American Manufacturing: From the Gloriou

American Manufacturing: From the Glorious Peak of the "World's Factory" to the Dilemma of Stagnant Transformation

 

When discussing the development of global manufacturing, the rise and fall of American manufacturing has always been a core topic that cannot be avoided. From its rise driven by the Industrial Revolution in the late 19th century, to becoming the undisputed "World's Factory" in the mid-20th century, and then to the gradual emergence of signs of decline in later periods, the transformation of this industry has not only profoundly impacted the U.S. economic structure, but also reshaped the division of labor in the global industrial chain.

 

In the late 19th century, the United States seized the opportunity of the Second Industrial Revolution. Relying on abundant natural resources, a vast domestic market, and the wave of technological innovation, its manufacturing industry began to develop by leaps and bounds. The steel industry took the lead in making breakthroughs: the Carnegie Steel Company, founded by Andrew Carnegie, significantly reduced steel production costs through technological innovations, and its output once accounted for a quarter of global steel production, laying a solid foundation for the construction of railways, bridges, and high-rise buildings in the United States. At the same time, the automobile industry emerged prominently. The assembly line production model invented by Henry Ford completely changed the manufacturing landscape, turning cars from luxury goods into consumer products for the general public. In 1927, the output of Ford Model T exceeded 15 million units, and the United States thus became the center of the global automobile industry. During World War II, American manufacturing ushered in a period of explosive growth. With its strong production capacity, it provided a large amount of weapons, equipment, and military supplies for the Allied forces. The output value of the manufacturing industry nearly tripled during the war, accounting for more than 50% of the global manufacturing output value at one point, and its status as the "World's Factory" was firmly established.

 

After World War II, American manufacturing entered a golden age of development. It not only maintained its advantages in traditional fields, but also seized the initiative in emerging industries. From the 1950s to the 1960s, industries such as machinery manufacturing, aerospace, and electronics in the United States developed rapidly. The Boeing 707 airliner launched by Boeing opened a new era of civil aviation, and enterprises such as General Electric and Westinghouse Electric took the global lead in power equipment and household appliances. During this period, American manufacturing not only supported the rapid growth of the domestic economy, but also influenced the global market through technology transfer and product exports. "Made in America" became a synonym for high quality and high reliability. A large number of blue-collar workers obtained stable incomes through manufacturing jobs, forming a huge middle class and further promoting the prosperity of the domestic consumer market.

 

However, starting from the 1970s, American manufacturing gradually showed signs of decline, and this trend became increasingly obvious after the 1990s. The first key factor leading to the decline was the "hollowing out" caused by industrial transfer. With the acceleration of economic globalization, American enterprises began to transfer labor-intensive industries to regions such as Asia and Latin America in pursuit of lower labor costs and more relaxed environmental policies. Traditional industries such as textiles, clothing, and toys were the first to move overseas, followed by industries such as auto parts and electronic assembly. Taking the automobile industry as an example, in the 1980s, Japanese cars entered the U.S. market on a large scale with their advantages of fuel efficiency and high cost performance. The market share of American domestic automobile enterprises continued to decline. Traditional auto cities such as Detroit began to witness factory closures and worker layoffs, gradually turning into the "Rust Belt". Although industrial transfer brought short-term profit growth to American enterprises, it also led to a continuous loss of domestic manufacturing jobs - from nearly 20 million manufacturing jobs in 1979 to less than 13 million in 2020. A large number of blue-collar workers lost their sources of income, exacerbating the domestic wealth gap.

 

The second key factor was the insufficient investment in manufacturing caused by the imbalance of the economic structure. After the 1980s, the U.S. economy gradually tilted towards service industries such as finance and technology. Capital tended to flow into the financial sector, which had high returns and short cycles, while investment in manufacturing continued to decrease. Taking R&D investment as an example, the proportion of R&D investment in the U.S. manufacturing industry in GDP dropped from 2.2% in 1980 to 1.6% in 2010, while the profit share of the financial service industry soared from 15% in 1980 to more than 40% in 2007. This imbalance led to the gradual weakening of the U.S. manufacturing industry's advantages in some core technology fields. For instance, in the field of semiconductor manufacturing, the United States accounted for more than 70% of the global semiconductor market in the 1980s. However, by 2023, only Intel, an American enterprise, was among the top five global semiconductor manufacturing enterprises, with a market share of less than 10%. At the same time, the decline of manufacturing also affected the transformation capacity of scientific and technological achievements. A large number of scientific and technological results could not be industrialized domestically, further worsening the decline in the competitiveness of the manufacturing industry.

 

The third key factor was the changes in the global competitive landscape and the fragility of the supply chain. After entering the 21st century, the manufacturing industries of countries such as China and Germany developed rapidly, forming competitive advantages with their own characteristics. Relying on a complete industrial chain and a large production scale, China has become an important base for global manufacturing, ranking first in the world in the output of steel, automobiles, electronics, and other fields. Germany, on the other hand, has maintained its leading position in high-end manufacturing and precision machinery through its "Industry 4.0" strategy. Faced with the intensification of global competition, the shortcomings of the U.S. manufacturing supply chain have gradually become prominent. After the outbreak of the COVID-19 pandemic in 2020, industries such as automobiles and electronics in the United States were caught in a production suspension crisis due to chip shortages, exposing the problem of over-reliance on overseas supply chains. In addition, international trade frictions have also impacted American manufacturing. In recent years, the United States has imposed additional tariffs on China and other countries, leading to increased production costs and hindered exports for some American enterprises, further exacerbating the dilemma of the manufacturing industry.

 

To address the decline of manufacturing, the U.S. government has launched a series of policies since the Obama administration in an attempt to promote "manufacturing reshoring". The Obama administration proposed the "Advanced Manufacturing Partnership" to increase support for emerging industries such as new energy and biomedicine. The Trump administration encouraged enterprises to move their production lines back to the United States through tax cuts and trade protection measures. The Biden administration launched the "CHIPS and Science Act" and the "Inflation Reduction Act", planning to invest hundreds of billions of dollars to support the development of industries such as semiconductors and new energy vehicles. However, the effects of these policies have been unsatisfactory. On the one hand, the labor cost in the United States is relatively high - the average hourly wage in the U.S. manufacturing industry was about $28 in 2023, more than four times that of China - so enterprises have little incentive to reshore. On the other hand, the United States is facing a shortage of skilled manufacturing workers. According to data from the U.S. Bureau of Labor Statistics, the vacancy rate of U.S. manufacturing jobs reached 6.2% in 2023, and some enterprises could not expand production due to difficulties in recruiting workers. In addition, the restructuring of the global supply chain requires long-term investment, and it is difficult to change the situation that American manufacturing relies on overseas supply chains in the short term.

 

Today, American manufacturing is in a critical period of transformation. How to balance manufacturing reshoring with global division of labor, how to increase long-term investment in manufacturing, and how to cultivate high-quality skilled workers have become important issues that the U.S. government and enterprises need to face. The history of the rise and fall of American manufacturing is not only a microcosm of the industrial development of a country, but also provides important enlightenment for the development of global manufacturing: manufacturing is the core of the real economy. Only by maintaining the stable development of manufacturing can we provide solid support for economic growth. In the context of economic globalization, only through technological innovation and industrial chain collaboration can we stand firm in the fierce global competition.