Defense Implications of Misleading Manufacturing Capacity Data

I’m following up my industrial production post. As calculated by the Federal Reserve, U.S manufacturing capacity today is 82% higher than it was in 1990.

The same pattern shows up in Fed data on individual industries. According to the Fed,  domestic manufacturing capacity in the motor vehicles industry is 66% higher than it was in 1990.  Similarly, the Fed figures suggest that domestic production capacity has risen over the past 20 years in the aerospace, machinery, chemical, electrical equipment, and especially computer industries.

What’s going on here? Both production and capacity are defined in terms of the value of shipments from a plant. That is, from the perspective of the Fed, a factory that makes all the components of a machine in-house is absolutely indistinguishable from a factory that imports all the components and simply assembles them into the final product.

Or, to put it a different way, an aircraft factory that builds all the components of a plane–wings, avionics, seats–is indistinguishable from  a factory that imports the components and ships the assembled plane.

Why does this matter for defense?  The source data  for most of the Fed’s capacity numbers comes from the Census Survey on Capacity Utilization (now quarterly). Here’s the form, and here’s the instructions. Companies are asked to estimate the value of their shipments each quarter, and their full production capability, defined in terms of shipments.

But then manufacturers are also asked for their National Emergency Production. This question was put on the form “at the request of the Department of Defense.”  The manufacturers are told to

Estimate the market value of production for this plant as if it had been operating under national emergency conditions for the quarter .

But here’s the kicker. In estimating national emergency production, the manufacturers are told to assume that

funding, labor, materials, components, utilities, etc. are fully available to you and your suppliers.

As worded, this question makes no distinction between foreign and domestic suppliers. And while Washington may have the ability to impose a national emergency on American plants, the U.S. has no such power over suppliers in China, Mexico, Japan, or any other country. We can’t order Chinese plants onto emergency footing.

As a result, the answer to this question will give a misleading rosy picture of the emergency capabilities of the U.S. manufacturing sector in the case of a natural disaster or major war.

Sometimes bad data is worse than no data…this is one of those times.

Comments

  1. It’s a good thing then that peace has broken out and the interference of hostile and semi-hostile foreign governments is no longer a concern. Right?🙂

  2. Mike Mandel says:

    Right! Just what I was thinking!

  3. Sometimes bad data is better than “good” data, this is one of those times.😉 The idea that the US would face “defense” issues because of a lack of highly commoditized imports is laughable at best. All this saber-rattling is merely an excuse to scam the populace into paying more for those finished goods, by bring more production back onshore at a higher price. The Republicans rattle sabers over Iran to get what they want, you and the Democrats do it over this trumped-up non-issue. The tactics are the same, the only difference is the exact goal. Rather, trade is a great inducement for voters to tell the hawks and protectionists to shut up, as they don’t want to lose business because of these backward-looking dummies.🙂

    • It’s true that the players you name drum up fear for the reasons you name, but that doesn’t mean the threat is necessarily a paper tiger. After all, scare tactics work better when there is an actual grizzly in the room! I remember hearing in the news during the Gulf War 2 that we were severely constrained in the supply of Tomahawk missiles and couldn’t ramp up supply. In Afghanistan, I’ve heard that we’re constrained in our ability to supply armor for our troops (armored vehicles, I believe) because there’s only one company in America who can handle the type of steel involved, and they can’t ramp up production quickly… and the foreign competitors won’t, partially because of political and ideological concerns.

      It’s possible the threat is overblown, but it’s not entirely fabricated. Your biases show strongly here when you call the idea laughable: unless your point is that no one would actually attack the US directly because their military is so large that we only have military issues in offensive actions?

    • The reason the threat is a paper tiger is for the reason I gave: US imports are highly commoditized and easily replaceable. If anything, they would lose far more in their poorer countries than the US would lose from such a blockade, effectively rendering such a threat extremely unlikely. What does the Tomahawk have to do with imports? If foreign steel-producers are boycotting this US armor company, which I doubt since steel is fungible and markets are liquid but let’s assume they are, more power to them. I have no problem with businesses choosing to reign in the dumb impulses of govt and its stupid wars. Precisely what biases show strongly? Perhaps you could name them if they’re so obvious.😉 The US has had almost no attacks in its history because of its unique geographic benefit of occupying most of a continent. I never raised the size of the military as an issue, though it should certainly be drawn down as it’s a huge waste of money. My point was the one I made: it is laughable to suggest the US faces any kind of “defense threat” from such highly commoditized imports.

      • Any product or component isn’t highly commoditized just because it is made from “commodity” raw materials. There are issues of tolerances, manufacturing process, finished material quality (bubbles in cast iron, purity of steel), etc. A lot of general purpose chips are made in foreign factories, and many former US semiconductor manufacturers have offshored or contracted out their fabs. Are computer chips highly commoditized these days? I’d say not.

      • Similar things apply to logistics. You may not have full control over the fleets that bring the foreign manufacture to your shores, or over the transport routes. To a lesser extent, shipping delays may become an issue.

      • My point was to support two ideas: manufacturing capacity matter in warfare (Tomahawk example), and there are at least some examples where imports (in this case armor, not the steel to make armor – source NPR) could not be ramped up to support the US military and where local capacity was too small to scale quickly. These directly refute the argument that all imports are easily replaceable commodities.

        “I have no problem with businesses choosing to reign in the dumb impulses of govt and its stupid wars. ” Businesses can do what they want, but when we calculate what our nation needs, we should take that into account.

        “Precisely what biases show strongly? Perhaps you could name them if they’re so obvious.” Biases against any argument that unlimited individual freedom won’t get a collective group of people an optimal result, or even that measuring the needs of a group separately form the individual make sense at all.

        “My point was the one I made: it is laughable to suggest the US faces any kind of “defense threat” from such highly commoditized imports.” If imports were infinitely replaceable as you suggest, there would be no such issue. But in the short term, that’s not always true.

    • cm, if all it took were commodity raw materials, silicon chips would be largely commodities too.😉 First off, computer chips are a negligible fraction of imports. Second, computer chips are not commodities, but their production is, which is why they’re designed here and produced offshore, often using US-made equipment. If Intel or some fabless company lost their foreign fabs, they would simply move production here (Intel has their research fabs in Oregon, production fabs here in Arizona and elsewhere). So the US would keep pumping out new designs, while the foreign fabs would be stuck without any new equipment or designs, which aren’t commoditized. As for logistics, that’s a trivial addition of another way trade can be affected, when we’ve already been discussing a complete blockade of trade.

      CompEng, of course manufacturing capacity matters in warfare, but since you cannot name a single reason why the Tomahawk was affected by imports, that’s irrelevant. If foreign steel to make the armor wasn’t the problem, now you have two examples that have nothing to do with imports, yet you fantasize that you have refuted arguments regarding imports?🙂 Our nation is not going to be affected by blockades of commoditized imports and you have been unable to make an argument that it will be. I haven’t argued that individual freedom always trumps group desires or that the group can’t be accounted for. In a free market, there are tons of such groups, whether corporations or unions or simply families. I have argued that your notion of a collective super-group of everybody, that you use to argue for dumb concepts like “the public good,” makes no sense at all and leads to parasitic monopolies like the federal govt and state insurance regulators. Imports don’t have to be “infinitely replaceable” to be easily replaceable, thus not a factor.🙂

      • Ajay,

        “foreign steel to make the armor wasn’t the problem, now you have two examples that have nothing to do with imports, yet you fantasize that you have refuted arguments regarding imports? ”
        Come on… read it again. In the mean time, I found a quote supporting what I was trying to remember.

        “Ms. Grassi also pointed out that there is now only one company left in the U.S. that manufactures roller cutters for armored plate or heavy steel, and the only reason this company exists is that when the U.S. military learned that there was an immediate need (due to the war in Iraq) for Humvee armor, it expedited its manufacture. Because of the limited existing manufacturing capability, however, it took almost a year to get the armor plate produced. ”
        I first heard this on NPR, I think, but found another internet source: http://www.thetrumpet.com/index.php?q=2682.1266.0.0

        “I have argued that your notion of a collective super-group of everybody”
        Not sure I ever generalized to that extent! Of course, global warming, if it were proven, and the protection of earth from asteroid a la “Armageddon” (but with actual science) might fall in that category.🙂

        “Imports don’t have to be “infinitely replaceable” to be easily replaceable, thus not a factor.”
        True, but you have an funny view of “easy”. Generally engineers have a decent sense that beyond the idea stage, almost *everything* is a pain in the butt.

      • “If Intel or some fabless company lost their foreign fabs, they would simply move production here”

        How do you “simply” move production here after decades of offshoring, workforce underdevelopment, pushing the old workforce out of the industry, and the same thing with large parts of the industry ecosystem? The old hands and specialty suppliers of yesteryear have not been kept on retainer and have had to move on to other things, physically as well as mentally. If nothing else, they are all 10-20 years older, and there are no new workforces as there has been no domestic industry to work in.

        I used to use a local cab company for airport transportation, and one of the drivers claimed to be an ex semiconductor manufacturing tech who went from one fab closure to the next until all fabs were gone and he “moved on” to driving cabs.

      • “Generally engineers have a decent sense that beyond the idea stage, almost *everything* is a pain in the butt.”

        Yeah, but in order to appreciate that you have to be an engineer.

      • cm,

        //“Generally engineers have a decent sense that beyond the idea stage, almost //*everything* is a pain in the butt.”

        “Yeah, but in order to appreciate that you have to be an engineer.”

        I’m not sure about that, but it doesn’t hurt.🙂

    • CompEng, aah, I see, you said the armor itself couldn’t be imported fast enough, not the steel. However, that’s not what your link says, it merely says the equipment to make the armor, the roller cutters, is not widespread in the US. There is no argument there about how that is affected by imports or that it would be difficult to build many more roller cutters if wanted. What it does point out is that when the Army wanted roller cutters, it “expedited” one, ie they could scale it up or down whenever they wanted. You sure you want to link to a site with a laughably-written article, that then links to “The United States and Britain in Prophecy” at the bottom, helpfully translated into German too?😉 You have used the dumb term “public good,” which is employed in the highly plural way I just described, and that is what I argued against before. Global warming would benefit cold climes, ie most of the world, so try again.😉 I have a very commonly understood view of “easy,” it’s called “commoditized.”🙂

      cm, simple, you ramp up the many local fabs and train up new people to do the same jobs your current fab technicians are doing. You can bring the old hands who remember something back or train up new ones, nothing earth-shattering here. Yes, that makes perfect sense that an ex-fab tech had to resort to driving cabs, that’s about the level of work he was doing as a tech.😉 I realize it might be a big pain in the butt for you engineers who work in large, bureaucratic, and outdated corporations to get anything done, not so much for engineers in startups.🙂

      • The NPR bit was better, explaining the how imports had largely replaced the service of the American company making the armor (which needed the roller cutters), making the ramp up time slow in battlefield terms. You conveniently ignore this point, of course. This was what I could find with a quick google search: take the information, not the paranoid right propaganda attached. Sometimes you need a few zealots around just to watch the things most people don’t *quite* care enough to really keep track of. Then you just have to filter out the garbage.

        “You have used the dumb term “public good,” which is employed in the highly plural way I just described”
        No, in a highly plural degree way about 15 degrees off of what you just described. It’s almost like you understand what someone is saying and then take the dumbest possible, most oversimplified related point as their position.

        “I have a very commonly understood view of “easy,” it’s called “commoditized.” :)”
        Somebody has figured out how to do it, and so it’s “easy”. That explains a lot.

    • CompEng, I can’t conveniently ignore an NPR bit I haven’t seen and that you have not linked to or summarized, till now. So the claim now is that the armor is largely imported from outside factories that use their own roller cutters? I find that hard to believe, considering the market for such armor is highly limited. The ramp up time is slow because the military was too dumb to plan for such armor in the first place, not because it’s supposedly imported. If you’re going to filter out the garbage, you’d have to do so for all of that trumpet post you linked to.😉 So public good is not a highly plural term now? It is you who almost “understand what someone is saying and then take the dumbest possible, most oversimplified related point as their position,” when you take my argument against the stupid concept of a “public good” and then argue that means I’m against all group desires, funny that you would then accuse me of that.🙂 No, commoditized is when someone has figured out how to do it in such a cheap and low-skilled way that even highly unskilled or low-skilled third-world laborers can do it, that’s what’s easy.🙂

      • It is you who almost “understand what someone is saying and then take the dumbest possible, most oversimplified related point as their position”
        I’m really going to have to do a bit more of that and maybe you’ll see what I mean😉

        You said: “So public good is not a highly plural term now?”
        I had said: “No, in a highly plural degree way about 15 degrees off of what you just described”
        What even possesses you to just pick upon one word like that? I admitted speaking in plurality, just not in the wholly overgeneralized and vapid way you imply.

        “No, commoditized is when someone has figured out how to do it in such a cheap and low-skilled way that even highly unskilled or low-skilled third-world laborers can do it, that’s what’s easy. :)”
        Then you apply the word beyond your definition.

        Bah. I should know where to get discussion and where to just get verbal sparring.

    • CompEng, as I noted, you are the one oversimplifying so far. Public good is an overgeneralized term, if you don’t know that, you must not know what word you’re using. Now we’re quibbling about what commoditized means? I note that you are unable to say how it applies beyond the definition, always a sign that someone has no argument and is just “verbally sparring.”🙂

  4. It would be informative to compare the current situation to that of 1941.

    There is a school of thought that FDR forced the Japanese to attach the US by cutting off US exports of scrap steel and other important commodities to them.
    My personal reaction to this thesis is that it just doesnot make much sense.

    But the US was also highly dependent on several imported commodities in 1941 as well. Rubber was a prime example of that and the US suffered severe shortages of rubber in WW II. This was the primary reason that tires were severely rationed during the war. But this severe shortage did not seem to keep the US from manufacturing a massive war machine including millions of vehicles with rubber tires and wiring insulation.

  5. Just another in the long line of misleading government statistics that measure the wrong thing.

    Even if a manufacturer retains the machinery/plant for making their products (and most do not – some, like Rubbermaid, even sold their equipment to the Chinese suppliers who were their outsourcers, for pennies on the dollar) there is the more-important issue of the ‘know how’ to make the product. In most cases, that has been irretrievably lost, especially in A&D. I think the government would be shocked to discover just how little control they would have were they to institute an emergency, only to discover all of the materiel they need is in fact produced offshore in factories they can’t touch or influence. Not only are we overstating our productive capacity, we are vastly overstating the utilization of that capacity also. We know for a fact that multiple shifts were idled at auto plants, for instance, yet the utilization rate didn’t change significantly. Same issue now they are re-instating those shifts.

    Now its true in the A&D world that much spending has been concentrated into fewer programs and most of them are worthless. Really. Take GMD for instance: ballistic missile defense. There are at most 20 interceptors so far deployed, from 2 known launch sites. Also the sea-based equivalent, there are all of 3 cruisers with launch capability. They’ve scaled back the number of F-22’s and F-35s they intend to make because each is so massively expensive. When someone comes at us, it won’t be with one bomber; they have hundreds of low-tech options and we’ll be overwhelmed. The capability exists just about anywhere to build those low-tech devices: think Hizbullah rockets in their thousands. How many multi-million dollar Patriot missiles do you need to shoot all those down? We’ve got no volume capacity, it takes years to build and assemble all this stuff, we couldn’t react anyway. How long did it take to ramp up production of the alternative to the Humvee that is mine resistant (MRAP)? Just about in time for the Iraqi pullout. How many plants make that vehicle? One.

    • Mike Mandel says:

      Your point about volume production is right-on. I’m researching precisely that issue now.

      • What seems to be critically absent is any concept of an ecosystem, complex working relationships built over time, and that the key to flexibility, quick ramp up, and generally absorption of shocks, is redundant capacity at all levels and in all parts of the system (which is at odds with “efficiency” and “lean”).

  6. Yes, what matters is the know-how and I find it laughable that John think it’s “irretrievably lost.”😀 If utilization is in fact overstated, then it should be easier to ramp up, not sure why you brought that up. As for the issue of how current defense money is being spent, that’s a completely different issue, with no real connection to volume capacity. The govt generals are always fighting the last war, hence they cling to cold war weaponry in a guerilla warfare world. We should adapt our tactics to a new time but that has nothing to do with imports.

    Rothbard once said that “War is the health of the state,” funny to see that Republicans aren’t the only ones who can use such dumb war excuses- I doubt any of you identify as a Republican, except possibly for JohnB- to push their pet dumb ideas.

    • “Irretrievably” lost is an exaggeration. But “lost” in some cases is not. And such knowledge does in fact take years and a significant amount of money to replace.

      We may always be fighting the last war, but if you think old-style wars can’t happen, just obsolete your capacity to deal with them and see where that gets you.

    • Clearly you understand nothing about the A&D industry. For some considerable time, the knowledge of the ‘medium technology’ needed to make volume parts has been lost in this country, its all been outsourced. A&D is a small-batch industry for the most part. Ramping that up requires extra tooling. Whilst that can be done, there isn’t much capacity in the tooling supply chain because its specialized work, they only make a couple each time. They’ve lost the skilled engineers and machinists who used to do this stuff. Right now, I’ll also hazard a guess that the majority of design work is being done by non-US citizens. The ones who used to do the design, development, and production are now approaching their 50’s and 60’s, soon to retire or already have, and have not been replaced by younger engineers. There’s plenty of capacity in that from China and India, but it’s of no help here. I’m a former industrial engineer that started off in that industry and am no longer in it. But, the business I am in allows me to still see what is going on. Facts are, the military is not able to ramp up production of anything in a timely manner, and in particular, they struggle with anything higher volume. They can make one or two of stuff to prove a concept, but half the time, the concepts are being done to prove a technological point, not to satisfy a true requirement. This isn’t assembling cars, where you can take people off the street and train them to do their one task in a few days.

      As for your assertion that I’m a Repub, you seem to have an axe to grind and see phantoms where they don’t exist. You couldn’t be more wrong. My interest is as a manufacturing ‘guy’, and I don’t like how things are going in this country in that industry. You need to get out more, and stop reading things into what people are saying that don’t exist to suit your own biases. People like you are truly dangerous.

    • JohnB, if you think new “skilled engineers and machinists” can’t be trained up or diverted from other endeavors, you have a remarkably simplistic understanding of human capability. Design work is being done by non-US citizens who live here or abroad? Either way, I guarantee it’s not even 20%, let alone a majority. Your description of the incompetence of the military, in not being able to ramp up or produce volume, is not exactly an endorsement for them to do more local production.😉 Nobody said it would be as easy as assembling cars, but considering we’re talking about a “small-batch industry for the most part,” it would be fairly trivial to redirect engineers or machinists from elsewhere to those parts if necessary later. “Except possibly” is not an assertion, learn some English. The only people seeing phantoms here are the ones arguing for idiotic war machines, for taxpayers to dump money into more military-industrial boondoogles. Yes, your real interest, and Mike’s, is obviously manufacturing, not defense: you don’t like how manufacturing is being done at lower cost abroad so you two manufacture these dumb reasons to support more higher-price local production. Precisely what are my biases and how am I dangerous? Sounds like you are the one “reading things into what people are saying that don’t exist.” If this country goes down, it won’t be because of war; it’ll be because of all the leeches sucking money off the productive for idiotic military-industrial welfare schemes like these. And you are the only “dangerous” ones pushing that.

      • I have to second John B. Engineering is not “software and bits stuff” where for the most part there are no physical constraints, replication costs are extremely low, and if it doesn’t work you can always push out a patch. In any subject matter that is not trivial, and most areas of engineering qualify for that, getting your chops and hands-on skills takes years, and even for somebody with solid base skills and experience it will take several months. With custom stuff, both manufacturing equipment and process co-evolve with the design. Designers have to know what can be made in practice, with acceptable yields, and manufacturing engineers/techs have to understand what they are making. This is not about training somebody to push a button.

      • And this applies to any custom engineering. Military products are just a special case.

      • Also there is the concept of engineering/manufacturing ecosystems that many people are not getting. A weak metaphor is perhaps a sports team in any ball sport. You cannot just throw some people together and expect them to win games. They have to learn to work with each other, knowing who is good at what, who can be trusted to lead (and to follow!), how to communicate with a given person to get the point across, etc. In an industrial ecosystem the relationships are more complex, but in every successful and nimble industry you have networks of go-to guys, who in turn can call on others to get specific stuff done, and so on.

      • They can’t be trained up to respond to a war situation, which is what the emergency powers require, which would be a few months or less. The issue Mandel makes, is that if the production capacity is abroad in factories we cannot control, we cannot ramp up. Since typically we are doing ‘systems integration’ of components or sub-systems made overseas, if we can’t get the components, adding assembly capacity gets us nowhere other than a short burst via leadtime reduction from inventory already int he pipeline.

        The only reason there is so much more manufacturing outside the US now is because the US companies exported the capabilities to make the products, spent a fortune on training them, and neglected all the people in the US. It was complete and utter labor arbitrage and nothing more. problem is, now we’ve lost the younger generation of engineers who should have been coming up and learning the ropes.

        And its nowhere near 20% of foreign-born engineers doing the designs. It’s way higher. And it’lll be getting nothing but worse over time.

        I’m not advocating we spend more money on the military-industrial complex. Again, you ascribe intentions to me I don’t have. My opinion is, the US is spending way too much money on very few highly technologically complex systems, like GMD and F35 all-purpose jets, when instead it should be focussing on lower tech solutions in greater numbers, which better reflect the true challenges being faced. Those expensive weapon systems are sucking up all the funding and capacity that should be being employed to things like MRAPs, which would support the warfighter on the ground in Iraq or Afghanistan. We can’t win those with a handful of stealth fighters, no matter how much Rummy enjoyed “shock and awe”. China and North Korea have millions of men in uniform. Hizbullah and the Taliban have thousands of guerilla fighters who won’t stand up and fight a conventional war. You can only fight them with better-trained real people.

    • Who’s talking about software? You’re the first one to bring that up and there are plenty of hardware constraints there too. Nobody’s talking about taking software engineers and making them industrial engineers, I’m talking about taking the people who already have those skills, ie the many engineers who work at Lockheed or other related industrial concerns, and repurposing them. The US has such an engineering workforce that is unparalleled in the world, that is its true strength in a time of war. “Co-evolve with the design”? Nobody’s talking about building a completely new weapon like the Manhattan Project, we’re talking about basic “medium technology” tooling and parts. Your team-building stuff is completely irrelevant to our discussion about engineering in a time of war.

      • I didn’t refer to software engineers, but that making hardware (that works) has different constraints, and usually more, than making software.

        As for “medium tech”, I don’t know where you draw the line between that and “high tech”, or what you think modern military equipment is made of.

        The “team” angle was in reference to the concept of an industrial ecosystem. It’s not just about raw skills but relationships, a common culture, mindsets, etc. As industries are run “lean”, cut to the bone, and not backfilled with new staff, these aspects are disappearing and will have to be regrown from scratch. The old veterans of the industry who were run out of the business in one way or another, or will have suffered various disillusionment and/or humiliation, will have mentally moved on or detached themselves, and you cannot expect them to go back to the old days and continue where they left off. This is not specific to “defense” tech but applies in every industry that is past its heyday.

    • JohnB, of course industrial and mechanical engineers from Lockheed or GE could pick up whatever they need in a few months. We can always ramp up because there is always some capacity here and it is easy to build more. You say labor arbitrage like it’s a bad thing.😉 The younger generation of engineers is now doing more productive things, since US manufacturing still leads the world, it just does it with less labor. You didn’t answer if the supposed 20+% of foreign-born engineers were working here or abroad, because all the mid- to high-level design work is done here and that’s nowhere near 20% non-US citizens. You did criticize the GMD before but then argued for more volume capacity, of what you didn’t make clear. I think we’re agreed that the high-cost weapons that the army still buys are largely a waste of money because you can’t fight a modern guerilla-style war with those antiquated weapons, but I’m still skeptical about your vague call for “greater numbers.”

      cm, I see, you didn’t refer to software engineers but were talking about “making software,” got it.😉 As you may have noticed, “medium technology” was in quotes because that was directly taken from one of JohnB’s comments, so your quibble is with him.😉 I think he’s right that it’s mostly medium tech, with some high tech thrown in. However, most of the high-tech work is still done here, so I don’t know why you think that’s relevant. As you yourself note, “relationships” are irrelevant to the defense tech we’re talking about, because people’s minds are awfully focused in a time of war.🙂 The rest is just the usual long whine from you about how various industry is moving abroad. I’ve got a newsflash for you: it doesn’t matter if the laid-off “old veterans” move on because that work is not coming back. That low-value work left for a reason, it’s not valuable enough to do here.

      • Mike Mandel says:

        Ajay

        You say:

        The younger generation of engineers is now doing more productive things, since US manufacturing still leads the world, it just does it with less labor.

        and then you cite the manufacturing productivity statistics. As you know, that’s exactly the problem I’ve been trying to address here….I’m really not sure those stats are correct.

      • I have not looked into the methods behind Mark’s statistics. I know that you claim in other posts that some of that is miscounted, because you say that imported components that are assembled here are then incorrectly included in the total price that is used for the manufacturing stats. Perhaps that is true to some degree but given the low value of the imported components to begin with, I’m skeptical that makes much of a difference in the overall picture.

      • Mike Mandel says:

        Ajay

        You say: “given the low value of the imported components to begin with”,

        That’s precisely the problem. The government statistics measure the dollar value of imports, not the physical quantity. So as the price of imports gets lower, we are importing a larger physical quantity for the same dollar value.

        We don’t know the physical quantity of imports. But if the price of imports is one-third less than the comparable domestic products, then the same dollar value buys 50% more imports than it does domestic goods.

      • “it doesn’t matter if the laid-off “old veterans” move on because that work is not coming back”

        You are missing the point. The topic was ramping up domestic manufacturing (which means the work *would* be coming back, at least for a time). You can either have an industrial ecosystem running on less than full capacity (facilities, equipment, and people, all in well tuned and working condition) or that can be repurposed to produce something else, or you have to build it from scratch. I was commenting on the people aspect of the latter.

      • Mike, it’s irrelevant what the “physical quantity” of imports is, all that matters is the dollar value. Let’s look at some actual numbers. According to this recent chart, imports rose from around $1.5 trillion in 2000 to $2.5 trillion in 2008. According to the second chart in that link, 55% of imports in 2010 were raw goods that are likely used by manufacturing, ie industrial supplies and capital goods. Let’s assume that 55% held over the 8 years from peak to peak, that means manufacturing imports rose from almost $800 billion to $1.4 trillion. Assuming you’re right about these manufacturing imports being improperly included in the total US manufacturing output from the first link, that would mean that rather than manufacturing output increasing by around $400 billion over that period, it actually fell by around $200 billion or around 8.5% of the adjusted total. That’s certainly more than I expected- though all this depends on precisely how much manufacturing output is inflated by improperly including imports, as it’s likely less than the maximum $1.4 trillion I used- but even the maximum of 8.5% is not a hugely significant drop.

        cm, I think you missed your own point.🙂 You said that you were not being “specific to ‘defense’ tech” so I addressed your claim about defense tech, then noted that “the rest” isn’t coming back. You then disingenuously apply that to some other manufacturing that is supposedly coming back. It would be easy to repurpose the vast industrial capacity and workforce in the US to defense work if necessary and the non-defense stuff is never coming back, to repeat what I stated earlier.

  7. Mike Reardon says:

    Even if not a direct conflict with China v. US, but only supportive conflict between other local combatants. The Chinese sphere of influence if they are involved, even as a second actor in a supportive role is going to be felt by all of its neighbors. None of China’s direct neighbors want to disrupt there trade or make it to a later list of scores that need settling.

    The thought that a quick commodity conversion in tech and our other basics over our whole economy can be a simple transfer from those Asian neighbor out to another areas production. Is faluty.

    The cost of another second battle front is not in the budget now, and a transfer of all component and assemble producer is not a budget reality. To heavy a cost supporting a two front warfare and new reinvestment over the base of out domestic infrastructure, has gone the way of America as the industrial arsenal of modern democracy. Its shared with suppliers.

  8. CompEng, “lost” would be an exaggeration also, as there’s nothing magical about these processes, nothing requiring much time or money. It’s about having the brainpower to redesign the process and the resources to recreate it, both of which the US has and most countries don’t. Yes, old-style wars can’t happen, because of the nuclear bomb and other modern weapons. I believe the quote is something like “no nuclear-armed country has ever attacked another one.” So exactly what we should do is obsolete the old capacity and focus on handling guerilla operations only, as the old style is exactly that, obsolete.🙂 We should also draw down our nuclear weapons because being able to destroy the entire planet three times over is quite enough,😉 no need for a hundred. However, we can’t even seem to draw down the obsoleted tanks and jets as the Republicans want to funnel money to the military bases in their districts and you Democrats want to keep your unions plugging away on building that crap. The military is just another “welfare” program used to bribe voters to vote for more govt, as all govt programs turn into, if they don’t start that way in the first place.😉

    Mike R, nothing is coming out of China, that would be an old-style war and that’s not going to happen because China is more scared of how spectacularly they would lose such a war than anything else, which is why they keep projecting military might to hide their weakness. If commodity conversion wouldn’t be easy, please provide a reason why, so far you can’t. As always, please try to compose cogent sentences if you want to be understood, cuz your last paragraph lapses into gibberish.

Trackbacks

  1. […] Michael Mandel explores the defense implications of misleading manufacturing capacity data: “While Washington may have the ability to impose a national emergency on American plants, the U.S. has no such power over suppliers in China, Mexico, Japan, or any other country. We can’t order Chinese plants onto emergency footing.” […]

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