In economics, students were once taught that the backbone of America’s economy rested on factories–the machines inside of them, and the men and women who ran them.
Even today, the economy is deeply rooted in high-tech machinery to produce the goods that help Americans live their daily lives. In today’s economy, manufacturing only accounts for twelve percent of the entire U.S. economy—but that hardly signifies how important manufacturing is to America.
Most importantly, manufactured goods are essential to trade. According to the World Trade Organization, around eighty percent of trade is in goods and twenty percent is services.
America needs to export more or there will be a growing trade deficit, and for many years, America has been trading goods with other nations–China, Russia, parts of South America, and many other countries.
Services industries also rely heavily on manufactured goods. Service industries depend on manufactured goods for their operation and their technical progress. Industries that create services–like an airline industry–need a manufactured good (e.g. airplanes) to run smoothly and efficiently.
As we hinted at before, economic growth also depends on manufacturing. As technical advances continue to be made in manufacturing, the U.S. is becoming an ideal spot for companies seeking to manufacture specialized goods. Because of the increased productivity in the U.S., the cost of labor is becoming a less significant factor, while cost of energy and materials are becoming bigger and bigger concerns.
One of the biggest hopes for manufacturing, though, is that the world will create strong regions of good manufacturing that will eliminate the possibility of poverty. Manufacturing generates middle-class jobs that anchor the economy.
Manufacturing isn’t just important because it lowers the trade deficit or helps service industries function; manufacturing can also help the economy grow in ways that many don’t think about. And hopefully, the growth of stable economies can reinforce other regions around the world to create more worldwide manufacturing.
In asking why manufacturing matters, it’s essential to weigh in on all aspects of the economy—from helping with trade to creating middle-class jobs. Students in economics classes may not learn as much about manufacturing today as they once did a few decades ago, but that’s hardly an indicator of the immense impact that manufacturing can have, both here in America and around the world.