"And on top of all that, the U.S. has de-industrialized to a significant degree. Our domestic auto production has been declining in terms of absolute number of vehicles for decades, . . ."
You should do a deep dive into U.S. ship building capacity next. I wonder if the same causes has led to that decline as well.
I love these US-centric economy posts. I'd love more articles on what the US actually makes, our strengths/weaknesses as an economy. Clearly the US creates a lot of value, but what exactly?
My first offer out of grad school 40+ years ago was as a research metallurgist at Republic Steel. I figured the industry was in trouble and went into microelectronics. Good call. I think the thesis is right here. Not enough industrial production. Some of that can be attributed to labor costs, but with increasing automation that is less significant. More can probably be attributed to pollution and environmental controls and associated regulatory oversight which make production in the US more expensive and slower to scale.
Noting that the decline in US steel production began in the 1970's - '80's, correlated with the decline of large infrastructure projects as well, brings me to wonder if the rise of neo-liberal politics played a part in curtailing federal investments in said projects; what with the neo-liberal penchant to choke government spending.
A minor addition. In the early 90s, GM, Ford and Chrysler increased production in Mexico and Canada. Haven't looked up the data, but NAFTA makes sense here.
The big 3 work yearly bid contracts for commodities like steel and those would also cover the export of steel to make vehicles. Which are reimported as high value add to the steel.
Also, US OEM vehicle share decreased. Steel body panels got lighter. Only heavy duty pickups (I think) use the strong steel heavy I-beam chassis. Most all vehicles are monocoque shells. CAE go vastly more sophisticated and pervasive in the 90s. Crash worthiness Science advanced and multifaceted safety systems allowed weight reduction.
Another interesting factor in declining industries is the perception issue - where the perception that the action is in other 'new and upcoming' industries causes the 'best and brightest' to move into those areas as students, researchers, and developers. To some degree, this becomes a self-fulfilling prophesy. I saw this issue considered decades ago, as the researcher looked at the switch of dynamism from coal to oil.
Nice article..... grew up in Pittsburgh....it is hard to imagine Pittsburgh without USS. Of course, the economy is now dominated by medical and high-tech.
Minor nitpick: car production in the US hasn't been declining, it's been closer to steady/trending slightly up long term (with lots of ups and downs on a shorter term basis). Not sure where that BEA data is from but per its numbers the US produces less than 2 million cars per year, which is obviously wrong (it may only be tracking a subset or something - maybe it doesn't include SUVs, or doesn't include foreign models assembled here). See here https://tradingeconomics.com/united-states/car-production and here https://afdc.energy.gov/data/10314
Regarding the list of industries we should be expanding, it strikes me as perhaps too long. If everything is a priority, nothing is a priority. What should we really focus on? Construction, infrastructure, and energy seem like obvious winners - we can't really import that stuff anyway. I'm less sure about sectors like machine tools. Is it important for us to have a big machine tools industry, and why, compared to all the other things we could be focusing on, like defense, ship building, auto, etc.?
One more thing we should do is close the US fiscal deficit. It slows growth but it also skews growth to services and away from traded goods by overvaluing the dollar.
Noah, your overall point here is well-taken and useful. I see a big problem with the consumption vs. domestic production thing though.
You say "the U.S. has switched from a modest steelmaking surplus to a modest deficit, but even if we had retained the surplus we had in the 1960s, our total steel production would likely be flat."
I suppose that's true for some values of "modest" but it sort of just waves away the entire difference...after all, production *hasn't* been flat, it's been falling. Your chart shows today's consumption almost exactly the same as it was in 1962, at around 80M tons. But production in 1962 was around 110M, vs only 70M in 2019. So production fell over 35% during that period while consumption did not change at all.
You say production decreasing is explained by consumption decreasing. But consumption didn't decrease. The change from a "modest surplus to a modest deficit" is in fact the *entirety* of the change in production.
If you go to NYC you'll be walking under scaffolding on every sidewalk from uptown to downtown. Looking from above, the cranes are working feverishly, and you wonder what is being built. Well, nothing is being built, all of these scaffolds are there to protect your head from falling bricks and mortar, and the cranes moving across skyscrapers are there for repairs. So, I wondered why U.S. Steel was being allowed to sell since I thought it was a national security issue. But, reading Noah's opinion, seems to hold true. The U.S. is de-industrializing and it is a struggle to find products made in America. The sale of U.S. Steel may not be as significant in the scheme of things, but it is concerning that one of our oldest and (I thought) well established companies will now be owned by another country. In 2024 the 10 biggest trends in manufacturing are related to AI, 5G and edge computing, predictive maintenance, and other digital models according to Forbes. Me, I'll miss buying products that say "Made in the USA".
**Love** this post, send this kind of post generally! I wonder, have any other countries successfully reindustrialized, even if only in limited niches? With current US level of functionality I don't feel optimistic, but maybe that's tecnica bias. Or maybe deindustrialization in general is too new a phenomenon?
"I am not going to screenshot this report because its charts are really badly formatted." Jeez, enough with the euro bashing, Noah. The Excel graph from USGS doesn't look much better.
"And on top of all that, the U.S. has de-industrialized to a significant degree. Our domestic auto production has been declining in terms of absolute number of vehicles for decades, . . ."
You should do a deep dive into U.S. ship building capacity next. I wonder if the same causes has led to that decline as well.
See https://www.businessinsider.com/us-navy-chinas-shipbuilding-capacity-200-times-greater-than-us-2023-9
I love these US-centric economy posts. I'd love more articles on what the US actually makes, our strengths/weaknesses as an economy. Clearly the US creates a lot of value, but what exactly?
My first offer out of grad school 40+ years ago was as a research metallurgist at Republic Steel. I figured the industry was in trouble and went into microelectronics. Good call. I think the thesis is right here. Not enough industrial production. Some of that can be attributed to labor costs, but with increasing automation that is less significant. More can probably be attributed to pollution and environmental controls and associated regulatory oversight which make production in the US more expensive and slower to scale.
Noting that the decline in US steel production began in the 1970's - '80's, correlated with the decline of large infrastructure projects as well, brings me to wonder if the rise of neo-liberal politics played a part in curtailing federal investments in said projects; what with the neo-liberal penchant to choke government spending.
Great observations Noah.
A minor addition. In the early 90s, GM, Ford and Chrysler increased production in Mexico and Canada. Haven't looked up the data, but NAFTA makes sense here.
The big 3 work yearly bid contracts for commodities like steel and those would also cover the export of steel to make vehicles. Which are reimported as high value add to the steel.
Also, US OEM vehicle share decreased. Steel body panels got lighter. Only heavy duty pickups (I think) use the strong steel heavy I-beam chassis. Most all vehicles are monocoque shells. CAE go vastly more sophisticated and pervasive in the 90s. Crash worthiness Science advanced and multifaceted safety systems allowed weight reduction.
Another interesting factor in declining industries is the perception issue - where the perception that the action is in other 'new and upcoming' industries causes the 'best and brightest' to move into those areas as students, researchers, and developers. To some degree, this becomes a self-fulfilling prophesy. I saw this issue considered decades ago, as the researcher looked at the switch of dynamism from coal to oil.
Nice article..... grew up in Pittsburgh....it is hard to imagine Pittsburgh without USS. Of course, the economy is now dominated by medical and high-tech.
Interesting read. Now please write an article about the downfall of Swedish Steel Aktiebolag in 1750.
Minor nitpick: car production in the US hasn't been declining, it's been closer to steady/trending slightly up long term (with lots of ups and downs on a shorter term basis). Not sure where that BEA data is from but per its numbers the US produces less than 2 million cars per year, which is obviously wrong (it may only be tracking a subset or something - maybe it doesn't include SUVs, or doesn't include foreign models assembled here). See here https://tradingeconomics.com/united-states/car-production and here https://afdc.energy.gov/data/10314
Excellent analysis!
Regarding the list of industries we should be expanding, it strikes me as perhaps too long. If everything is a priority, nothing is a priority. What should we really focus on? Construction, infrastructure, and energy seem like obvious winners - we can't really import that stuff anyway. I'm less sure about sectors like machine tools. Is it important for us to have a big machine tools industry, and why, compared to all the other things we could be focusing on, like defense, ship building, auto, etc.?
One more thing we should do is close the US fiscal deficit. It slows growth but it also skews growth to services and away from traded goods by overvaluing the dollar.
Noah, your overall point here is well-taken and useful. I see a big problem with the consumption vs. domestic production thing though.
You say "the U.S. has switched from a modest steelmaking surplus to a modest deficit, but even if we had retained the surplus we had in the 1960s, our total steel production would likely be flat."
I suppose that's true for some values of "modest" but it sort of just waves away the entire difference...after all, production *hasn't* been flat, it's been falling. Your chart shows today's consumption almost exactly the same as it was in 1962, at around 80M tons. But production in 1962 was around 110M, vs only 70M in 2019. So production fell over 35% during that period while consumption did not change at all.
You say production decreasing is explained by consumption decreasing. But consumption didn't decrease. The change from a "modest surplus to a modest deficit" is in fact the *entirety* of the change in production.
If you go to NYC you'll be walking under scaffolding on every sidewalk from uptown to downtown. Looking from above, the cranes are working feverishly, and you wonder what is being built. Well, nothing is being built, all of these scaffolds are there to protect your head from falling bricks and mortar, and the cranes moving across skyscrapers are there for repairs. So, I wondered why U.S. Steel was being allowed to sell since I thought it was a national security issue. But, reading Noah's opinion, seems to hold true. The U.S. is de-industrializing and it is a struggle to find products made in America. The sale of U.S. Steel may not be as significant in the scheme of things, but it is concerning that one of our oldest and (I thought) well established companies will now be owned by another country. In 2024 the 10 biggest trends in manufacturing are related to AI, 5G and edge computing, predictive maintenance, and other digital models according to Forbes. Me, I'll miss buying products that say "Made in the USA".
This is interesting to read back to back with your note on the Solow model, instead of investing in K its investing in A?
**Love** this post, send this kind of post generally! I wonder, have any other countries successfully reindustrialized, even if only in limited niches? With current US level of functionality I don't feel optimistic, but maybe that's tecnica bias. Or maybe deindustrialization in general is too new a phenomenon?
"I am not going to screenshot this report because its charts are really badly formatted." Jeez, enough with the euro bashing, Noah. The Excel graph from USGS doesn't look much better.