Biggest Market for Machining Centers

And to think, the world leader in machine tool production after the great war was for fourty (40) years the U.S.A.. It is a true shame that there is nearly nothing left that can be called an American-made machine tool.

Perhaps it is time to resurrect the past, but with a change in strategy. The U.S.A. certainly knows how the market was won, but unfortunately it knows too well how it was lost. It is still not too late.

Ing. Robert Forbus

Mr. Forbus:

I think that you are particially correct about how the US as a world leader in manufactured goods for last forty years 40 years, but if you were to research a little farther back. You might find that we could have been a world learder for a lot longer than that. After WWI the financial capital of the world went from London to New York, because of a nearly bankrupt England. Germany could not print money faster than its inflation rate and France was too busy building the Majonal Line to protect themselves against another attack from Germany to get much involved with anything else. Oh and both France and England wanted to beat the piss our of Germany not because they started started the War (by the way it was Austria's fault because that Archduke was killed by some guy in Serbia), but because Germany was the only other European country that was big enough to compete in the "lets' colonize the natives and exploit their resources" race.

But..

I want to say a man back in 1750 wrote a book called The Wealth of Nations. I think it was by Malthus or Richardo. A important economic theory from it was referred to as "comparitive advantage". The basic idea is each country has a certrain commodity that they can make more efficiently than any other country. If that country were to produce a different good made by another country, they would decrease their ability to produce the goods they are more efficient at making. The result is it would cost them more in terms of lost capacity than to just trade one for one.

A big concern that I have is the change from the US from a manufacturing economy to a service eceonnomy. This has been a trend since the late 1970's and 80% of our GNP is related to services, but many of these service jobs are not even paying enough to make it to the poverty line.

Now I don't mean to sound like a closed-minded person when I believe that the U.S. has been leader in product innovations for the last 50 years (TVs, Flatscreens, LCDs, Mylar ballons, NYLON, Fiberglass insulation, suburbia (oh look, my house looks just like yours), fast food, video games, the internet, computers, Microwave ovens and a whole bunch of other things (zero gravity pen).

The problem happended when American companies wanted to make higher profits and most of the production was outsourced to countries that could make them a lot cheaper than we could. The good result was that now everyone could afford a color TV. The bad result was we gave a technology away. Today there are no American made color TVs thanks to Walmart initiatives and the overfed American consumer who feel they have to have everything whether it is needed or not (See a frontline article "Is Walmart Good For America" on www.pbs.org). But I don't completely blame Walmart for our position.

A new threat is now going to hit the U.S. and make it more unemployable in the world economy. As literacy rates are on a steady increase in developing countries many middle management and technical jobs once held by Americans will be lost. This trend has accelerated with the increasing efficiency of our communcation system.

The U.S. can compete with our business sense (yes business sense), innovation and new ideas, but those ideas have to come from a new generation. The US became a leader in technology because swe realized the need for science and math class, because we had to beat the commies in Russia back in the 60's through the late 80's. We haven't focuesd on teaching our children the improtance of math and science (I think we past that responsibility off to our public school system, because after all, its their job to teach me kids, not mine!.) So where are the next innovative products going to come from? India (I am not Indian) because they wanted it more than the Americans who were too busy watching the TV they bought at Walmart.

Another idea is to go back and start imposing tariffs and trade restrictions on imported goods. But the bad part about this idea is it opens up American companies to basically charge what they want and get realy rich off it because there are no foriegn companies to put pressure on them to become more efficient. This was done in the early 1900 shortly before Teddy Roosevelt was working on the anti-trust laws. Closing our doors is not the solution.

I heard a speach at a graduation ceremony at the Carlson School at the University of Minnesota a few years ago. His theory was a summary of similar theories I have heard in the past, but it was always nice to hear it again. Once a country starts to have a surplus of funds it has to invest them or inflation will take it away. It is common to have reinvestment in our country from another country sometime in the future. The money goes back into the economy of another country which will develop that countries abilities (what ever they are). To me, it was kind a like playing hot potato, but with money and not potatos

Mr. Atkinson,

Thank you for an excellent post. As a former German national, I am all too familiar with the aspects of European history after the collapse of the economies following the first great war. The cost of reparations dictated by the Versailles treaty were too great to bear and after the depression began in Germany it had cataclysmic effects first in Germany, and then for the rest of the industrialized world as we knew it then.

The United States recovered democratically, but the same cannot be said for Germany. The English based so much of their economy on seafaring trade in the years just before the first war that along with the cost of the first war, they did not have a very strong industrial base and could not compete with the cost of raw goods produced elsewhere, save for the steel market. But when Germany rearmed, they began to produce steel in the quantity never before seen. They developed the science and methods of statistical process control, but never employed them during their short and furious rise in heavy industrialization and manufacturing.

With the end of the second great war the United States was the SOLE manufacturer of durable goods and machine tools. If you wanted it, it HAD to come from the U.S.A. as no one else could make it. This provided the work and wealth for the American people for approximately twenty-five (25) years until emerging economies in Europe and Japan began to take market share. You know, when a nation is aided in its rebuilding process it often has an unfair effect on the trade of other nations! By comparison our economy (the U.S.A.) could not compete with cheaper goods (and many of them were CHEAPPPP) coming from the Asian sources. The Germans were certainly not very competitive, and if you purchased a German product, it was solely because you wanted to.

Asia, led by the spirit of Japan saw that the market existed for Asian goods, but the quality had to be not "just as good," but the best in the world for a decent price. The Germans maintained their machine tool industry, and while it is not as large as it was in the past it still survives to this day. I often wonder how they can compete with other markets, as they have literally priced themselves away from the world market for so many things. I guess the only reason that they can is because they maintained their industrial base for the machine tools that are no longer built in the U.S.A. and they offer an alternative to Asian sources. And, heavy government assistance, combined with high tariffs on non-German goods never hurts! Self-protection if you will, and similar to the self-protection enjoyed by the heavy industries of the U.S.A. through the 1970's but without the government subsidies past a few tax breaks.

The U.S.A. still has the richest sources for raw materials, and a population and land area that can produce a tremendous amount of industrial might. I agree about the service economy issue, and remember hearing about it during the late 1970's and just shaking my head in disbelief. Well I believe it nowadays and have for some time to come. The machine tool and durable goods industries of the U.S.A. made it the undisputed world leader for so many years after the great war, but resting on laurels, so to speak, and not making quality improvements while maintaining or reducing the prices for durable goods cost it the world market, then its own market.

There is no doubt that the U.S.A. still leads the world with innovation, as far as I am concerned. But we give it to the world so it can first copy, then improve the good. It is very easy to make improvements after someone else conceived the idea, invested a tremendous amount of engineering costs, built and tested the prototypes, and then finally refined the manufacturing process so that the good was somewhat affordable. I do not know whether I will see it in my lifetime, but the nation of China will probably become the largest consumer of all goods produced in the world due to its sheer size. During the "nation building" that began there not so long ago, there is a tremendous market for not only machine tools, but the applied technologies for the economical production of goods.

Ah, the Wealth of Nations. I am glad that you mentioned that book, because several months ago I thought about it for just a brief moment. It has been so long since I read that book that I think it deserves a re-read. I'll see if I can buy a used copy today. Mr. Atkinson, in closing, I again say that I enjoyed your post. I know that we are re-living history a bit (one of my favourite subjects) but without history there can be neither present nor future.

Best Regards,

Ing. Robert Forbus

The author was Adam Smith - profound book about the geopolitical and socio economic landscape - actually claimed that the area which is Germany has a distinct logistical advantage.

Kirk A.

I thought it might have been the other two, but now I remember. Thanks for the correction.

while the US buys almost everything from China look at who they go to for machine tools.