Challenging conventional wisdom, Eamonn Fingleton argues that manufacturing expertise -- not the new information economy -- is crucial to jobs, exports, and growth. It is universally accepted that the future of the U.S. economy depends on its successful adaptation to a postindustrial, information-based global economy. The same conventional wisdom says that advanced economies should abandon manufacturing in favor of information-driven services such as finance, entertainment, and software. In this surprising and provocative book, the acclaimed financial journalist Eamonn Fingleton demonstrates that by every measure, including high-wage job creation, contribution to national income, and balance of trade, the manufacturing sector outperforms the "new economy." In Praise of Hard Industries argues with compelling logic that America's long-term economic success depends on its strategic advantage as a manufacturer of sophisticated equipment and producer goods.
Eamonn Fingleton is a former editor for the Financial Times in London and Forbes magazine in New York who is known for his early and outspoken identification of postindustrialism as a prime cause of American decline.
In Blindside in 1995 and In Praise of Hard Industries in 1999, he challenged the then consensus that a shift to an all-digital New Economy would propel the United States to a new, unchallengeably high level of competitiveness. He poured particular scorn on what he called financialism, a tendency for financial services to pre-empt an ever larger share of U.S. GDP and human talent. America's financial services industry, he argued, was "a cuckoo in the economy's nest." Writing from a base in Tokyo, where he lived for 27 years, he warned that if Washington failed to stop the erosion of manufacturing, America would rapidly lose competitiveness, incur increasing trade deficits, and sink ever deeper into debt to the manufacturing-based exporting economies of East Asia.
He calculated that, per unit of output, manufacturing businesses are nearly ten times stronger exporters on average than services. One reason is that manufactured products generally require little adaptation to sell abroad. By contrast such key postindustrial products as computer software have to be expensively adapted to meet different cultural needs in foreign markets and the costs are generally incurred abroad. In other cases, American postindustrial companies hire large numbers of foreign employees to provide direct services to foreign customers. Either way the net receipts transmitted back to the United States are minimal.
In Fingleton's view, those who have dismissed America's manufacturing base as the "Rust Belt" display deep ignorance of modern First World manufacturing. Advanced manufacturing these days is highly capital-intensive, which means that each worker's productivity is greatly leveraged by sophisticated production machinery. This creates ample scope for employers to pay high wages. Advanced manufacturers moreover require great accumulations of proprietary production knowhow - typically knowhow acquired over generations of "learning by doing" and often understood only by top engineers who incorporate them into secret machine settings - and this powerfully shields them from low-wage foreign competition.
Fingleton argues that American opinion leaders have been blinded by dogma in believing that when American factories close, this is dictated by the "wisdom of the market." In reality, American manufacturers are competing in a globalized marketplace that is comprehensively rigged against them. The fact is that almost as soon as American corporations invent new, more efficient production technologies, they come under pressure from foreign governments to transfer these out of the United States. If they don't do so, they face non-tariff barriers in the relevant foreign markets. By contrast by moving their best technologies to overseas operations, they improve their foreign market access while retaining their ability to sell into the American market. The net effect is that it is increasingly foreign workers, not American ones, who benefit from corporate America's innovation.
In his most recent book In the Jaws of the Dragon, published in 2008, he identified a policy of suppressing consumption as a main driver of China's rise. The policy - implemented through, for instance, ultra-tight zoning policies which have forced housing costs through the roof and created huge profits for landowners - generates a vast surplus of savings which Chinese leaders then direct, via a state-owned banking system, into equipping industry with ever more efficient production technologies.
Born in Ireland in 1948, he is a graduate of Trinity College Dublin. He is working on a new book entitled Sandcastle Empire: American Decline and the Crisis of Individualism.
