Why Manufacturing Generates Wealth

Somewhere in College, a professor went on to tell the class that America had moved on from a manufacturing economhy to a service economy, and while the manufacturing was being exported to other countries, the brains behind the operation remained in America. America, apparently, provided the design and the innovation. This apparently meant that the money was still coming to America. Well, as both England and America have recently discovered, there’s a lot more than a disappearing job market at stake when manufacturing is exported to another country. It appears that manufacturing generates wealth while services are the outcome of wealth.

Manufacturing is Main Source of Innovation and New Design
If you think about it, when you are creating a craft or cleaning a kitchen, or doing anything else, it is while you are doing these tasks that you discover better ways of doing them. If you have never done something, regardless of your book knowledge of it, you seldom come up with anything knew. Think about it for a moment.

More and More Innovation and Design Coming From the East
How have Taiwan and China become the giants they have in recent years? Well, first they established a manufacturing base, then they noticed how things were made, then they improved on them, and then, finally, they started moving towards innovation. Currently, of course, America is still at the leading edge, but with manufacturing ever decreasing, at what point will innovation begin the downward spiral?

Manufacturing Lays Base for Service Industry
As manufacturing products begins to provide both jobs and goods for everybody, basic needs are satisfied and the economy moves on towards a service industry where it is the ‘wants’ rather than the ‘needs’ that are provided for.

When Manufacturing Disappears…
When manufacturing slows down, there are several consequences. The prime one is a loss of jobs. Some of those people will be reabsorbed into other industries if they are young enough, but generally, the older employees are, the more it is difficult to learn new skills and crafts. It takes a period of time to develop expertise and companies believe it a better investment to train the young who will then have longer working years ahead of them. Also, older brains do not learn new technologies as quickly as younger ones. The other issue with absorbing workers displaced through closing down factories is that when this process happens very quickly, there isn’t sufficient time to build up new industries to absorb those.

Service Industries Eventually Collapse as Well
At some point, joblessness affects the ability to pay for the service industries. At that point, the service industries, which are generally more about the luxuries of life, begin to be affected by the lack of discretionary income. This becomes a catch 22 situation. There is no solid manufacturing foundation providing the country with both jobs and the cheaper basic necessities of life, ergo there is less and less discretionary income to buy services, which are generally not the necessities of life. The service industry begins to fail, and now begins to lose jobs as well.

The Basis of Creativity
It has been shown in several studies that creativity is the result of sufficient discretionary income to be able to try out new things combined with the free time to do it. If the population no longer has the extra income to experiment and are exhausted through long working hours and excessive stress, then innovation and creativity begins to vanish.

Full Circle: It All Starts with a Manufacturing Economy
The idea that a country can continue to grow wealth without a solid manufacturing industry needs to be reexamined. Britain has seen a fall from grace as a result of closing her manufacturing facilities and becoming a fully fledged service industry (primarily banking) and her people have gradually slidden into poverty. Germany, with an extremely strong manufacturing sector continues to be the leader in the European economy – which is larger than the American economy. Asia with its massive manufacturing base is rapidly beginning to offer products that are on the cutting edge of innovation. Service economies do not propel countries into wealthy. Service industries are the results of a country having a strong manufacturing sector.