Executive Briefings

U.S. Manufacturing Won't Be Beaten by China - and Here's Why

The conventional view is that manufacturing in the U.S. is in a long-term decline and possible in its death throes, but Hal Sirkin, a senior partner and managing director at the Boston Consulting Group, says that isn't the case.

"We have seen this prediction of U.S. manufacturing's death many, many times. If you go back to the 1970s, we were reading articles all the time about how Japan Inc. was going to take over the world. They were going to bring over televisions, cars, radios and were going to manufacture just about everything. At that point in time, parents were literally sending their kids to school to learn Japanese because that was going to be the new language of the world. Japan, which had lost the war in 1945, by 1975 was going to dominate the world again. And of course what we've seen is that didn't happen.... We saw it again in the 1980s and 1990s when the Asian Tigers were going to dominate the world. The low-cost production facilities in Korea, Taiwan, Hong Kong and Singapore were going to dominate manufacturing. There was going to be a huge cost advantage, and U.S. manufacturing was going to go away. But of course everybody knows that didn't happen either.

"In the current situation, starting in 2001 with China's entry in the WTO, the conventional wisdom was the same -- that China was going to roll up U.S. manufacturing, that we were basically going to become the farmers and bankers of the world and that was what was left. But of course in many ways as we're starting to see now, that hasn't happened, and it's not going to happen. It's because the U.S. economy responds tremendously well to threats. We have a system where our people want to work and they find ways to do this. We have a system in which our companies are forced to get more productive because it's do or die. There aren't state-owned companies in this country. We don't subsidize companies in many ways in this country. And therefore, it's the free market at work. And it does some amazing things.

"So between 1972 and 2010, [production of manufactured goods increased 2.5 times]. We do that with 30 percent less labor, which is an amazing increase in productivity. Our society has gotten incredibly productive. We use our resources very efficiently, and that makes all the difference. That's what's going to cause the change as we start to move from off shore into China to in-sourcing around the world."

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The conventional view is that manufacturing in the U.S. is in a long-term decline and possible in its death throes, but Hal Sirkin, a senior partner and managing director at the Boston Consulting Group, says that isn't the case.

"We have seen this prediction of U.S. manufacturing's death many, many times. If you go back to the 1970s, we were reading articles all the time about how Japan Inc. was going to take over the world. They were going to bring over televisions, cars, radios and were going to manufacture just about everything. At that point in time, parents were literally sending their kids to school to learn Japanese because that was going to be the new language of the world. Japan, which had lost the war in 1945, by 1975 was going to dominate the world again. And of course what we've seen is that didn't happen.... We saw it again in the 1980s and 1990s when the Asian Tigers were going to dominate the world. The low-cost production facilities in Korea, Taiwan, Hong Kong and Singapore were going to dominate manufacturing. There was going to be a huge cost advantage, and U.S. manufacturing was going to go away. But of course everybody knows that didn't happen either.

"In the current situation, starting in 2001 with China's entry in the WTO, the conventional wisdom was the same -- that China was going to roll up U.S. manufacturing, that we were basically going to become the farmers and bankers of the world and that was what was left. But of course in many ways as we're starting to see now, that hasn't happened, and it's not going to happen. It's because the U.S. economy responds tremendously well to threats. We have a system where our people want to work and they find ways to do this. We have a system in which our companies are forced to get more productive because it's do or die. There aren't state-owned companies in this country. We don't subsidize companies in many ways in this country. And therefore, it's the free market at work. And it does some amazing things.

"So between 1972 and 2010, [production of manufactured goods increased 2.5 times]. We do that with 30 percent less labor, which is an amazing increase in productivity. Our society has gotten incredibly productive. We use our resources very efficiently, and that makes all the difference. That's what's going to cause the change as we start to move from off shore into China to in-sourcing around the world."

Read Full Article