I initially picked up a Vaclav Smil book a few years ago after realising he was a regular on Bill Gates’s recommended reading list. After reading one of his books, I could see why he was so popular with Microsoft’s founder.
So what is this book Made in the USA about?
This is a book that makes you think, are manufacturing jobs important?
The answer is yes, they are. For any country.
This book centers on the basic subject of whether or not it is time to shift our focus away from manufacturing and toward creating an economy based on services and the financial sector.
Vaclav Smil counters this viewpoint, arguing that manufacturing is just as vital to the success of any nation today. U.S. economic decline began when the country allowed China to gain a dominant position in the manufacturing sector. This is why, according to Smil, manufacturing jobs need to be treated with the same importance as they were in the 1940s if America is to regain and strengthen its leadership position.
Made in the USA is Vaclav Smil’s powerful rebuttal of the notion that manufacturing is a relic of pre-digital history and that the loss of American manufacturing is a desirable evolutionary step toward a pure service economy.
In this book, Smil argues that manufacturing is a necessary step in the process of transitioning to a pure service economy.
He contends that a prosperous modern economy cannot exist in the absence of a robust and sophisticated manufacturing sector, as well as the employment that the sector generates.
In contrast to widespread urban legend, the wealth of a nation is not determined by its financial standing, as this kind of money is intangible and inaccessible to most citizens.
Normal people have no use for the large profits that corporations make, but they do have use for steady high salaries, and these high salaries can only be provided if the country can sell what it produces.
If the country can’t sell what it produces, then the country is simply shifting money around, which is not desirable.
The true definition of riches is the production of something where there was before nothing, or the extraction of focused energy from a variety of sources.
So, the book kicks off with a discussion of how America’s robust economy was built on a foundation of incredible technological innovation and industry.
He briefly discusses the pioneering entrepreneurs who invented the radio, cars, computers and microchips, steel, telephones, planes, war equipment and electricity. It’s an interesting look back at the evolution of many different types of innovations and advancements.
Smil is also critical of US high-tech leadership. US companies commercialise a disproportionate share of sophisticated technological items, although the country has a small trade surplus in these high-value commodities.
Most of the semi-conductor sector has gone to Asia [China], and other hi-tech corporations have offshored as much as possible for advantages that appear modest to anybody but shareholders and senior managers.
Apple’s iPhones are made in China. Smil argues that Apple could easily make the iPhone in the US since labor expenses are a small portion of total production costs. Apple’s profit margin would drop from 64% to 50% if it made and sold the iPhone in the US, Smil says. By ‘onshoring’ iPhone manufacture, Apple could keep earning money and create employment at home.
Manufacturing is the core cornerstone and foundation for every country looking to build its economy.
When we manufacture things, we create value.
I love history, innovation and entrepreneurship so this was a fantastic read for me. The writings of Smil always provide a comprehensive look at the subjects they cover. The research is quite in-depth, but presented in a simple style.
I really enjoyed parts of the history, especially the explanation of how during the Great Depression one of the most important investments was made in the country’s infrastructure.
There are several parallels between this book and The Innovators by Walter Isaacson. One major point of differentiation is that Vaclav Smil’s interpretation of the history of innovation and manufacturing in the United States is far simpler to comprehend. Although I enjoy reading what Walter Isaacson has written in The Innovators, I think Vaclav Smil expresses himself more clearly on a number of issues in this book regarding innovation.
This book is nine years old, yet its message is still relevant.
- “Claims about the dematerialisation of modern economies and about a postindustrial world in which manufacturing does not matter are costly misinterpretations of fundamental realities.”
- “China’s ruling party, as firmly in control of the government as ever, attracts foreign companies and enormous direct investment by guaranteeing the stability of a police state and by supplying a docile workforce that labors with minimum rights, commonly for extended hours under severe discipline, and is housed in substandard conditions.”
- “I wrote this book because I wanted to narrate the great, and a truly nation-building, story of US manufacturing—and because I believe that without the preservation and reinvigoration of manufacturing, the United States has little chance to extricate itself from its current economic problems, meet the challenges posed by other large and globally more competitive nations, and remain a dynamic and innovative society for generations to come.”
- An editorialist in the Economist [April 21, 2012] wrote disparagingly about governments clinging “to a romantic belief that manufacturing is superior to services, let alone finance.” I am not endowing manufacturing with any superior attributes, I am simply recognising the obvious: we could obviously do quite well as an affluent civilisation without a myriad of modern services, but our physical and mental well-being, from being able to access food and shelter to receiving health care and having reliable transportation, rests on an assured supply of a myriad of manufactured products. First things first: “superior” is a wrong term to use, but manufacturing [now including its many “service” components] is fundamentally more important than arranging dubious mortgages, investing in even more dubious hedge funds, and boasting about the exploits of a new dog on a Facebook page. Within a decade we will know whether the Facebook route to economic might works—or whether the United States is sinking ever deeper into prolonged economic stagnation. While it can be argued that the past decade does not make a long-term trend, the indications have been worrisome.