In praise of manufacturing

Ever have someone express something you believe in better than you could yourself, reminding you in the process why you believe it?

This happened to me twice recently, first while reading a Harper’s Magazine article on the U.S. manufacturing industry, and then again while perusing a Statistics Canada report on Canadian manufacturing.

Appearing in the January 2010 issue, the Harper’s Magazine piece was written by Alan Tonelson, a research fellow at the U.S. Business and Industry Council. The article challenges the idea, embraced by some, that America can cease being a manufacturer and thrive instead as a service provider. “For decades, America’s economics and business elites have been confidently assuring their countrymen that the alarming decline of the U.S. manufacturing sector was nothing to worry about,” Tonelson summarized. “They claimed the demise of manufacturing simply heralded the rise of alternatives better suited to modern circumstances–chiefly, the spectacular progress of information technologies and the impressive advances in the psychology and mathematics of finance.”

But that was then, before North America’s production-light economic expansion officially collapsed into the worst worldwide downturn since the Great Depression. “Today, the idea of maintaining genuine American prosperity without a vibrant manufacturing sector stands exposed as a fairy tale,” Tonelson wrote. “Business leaders are beginning to understand that real, self-sustaining recovery and prosperity require a manufacturing base that is not only highly productive and innovative, but is a much larger share of gross domestic product.”

I hope Tonelson will forgive my impertinence, but his entire 3,000 word article can be boiled down to one conclusion: Economic prosperity comes from making things.

But that’s the U.S. Doesn’t apply up here in Canada, right? That’s certainly what some believe. In lockstep with their American cousins, Canadian commentators have long been saying that manufacturing can be outsourced and that we’ll do just fine, thank you very much, as a nation of hamburger flippers and call-centre operators–a change that’s well underway, they add, as information technology and high finance shove a shriveling manufacturing sector off the stage.

Truth is, of course, Canada’s economic prosperity depends on manufacturing as much as–if not more– than on any other component. And, according to a July 2009 Statistics Canada analysis by economists John Baldwin and Ryan Macdonald, our manufacturing sector isn’t in decline, either. In terms of volume of output, they conclude, Canadian manufacturing production as a share of the economy hasn’t changed much in almost half a century.

So why does it often feel like it has? The problem in assessing manufacturing by jobs and dollar measures, Baldwin and Macdonald suggest, is that these don’t accurately capture what’s going on in manufacturing output by volume. As productivity increased, and prices of manufacturing goods fell over the decades, Canadian manufacturing continued to produce. As with Tonelson’s article, the thrust of the paper can be summarized in a few words: Is Canada deindustrializing? No.

The jury’s probably still out on this argument, but it’s welcome news if true, because–while the activists might gripe –there’s simply no better route to wealth creation and prosperity than a robust manufacturing sector that employs knowledge workers as well as traditional labourers, engages academic institutions in meaningful R&D programs, and pioneers new applications to serve new markets.

If you’re reading a business magazine like Canadian Plastics in the first place, chances are you agree. So why bother preaching to the choir? As mentioned above, it’s refreshing sometimes to have people with real facilities for words–Messrs. Tonelson, Baldwin and Macdonald, that is, not yours truly–remind you of what you know to be true. So kudos to StatsCan for suggesting that our manufacturing industry isn’t in long-term decline, and to Tonelson for reminding us why this matters.

Mark Stephen mstephen@canplastics.com