In Defense of Making Things: Why Manufacturing Still Matters

A relatively recent International Monetary Fund (IMF) publication is not the only voice that suggests the possibility of achieving prosperity and growth in the modern age without the need to have a strong manufacturing base. Like agriculture before the industrial revolution, “making things” appears to take the back seat as services, and in particular knowledge intensive services that determine “how to make things”, take over as growth drivers. Of course, the trends of progress are irreversible, and “making things” will constitute a shrinking part of employment and, possible value created. The latter will most likely be even truer if one cannot separate perfectly the value of incorporated services, as the knowledge content of the “things made” and the incorporated services build their own complex interactions and grow exponentially. However, as we argue here, there will always be a need to make things (including the occasional spacesuit taking a drive in its interstellar Tesla car). Even as the relationship between physical manufacturing, knowledge and services becomes more blurred, manufacturing will remain an indispensable ingredient of the final product. As pointed out in the literature, the role of manufacturing is and will never be the same for developing and developed countries, performing different roles in both. For developing countries, it will still contribute towards the rapid development of key skills that will complete the skills set of the country, and for developed countries, it will have a mature and symbiotic relationship with services, ensuring the proximity of the know-how and the production of goods that incorporate it, seamless cooperation, and design and service development at the frontier. Within such a setting, measuring the importance of manufacturing through its share in employment or value added may not really capture its contribution to the success of the business ecosystem of any country. The classic study of Dertouzos, Solow and Lester highlighted already decades ago the problem of the thinning production base in the USA, suggesting that even while an economy moves towards becoming a service economy it should not neglect its production base. The latter, the authors note, acquires a symbiotic relationship with services, which are included in the value chains giving rise to opportunities for the growth of services. Decades later, a new research initiative from MIT titled Production in the Innovation Economy, reaffirmed these findings, documenting a relationship that emerges to be very fluid with respect to the attributes that define the relationship between production and services. Neither, moving production to other countries not the emphasis on services harm a priori the ability of an economy to produce and innovate, if a sufficient mass of productive activities that cover a sufficiently diverse array of activities and skills is maintained. The initiative reaffirmed that in all developed countries, but also in the developing countries that have established in the past decades a strong production base, the knowledge and experience that follows when one “makes things” is ultimately a necessary precondition to maintain the ability to further develop the services that concentrate around value chains that include production. In addition, the importance of the production base, not only with respect to its size but also regarding the dispersion among many activities, skills and specializations as well as the ability to interconnect these points of economic activity in a way that encourages the emergence “of the new and unexpected” has been quantified by researchers at Harvard and MIT. Thus, even while its share of overall economic activity declines, as well as its role in the dynamics of output per worker as the IMF report argues (IMF, 2008: ibid.), manufacturing is likely to maintain …