Automation Will Accelerate the Return of U.S. Manufacturing

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Posted by: briansittley Comments: 0 0 Post Date: November 2, 2017

In a recent article from Trends eMagazine entitled “China’s Day Never Came” editors there make the point that, despite a 2017 report from PwC projecting that China will become the world’s largest economy “by a significant margin” by 2050, it all depends on how you measure.
PwC uses a measure called “DGP at PPP,” or Gross Domestic Product at Purchasing Power Parity to adjust for price level differences across countries, thus providing what they believe to be a better measure of the volume of goods and services produced.  But Trends argues that according to a different measure that includes market exchange rates, the U.S. economy will still be twice as large as China’s by 2050.
Without drilling down into the economic arcana, and the abstruse nature of Chinese economic data to begin with, it’s interesting to note Trends’ very different conclusions about the growth of the U.S. vis a vis China and others.  In a nutshell, they point to the accelerated return of the U.S. manufacturing sector as among four critical reasons why the U.S. will hold its own in the decades ahead:

  • China’s key advantages – the size of its population and low cost of labor – will erode by the end of the next decade. Thanks in part to the one-child edict of the 1970s, population will begin to decline in 2030.  Meanwhile, wages will continue to rise, and China’s low-cost-leader position will become ever more difficult to maintain.  Already wages in China average about five times those in India, and more elsewhere, according to a recent report by CNBC.
  • Automation will accelerate the return of the U.S. manufacturing industry while causing the decline of China’s manufacturing. This is a big one, according to Trends’ editors.  Robotics and additive (or 3-D) manufacturing are making the U.S. competitive in high-value goods.  Lower costs of distribution from shorter transportation distances and cheap fuel means U.S. companies can now manufacture products for domestic consumption at prices competitive to imports.
  • China’s birth rate will fall while its elderly population will expand. By 2030, one-fifth of Chinese will be over 65.  Consumer spending will lack its expected potential given only one child to support both elderly parents as well as their own families, even with rising wages, putting increased competitive pressure on the Chinese economy.
  • The wealthiest Chinese won’t boost their homeland’s economy, but will move assets to other countries instead. It’s already happening.  In fact, The Wall Street Journal reported in 2014 that nearly two-thirds of ‘high net worth individuals’ polled were already emigrating or planning to do so.

These trends bode well for the strength of the U.S. economy and particularly our manufacturing sector in a global competitive environment.  Once again, automation is helping to lead the way, and if history is any guide, that will only open up still more jobs, not fewer, in the decades ahead.

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