusing on improving the productivity of their Mittelstand and actively providing subsidies to retrain and improve labor, the US took free markets to their heart and sat on the systematic shift in manufacturing jobs from US to Asia.

    EU Manufacturing exports as a share of global exports have held steady at 23% over last 15 years; US share has declined from 18% to 9%. China on the other hand rose from 5% to 18%. I can go on with more data but are we dealing with some sort of cognitive dissonance here?

  7. Michelle – why are manufacturing exports a goal in themselves? The comment reflects the bias the author describes. A more sensible economic objective – GDP per capita – is 10-20% higher in the US depending on measurement, so it is far from obvious that the US is any worse off by (in relative terms) exporting services and importing manufactures. (But, of course, even GDP per capita is far too narrow a goal in terms of wellbeing which depends on other factors such as health, life expectancy etc…but it is a wider goal than the amount you manufacture).

  8. Dropping the fetish only makes sense if we fix our education system. Unless we train and educate our population, we’re going to have large swaths of men and women, mostly of color but also white idle and not contributing. Call centers will be automated away along with all the other low skill. On manufacturing jobs.

    Typo: remove “have possess”

  9. I think you hit the nail on the head when you mentioned that economies need to be diversified. We shouldn’t run everything on a service economy or a manufacturing economy. I think the question is getting the right balance, and I think that is what gets people so up in arms. We want to see more of every job type, but it feels like we are moving towards a technology-based careers. This is not a bad thing, but change is hard and we should be able to keep some manufacturing jobs for balance in our economy.

  10. I believe the reason we stopped hunting and gathering around 12,000 years ago was that we ran out of food, something agreed by all anthropologists. Previously, life as a hunter-gatherer was not what we might think.

    Twenty hours a week were spent finding food, and our mixed diet was ideal for keeping us healthy.

    We lived in social groups of up to 150, which is the ideal grouping size for humans. It’s also known as “Dunbar’s Number, after Prof Robin Dunbar who worked it out. https://en.wikipedia.org/wiki/Dunbar%27s_number

    Jared Diamond, in his 1987 paper, says farming was “The worst mistake in the history of the human race”, and it’s well worth reading. To call it a mistake is perhaps unfair – we had no choice. If you want to know where our problems today originated, it’s exactly here. http://www.ditext.com/diamond/mistake.html

    And to be really specific, this a good candidate for the first farm: https://www.reading.ac.uk/archaeology/research/Projects/arch-WF16.aspx

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