US: Four Revolutions

Many believe that the United States is doing very badly. The proof? The events in Crimea and Syria, places where North American power cannot be found anywhere; a politically divided country unacceptably unequal in the distribution of income; the swift rise of its Chinese rival. The list of things that are not going well for this overwhelmed superpower is even longer — and deceiving. All of these weaknesses exist and some of them are serious: economic inequality, for example. But there are also sectors that are going very well for the U.S. and that are on the way to doing even better. One of them is the manufacturing industry. The combination of low energy prices along with better and more innovative information technology, new materials and robotics will produce a manufacturing revolution that will transform not only the U.S. economy but also affect all of us.

But before going into detail on this, it is useful to keep some facts in mind. According to Martin Baily and Barry Bosworth from the Brookings Institution, in the last 50 years industrial production in the U.S. has grown at the same rate — and sometimes more rapidly — than the economy in its entirety. Therefore, the share of manufacturing in the entire North American economy has remained constant. This finding contradicts the general impression that factories are disappearing. On the contrary, in 2010, the U.S. could boast of the world’s largest industrial sector. Although China just surpassed it, it continues being a manufacturing power. The problem is that this industrial expansion has been made with such advances in productivity that the greatest production has not generated a proportional increase in new jobs. It produces much more, but with fewer workers. Since the year 2000, the U.S. has lost 5.7 million jobs in this sector.

One of the principal reasons was the economic crisis that began in 2008. But another very important reason is that in the United States, the growth of manufacturing has occurred primarily in one field: computers and electronic equipment. Ninety percent of manufacturing unrelated to electronics has been continually decreasing, and its productivity grows much more slowly. Another important fact is that because of its enormous size, since 1980, the U.S. has been importing more manufactured goods than it exports. Additionally, in the last decade, nearly all of what it imports comes from Asia, and especially China. The numbers are spectacular: In 2000, 75 percent of the entire U.S. trade deficit in manufacturing was due to the difference between what it imported and exported to Asia. For 2012, it came to be nearly 100 percent of the deficit. That is, Asia is the only region in the world from where the U.S. imports more manufactured goods than it exports. And if in 2000, only one-third of the deficit in the manufacturing business with Asia was focused on China, in 2012, the deficit related to the Asian giant increased to reach an enormous 72 percent.

According to Baily and Bosworth, all of this is at the point of changing drastically thanks to four revolutions: in energy, robotics, materials, and the use of information technology applied to manufacturing. The U.S. will soon have natural gas prices that will be below average, which will give it a competitive advantage unique to its industries. This is related to the new technologies that allow the extraction of gas and petroleum trapped in shale. The U.S. has the world’s second largest reserves of this resource and has been a pioneer in the development of the techniques to exploit it.

The second revolution is occurring in the automation and robotization of manufacturing plants. The prices for robots are falling, while their precision and the tasks they carry out increase. Naturally, this has serious repercussions for the creation of jobs, as workers are replaced by machines. The revolution in new materials, which combine nanotechnology with biotechnology, opens unusual and very promising possibilities for new products and productive processes, which other countries will not be able to replicate easily. And finally, the widening use of the Internet, “Big Data,” the connection and communication between more and more devices and objects, and 3D printing of designs will also revolutionize manufacturing. Corporations like General Electric are beginning to transfer manufacturing operations from Asia to Silicon Valley (California) in order to take advantage of the proximity to leading corporations in new information technologies. And the savings in transportation costs from Asia, as well as the lower energy costs, will give them a great advantages.

Not everything is going well in the United States, but in some fields, it would be a mistake to suppose that it is a power in decline.