An editorial in the Washington Times by Alan Tonelson, Is Obama’s manufacturing fix too late?, focuses on our diminishing manufacturing capacity. Tonelson is “a research fellow at the U.S. Business and Industry Council, a national business organization whose nearly 1,900 members are mainly small- and medium-sized domestic manufacturers.” Naturally, he is concerned about our manufacturing capacity.
However, we are transitioning away from a manufacturing-based economy to a service-based economy, and that is not so bad a thing. Many years ago, we moved from an agricultural economy to a manufacturing economy. That transition was painful for many, as most transitions are. But in general, it was a good thing.
Let us take a look at a mythical village, as its economy evolves. First, basic needs must be met. Food, water, and shelter. So, we locate our village where there is water, building materials, and cropland. We plant our crops, build our houses and barns, and dig our wells. Well, clothing would certainly be nice, so the women spin yarn and thread from the lambs’ wool, weave cloth, and sew clothes. Perhaps they make jackets and shoes of leather. Some are better at spinning than sewing, or better at knitting than weaving. Division of labor arises, as does trade between the women. The same occurs with the farmers. Some cropland is better for corn, some for wheat, and some for vegetables. So the farmers grow what they best can and trade for what others do better.
Things are going so well with this division of labor that not everyone is needed to grow food. But this prosperity has a downside. Farmers are going out of business because there is too much food. Some whine and complain, others become full-time manufacturers — cobblers, coopers, smiths, carpenters, etc. Still others become merchants — the middlemen between the farmers and manufacturers. This last group is the start of what Adam Smith called “unproductive labor.” He did not mean this in any pejorative sense, only that they did not produce anything. What they do is free up those who do produce so that they can produce more instead of spending their time trading what they produce for what they need or want.
Still others go into the service business. They cut your hair, give you a shave, shine your shoes, etc. There may not be any time-savings involved, but a pedicure sure is nice sometimes.
As our village increases productivity and population, more and more stuff is produced. The village produces plenty of food. Our villagers are getting obese! The general store (run by Sam Walton, of course), carries everything we need or want. Our village has grown to a town, but because of increased productivity, our one cobbler can still produce all the shoes we need, and our one blacksmith can still provide all of the horseshoes our horses need. So what will their children do for work? Some will invent more stuff that we decidee we need. Some will build and maintain storage for our stuff. But the majority will earn their living as servants.
This is not a bad thing, any more than it was bad for farmers to become manufacturers. Many people would rather have that pedicure every month, or have their house cleaned by someone else, than have more stuff.
We need only produce enough food to feed us, and stuff to satisfy our desires. Tonelson is focused on the stuff aspect of wealth, not the comfort aspect. It is a comfort not to have to clean one’s own house. So if one person in ten produces all the food we need, and a second all the stuff we need, what’s the problem with the other eight of us serving one another?