In a post on the Curious Capitalist blog titled “How ‘Made in the USA’ is Making a Comeback,” Rana Foroohar writes about a “powerful equation refiguring the global economy”:
U.S. factories increasingly have access to cheap energy thanks to oil and gas from the shale boom. For companies outside the U.S., it’s the opposite: high global oil prices translate into costlier fuel for ships and planes — which means some labor savings from low-cost plants in China evaporate when the goods are shipped thousands of miles.
And about those low-cost plants: workers from China to India are demanding and getting bigger paychecks, while U.S. companies have won massive concessions from unions over the past decade. Suddenly the math on outsourcing doesn’t look quite as attractive. Paul Ashworth, the North America economist for research firm Capital Economics, is willing to go a step further. “The offshoring boom,” Ashworth wrote in a recent report, “does appear to have largely run its course.”
Related: Time Magazine’s cover story this week is “Made in America” (subscription required).
MP: I wrote about this trend last summer in an article for the US Chamber of Commerce titled “Manufacturing In Our Favor,” here’s part of my conclusion:
The increased competitiveness of America’s industrial sector in recent years has brought manufacturing production and employment back to the United States and this reallocation of global production is expected to continue in the future. From two parallel boosts to the U.S. manufacturing sector—one wage-related and one energy-related—the reallocation of global manufacturing could possibly create 3 to 4 million new manufacturing jobs in the United States over the next decade.
A significant benefit of the U.S. manufacturing renaissance is that it will help move America’s industrial sector forward in one area where it already has a strong global edge —technology-driven, modern, advanced manufacturing. As new manufacturing technologies emerge, like computationally engineered materials, 3-D printing, and direct-digital manufacturing, the highly paid, technically-trained workers available in America will be more important than cheap overseas labor for the technology-driven factory floor of the 21st century. With America’s rich history of innovation, research, education, and entrepreneurship, it has the key resources available to maintain its position as one of the world’s largest and most sophisticated manufacturing nations.
Putting it all together, the U.S. manufacturing sector had one of its best years ever in 2011, reflecting a new manufacturing rebound that is now underway and is expected to accelerate in the years ahead. Flush with record-level profits, the manufacturing sector has never been financially healthier than it is today, and the future of American manufacturing has never looked brighter. After years of negative reports about the decline of American manufacturing, it’s now time to recognize and celebrate a great turning point, as America’s industrial sector moves in a new direction that many are now calling a “manufacturing renaissance.”