Noah Smith asserts in a commentary republished January 27 by Asia Times that “reshoring US industry is possible and happening.” His argument is based on egregious misrepresentation of the facts.
Some of his misstatements depend on cherry-picking the date range – for example, a chart that shows battery production up 20% since 2018. But US battery production is down 20% from 2014, if one looks at a long-term chart (below). That’s not a success story. Never mind that overall manufacturing production peaked at 106 on the Federal Reserve index in 2007 and now stands at just 99.
When the Biden Administration announced its CHIPS Act subsidies – which Smith hails as a great leap forward for American manufacturing – the rush to build chip fabrication plants ran into shortages of labor and materials. The Producer Price Index for new plant construction rose by 37% in a single year, an utterly unprecedented event. At the same time, the number of unfilled construction jobs nearly doubled.
Smith is elated that US solar panel manufacturing capacity reached 27,000 megawatts in 2024, allowing that the US is “still way behind China.” How far behind? Smith doesn’t say. I will: China can produce 890,000 megawatts of solar panels – 33 times the US figure.
The elephantine omission in Smith’s panegyric to US industry is America’s overwhelming dependence on imported capital goods – goods that produce other goods.
US imports of capital goods at $1.1 trillion a year are nearly three times domestic orders for capital goods at just $400 billion annualized. Both numbers are deflated to January 2000 using the government’s price indices for cap goods imports and private capital equipment, respectively. Both series exclude autos. Whatever the US is producing, it produces it mostly with imported capital goods.
Of course, the US imports a lot of electronics, whose prices have fallen by half since 2000, and it exports machinery, whose price has doubled (the US exports about half as much capital goods as it imports). It’s hard to get an apples-to-apples comparison of domestic cap goods orders and cap goods imports. But the trends nonetheless are startling: US cap goods imports jumped after Covid, rising by 60% from 2020 through 2024.
Yes, the United States shortly will produce more computer chips onshore, thanks to Taiwan’s TSMC, which built a plant in Arizona – staffed mainly by workers and technicians imported from Taiwan, because TSMC couldn’t find enough skilled labor in the United States. That’s the kind of success that makes failure seem attractive by comparison.
But the big picture is that America’s foreign dependence is rising fast. Overall industrial output has been virtually unchanged during the past ten years, while imports of capital goods have nearly doubled. It will take more to re-shore American industry than hot air from an economics blog.
US stats live in lala-land just like the Soviets did before. Half the industry was shipped and half the population that created it was dissolved. This many decades long process will not be turned around with a dozen Executive Orders. A more likely scenario: 4 years, the Dems are back and finish the destruction.
No matter what, the US is going to have to start producing more capital goods, open up more mining resources, and to shed many of its paralyzing regulations. We have allowed the bureaucrats in the Washington Beltway to cripple our economy beyond recognition. Oh yes, we need to worry about the spotted owl….but not nearly as much as a Chinese Navy which is beginning to dwarf ours. Sorry to all the woke sensibilities; but your day has come and gone. Time to re educate our young people to do actual work, get their hands dirty, and compete.
This article is why I decided to subscribe to AsiaTimes.
Thanks for a fact full article putting the reshoring into a sober perspective
It takes longer to industrialise than de-industrialise. When a manufacturer of finished goods exports production, it is not just final product that takes the exit, but inevitably the parts manufacturers as well. After a couple of decades without the industry, the practical expertise dies out as well.
Thirty years ago I could see the rot setting in, the idea that everyone should go to university, for useless degrees mainly. The Ford Motor Company did not employ its first university-educated manager until after World War II.
This is where a more extended memory us useful. By 1994, the rot was well advanced. The Powell Memorandum of 1971 was a clarion call to dismantle the New Deal. The offensive got rolling with the 1973-75 recession. Real wages have fallen ever since, in spite of what the cooked figures of the CPI report.
lol David Goldman agreeing to publish Noah Smith slop only to slag it on the very same publication, a play at “fair and balanced” I guess
this is why Asiatimes is much more vibrant than other western media
I guess, that this Noah Smith is hot at the moment, having interview with Krugman etc., so it’s relevant to republish his essay. So it’s fair to criticize Noah, cause his essay about reindustrialize USA was rubbish, as Goldman points out.
Not a play at fair and balanced, surely, but to show how unreliable and plain nonsensical so much of the decoupling, de-risking boosterism is, though our media are saturated with it.