CHAPTER SIXTEEN

The “Re-Industrialization” of America

WE’LL HEAR MORE AND MORE these next few years about “re-industrializing America,” that is, about restoring the country’s competitive strength and leadership in manufacturing industry. Both major parties were working on re-industrialization planks in their platforms for the 1980 presidential campaign. And there is a similar demand for re-industrialization policies in Japan, Germany, Britain, Sweden, and other developed industrial countries.

It is important, however, to distinguish between two meanings of the slogan. When union leaders and executives in old-line manufacturing industries call for re-industrialization they most commonly mean policies that will maintain traditional blue-collar employment—especially jobs for semiskilled machine operators—in traditional mass-production industries.

But in the United States and in all other highly developed industrial countries, including the more industrialized parts of the Communist bloc, policies aimed at maintaining traditional blue-collar employment are incompatible with another meaning of re-industrialization: the restoration of the country’s international competitiveness to produce and export manufactured goods. On the contrary, the only way for a developed economy such as the United States’ to regain its international competitiveness is to encourage a fairly rapid shrinkage of traditional blue-collar employment.

The reason for this paradox is demography, not technology. Most developed countries are beginning to experience their second major demographic transition in this century. The first one, beginning around the turn of the century and cresting after World War II, was the shift from farming to manufacturing industry as the center of employment.

The movement of large masses from the farm to the plant created the modern blue-collar worker, i.e., the semiskilled machine operator, and with him mass-production industry. Farm labor forces were decimated. Farmers made up 60 percent of the total U.S. work force in 1900, but account for only 3 percent to 4 percent today, while the proportion in Japan dropped from 60 percent as late as 1946 to less than 10 percent today. But the demographic shift enabled both farm output and industrial output to triple or quadruple.

Now the second demographic transition is moving labor massively out of manual work into “knowledge work.” Compared with thirty years ago, only half as many young people in the United States are coming into the labor force with the schooling, expectations, and skills that will lead them into traditional blue-collar work. The squeeze will become even tighter when the “baby bust” children of the sixties and seventies reach working age: Only one third as many potential blue-collar entrants will be available in 1990 as there were in 1950.

The demographic shift in the industrialized countries is inextricably linked to transformations in the developing economies, which are now going through the same transition from farm to city that took place in the developed economies earlier. Thanks to this transition and to a sharp drop in infant mortality since 1950, most developing countries now have a tremendous bulge of young people qualified only for traditional labor-intensive, low-skilled, or semi-skilled, machine work. Even with productivity miracles, there is no way that semiskilled workers in the industrial countries can compete with low-wage labor in countries like Malaysia, Mexico, and mainland China with their 40 percent to 50 percent unemployment rates and their millions of young urban semiskilled workers.

To maintain competitive strength and leadership in manufacturing, whether in competition with Germany and Japan or with the rapidly industrializing countries of the Third World, therefore requires a country like America to gear manufacturing technology to the available labor supply of knowledge workers rather than to the dwindling supply of manual blue-collar workers. It requires shifting manufacturing work from operating machines to programing machines, and indeed to programing plants and processes rather than individual machines or lines.

Most of all, perhaps, it requires a shift in managerial attitude. Labor must be treated not as a cost (a view which is anyhow incompatible with true productivity) but as a resource. For in terms of cost, labor in the developed countries cannot possibly be productive and competitive.

There are three parallel approaches to this kind of re-industrialization. The one that has been attracting the most attention over the last twenty-five years is automation, especially the use of robots, or fully automated machine tools, on the assembly line. Sophisticated robots are already being used in the automobile industry, particularly in the Zama plant of Nissan, the manufacturer of Datsun cars, as well as in some General Motors assembly plants in the United States.

But however spectacular robots may appear to the layman, they are probably a good deal less important than a second approach to re-industrialization: the redesign of entire plants and entire processes as integrated flow systems. This redesign barely affects conventional assembly but totally changes the manufacture of parts and their quality control, which are integrated and constantly calibrated by feedback from the end product. The Japanese TV manufacturers use this approach in their American plants. So does RCA, whose TV plants in the United States are capable of competing with offshore low-wage producers and beating them handsomely.

The third and most important approach to re-industrialization is the integration of the mini-computer and micro-computer into the machine, the tool, the instrument. This development is proceeding so fast and furiously that some observers speak of a “third industrial revolution.” Its impact is fully comparable to that of the fractional horsepower motor one hundred years ago.

Within thirty years the fractional horsepower motor transformed the industrial landscape and made possible today’s manufacturing technology, today’s farming, and today’s household appliances. Similarly, the integration of mini-computer into machine and tool shifts workers from being “semiskilled” blue-collar machine operators to being “semiknowing” white-coated technicians.

Demographic pressures are so great and so irreversible that they will render futile any policy that tries to maintain traditional blue-collar employment in the traditional manufacturing plant. Even in the short run such a policy can only diminish the number of blue-collar jobs, no matter how much money might be spent on creating and maintaining them. For it could only make traditional manufacturing industries less competitive.

The opposite course would be to maximize knowledge jobs, encouraging automation and the shift from blue-collar workers to white-coated technicians and easing the hardships of old blue-collar workers by redundancy planning. The shift to knowledge-based manufacturing is the only way to expand employment in this country without worsening inflation.

But can any politician in any of the developed countries advocate it? The best we can hope for would be a re-industrialization policy that emulates American farm policy since the days of Franklin Roosevelt.

For fifty years now our farm rhetoric has trumpeted as its goal the maintenance of the small-family farmer. But by and large, farm policies have given priority to making farming competitive rather than to protecting inefficient farmers. Or at least our farm policies have confined themselves to paying off the inefficient farmer rather than yielding policy substance to him. Whether the politicians and farm leaders always knew what they were doing, I doubt. But in general they understood the demographic transition and saw it as an opportunity.

Will we likewise use the second demographic transition as an opportunity for a true re-industrialization of America?

(1980)