The United States entered the Industrial Revolution in 1790 when Samuel Slater’s mill first mass-produced cotton thread. The First Industrialization in the United States began in the Northeast. Eventually many of the Northern rural communities were transformed from agriculture to manufacturing resulting in economic prosperity.
However, along with this newfound wealth and prosperity came higher labor cost as well as increased taxes needed to support the complex infrastructure requirements, such as: transportation, fire protection, law enforcement medical facilities, utilities, etc.
Eventually the high concentrations of hourly workers attracted labor unions. In the early days, labor unions did contribute to making manufacturing safer, and reduced many causes of worker’s long term health problems. Unfortunately, unrealistic labor union demands forced many manufacturers out of business and others to be priced above their competition thus losing most of their customer base.
Manufacturing overhead costs became such a burden in the Northern States that many manufacturers elected to relocate to southern states where a business friendly environment still prevailed. This exodus from the Northern States created what was known as the “Rust Belt.”
Eventually history repeated itself and the very same increases in overhead and labor cost reappeared into their new southern locations; with one exception, the Unions, failed to gain a strong foothold in the Southern States. Some attributed this to a strong culture of self reliance and others believe that the Bible Belt had a positive influence on the loyalty of employees.
Unfortunately, lacking domestic options, excessive manufacturing cost forced many American manufacturers to move to other countries. First it was Japan. But eventually Japan also became cost prohibitive as their standard of living increased and unlike the United States, Japan refused to allow indigent immigration to keep the cost of unskilled labor low. So for many years, Japanese manufacturers have actually been subcontracting manufacturing to mainland China.
History does repeat itself. China is apparently running out of cheap rural labor and, with the cost of metropolitan living being much higher, Chinese workers now average $3.60/hour when combined with the traditional inefficient bureaucracy of Communist Government and burdensome government controls the result has been a major exodus of international manufacturing from China.
Africa is one of the least developed areas in the world — unfortunately, it is ranked low in factors that influence investment such as: the poor quality of roads and ports, the reliability of electricity, infrastructure, the degree of political stability, the level of excessive bureaucracy and a culture of corruption. For example, in Ethiopia a huge industrial park was built to encourage new businesses — however, the lack of a local work ethic, high labor turnover and public protests that border on riots, are already challenging the success of the new export industries.
Most light manufacturing jobs are likely to be substituted by machines in the near future. Robots nowadays are able to produce garments and other products that could not be fully automated a few years ago. Yet even with today’s technical advancements there still remains a major part of production work that is not technically feasible to automate, but even those should remain cost-competitive with technological.
Deployment size and costs of robots is decreasing rapidly. In a decade or so unit costs from fully automated factories will likely fall below those from traditional labor-intensive manufacturing. Two recent surveys suggest that the vast majority of Chinese garment and other light industries will invest in technology upgrades at home or close down rather than to relocate abroad.
Yet, about 10% of firms do see relocation abroad as an option. Even if most of them prefer Asian countries, a small share of Chinese firms can make a big difference to Africa. African policymakers are, therefore, well advised to closely observe the Ethiopian experiment as well as the ongoing trends in factory automation and, above all, undertake reforms to reduce the cost of doing business.
As stated earlier, “History repeats itself” — or better yet “What goes around comes around.” And with strong businessmen leading our country, all indications are that many of our manufacturers will finally complete the circle and end up, much as the Prodigal Son, at home, older and wiser.
Mark Schenck is the former chairman of the Scotland County Republican Party.
