Understanding the distinction between manufacturing and production is crucial for how we leverage technology to revive the economy and create more jobs.
Manufacturing: To make into a product suitable for use.
Production: The creation of utility; esp.: the making of goods available for use.
As the U.S. presidential campaign heats up and unemployment continues to hover above 8 percent, we have been highlighting efforts to revive U.S. manufacturing as a way to put engineers and technicians back to work. What we have come to understand in our reporting is that the next engine of economic growth in the West is about much more than metal bending or the other metaphors associated with the post-World War II industrial boom.
Some economists, such as former Labor Secretary Robert Reich and Christina Romer, former chairwoman of the President Obama’s Council of Economic Advisors, downplay the role of manufacturing in job creation. Romer and others argue that lack of demand, rather than the decline of manufacturing, is the real source of persistently high unemployment. Reich, for his part, points to automation that adds value but shrinks the manufacturing workforce. Few would argue that those manufacturing jobs are coming back.
That is why “production” and its economic benefits are critical to a Western economic revival. We wholeheartedly agree with those who continue to argue that you can’t control what you can’t produce—the operative word here being “produce.”
Manufacturing, argues John Zysman, co-author of the watershed 1987 book Manufacturing Matters: The Myth of the Post-Industry Economy, has evolved to become a subset of production. The words are often assumed to be synonymous, and any debate over their meaning merely an exercise in semantics. In an economic context, however, production takes in much of what is created by the brain as well as the hands.
Zysman provides the example of the crane maker who wants to get into the business of port management, a booming sector in places like China. One way the crane maker might do that is to embed intelligence into his newest crane. The added value increases the chances that the crane maker will get a contract to run a port facility.
Production thus includes the vast service sector and the massive ecosystem that has arisen around delivering services. Services now account for the lion’s share of the U.S. economy; some estimates put it as high as 80 percent of the annual U.S. gross domestic product. The march of networking technology since the beginning of the manufacturing decline in the 1970s means many services can now be delivered via emerging infrastructures like cloud computing. Google and Amazon invest billions in server farms; producers can then leverage the technology to deliver what Zysman and his research colleagues call “cloud-enhanced services.”
In our community discussion about cloud-enhanced services, many readers have provided real-world examples of how the cloud and earlier networks have been leveraged to promote engineering collaboration. These are prime examples of how networks have matured into a new kind of utility that allows both service providers and manufacturers to add value to their products.
It is this capability, not the return of manufacturing jobs from China, that will again allow U.S. companies to compete in the global marketplace. As one contract manufacturer told us, too much money has already been invested in Chinese manufacturing operations to simply pull up stakes and move back to the States; but this same New Jersey manufacturer has been reinvesting in his own domestic operations in hopes of moving up the value chain to higher-volume, flexible manufacturing.
So there is a real distinction between manufacturing and production. Not only does America need to make more stuff, but it also needs to increase production of goods and value-added services that will create the jobs needed to revive U.S. and Western economies.
Value-added production really does promise, as the saying goes, to lift all boats.