Losing industry?

One semi-common comment is that the US, or "the western world", is de-industrializing, or losing industry, or that industry is in decline.

Twofish in a comment to a post at Brad Delong's blog argues that the whole world is de-industrializing.

Actually the reason that industrialization didn't spread in China-19th century is easy to explain. In the early 21st century, we are witnessing a massive worldwide de-industrialization, as capital-intensive industries are being replaced by labor-intensive ones in China.

Look at your shirt. Chances are that it wasn't made in a factory in the Midlands and New England, but rather by hand in China. The reason for this is that China has a lot of people, and this population boom started in the late-1600's.

This idea ignores a couple of important facts.

1 - The value of industrial production in "industrialized western countries" continues to increase.

http://www.geocities.com/timwfowler/industrialproduction.gif

That data is for the US, but the same idea applies to most industrialized countries.

2 - China (and other developing countries) are industrializing. In China's case at a fairly rapid rate.

Yes China's production methods typically are more labor intensive than those in say the US, but its not like China's export industry consists mostly of purely hand crafted items. Factories are going up or expanding all over China. Yes production in more labor intensive developing countries such as China, is growing faster than production in more developed countries. But since the value of industrial production is increasing in both in China and in the rest of the world, it doesn't make a lot of sense to say the world is losing industrial production.

In the developing countries not just the value but the bulk and weight of industrial products is increasing. (That might also be true for developed countries but I'm not sure where to find the stats, and in any case I consider value to be much more important than weight, why should we feel bad if we switch to lighter and/or smaller products if they are equally or more useful than the old items?)

In one sense developed countries are "de-industrializing", in that less people are required to produce manufactured goods. But that just means productivity has grown, not that we are "losing industry to China", let alone that the world as a whole (including China) is losing industry. This is similar (if so far much smaller than) the decline in agricultural labor in the US. We used to employ a large majority of Americans in agriculture, now less than 2% of Americans are farmers, but they produce much more (not just in terms of real value, but even in terms of tonnage).

 

Share this