Executive Intelligence Review


Defense Department Report Depicts the Sorry State of U.S. Manufacturing

Nov. 23, 2018 (EIRNS)—If there is any upside to the crazy “China threat” scenario now spewing out from the media and from statements by hysterical U.S. officials, it is the growing focus that has been placed on the dilapidated state of U.S. industry and manufacturing. The September 2018 Defense Department report “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States,” while comprising another screed about the “China threat,” also includes a rather insightful depiction of the destruction of U.S. manufacturing over the last two decades. And, interestingly enough, its Introduction begins with a quote from Treasury Secretary Alexander Hamilton’s 1791 Report on the Subject of Manufactures, in which Hamilton polemicizes that the U.S. requires a domestic industrial basis to supply military manufacturing needs.

“Between 2000 and 2010, over two-thirds of U.S. manufacturing saw production declines in terms of inflation-adjusted output,” the report says.

“While multi-factor productivity in manufacturing grew on an average of 2% per year from 1992-2004, productivity has declined an average of 0.3% per year from 2004 through 2016, implying diminishing economies of scale from inputs including labor, capital equipment, energy, materials and purchased services. Between 2000 and 2010 alone, the U.S. lost over 60,000 manufacturing facilities. While the U.S. has seen an uptick in manufacturing, adding around 380,000 jobs since January 2017, much work remains to be done to remedy years of decline in the sector,”

the report says.

One of the key areas of the decline has been in the manufacture of machine tools.

“Critical to creating modern defense and non-defense products, machine tools impact the entire supply chain and multiple sectors. The U.S. once led the world in the innovation and capacity of its high-end machine tools sector, but U.S. standing has dropped significantly since 2000. Key changes in machine tool consumption affected global patterns of production.”

While here again the report places the blame on China, which now produces 24.7% of machine tools globally, the U.S. also lags behind Japan, Germany, Italy and South Korea in the production of machine tools.

And the period of decline has also taken its toll on the labor force, the report states.

“With the weakening of the U.S. manufacturing sector, the American manufacturing workforce has suffered, with employment peaking in 1979 and job losses accelerating significantly in the 2000s. ... [T]he share of employment attributed to manufacturing has fallen dramatically, from over 30% in the 1950s to less than 10% in 2017. From 1979 to 2017, the U.S. lost 7.1 million manufacturing jobs, 36% of the industry’s workforce, with more than 5 million manufacturing jobs lost since 2000 alone. Job losses have been most pronounced in vital sectors subject to import competition, including primary metals, electronics, chemicals, and machinery. Manufacturing and defense industrial base companies’ inability to hire or retain U.S. workers with the necessary skill sets has led to significant gaps in skilled labor.

“A lack of skilled manufacturing workers and a decreasing number of jobs is destabilizing workforce readiness and leading to skill atrophy. ... [S]uch instability and atrophy further increase the gap between job openings and hires and accentuate the effects of a shrinking workforce, making worker placement more challenging even when labor is needed.”

The report also speaks of the decline of innovation in manufacturing.

“With increased offshoring of manufacturing, many companies have excised their process engineering capabilities, further reducing technical innovation and deterring future investment in next generation manufacturing. Together, these effects jeopardize the ability of Americas manufacturing base to supply innovative products and skilled workers to the industrial base, threatening capabilities needed for national security.”

If these characters would drop their crazy China “blame-game” and begin to place the onus, as President Donald Trump has, on the absolute failure of previous administrations to address these growing problems, this wake-up call could very well lead to the type of paradigm-shift which would open the door to the policies that Lyndon LaRouche has been proposing for at least the last four decades.