The Wealth of Nations: Why We Should Worry

Two industries are basic to any modern economy. Those are machine tools and material handling equipment. Production, productivity and the wealth of any nation are more dependent on them than on any other industry. So shouldn't we worry about what's happened in the past 30 year to each of these industries in the United States?

Japan produced $7.9 billion and consumed $4.1 billion worth of machine tools last year. Germany? It produced $7.5 billion and purchased $4.4 billion. And, of course, the leading customer for these most wealth-producing of devices for several years has been China; it produced $2.9 billion in 2003, but bought $6.6 billion. The U.S.? We turned out $2.2 billion and bought $3.9 billion in 2003. These numbers come from the Association for Manufacturing Technology (AMT) in McLean, Va., www.AMTonline.org, and the Metalworking Insiders' Report, Larchmont, N.Y., at gardnerweb.com/consump/survey.

Thirty years ago, we dominated the world in terms of both production and consumption of machine tools. We were proud of that and we gladly showed our prowess off to the rest of the world. Since those days, the rest of the world has learned about the importance of the machine tool industry.

In a similar way, the material handling industry was once almost an entirely American industry in terms of domestic markets. Yet, similar numbers can be listed about numerous domestic industrial truck manufacturers, for example, and crane producers as well as other kinds of handling equipment. In fact, foreign companies now dominate some parts of both of these two small but crucial industries.

Some like to point out that our industrial and business strength is a matter of variety, creativity and modern production communications. Some say we are post-industrial and in the Information Age. We still show off plants in some parts of the country that are state-of-the-art in terms of systems integration and the use of computerization as well as other technologies. And, if it's any consolation to the seniors reading this, both Mazak and U.S. Amada like to give tours of their modern machine tool facilities, which use state-of-the-art material handling systems largely from Japanese producers.

But there's another number that is even more revealing about a nation's overall productivity and economic health. That's per capita machine tool consumption. That tells you what a modern nation's millions are producing by using machine tools and related technology. What would your guess be about who leads? Who lags? Where are we?

First place in per-capita consumption has been Switzerland for some time. Others with high per-capita consumption rates are South Korea, Taiwan, Italy and Germany. Needless to say, our 250 million people bought, per-capita wise, far less than many other countries.

Here are the latest per-capita machine tool consumption numbers in dollars/individual citizen. Switzerland, $74. South Korea and Italy, $57. Germany, $52. Taiwan, $50. Dropping a dozen countries down, we come to us, Number 17 out of 29, at $14, ahead of the United Kingdom at $12, the other great industrial leader of not so long ago. Argentina and Hungary are tied for last place at about $0.80. Canada's number, incidentally, is two-and-a-half times the U.S. at $35.

So what's the overall message here? Simple. The wealth of nations is always a matter of the production and productivity of its people. Our numbers in these essential industries do not suggest an increasing standard of living in coming years. True, there are other important aspects of productivity, but the production and the use of machine tools and material handling equipment on the factory floor remains basic for economic success.

Other industrial issues, like unemployment, outsourcing and the "jobless recovery" are in the headlines. Worrisome stuff. Yet, I feel we should be especially worried about these latest domestic machine tool consumption figures and the fact that two of the most important of modern industries have declined so much in terms of domestic use and deployment in recent years. I'm worried. Aren't you? If you're not worried, please let me know why not.

George Weimer, contributing editor, [email protected]

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