Manufacturing Failure

Brian YS Wong February 05, 2025 22:07

I have written previously of the “manufacturing” of success by US President Donald J Trump. Much as consent and misinformation, success – too – has become an artificial product, one that is birthed from the algorithmic womb and bestowed life by the vindictive vitriol and fraying of trust that constitute America today. At a time when truths are less compelling, less interesting, and thus less persuasive than lies, the value of truth – and its endurance – are increasingly diverging in their respective trajectories.

Yet here, I’d like to shift my attention to a slightly different subject at hand: the question of failure. Manufacturing failure occurs when there is a fundamental incapability on the part of a producer to manufacturer the intended goods – whether they be cheap, “low-end” consumer goods, such as bracelets or chairs, or “high-end” goods such as semiconductors. For all the talk of “Making America Great Again” through shifting supply chains back to the US, Trump will likely be facing a deeply antithetical uphill battle over the coming years.

Whilst manufacturing remains an integral component of the American economy, its efficiency – as a sector, and on a sector-wide level – is increasingly shrinking, as noted by a November 9th 2023 Economist article.

Those who herald industrial policies who hence praise Biden’s “visionary” Inflation Reduction Act (IRA), and some might even go as far as to conclude that Trump’s protectionist measures are a necessary evil in spurring domestic innovation. Yet such sanguine predictions ignore the fact that the innovation spurred does very little in amplifying or shoring up the competitiveness of American manufacturing – instead, much of the past ten years of “so-so” (in terms of hardware maturity) automation has been dedicated to and centered around improving consumer interfaces.

Indeed, the secondary sector of the economy suffers from several systemic issues that – were they to remain unresolved – would fundamentally thwart even the most serious and coordinated attempts to revitalise blue-collar industries and create, sustainably (as opposed to in response to the COVID-19 blip), a raft of corresponding job opportunities.

In short, the failure to manufacture well is not so much a product of short-term manufacturing. For once – and for a long while – it has been a baked in, structural problem for the US economy that can be traced to the 2000s, where a mixture of the “China Shock” (cf. David Autor) and broader outsourcing on grounds of cheaper labour costs led to a fairly sticky and perhaps irrevocable decline in appetite to invest for American firms.

The first issue concerns wages and costs. Basic Labour Economics 101. American workers have the option to work in a number of jobs – including white-collar jobs that, even if lower in pay, offer much stabler and safer work environs, and are perceived to harbour better career prospects for households aspiring towards social mobility. In the age of automation, such dynamics may well be reversed (we can think of Moravec’s hypothesis concerning the relative ease of automating cognitive labour) – but such shifts will inevitably take time in order to truly shape and alter the preferences of newcomers into the job market. Blue-collar jobs must thus come with handsome wages – much higher wages than in many other developing economies across the world – in order to attract talents. When offered the opportunity to build factories outside the US (and also beyond China, too), it is only understandable that American MNCs would snatch up these opportunities with zeal and joy.

Unless Trump imposes seriously punitive tariffs and restrictions on investment into Vietnam, Indonesia, Malaysia (in ASEAN) or Brazil and Argentina (in Latin America), American manufacturers will always find a way to preserve their supply chains abroad and minimise unnecessary investments into bolstering the marginal labour productivity domestically. Capital-intensive domestic operations, paired with labour-intensive overseas operations, are increasingly the modus operandi for many MNCs seeking to adjust to the new normal on inflation in the US.

The second issue concerns workplace culture and labour expectations. It is fair to posit that all workers are entitled to minimally decent safeguards and protections of their welfare; to ask that they are not subject to undue abuse and exploitation. Labour laws matter. Yet the regulatory onslaught adopted by bureaucrats during Trump I, and politicians during the Obama and Biden years, has contributed towards immense barriers for heavily US-exposed manufacturers to lower costs and to outcompete their foreign counterparts. Whilst the likes of Musk will likely press aggressively for more “sensible” labour regulations, the drive towards de-regulate will take up a considerable amount of time – and may not necessarily yield dividends or fruits in states where state governments remain very much captive by powerful labour unions and working-class lobby groups.

In the absence of the incredible industriousness and ‘push-oneself-to-limits’ mentality that proliferates through Taiwanese and Mainland Chinese semiconductor plants, it would be difficult to see a viable path forward for homegrown manufacturing to flourish – whether it be in Arizona or elsewhere – on American soil. What is needed here is more than just the brains or technical prowess of Chinese STEM talents, but the very ethos of grit they espouse.

And this is where the final issue kicks in. As I have argued elsewhere earlier this week, one can impose all the export controls on technology as one may wish – for political or ideological reasons. Yet one cannot impose export controls on talents. Say what you will of Deepseek, but if there is one thing that can be ascertained – it is that Deepseek fundamentally highlights the strength and potential on the part of homegrown, bona fide Chinese engineers, most of whom have never set upon the US (with a handful of exceptions who have inturned at Nvidia and elsewhere). The US should indeed seek to attract talents, but with the racist McCarthyist and Red Scare campaigns that its establishment is waging today against ethnic Chinese scientists and academics, such pledges and commitments really amount to very little more than sound and fury. Signifying nothing.

Brian YS Wong

Assistant Professor, HKU