For the first time ever, labourers were able to purchase cheap goods for themselves. The first factories focused on mass production of cheap goods for the poor. Shoes, for example, were produced for the proletariat — the rich bought made-to-measure shoes. This was different from France, where the government’s mercantilist product standards, designed to uphold quality, ensured that nothing was produced for the poor at all. In France, mercantilism continued to be state policy for much longer than in England. This is the reason why industrialisation took fifty more years to arrive on France’s shores.
J.P. Floru, Heavens on Earth: How To Create Mass Prosperity, quoted by Brian Micklethwait at Samizdata, 2013-03-29.
April 2, 2013
QotD: In praise of cheap, gimcrack, run-of-the-mill manufacturing
Comments Off on QotD: In praise of cheap, gimcrack, run-of-the-mill manufacturing
March 30, 2013
All those manufacturing jobs are never coming back
Tim Worstall explains why this is at the Adam Smith Institute blog:
I’m always rather puzzled by those who shout that we’ve got to bring manufacturing back to the UK. Apparently this will solve all our problems over what to do with dim Northern lads or something. Once they’re all hammering out whippet flanges then we just won’t have a problem with unemployment ever again. The problem with this idea is that modern manufacturing simply doesn’t provide many jobs. And if it were to provide mass employment it would be very badly paid employment too:
Americans working to produce traded goods and services earn, roughly, according to their productivity. If low-skill workers in America aren’t much more productive in manufacture of traded goods and services than low-skill workers in China, then they can’t earn much more than workers in China while being employed in manufacture of traded goods and services. They can earn a rich-world wage in production of non-traded goods and services, like sandwiches and haircuts, so long as there is sufficient local demand. In other words, the only way to get less-skilled Americans a good wage in a manufacturing industry is to significantly raise their skill and productivity level. If that can’t be accomplished, they can only hope to find good wages in non-traded industries. At least, that is, until wages of less-skilled workers across the developing world come much closer to converging with those in America.
Of course, that’s all about America but the same logic pertains here as well. Chinese manufacturing wages are around $6,000 a year at present. Meaning that if we had mass employment in manufacturing, as they do, then wages would need to be around that level. Or, alternatively, UK based manufacturing would have to be much more productive to support higher wages. And “more productive” is the same as saying “uses less labour”. Thus you can have few well paid jobs (in the Rolls Royces etc of this world) or you can have many badly paid jobs (Shenzen). It isn’t actually possible to mix and match between the two.
Comments Off on All those manufacturing jobs are never coming back
March 19, 2013
Sifting through the 3D printing hype
At The Register, Professor James Woudhuysen looks at the gap between the breathless hype about 3D printing and the current and near-term technological, political, and legal limitations:
3D printing, otherwise known as additive manufacturing, is a subject that pumps out enthusiasts faster than any real-life 3D printer can churn out products.
In conventional machining, computer-aided design and computer-aided manufacturing (CADCAM) combine to make products or parts of products by cutting away at, drilling and otherwise manhandling materials. With 3D printing, CADCAM works with product scanners, other bits of IT and special plastics and metals to build products up, whether through the squirts of an inkjet-like device or the sintering of metal powder by lasers or electron beams.
Rather in the same way, America’s somewhat self-conscious Maker Movement — several thousand DIY fans out to revive manufacturing through the web and from the privacy of their own garages — promotes 3D printing with layer upon layer of hype.
It’s true that 3D printing has its good points. Without having to engage in expensive retooling, a 3D printer can easily be reprogrammed to make variations on a basic product — good for dental crowns, for example. 3D printing can also make intricate products with designs that cannot be emulated by conventional, “subtractive” techniques.
[. . .]
Despite all this, those who blithely proclaim that 3D printing brings a revolution to manufacturing make a mistake. 3D printing does not represent a pervasive, durable and penetrating transformation of the dynamics and status of manufacturing. Nor, as The Economist newspaper has proposed, is its emergence akin to the birth of the printing press (1450), the steam engine (1750) or the transistor (1950). There is much to celebrate about 3D printing, and even its too-fervent advocates at least represent a reasonable desire to produce new kinds of things in new kinds of ways. Yet what characterises 3D printing is how, as with other powerful technologies today, it need only barely arrive on the world economic stage for zealots to overrate it, and for others to turn it into an object of fear.
Comments Off on Sifting through the 3D printing hype
February 22, 2013
Ford’s wage-doubling myth
In the Financial Post, Philip Cross explains the myth and reality of Ford’s famous wage-doubling ploy:
Start with the premise that Ford raised wages to increase purchasing power. As the Fortune article documents, before raising wages, Ford already had doubled output of the Model T with his innovative use of the moving assembly line, without adding to employment. The moving assembly line is what Ford deserves accolades for. To get an idea of how revolutionary it was, Ford built just over a quarter of a million cars in 1914, as much as the rest of the industry combined, but with 80% fewer workers. In other words, productivity already had doubled, allowing Ford to double wages without increasing labour costs.
And he needed to raise wages. Employee turnover at the Highland Park Model T assembly plant hit 370% in the year before the wage increase, clearly symptomatic of a dysfunctional internal labour market. That means Ford incurred the cost of hiring 52,000 people in 1913 to fill 14,000 jobs. The real reason Ford hiked wages was to reduce the cost of this turnover, not a soft-hearted desire to transfer purchasing power from management Scrooges to the Cratchits of the world.
The plan worked like a charm, as turnover plunged to 16% after wages were doubled, reducing labour costs despite the wage hike. Saying he did it to raise purchasing power was just good public relations. Who wants to advertise that their workplace was so disagreeable they could not keep workers for more than a few weeks at a time?
[. . .]
Ford is still reaping good publicity from the notion its founder spread joy and good cheer in the workplace by raising wages. Its website marvels that “newspapers from all the world reported the story as an extraordinary gesture of goodwill.” The universal appeal of this fable, repeated today by gullible journalists like those at Fortune, is probably because it feeds everyone’s fantasy that one day you’ll show up at work and get that long overdue raise, without your firm compromising its competitive position.
Comments Off on Ford’s wage-doubling myth
December 7, 2012
No, we’re not running out of phosphorus (phosphate) and potassium (potash)
The most recent outbreak of the-sky-is-falling, we’re-at-peak-whatever panic mongering is debunked by Vaclav Smil:
Jeremy Grantham, a well-known presence in the financial world, recently published a World View column in the journal Nature in which he concludes that, “simply, we are running out” of almost all commodities whose consumption sustains modern civilization. There is nothing new about such claims, and since the emergence of a vocal global peak oil movement during the late 1990s, many other minerals have been added to the endangered list. Indeed, there is now a book called Peak Everything. What makes Grantham’s column – published under the alarmist headline “Be Persuasive. Be Brave. Be Arrested (If Necessary)” – worth noticing, and deconstructing, is that he puts his claims in terms more suitable for tabloids than for one of the world’s oldest and most prestigious scientific weekly magazines.
His direst example is “the impending shortage of two fertilizers: phosphorus (phosphate) and potassium (potash). These two elements cannot be made, cannot be substituted, are necessary to grow all life forms, and are mined and depleted. It’s a scary set of statements…. What happens when these fertilizers run out is a question I can’t get satisfactorily answered and, believe me, I have tried.” Well, he could have tried just a bit harder: an Internet search would have led him, in mere seconds, to “World Phosphate Rock Reserves and Resources,” a study published in 2010 by the International Fertilizer Development Center (IFDC) and funded by the U.S. Agency for International Development.
This detailed assessment of the world’s phosphate reserves (that are the part of a wider category of resources that is recoverable with existing techniques and at acceptable cost) concluded that they are adequate to produce fertilizer for the next 300 to 400 years. As with all mineral resource appraisals (be they of crude oil or rare earths), the study’s conclusions can be criticized and questioned, and the statement by the Global Phosphorus Research Initiative is perhaps the best document of that kind. But even the most conservative interpretation of IFDC’s assessment shows that phosphates have a reserve/production ratio well in excess of 100 years, higher than that of many other critical mineral resources.
Comments Off on No, we’re not running out of phosphorus (phosphate) and potassium (potash)
November 17, 2012
“3D printing will be bigger than the web”
While I’m not quite willing to go as far as Chris Anderson (quoted above), I do think 3D printing is going to be a fantastic development in our very-near future:
Chris Anderson has exited one of the top jobs in publishing — Editor-in-Chief of Wired magazine — to pursue the life of an entrepreneur, making a big bet that 3D printers represent a massive new phase of the industrial revolution.
He spoke at a Wired “Culturazzi” event, at the Marriott Union Square and to sign copies of his latest book: Makers: The New Industrial Revolution.
Mr Anderson is always an excellent speaker and his talk covered the beginnings of the Industrial Revolution, which he picked out as the invention of the Spinning Jenny in 1764 — a hand powered machine for spinning yarn.
I’d have pinned the start of the Industrial Revolution to the invention of the steam engine and its ability to power large numbers of machines thus enabling the first factories — which represented aggregated labor energy. Scale makes factories viable.
But I can see why Mr Anderson would favor the Spinning Jenny as it was a high-tech machine that was kept in a home — just as 3D printers are home based, completing a neat cycle of history.
Comments Off on “3D printing will be bigger than the web”
November 15, 2012
I, Pencil: The Movie
A film from the Competitive Enterprise Institute, adapted from the 1958 essay by Leonard E. Read. For more about I, Pencil, visit www.ipencilmovie.org
Comments Off on I, Pencil: The Movie
November 14, 2012
The “manufacturing fetish”
John Kay talks about the widespread belief that only manufacturing is “real” in terms of what a national economy produces:
Manufacturing fetishism — the idea that manufacturing is the central economic activity and everything else is somehow subordinate — is deeply ingrained in human thinking. The perception that only tangible objects represent real wealth and only physical labour real work was probably formed in the days when economic activity was the constant search for food, fuel and shelter.
A particularly silly expression of manufacturing fetishism can be heard from the many business people who equate wealth creation with private sector production. They applaud the activities of making the pills you pop and processing the popcorn you eat in the interval. The doctors who prescribe the pills, the scientists who establish that the pills work, the actors who draw you to the performance and the writers whose works they bring to life; these are all somehow parasitic on the pill grinders and corn poppers.
When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.
Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world. But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services.
[. . .]
Most unskilled jobs in developed countries are necessarily in personal services. Workers in China can assemble your iPhone but they cannot serve you lunch, collect your refuse or bathe your grandmother. Anyone who thinks these are not “real jobs” does not understand the labour they involve. There is a subtle gender issue here: work that has historically mostly been undertaken by women at home — like care and cooking — struggles to be regarded as “real work”.
Comments Off on The “manufacturing fetish”
October 19, 2012
Vegemite: it’s not just Australian for Marmite
BBC News celebrates the 90th birthday of that uniquely Australian spread, Vegemite:
Vegemite and Marmite
Photo via Wikimedia
Vegemite started as a wartime substitute for Marmite, but it’s now as symbolic of Australia as Sydney Harbour Bridge and the koala. How did this salty spread become so popular?
What’s the link between German U-boats, the beer industry, processed cheese and the Men At Work’s 1983 hit, Down Under?
The answer is, they all played a part in turning Vegemite from a humble yeast spread into an Australian icon. Stop any Aussie on any street, anywhere in the world, and they will have a view on Vegemite – for, or against.
Now, on the eve of its 90th birthday, the first official history has just been published. The Man Who Invented Vegemite is written by Jamie Callister, grandson of the man who created it.
[…]
Walker put Callister on the case in 1923, and by the end of the year, the pair were confident they had a finished product. Walker decided to launch a competition so the public could name it and claim a £50 prize. Hundreds entered and it was Walker’s daughter Sheila who pulled the word Vegemite out of a hat.
Like the product itself, the name stuck. But sales were sluggish.
Walker had heard about an ingenious Canadian called James Kraft, who had perfected what came to be known as processed cheese. It was a sensation, as it allowed people who couldn’t afford fridges to store cheese for much longer periods.
In 1924, Walker met Kraft in Chicago. The two men got on well and Walker persuaded Kraft to grant him rights to sell his cheeses in Australia.
[…]
As World War II unfolded, Vegemite became associated with the national interest. Posters put up in Australia had pictures of it with the slogan, “Vegemite: Keeping fighting men fighting fit.”
For Vegemite, the war was a turning point, marking its entry deep into the hearts and consciousness of the Australian public.
Comments Off on Vegemite: it’s not just Australian for Marmite
September 11, 2012
Manufacturers may follow the music industry pattern
An interesting article in The Economist:
As an expert on intellectual property, Mr Weinberg has produced a white paper that documents the likely course of 3D-printing’s development — and how the technology could be affected by patent and copyright law. He is far from sanguine about its prospects. His main fear is that the fledgling technology could have its wings clipped by traditional manufacturers, who will doubtless view it as a threat to their livelihoods, and do all in their powers to nobble it. Because of a 3D printer’s ability to make perfect replicas, they will probably try to brand it a piracy machine.
[. . .]
As with any disruptive technology — from the printing press to the photocopier and the personal computer — 3D printing is going to upset existing manufacturers, who are bound to see it as a threat to their traditional way of doing business. And as 3D printing proliferates, the incumbents will almost certainly demand protection from upstarts with low cost of entry to their markets.
Manufacturers are likely to behave much like the record industry did when its own business model — based on selling pricey CD albums that few music fans wanted instead of cheap single tracks they craved — came under attack from file-swapping technology and MP3 software. The manufacturers’ most likely recourse will be to embrace copyright, rather than patent, law, because many of their patents will have expired. Patents apply for only 20 years while copyright continues for 70 years after the creator’s death.
[. . .]
In that, the record industry was remarkably successful. Today, websites and ISPs have to block or remove infringing material whenever they receive a DMCA takedown notice from a copyright holder — something that happens more often than actually justified. Google reckons that more than a third of the DMCA notices it has received over the years have turned out to be bogus copyright claims. Over a half were from companies trying to restrict competing businesses rather than law-breakers.
Rallying under the banner of piracy and theft, established manufacturers could likewise seek to get the doctrine of “contributory infringement” included in some expanded object-copyright law as a way of crippling the personal-manufacturing movement before it eats their lunch. Being free to sue websites that host 3D design files as “havens of piracy” would save them the time and money of having to prosecute thousands of individuals with a 3D printer churning out copies at home.
Comments Off on Manufacturers may follow the music industry pattern
September 8, 2012
Gamers are not superstitious (all the time) about their “lucky dice”
Many gamers are highly protective of the “lucky D20” they use for certain die rolls. In some cases, that’s not superstition at all, it’s taking advantage of a manufacturing flaw in polyhedral dice:
One of the biggest manufacturers of RPG dice is a company called Chessex. They make a huge variety of dice, in all kinds of different colors and styles. These dice are put through rock tumblers that give them smooth edges and a shiny finish, so they look great. Like many RPG fans, I own a bunch of them.
I also own a set of GameScience dice. They’re not polished, painted or smoothed, so they’re supposed to roll better than Chessex dice, producing results closer to true random. I like them, but mostly because they don’t roll too far, and their sharp edges look cool. I couldn’t tell you if they truly produce more random results.
But the good folks over at the Awesome Dice Blog can. They recently completed a massive test between a Chessex d20 and a GameScience d20, rolling each over 10,000 times, by hand, to determine which rolls closer to true.
In a video from a few years back, Lou Zocchi explains why his dice are the best quality in the business:
Comments Off on Gamers are not superstitious (all the time) about their “lucky dice”
August 12, 2012
The (long awaited) growth in Indian manufacturing
The Economist on the relatively slow development of India’s manufacturing sector:
If India is to become “the next China” — a manufacturing powerhouse — it is taking its time about it. “We have to industrialise India, and as rapidly as possible,” said the country’s first prime minister, Jawaharlal Nehru, in 1951. Politicians have tried everything since, including Soviet-style planning. But India seems to prefer growing crops and selling services to making things you can drop on your foot.
Manufacturing is still just 15% of output (see chart), far below Asian norms. India needs a big manufacturing base. No major country has grown rich without one and nothing else is likely to absorb the labour of the 250m youngsters set to reach working age in the next 15 years. But it can seem a remote prospect. In July power cuts plunged an area in which over 600m people live into darkness, reminding investors that India’s infrastructure is not wholly reliable. And workers boiled over at a car factory run by Maruti Suzuki. Almost 100 people were injured and the plant was torched. The charred body of a human-resources chief was found in the ashes.
Yet not all is farce and tragedy. Take Pune in west India, a booming industrial hub that has won the steely hearts of Germany’s car firms. Inside a $700m Volkswagen plant on the city’s outskirts, laser-wielding robots test car frames’ dimensions and a giant conveyor belt slips by, with sprung-wood surfaces to protect workers’ knees. It is “probably the cheapest factory we have worldwide”, says John Chacko, VW’s boss in India. In time it could become an export hub. Nearby, in the distance it takes a Polo to get to 60mph, is a plant owned by Mercedes-Benz.
The initial demand for a domestic manufacturing base was more political than economic: it would serve to reinforce the newly won independence of India by showing that India could make its own goods rather than importing from the UK or other major manufacturing nations. It was also economic, in that it would provide relatively high-paying jobs for India’s rapidly urbanizing population.
Ironically, now that the manufacturing sector seems to be on the upswing, the one thing it isn’t going to do for India is provide lots and lots of jobs: as with the rest of the world, manufacturing “things” is being done with fewer workers every year (even when the total output increases, fewer workers are needed to produce that output).
Comments Off on The (long awaited) growth in Indian manufacturing
May 9, 2012
Stephen Gordon explains that Dutch Disease is merely “economic hypochondria”
Politicians and newspaper columnists have a fetish about manufacturing. In the Globe and Mail Economy Lab, Stephen Gordon explains why it’s not the crisis we’re constantly being told it is:
The appreciating Canadian dollar has little to do with the decline in manufacturing; employment has been declining worldwide for decades. Changes in relative prices are more important. Producer prices for manufactured goods have increased by about 15 per cent since 2002, while the Bank of Canada’s commodity price index has more than doubled. Any attempt to promote manufacturing exports by depreciating the dollar is doomed to fail, since a lower Canadian dollar will also benefit resource exporters. Capital and labour will always move from sectors where prices are soft to sectors where demand is strong, regardless of what the exchange rate is doing.
But what about those 500,000 lost jobs? An underappreciated fact of the Canadian labour market is the size of the flows in and out of employment. More than 100,000 workers are laid off every month, and even more are hired. Before the recession, the fall in employment manufacturing was largely the result of attrition — workers who quit were not replaced. The loss of 500,000 manufacturing jobs since 2002 has been more than offset by the creation of 2.5 million jobs in other sectors.
[. . .]
Penalizing exports of raw resources could create processing jobs, but those gains will be more than offset by losses elsewhere. If processing in Canada were profitable under world prices, no government intervention would be necessary. The only way policy can generate significantly more processing jobs is by forcing producers of raw materials to accept lower prices or by forcing provincial governments to accept lower royalties. This would be a simple redistribution of income if production is held constant. But it is much more likely that producers would respond to these lower prices by reducing output. Total output and income would fall.
[. . .]
The shift away from manufacturing is part of a process that has increased incomes across Canada. “Dutch disease” is not a problem that needs solving.
Comments Off on Stephen Gordon explains that Dutch Disease is merely “economic hypochondria”
April 8, 2012
The Military-Industrial Complex lives
From Strategy Page, where the US Army doesn’t want any more tanks right now, but the politicians (and their crony capitalist “friends”) want the tanks to continue to be built and upgraded:
The U.S. Army is fighting the politicians to avoid having to buy more M-1 tanks, or upgrade some older ones that do not need upgrades. What it comes down to is that the politicians want to keep the only American tank manufacturing plant open. It’s all about political posturing, votes and getting reelected. But the army wants to spend its shrinking budgets on things that will save lives in the next battle. At stake is several billion dollars. The generals cannot openly say that this is about buying votes versus buying lives, but that’s what it comes down to.
So far, over 9,000 American M-1 tanks have been produced and most of them subsequently updated at least once. But the army, seeking to save a billion dollars, wants to close the plant that builds and modifies the M-1. The closure would be for three years, and when it was reopened there would be a backlog of upgrades and parts orders to fill to keep the plant open until, perhaps, an M-1 replacement comes along. At the moment the generals do not have any firm plans for an M-1 replacement.
Politicians and the operators of the plant want to keep the plant open in order to save jobs, votes, and operating profits. This is basically a largely political decision that involves getting the money (from the taxpayers) to stay open by pretending that the army wants this. But the army leadership has not cooperated and has openly opposed this plan. How long the plant will remain in business is uncertain, as is the future of the M-1 tank.
Comments Off on The Military-Industrial Complex lives
February 5, 2012
This is where all the manufacturing jobs have gone
Jackart explains that they’ve not so much been “outsourced” as they’ve been compressed, optimized, economized, and made more efficient. Fewer workers are now required to produced more things, and this is unequivocally a good thing:
A small cadre of highly skilled professionals do the jobs with enormous machines once done by vast armies of peasant labourers; which is what’s happening to manufacturing. British industrial production is rising barring recessionary glitches, UK industrial production has kept rising for most of the last 100 years. We are still producing lots of things that can be dropped on a foot. It’s just it’s no longer done by the descendants of those peasants who left the land during the industrial revolution to seek work in factories. Those factories still exist, but they employ a small number of highly paid people to operate machines which do the riveting, welding, assembling and polishing. Each machine takes does the job of hundreds of people.
That’s what happened in Agriculture, and is happening in Manufacturing. And THIS IS A GOOD THING. Because all those people not employed in riveting in Tyneside shipyards or Scything Lincolnshire corn fields are employed doing something else for someone else. All that productive labour has been freed, but we’re still getting the food produced, in abundance the Lincolnshire harvestman would have thought impossible.
The majority of Western economies are now services. Even the Germans, who’ve a niche in Machine tools and Automobiles have only 21% of their economy in making things they can drop on their feet.
And this reflects another point. Manufactured products are getting cheaper, so to have material wealth unimaginable to our Lincolnshire harvestman requires far fewer hours of Labour to achieve. Thus cars, the most expensive manufactured products most of us buy, are getting cheaper relative to average earnings, decade by decade. A reliable runaround would have been beyond the means of a WW2 factory worker, but is available to a cleaning lady now. So the same car forms a smaller part of the economy. Having spent less on the car, we can spend more on clothes, shoes, music, computers, kitchen appliances etc, and in so doing provide jobs to people supplying those things. Above all we can pay for people do do things for us – cut our hair, serve us food in restaurants, mediate for us legally, invest our surplus production into other productive activities, heal our illnesses and so on.
[. . .]
The next challenge is to banish stress and misery from our lives. I suspect this will be harder. The only caveat is that I have a great deal more faith in Adam Smith’s “invisible hand” (a much maligned and misunderstood idea) than the idiotic ideas of politicians. Politicians still seem to think manufacturing jobs are special, which suggests they don’t understand why we’re rich. The only limitless resource is man’s ingenuity. Markets aren’t an ideology, they’re simply what works in the absence of one, by deploying that one limitless resource to everyone’s benefit.
Comments Off on This is where all the manufacturing jobs have gone
