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Friday, March 02, 2007



Never mind, every time I discuss reform with economists in France, I go down the same intellectual The future of manufacturing in Europe (and the developed West, meaning North America and most of Europe) is in value-added technologies - that is, those innovated by R&D.

Industrial Age industry (automotive, steel & iron, household gadgets, etc.) is due to bow to the onslaught of low-cost near and Far East manufacturing muscle as it inevitably masters their technical complexity - which is not difficult.

Aircraft manufacturing remains with Europe and the US for only one reason, the development of composite materials technology. When that becomes "standard technology" it too will be dislocated to places where assemblage manpower is cheaper. The same is true for all manufacturing where manpower is a non-negligible factor input.

I get bored at saying it, but the west's savior will be enhanced skills in technologies not yet invented and, or course, localized service industries that cannot be dislocated because the customer will not contract it over the Internet. Services are key, but giving up on manufacturing may, indeed, be wrong.

Any existing manufacturing process that does not render itself to highly automated production systems (that offset manpower cost with enhanced productivity) are destined to disappear. Strangely, little is being developed in this area, because automated systems are expensive and it is simply cheaper to dislocate. So, without some sort of accelerated amortization scheme that brings companies tax relief, they will neither consider nor adopt them.

AMD has created in Germany (average total compensation rate 10 times that of China) an automated semiconductor foundry. Why? Because the manufacturing component is almost negligible and, more importantly, German engineers developed a system that adapted quickly to changing production lines quickly, thus responding better to customer demand. Lead times in the semi-conductor industry of most components are in months not years (as for an automobile).

Europe and the US are going to need mounds and mounds of new talent to drive technological innovation. Both had better get cracking.


I get bored of saying it, but the history of technology is that every new "value-added" industry employs less people than the last one did. There is no saviour for the economies of the West, or even most of the world. We are actually approaching the end of general employment and we don't even realise it.


"I get bored of saying it, but the history of technology is that every new "value-added" industry employs less people than the last one did."

When IBM started seriously producing computers, it had to junk its mechanical Hollerith-machine (punch card devices) product line. Thousands of people - all used to producing mechanical apparatus - were gradually let go as its typewriter operations could not absorb them.

IBM then went on to greatness employing far more than ever before.

And, that is only one example in a long, long line of technological innovation throughout the course of mankind.

Arthur Eckart

The trend in manufacturing is inevitable. Rich countries will continue to shift into high value and new goods, while poor countries will continue to shift into rich country's low value goods. However, globalization benefits both rich and poor countries. Generally, rich countries are shifting from the Information Revolution, which had a surplus of labor, into the Biotech Revolution, which has a shortage of labor (although the shifts from the Agricultural and Industrial Revolutions continue). The global economy remains in its early development stage, since there have been only four economic revolutions. Eventually, there will be hundreds.

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