The January 22, 2012 NYT article about Apple's jobs, along with Davidson's piece in The Atlantic about automated factories, point the way to a reality that will soon engulf China and other developing nations as much as it has engulfed the US. That reality is that, as with farming, we can now manufacture whatever we want with a very small fraction of the working population. Even the prescient Obama is not coming to grips with this.

I suggest that instead of trying to emulate what many others can do more inexpensively and just as well, instead of pushing to return to a manufacturing base, we as a nation should look to what we do better than anyone else: namely, invent and innovate. We have the cultural orientation, the employment flexibility, the institutional base, and the devotion to freedom of action that foster innovation, and by paying careful attention to the policies that inhibit invention and innovation we can build on those capabilities. We also have the wealth to spend on the necessary education.

Can innovation alone provide work for all? Quite possibly. Although Apple employs few people in the US, its enormous profits support a vast amount of labor providing entertainment, culture, education, and other services to those employees and to Apple's happy stockholders. To properly measure the economic impact of our innovators, we need to count those service providers who depend on the high salaries and profits of innovation. After all, what is America's largest industry? Entertainment.


  1. Interesting idea here that we may be squandering energy trying to fight a battle on ground where other countries have already seized the advantage. And I agree that innovation has always been a comparative strong suit for the U.S., and that we have the frameworks for this to conitinue being so in the future.

    The problem, however, is that innovation isn't worth much economically until it's translated into concrete goods and services that people are willing to pay for. And if we're going to continue relying on other countries for low-cost manufactured goods, we have to have stuff to trade in return.

    To date we're being shielding from the reality of this dynamic becauase we own the U.S. Dollar, which remains the world's primary reserve currency. China and other countries have been willing to go on shipping real goods to us and simply warehousing the dollars they get in return. That's the chronic U.S. trade deficit.

    The days of being able to go on exploiting this deficit are numbered at this point, in my opinion. And when other countries are no longer willing to increase their dollar holdings further, and maybe start trading down dollars because there are not enough U.S. goods they're interested in buying, then the value of the Dollar will decline to the point where "cheap" imports are no longer cheap at all. And we may have degraded our manufacturing infrastructure to the point where we could be surprised at how hard it could be to fill the gap with domestic production.

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    1. When you say that innovation isn't worth much economically, I think you are making a major error. Our current examples of innovation that has occurred since high tech manufacturing went overseas include Apple products, Facebook, Twitter, and various Google things in the high tech arena, and quite a bit of innovation in the automobile, power, and machinery businesses as well. These do not directly employ so many people as such, but indirectly they energize a vast array of services ranging from advertising, financial advice, and packaging design to lawn care and car washes. Because they are high paying jobs, they handsomely support the financial industry, the entertainment industry, and the restaurant and hospitality industry as well. I cannot calculate the economic value of all this, and do not pretend that it compensates for the mass employment of ill-educated people that manufacturing formerly provided. But I am arguing that all countries will soon be facing the same issue, and that we at least have this high value specialty going for us.

      The balance of payments problem is, indeed, a problem. I am encouraged by the fact that all political elements seem to agree on the need to set our federal finances in order. In this respect, I believe that we are doing a lot better than Europe.

  2. Keith,

    I wasn't trying to diminsh the economic value of innovation, but to make the point that the value has to be realized ultimately in the form of real production in sufficient volume untimlately to balance the value of the stuff we consume. "Energizing" services is a good thing, but the end result at some point has to find its way into tradable product or our trading partners will start re-orienting their production elsewhere.

    This imbalance may be so deeply embedded in the real economy now that the adjustment process is not likely to be as simple just getting our finances in order.