Biggest Manufacturer Since 1890s, US Now Slipping Behind China

After about 110 years as the world’s leader in manufacturing output, the US is likely to hand over its leadership mantle to China in 2011. Despite a century-long head start, elite universities, as well as historically world-class technology and infrastructure, the US will not retain its title much longer.

According to the Financial Times:

“Last year, the US created 19.9 per cent of world manufacturing output, compared with 18.6 per cent for China, with the US staying ahead despite a steep fall in factory production due to the global recession.

“That the US is still top comes as a surprise, since in 2008 – before the slump of the past two years took hold – IHS predicted it would lose pole position in 2009.

“However, a relatively resilient US performance kept China in second place, says IHS, which predicts that faster growth in China will deny the US the top spot next year.

“The US became the world’s biggest manufacturer in the late 1890s, edging the then-incumbent – Britain – into the number two position.”

The FT goes on to point out that this shift in leadership should be no surprise. China’s population is 400 percent that of the US and its wages are far lower. Yet, it doesn’t seem necessarily obvious that China, in particular, should take over first. India also has a greater population and its citizens a better grasp of English, which remains the dominant language of global commerce.

Well, there’s another, more compelling, historical precedent offered. Reaching further back into history, China “was the world’s leading country for goods production for more than 1,500 years up until the 1850s, when Britain took over,” mainly due to the industrial revolution. Perhaps this is a sign that the US advantage associated with being a first mover in industrialization is beginning to have run its course.

You can read more details in the Financial Times coverage of how the US manufacturing crown slips.


Rocky Vega,
The Daily Reckoning