HARPER — RESTORING AMERICAN MANUFACTURING

On October 5, the White House released a 139-page report, "Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States." The report had been originally due to be completed in April, but the deadline was extended, due to the importance of the study and the involvement of the Defense Department, the Commerce Department, the Treasury Department and the White House in researching and writing it.

The report is unclassified (there is a Classified Action Plan which calls for a further Defense Department study on industrial base requirements for military force modernization) and is well-worth reading in its entirety. It is the most comprehensive assessment of the US manufacturing sector by the US Government in 65 years--since President Eisenhower conducted the Solarium Project to prepare for the Cold War. Needless to say, it is not a pretty picture. From 1979-2017, the country lost 7.1 million manufacturing jobs, with more than 5 million lost since 2000.

The report pinpoints many national security vulnerabilities as the result of the out-sourcing of our manufacturing base. Rare earth and other strategic materials vital to defense production, space research and high-tech manufacturing outside the defense sector are all imported. Many vital production facilities for the defense sector rely on one producer, or rely on firms that are facing bankruptcy. STEM education (science, technology, engineering and mathematics) are declining. Highly skilled workers are reaching retirement age, and firms are finding it nearly impossible to recruit and train younger replacements.

The report is a call to arms, for a revival of the nation's manufacturing sector, through improved STEM education, capital investment in choke points, and a launching of apprenticeship programs, to encourage young generation men and women to seek jobs in the manufacturing sector that can provide a middle class standard of living without the need for a four-year college degree and post-graduate degrees....

Sic Semper Tyrannis
HARPER: RESTORING AMERICAN MANUFACTURING

Brian Romanchuk — Services And Production Decisions

One of the problems with many theoretical approaches to the business cycle is that there is an implicit bias towards a manufacturing economy. The modelling of business sector decision making for manufacturing is quite different than for the service sector. This matters, as the developed economies are increasingly services-driven (figure above). For consumer-facing service industries, output is largely demand-driven. This fits much better with the post-Keynesian approach.

This article is discussing a bit of a theoretical puzzle that came up when I was thinking about the next large instalment of business cycle articles. (Once again, my next project after the breakeven inflation analysis book is one on business cycles.) Rather than mess up that discussion with a long digression, I have broken this out into a small stand-alone article. I am not going to argue that what I am discussing is extremely deep, as it is possible to work around. However, we need to keep it in mind when discussing the varying approaches to business cycle analysis.

Bond Economics
Services And Production Decisions
Brian Romanchuk