Published: Tue, 1 Jul 2025 11:34:27 -0800
Deng Xiaoping inherited a tumultuous country. The Cultural Revolution, the death of Mao, and the reign of the Gang of Four did not leave China in a good place. China had attempted to move towards industrialism during the years before, but it was not particularly productive. Backyard furnaces created low quality steel which did little to actually benefit the economy of China. Deng was not as ideologically rigid as his predecessors, he was willing to work with the West in order to boost the economy of China, even if it meant implementing market reforms. They needed an influx of capital, and they had one of the largest labour supplies in the world. Within 30 years China became the second largest economy in the world and the largest hub of manufacturing.
Let's draw our focus to the US during the period after this opening up. In 1980 about a quarter of all jobs in the US were in non-farm manufacturing, today it is bellow 10% and shrinking (Bureau of Labor Statistics). Over the course of this 40 year period, manufacturing jobs were offshored to developing countries, largely China, for their lower labour cost. This was sold as a beneficial pivot, entering a new era where everyone will be able to enter cushy service-sector jobs and enjoy the flood of cheap products that were enabled by this slash in labour costs. This is, of course, a fantasy.
We did get this fantasy for some time, and depending on how much money is being printed, still get tastes of it. However, we're chasing the dragon at this point and we're feeling he down-sides of the drug more and more. Having a service heavy economy is great when people are flush with cash to purchase services, but when they aren't, they don't spend as much, the company has to (chooses to) cut wages, they then have less money that they cannot use to purchase other services and the whole thing goes belly-up. In manufacturing heavy economies, there are always things that need to be made, there's an inherent security that comes with these jobs. You may not always need a stylist, or a clothing sales associate, but you will always need clothes. Inversely these service jobs are far easier to offshore, lacking the same degree of required dedicated infrastructure.
Now we're a sitting duck. The massive growth of the tech sector that brought us through the 2010s has largely hit a lull (except for in the case of AI). We've offshored the vast majority of manufacturing, the real driver of economic growth, and attempts to build it back up are met with unforseen challenges. We simply lack the knowledgable personnel to even come close to competing with the likes of our Chinese counterparts, not aided by the burden of our stricter regulations that inflates the cost of doing anything in the US. This can be seen with our failure to get semiconductor manufacturing operational in the US despite the hundreds of billions of funding poured into it.
Though I don't agree with the conclusion that trying to bringing back manufacturing to the US is a pipe-dream, PJ Vogt's search engine has a pretty good episode on this subject: The Puzzle of the All-American BBQ Scrubber
Trump's tariffs are (were?) too late, the flight has already left the runway, putting up hurdles at the gate isn't going to do anything but hurt us.
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