You have to be really careful when citing numbers like these.
A typical American "manufacturing" firm primarily does design and supply chain management, with the actual physical task of production and assembly outsourced. So if they can get the foreign production for $100 and they sell the product for $300, then their design and supply chain management is worth $200 and we say that the US has a strong manufacturing base because of that $200 contribution to GDP.
Thus Boeing and Maytag are considered US manufacturers, because they are American companies that produce physical products. But both of these companies outsource most production. But as long as they earn a big spread between their costs of outsourcing and what they sell the finished products for, it will appear as though US manufacturing is strong.
Therefore the US is at incredible risk in its manufacturing base, with the contributions to GDP held together primarily by preventing IP theft. The moment the suppliers can set up their own shop or sell enough IP to local rivals, they will be able to sell the identical good for $150, undercutting the US manufacturer and then they have to either exit the market to some other product line where IP protections are stronger or just go out of business.
That's a good question. The answer is that it drives productivity growth. Most of the economy does not increase in productivity at all. Your haircutter or waiter is not more productive than a haircutter or waiter in the 1800s. But they make much more per hour because of cost-disease as they attach themselves to industries where one hour of labor can produce exponentially more output. So you have 20% of the economy driving basically all of the economic growth and productivity gains, and the wage growth of everyone else is dependent on this 20% doing really well. Therefore some nations, like China, are willing to fight for those manufacturing industries, even as other nations, like the US, think they can maintain advanced status if their workforce consists of marketing executives and baristas. They think IP protections will keep those marketing executives earning huge bonuses and then that will support spending more on each espresso. Long term, this is not a viable plan, even if it works well in the short term.
> 14 million farm workers in 1910. 3 million today. Tragedy?
No, that's productivity gains. But we are still farming and producing that food. The equivalent would be if the US got out of the farming business and turned to designing genetically engineered seeds. Let all those other nations grow food, we will do the high value stuff and outsource the actual growing-of-things. Well, OK, until other nations decide to stop paying licensing fees or switch to their own designs. Then not being able to grow things would really hurt us. Same for not being able to make things and turning to just designing stuff.
When a nation loses their increasing returns to scale industries is when economic growth stops.
Farm workers went from 14m to 3m because farms became much more productive (even more than 14/3, since we produce more agricultural goods too).
Surely you see that having fewer workers because the work is being done someplace far away is not equivalent having fewer workers because we can do more work with fewer.
A typical American "manufacturing" firm primarily does design and supply chain management, with the actual physical task of production and assembly outsourced. So if they can get the foreign production for $100 and they sell the product for $300, then their design and supply chain management is worth $200 and we say that the US has a strong manufacturing base because of that $200 contribution to GDP.
Thus Boeing and Maytag are considered US manufacturers, because they are American companies that produce physical products. But both of these companies outsource most production. But as long as they earn a big spread between their costs of outsourcing and what they sell the finished products for, it will appear as though US manufacturing is strong.
Therefore the US is at incredible risk in its manufacturing base, with the contributions to GDP held together primarily by preventing IP theft. The moment the suppliers can set up their own shop or sell enough IP to local rivals, they will be able to sell the identical good for $150, undercutting the US manufacturer and then they have to either exit the market to some other product line where IP protections are stronger or just go out of business.