[p2p-research] The Future of Manufacturing in the U.S.

[Kevin Carson]

  Sent to you by Kevin Carson via Google Reader: The Future of
Manufacturing in the U.S. via oftwominds by noreply at blogger.com
(Charles Hugh Smith) on 2/5/10
Hoping that old jobs return is a doomed project; we must look ahead to
new modes of production and creating value.
Frequent contributor Michael Goodfellow responded to The Wal-Mart Model
of Self-Destruction: Lowest Prices, Always (January 24, 2010) with this
story on the future of small-scale manufacturing: In the Next
Industrial Revolution, Atoms Are the New Bits (Wired.com) .

His point was that to bemoan the loss of old large-scale manufacturing
jobs was not productive compared to forward-looking models such as
the "workbench" production and crowd-sourcing/out-sourcing described in
the Wired article.

What I find radically appealing is not so much the technical aspects of
desktop/workbench production of parts which were once out of financial
reach of small entrepreneurs--though that revolution is the enabling
technology--it is the possibility that entrepreneurs can own the means
of production without resorting to vulture/bank investors/loans.

Anyone who has been involved in a tech startup knows the drill--in
years past, a tech startup required millions of dollars to develop a
new product or the IP (intellectual property). To raise the capital
required, the entrepreneurs had to sell their souls (and company) to
venture capital (vulture capital) "investors" who simply took ORPM
(other rich people's money) and put it to work, taking much of the
value of new promising companies in trade for their scarce and costly
capital.

The only alternative were banks, who generally shunned "speculative
investments" (unless they were in the billions and related to
derivatives, heh).

So entrepreneurs came up with the ideas and did all the hard work, and
then vulture capital swooped in to rake off the profits, all the while
crying bitter tears about the great risks they were taking with other
rich people's spare cash.

Now that these production tools are within reach of small
entrepreneurs, the vulture capital machine will find less
entrepreneural fodder to exploit. The entrepreneurs themselves can
own/rent the means of production.

That is a fine old Marxist phrase for the tools and plant which create
value and wealth. Own that and you create your own wealth.

In the post-industrial economies of the West and Asia, distribution
channels acted as means of wealth creation as well: you want to make
money selling books or music, for instance, well, you had to sell your
product to the owners of the distribution channels: the record labels,
film distributors, book publishers and retail cartels, all of whom sold
product through reviews and adverts in the mainstream media (another
cartel).

The barriers to entry were incredibly high. It took individuals of
immense wealth (Spielberg, et al.) to create a new film studio from
scratch (DreamWorks) a few years ago. Now any artist can sell their
music/books via the Web, completely bypassing the gatekeepers and
distribution channels.

In a great irony, publishers and labels are now turning to the Web to
sell their product. If all they have is the Web, then what value can
they add? I fully expect filmakers to go directly to the audience via
the Web in coming years and bypass the entire film distribution cartel
entirely.

Why go to Wal-Mart to buy a DVD when you can download hundreds of new
films off the Web?

Both the supply chain and distribution cartels are being blown apart by
the Web.Not only can entrepreneurs own/rent the means of production and
arrange their own supply/assembly chains, they can also own their own
distribution channels.

The large-scale factory/distribution model is simply no longer needed
for many products. As the barriers to owning the means of production
and distribution fall, a Renaissance in small-scale production and
wealth creation becomes not just possible but inevitable.

Of course some manufacturing entails large scale production: aircraft,
bulldozers, semiconductors, etc.

Surprisingly, perhaps, some large-scale manufacturing is growing in the
U.S.: Radical Shifts Take Hold in U.S. Manufacturing (WSJ.com)

Here is a chart from the article:



Protecting intellectual property is a powerful reason to bring
high-level manuafcturing back home. It is simply fact that intellectual
property is at risk overseas in countries with poor IP protection and
rule of law. So is it worth risking your crown jewels to expand
overseas? That is at least one issue facing Google in China.

Anecdotally, it is known that the Japanese are careful to keep
high-level manufacturing technology in Japan to protect it from theft
or reverse engineering.

The chart reflects this: there isn't much IP in furniture, textiles or
plastic products to reverse engineer/steal, so these industries will
continue declining unless they move to a small, flexible, low-cost
model as described in the Wired article.

Those industries which need to protect their IP or which cannot be made
overseas (electricity) continue to expand.

Opportunities abound on both large and small scales.


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