Manufacturing Fetishism

I’ve been having an ongoing email debate with a friend about the role of manufacturing in modern economies, especially the “manufacturing fetishism” that exists in many economic quarters. Interesting, with that in mind, to see a related debate over at The Economist.

An excerpt:

Then Mr Chang seems to be unaware of the conceptual problems that make comparisons, across countries and indeed over time, of manufacturing and services difficult. As I noted almost two decades ago, services often are a result of what I called a “splintering process”. Imagine a car being produced on an assembly line. It is painted by an in-house crew, so that the value added by the painters is part of manufacturing value added. But suppose that, as painting jobs multiply, painters move out of the factories and set up “painting services” establishments. Suddenly, the painting value added becomes now “services” value added and the manufacturing value added declines, though little of substance has changed. The “deindustrialisation” that is measured is then a statistical artefact.

More here.

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