You might be interested in looking at Mark P. Mills’s post on modern industrial policy at Manhattan Institute. It’s lengthy and mostly devoted to a single insight—there isn’t as much of a bright line between manufacturing and services as there used to be:
First: for several years, there has been an ongoing fusion of services within and around manufacturing enterprises. As a result, the official data that are the foundation for commentary and public-policy proposals misconstrue economic reality: many jobs and economic activities categorized as “services†are, in fact, part of “industry.†This fusion is no small matter. Across a wide range of industries, research shows that services account for 30%–90% of the value of manufacturing output. The majority of these services are not clerical, back-office tasks; they involve every aspect of the production ecosystem. Some 40%–90% of those services are performed by outsourced—but not necessarily offshored—providers. Overall, some significant share, perhaps 20%–50%, of the economic and labor activity involved in manufacturing is now being erroneously counted under “services.â€
My contribution to his insight is that will only increase over time. Additive manufacturing is itself manufacturing-as-a-service.
I would articulate it a bit differently. There’s “primary production”, e.g. agriculture, mining, lumbering, making iron and steel, manufacturing widgets, etc., and there’s “secondary production”—accounting, advertising, sales, and most of the other things that are done in a modern economy. Nowadays some important secondary production barely existed a dozen years ago or didn’t exist at all, e.g. web services, managing social media presence. These are among the fastest-growing sectors today.
A major difference between primary and secondary production is that primary production tends to be a lot more labor-intensive than secondary. Much of secondary production employs very few people at all. A substantial distinction is that secondary production tends not to emit carbon or pollute the environment in the way primary production does.
Should we conclude from those differences that we should be emphasizing secondary production and de-emphasizing primary production? It would be nice to think so but there are major risks incurred in that strategy as we have learned in the last year including becoming dependent for vital goods on other, not necessarily friendly countries.
My view is that we need much, much more primary production here in the U. S. but we also need to manage it a lot better. That will both create the much-celebrated “good jobs” and be more environmentally sound than what we’re doing.
Don’t think I’m buying this one. Just because you have myriad process controls or design aspects to the production of steel, injection molded parts or growing of crops doesn’t mean we’ve morphed from manufacturing to services. In name only; unit opertions are unit operations. If I buy futures contracts to hedge my corn crop price I’m still a farmer, not a financial services provider. Nor does selling it or counting it change the nature of growing it, refining it or assembling it.
“A major difference between primary and secondary production is that primary production tends to be a lot more labor-intensive than secondary.”
Don’t think I’m buying that either. Primary production was always relatively capital intensive. Even more so now as labor productivity has steadily improved. It was light manufacturing, low value added assembly, that was labor intensive and went off shore. “Primary production” lost much of its share in the bad old days due to work rules (an exception to what I said), but also poor quality or out and out foreign subsidy.
I think the difficult debate on trade continues, Mr Mill’s breezy commentary notwithstanding.
If I even understand the topic correctly it’s that companies have found services with recurring subscription charges much more profitable.
It’s why Apple would even consider become a carmaker, (or acquiring one).
The map data from your travels is saleable, you can be marketed to. Conversations monitored for metadata.
Why is it I believe the self driving vehicle will have monthly service connection fees like a phone? With price and service levels?
For proof, look to the P/E for manufacturing companies vs services like NFLX, GOOG, or CRM.
From my perspective the point of the piece is that the line between primary production and secondary production is becoming blurry which I agree with. An increasing proportion of jobs in the future will be in secondary production.