What’s Going on With All the Manufacturing Decline Deniers?

Even with the Trump administration pushing to rebuild U.S. manufacturing—or perhaps because it is—there remains considerable intellectual resistance to the idea that anything is wrong with the sector or that serious action is needed to reverse its decline.

One argument holds that concern over manufacturing is simply backward thinking. CNN’s Fareed Zakaria reflects this view when he dismisses manufacturing as an “image of the past,” suggesting that the most advanced countries have small manufacturing sectors. Ah, thanks for clearing that up.

But the narrative has shifted. Increasingly, it’s not that manufacturing is unimportant, but rather that it’s doing just fine. Healthy, even! Ipso facto: no need to intervene.

They imply it’s obvious: “Can’t you see? The manufacturing job losses are all due to automation.” Come on, get with it. As Washington Post columnist Catherine Rampell puts it: “U.S. factories still make things, but those things are increasingly produced by robots.”

Hmm. Then maybe we need better robots, because U.S. manufacturing productivity has been in absolute decline for more than a decade.

Then there’s the Progressive Policy Institute, confidently asserting in an op-ed that “the U.S. still has a healthy manufacturing sector—in 2023, it was the world’s second largest after China.”

Of course it was—the United States has the world’s largest economy. Would we only acknowledge a problem if manufacturing output fell 40 percent and dropped below Japan’s, the third-largest manufacturing economy in the world?

In reality, things look far worse. According to the Bureau of Economic Analysis (BEA), from 2005 to 2013, the inflation-adjusted value-added contribution of manufacturing to U.S. GDP was just 66 percent of what it would have been had the sector maintained its 2005 share of the economy. And that modest growth was highly concentrated: Just 4 industries drove it, while the remaining 15 either declined outright or grew at less than half the expected rate.

But wait, there’s more. Thanks to Moore’s Law, the BEA vastly overstates output growth in computers and electronics. Remove that sector, and manufacturing’s contribution to GDP growth is just 26 percent of what would otherwise be expected.

So why the widespread denial about U.S. manufacturing’s difficulties?

Some of it is just laziness. Too many people can’t be bothered to dig into the BEA numbers. Top-line stats make it look like the sector is growing. Never mind adjusting for inflation, GDP share, or distorted growth in computers and semiconductors. Zoom out to a 65-year trend line, and the last decade’s decline barely registers.

But laziness alone doesn’t explain it. There are plenty of quasi-complicated economic issues where analysts do dig deep into the details. So why not this one?

There are two core reasons for manufacturing decline denialism:

1. Fear of protectionism
2. Blind faith in market forces

The first is that admitting there’s a problem risks opening the door to protectionism, something Washington Consensus types fear more than not being invited to Davos. Leaving aside the debate about the merits of tariffs, ignoring a structural economic problem out of fear of how it might influence policy is intellectually irresponsible. The job of analysts and even pundits is to report reality, not hide or manipulate perceptions to steer policy outcomes.

Besides, how well did two decades of manufacturing decline denial work out? We got Trump’s tariffs anyway, despite all the op-eds insisting everything was fine. Ironically, we likely wouldn't have gotten the tariffs at all if the United States had embraced a robust national manufacturing strategy 25 years ago. But that was never going to happen, because policymakers were relentlessly told that anyone worried manufacturing was in trouble was either a protectionist or a fool.

The second and more serious reason for denial is ideological. Acknowledging that manufacturing has faltered calls into question the bedrock of the Washington Consensus: that market forces naturally yield the optimal economic structure. Oh no. The horror.

It’s time to move past the pearl-clutching and accept the hard truth. The structure of the economy does not automatically evolve in the national interest. That does not mean socialism. It doesn’t mean Soviet-style planning. And it doesn’t mean the government picking narrow winners.

But it does mean recognizing that the United States needs a robust advanced production system—and that achieving it requires serious, sustained industrial and innovation policy.

So to the deniers: The facts are in. Reality hurts. But it’s time to face it.