By Yan Peng / Beijing Cultural Review
Manufacturing is the industrial foundation of the United States’ rise to world system hegemony and the material basis on which the United States has been able to maintain its hegemony to date. Within the political shell of the United States, a manufacturing empire continued to evolve under the name “The American System. The concept of the American System has two connotations, one refers to the 19th century American economic protectionist ideology and its policy practices, which can be called the “institutional American System”; the other refers to the 19th century American manufacturing industry emerged in the mass production system (mass production system) as the characteristics of the manufacturing method, which can be called the “manufacturing of”. The second refers to the mass production system that emerged in the American manufacturing industry in the 19th century, which can be called the “American system of manufacturing. The two American systems were distinct and influenced each other, and together they helped the United States achieve economic supremacy over the hegemonic power of Great Britain in the early 20th century and defeat the Axis powers in World War II, which still retained the tradition of artisanal manufacturing. However, after becoming hegemonic power, the United States chose a global political and economic institutional arrangement that was in line with hegemonic interests, contributing to the accelerated proliferation of the American system in the process of globalization, which instead eroded the foundations of the American manufacturing empire itself and caused a partial de-industrialization of this empire with a relatively intact system. The new dynamics of global economic development make it difficult for the U.S. to maintain its traditional manufacturing empire, but the strategic nature of manufacturing and the continuation of 19th century American industrial culture have led the U.S. government to continuously attempt to revitalize manufacturing in the traditional way, resulting in contradictions that have become an important source of current global political and economic tension.
Ralph Lauren Polo Hamilton’s Ghost: America’s Industrial Cultural Tradition
On March 31, 2021, President Biden unveiled a $2.25 trillion infrastructure plan focusing on investments in infrastructure, manufacturing, clean energy, care industries, and technology research and development, proposing an annual investment in infrastructure of 1% of U.S. domestic GDP, to be paid for by tax reform initiatives such as higher corporate tax rates. The Biden administration’s plan’s focus on manufacturing both continues the Democratic Obama regime’s policy of reinvigorating U.S. manufacturing and is consistent with the Republican Trump regime’s spirit of governance to make U.S. manufacturing great again. U.S. manufacturing once had some all-around global leadership, but after the 1960s, the place of manufacturing in the U.S. economy changed, and employment in the manufacturing sector stopped growing and began to decline. It can be said that since the 1960s, the U.S. government and elites have had a persistent manufacturing anxiety. This anxiety is real, stemming from the disintegration of the once globally dominant U.S. manufacturing empire, but, given that U.S. manufacturing remains firmly at the top of the global industrial system, it also contains an emotional mindset rooted in the industrial culture tradition that was formed at the beginning of U.S. independence.
Before American independence, the British Empire adopted a mercantilist policy of suppressing the development of local manufacturing to its North American colonies, but colonial manufacturing still broke out under the inducement of market demand. Over time, some colonial elites gradually developed a sense of independence and saw manufacturing self-reliance, which broke the shackles of the mother country’s policies, as an important connotation of independence as well. From 1769 to 1772, for example, Franklin explicitly supported several large manufacturing programs in the colonies that would compete with British manufactures such as glass, nails, and porcelain. Two years before the American War of Independence was fought, the Massachusetts Legislature declared, “Each nation should plan its own domestic policy, as a means of prospering itself, by producing, within their own borders, every commodity necessary for life and defense.” This brewing industrial culture that valued manufacturing became one of the ideological precursors of American independence. And the way of thinking that combined the development of manufacturing with political independence became an important feature of the future American industrial culture.
The war has always been an ongoing influence on the evolution of American manufacturing and industrial culture. In the War of Independence, the lack of clothing and ammunition for the Continental Army made military leaders such as Washington and Hamilton feel firsthand the importance of manufacturing for the supply of strategic materials. In other words, the war reinforced the notion of the importance of manufacturing self-sufficiency in the minds of some American elites. However, when Hamilton became the first U.S. Secretary of the Treasury, his Report to Congress on Manufactures in 1791 contained economic considerations that went beyond strategic conceptions. Hamilton had a dynamic, modern view of economic development, actively supporting new industries such as industry and finance, which was at odds with the overall cultural climate of American society, which was rooted in agriculture at the time. Thus, the Report on Manufacturing was first and foremost an advocacy piece in defense of manufacturing. Hamilton’s political opponent, Thomas Jefferson, had published “Notes on Virginia” in 1781, arguing for the superiority of agriculture over manufacturing from a moral standpoint and suggesting that the United States should not develop manufacturing: “As far as the full operation of manufacturing is concerned, it is better to leave our workshops in Europe.” The political dispute between Hamilton and Jefferson actually involved a dispute over the founding line of the United States, a dispute that continued in different forms throughout the history of the struggle between American interests.
The Report on Manufactures did not prevail in the polemics of the time, and Hamilton’s political life was hastily ended by his defeat in a duel, but his legacy survived in the United States and became the foundation of American industrial culture. The opportunity for evolution remained the war. the early 19th century saw growing tensions between the United States and its former suzerain, Great Britain, and eventually led to another war. In 1809, Jefferson confessed in a letter, “I have lately been repeatedly exhorted to encourage the manufacture of all commodities the raw materials of which are produced by ourselves, in such quantities as will at least satisfy our own consumption.” Jefferson became the executor of Hamilton’s “political will”. The “militant industrial state” took the first step to world domination by choosing to develop manufacturing. From this moment on, the ghost of Hamilton, who failed to win the White House, will always float in the sky over the White House.
It is noteworthy that the Report on Manufactures was actually a parody of the European mercantilist system of the same period, advocating a protective industrial policy for American manufacturing as an infant industry. Hamilton’s recommendations included implementing protective tariffs, prohibiting the import of competitive foreign goods, prohibiting the export of manufacturing raw materials, providing incentives to enterprises, exempting manufacturing raw materials from taxation, encouraging invention and mechanization, establishing strict product inspection regulations, promoting inter-regional money turnover and facilitating the transportation of goods. These proposals were a summary of European mercantilism in its entirety, and they were not without Hamilton’s original ideas. For example, Hamilton valued the policy of direct government subsidies to enterprises more than the high tariff policy usually implemented by mercantilism. At the same time, the emphasis on the introduction of machinery closely followed the new situation of the industrial revolution. More importantly, Hamilton’s program was actually a comprehensive economic modernization plan that included the use of quality testing, financial markets, infrastructure development, and many other means to foster a manufacturing system in all directions. The U.S. Congress actually accepted almost all of Hamilton’s proposals to raise tariffs on manufacturing products, without touching on subsidies and other proposals. Thus, on the one hand, high tariffs became a practical policy tradition left by Hamilton to the United States; on the other hand, cultivating manufacturing became a conceptual tradition deeply rooted in the United States. The evolution of American industrial culture in both policy and conceptual directions constituted the basic institutional background for the rise of the American manufacturing empire.
Ralph Lauren Polo Two New Frontiers: the Formation and Expansion of Two American Systems
The development of U.S. manufacturing was part of the global industrialization process, but U.S. manufacturing, with its technological and organizational innovations, participated in leading part of the industrial revolution for a considerable period of time. Table 1 provides an overview of the three U.S. industrial revolutions, and although its generalization is overly simplified, it can still demonstrate the general course of the U.S. industrial revolution and its phases.
Knowledge is power, and power also supports knowledge, which is the historical lesson of the rise of the American manufacturing empire. From the industrial culture proposition of “knowledge is power”, American manufacturing industry has always relied on innovation based on knowledge search and accumulation to expand new frontiers. This is the inherent evolutionary mechanism of the American system of manufacturing. But what cannot be overlooked is that during the long 19th century, the period of American economic catch-up, American manufacturing also relied on geographical frontier expansion to sustain growth, and this is precisely the role played by the “institutional American system.”
As a former colony, the United States has always had a comparative advantage of a relatively abundant population compared to natural resources, an advantage that was particularly evident in the 19th century. To solve the problem of relative labor shortage, the United States in the early 19th century relied on immigration to replenish its population and expand to the western frontier, and on the innovation of labor-saving mechanical inventions to meet the needs of industrial and agricultural production. Mechanization was one of the main lines in the evolution of manufacturing in the U.S. In 1851, Samuel Colt, an American arms manufacturer, boasted to the British Parliament that “there is nothing that cannot be made by machine.” Although Britain was the home of the Industrial Revolution, and many American mechanical inventions were introduced from Britain, by the mid-19th century, the mechanization of American manufacturing had impressed British manufacturers. Based on mechanization, American companies developed a standardized system based on interchangeable parts in production. This system has distinctive American characteristics, is the basis for the realization of mass production, so the British called the “American system”. When the British, who had just completed the first industrial revolution, came up with such a concept, the prospect of the American manufacturing empire dominating the world was already visible.
The “Made in America System” originated in the military industry, again demonstrating the importance of warfare to the evolution of American manufacturing. Indeed, military needs have been one of the most important drivers of human manufacturing development. However, beginning in the mid-19th century, the American system of manufacturing began to expand in civilian industries, which were more closely tied to the national economy and drove the growth of the entire U.S. economy. Representative industries that applied the American system included clocks, sewing machines, furniture, farm machinery, bicycles, etc. It was the automobile industry that eventually matured the American system and brought American manufacturing to its peak. Henry Ford combined various elements of the American system of manufacturing that had previously emerged and innovated so that the automobile became a durable consumer good capable of mass production, revolutionizing the world economy in both production and consumption. This revolution was not only the foundation of the American manufacturing empire, but also the material roots of American hegemony in the 20th century. The highly efficient assembly line is generally regarded as the core of the Ford system, but in reality, when Ford was first founded, the concept of interchangeability and related manufacturing experience were not available, and highly skilled workers were still operating general-purpose machine tools with general purposes for machining and manufacturing. Later, through partnerships with machine tool vendors and the hiring of machinists, Ford rearranged its production floor and introduced specialized or single-purpose machines. Specialized machines broke down complex skills and used machinery to simulate human craftsmanship, reducing the factory’s reliance on highly skilled workers. In addition, machine tools improved the accuracy of parts, and only high-precision parts were interchangeable. Thus, the Ford system, which represents the American system of manufacturing, is the product of technological and organizational innovation across the board.
Mass production was indeed the main weapon of the American manufacturing empire to conquer the market, but it cannot be ignored that the rise of American manufacturing in the 19th century also depended on the “scientificization of manufacturing”. The “scientification of manufacturing” is a summary and a reference to the German manufacturing innovation model of industry-academia combination when the German chemical industry overtook Britain in the 19th century. This innovation model has also been developed in the United States in the electrical industry and other manufacturing sectors. In fact, the “science of manufacturing” eventually evolved into the research and development (R&D) mechanisms of large industrial companies. Large U.S. companies such as General Electric and Bell have established their own corporate laboratories, which have become important engines of innovation for U.S. manufacturing. Moreover, some of the research work of large industrial corporate labs is quite fundamental. For example, Irving Langmuir, a member of GE’s laboratory, was awarded the Nobel Prize in Chemistry in 1932 for his work on the physical processes on the surface of incandescent filaments, and he was awarded 63 U.S. patents during his career, many of which were of great use to GE. The diversity of innovation models has enhanced the overall strength of the U.S. manufacturing empire. However, in terms of American specificity, it was not until World War II that mass production was the unique model and competitiveness of American manufacturing that distinguished it from manufacturing in other industrial countries and became a veritable American system.
American manufacturing relied on knowledge-based innovation to intrinsically expand its new frontiers and to transform the new frontiers of technology and organization into new frontiers of expanding markets. On the other hand, power also extrinsically influenced the new frontiers of the 19th century American manufacturing empire. Over time, as the Southern elites of the United States, who had tolerated high Hamiltonian tariffs for reasons of national security, found it increasingly difficult to accept them, the Northern elites developed the theory of the American system, which advocated the importance of industry. in 1824, in defense of tariff policy, Henry Clay introduced the “American system The concept of the “American system” combined tariffs with domestic improvement policies, including the construction of canals and roads, to construct a comprehensive system designed to reduce America’s dependence on overseas resources and encourage manufacturing and domestic trade to go hand in hand. This was the American system proposed by the Americans themselves, which was portrayed as a blueprint like this: “The Midwestern states have their main markets for their agricultural products, such as grains and their processed products, and their surplus is sold to the Eastern states, while their minerals and some of their manufactured products are shipped to the East and South. The South exchanges their supplies of cotton, sugar, tobacco and rice, for manufactured goods.” In this way, U.S. state producers would be less dependent on overseas trade and work side by side in a unified domestic market. This blueprint requires independent manufacturing, and independent manufacturing requires government protection. Clay, who has served as speaker of the U.S. House of Representatives, secretary of state and several times as a presidential candidate, has worked to translate his ideas into policy. As historian Turner notes, during America’s westward movement, “the protective tariff bill was passed under Clay’s …… leadership, when the slogan was ‘farms to factories’ “. Influenced by it, the Tariff Act of 1824 raised the average tariff rate on dutiable imports from about 38% in 1823 to about 42% in 1825, and the import tariff on cotton and woolen goods from 25% to over 33%. These moves intensified the conflict between the elites of the North and South and contributed to the formation of the Republican Party. Eventually, through a civil war, the obstacles to the establishment of the American system by the Republican Party were cleared. This American system was the same name as the American system in manufacturing, the formation of the “institutional American system.
After the end of the Civil War, the average rate of duty on dutiable items in the U.S. tariff rose from 36% in 1864 to 47% in 1870, and remained essentially at that level for the next 40 years. And from 1860 to 1900, the average tariff rate on U.S. imports ranged from 40% to 45%, never exceeding 52% and never falling below 38%. Overall, tariffs accounted for 55% of the U.S. federal government’s revenue in the 19th century. High tariff barriers allowed U.S. industrial firms to see a stable domestic market and gave them the confidence to invest, as Andrew Carnegie, a giant of the U.S. steel industry, recalled, “Capital began to enter manufacturing with confidence that the country would protect it for as long as possible.” The institutional American system thus geographically expanded new frontiers for the American manufacturing empire and gathered wealth within the frontier lines, giving nascent American manufacturing the accumulation necessary for growth. Frontier expansion tugged at American history in the 19th century, and economically speaking, the frontier provided a wealth of opportunity, with significant growth in the property of early settlers, farm laborers gradually becoming ranchers, and poor farmers often increasing their property as well. In other words, frontier expansion created a large domestic market for the United States, and the institutional American system reserved the maximum amount of this domestic market for American manufacturing firms. Carnegie then argued that “one of the great advantages the United States has in competing worldwide is that manufacturing firms here have the best domestic market. They can rely on this market to obtain a return on investment, while exporting the remaining products very competitively”. It can be said that the American system of institutions nurtures the American system of manufacturing.
The United States in the 19th century was closer to a continental empire, with its manufacturing industry based on the domestic market to achieve the industrial revolution. Table 2 presents data on U.S. trade and output of manufactured goods from 1810 to 1899, and it is clear that U.S. manufacturing had a clear import substitution in the 19th century. On the one hand, U.S. manufacturing imports exceeded manufacturing exports for a long time in the 19th century, but on the other hand, the share of imported manufacturing goods in domestic consumption continued to shrink. In 1907, Carnegie, who had praised the high tariff system, declared, “Tariffs on steel products were very important in the early days of our steel industry, but we can now eliminate all tariffs on steel products without harming the domestic industry. industry.” American entrepreneurs are calling on the U.S. government to eliminate import tariffs in order to demand that other countries similarly dismantle tariff barriers. It’s time for America’s manufacturing empire to make an expedition across the ocean.
The Paradox of Ralph Lauren Polo Hegemony: the Fragmentation of American Manufacturing After WWII
Cultures associated with production and technology are more likely to diffuse across communities than those associated with spirituality and belief. This diffusion includes both the conquest of markets by the products of the technologically advanced and the technological laggards to learn the production methods of the advanced. The diffusion of the American system refers primarily to the manufactured American system. As early as the late 19th century, leading industrial enterprises in Europe, such as Siemens, began to learn this system, the introduction of American machine tools, trying to mass production. After the formation of the Ford system, the proliferation of the American system took on more connotations.
The Second World War allowed the U.S. system to completely defeat the old model of European and Japanese manufacturing. Automobile companies such as Daimler-Benz, which was engaged in military production for the Third Reich, had to introduce the American system in order to increase their production capacity. The same was true for the German aviation industry. However, German companies realized too late that their efforts were completely unable to resist the constant flow of weaponry and military supplies sent to the front by the American manufacturing empire. After the fall of the Third Reich and the Japanese Empire, the industrial enterprises of these two countries had more time and better conditions to learn the American system and to adapt it to their national conditions and markets. Volkswagen, for example, was a car manufacturer created by the Nazi regime as a counterpart to the U.S. auto industry. It was created because traditional German car companies such as Daimler-Benz had no interest in the American concept of the “national car,” so from the beginning, Volkswagen was the introduction of the American system in Germany. Seventy percent of the company’s buildings and more than 90 percent of its machinery survived the Allied air raids, enabling it to move quickly to American-style mass production after the war and become a formidable foe of the American auto industry. Japan’s Toyota defeated the U.S. auto industry with lean production after World War II, but the Toyota production method was undeniably still based on mass production, introducing the American system of machine tools as the core of manufacturing techniques. Kiichiro Toyoda, who pushed Toyota to manufacture automobiles, believed that “with the use of fairly advanced equipment, it is possible to produce products that are by no means inferior to those of foreign countries at a good price. …… If you are hesitant to buy these machines, it is better not to be in the automobile business in the first place.” The proliferation of the U.S. system after World War II fostered strong competitors for American manufacturing.
Thus, the hegemony achieved by the United States after World War II is a paradox for the American manufacturing empire. In order to maintain its hegemony, especially for the Cold War with the Soviet Union, the U.S. had to make concessions to its allies, forbidding the flow of advanced technology to the socialist camp while not hesitating to transfer technology to its allies in the capitalist camp and opening its domestic market to them, self-destructing the American system and accelerating the proliferation of the American system of manufacturing. In this way, some manufacturing industries of some U.S. allies were able to rise, which in turn squeezed the viability of related U.S. industries and brought the U.S. manufacturing empire as a whole to disintegration. Starting in 1950, U.S. manufacturing output and productivity growth were lower than those of other major industrial countries, even after major changes in exchange rates and terms of trade in the 1970s. Table 3 shows the average annual growth rate of manufacturing output per hour in the major industrial countries from 1950 to 1978.
Until 1977, the United States still held the largest share of world industrial production and had the leading position, but this leading position has been greatly weakened compared to the dominant position at the end of World War II, and there is a trend of continuous decline. Changes in industry are reflected in trade. At the end of World War II, the U.S. trade pattern was distorted by the significant decline in industrial capacity of other major developed countries, but as industrial capacity in other countries recovered and expanded, the U.S. trade pattern changed again. For example, from 1925 to 1938, the U.S. was a net importer of consumer goods every year, but after the war ended in 1946, the U.S. became a net exporter. However, as industrial capacity in Europe and Japan was rebuilt, the U.S. consumer goods trade surplus steadily shrank, and by 1959, the U.S. became a net importer of consumer goods again, and its trade deficit gradually widened. More serious and symbolic was the decline in the competitiveness of the automobile industry as a representative of the U.S. system. From 1968 onward, the U.S. trade deficit in automotive supplies was widening, a structural change for U.S. industry and trade. In fact, not only the auto industry, but also the steel industry in the U.S. trade structure has seen the same change. 1959, the United Steelworkers of America shut down domestic production for 116 days, the U.S. steel imports exceeded exports for the first time in the 20th century. Since then, the share of imported steel in U.S. domestic consumption has steadily increased. The steel industry is also a traditionally dominant industry in the United States, and the change in its trade pattern is iconic. Importantly, but not easily seen, the machine tool industry, long a driver of change in U.S. manufacturing, has also declined. In fact, with the ability to innovate across knowledge frontiers, the U.S. invented CNC machine tools after World War II, setting off a revolution in the machine tool industry in the sense of industrial philosophy. However, due to the neglect of investment and the neglect of skilled workers training, coupled with the underestimation of the Japanese machine tool industry’s ability to learn and transfer advanced technology to it, by the 1980s, the machine tool industry, once at the center of the U.S. system, was in decline. The U.S. manufacturing empire built by Ford and Carnegie was no longer majestic, and the domestic market that once fed the U.S. manufacturing industry fell into the hands of foreign competitors one industry after another.
The above-mentioned picture does not indicate that the U.S. manufacturing empire has entered a stage of demise; this empire has only become divided. On the one hand, those so-called low- and medium-tech or traditional manufacturing industries have indeed been extensively weakened and even nearly extinct in the United States, but on the other hand, the high barriers to entry built by the accumulation of knowledge have enabled the United States to maintain strong innovation capability and long-term leadership in the fields of military, aerospace and electronic information. Of course, it is not only the different sectors or industries of the U.S. manufacturing empire that have diverged, but also the manufacturing methods themselves. In the free trade system created by the U.S. hegemony, U.S. manufacturing has been globalized, but this globalization is not just about conquering the world market with products as in the past, but the manufacturing activities themselves have also broken geographical boundaries and been divided under the dominance of the cost principle, with a large number of links moving away from the United States. Therefore, if we only care about the accumulation of capital and knowledge behind specific industries, the United States, where manufacturing is in decline, remains the accumulation center of the world system and an important innovation center of global manufacturing. However, the virtualization of manufacturing industry has its limits, and a large amount of knowledge of manufacturing activities arises from the field experience and from the close communication of each link of manufacturing industry, and the knowledge segmentation brought by the segmentation of manufacturing activities is unfavorable to the knowledge accumulation needed for manufacturing innovation. This disadvantage, at a time when the American system of the system has long since died out, continues to hinder the successful implementation of several U.S. governments in the 21st century to reinvigorate manufacturing. Having risen from a relatively closed continental system, the U.S. manufacturing empire had to make certain sacrifices for hegemony when the U.S. hegemony broke free of the old system to support itself with a more open system of sea power. This is the paradox of hegemony, or more precisely, the cost of hegemony. However, U.S. hegemony can never voluntarily retreat back to a continental empire, so it is difficult to succeed in revitalizing U.S. manufacturing in the old way and under the old system.
For the U.S. government, the problems of unemployment, technology loss, lack of self-sufficiency in strategic goods, and deteriorating regional economies brought on by the decline of domestic manufacturing were by no means insignificant. In 1971, the year the United States first ran a trade deficit, President Richard Nixon’s Commission on International Trade and Investment Policy, known as the Williams Commission, issued a report in July calling for a “New Realism,” which portrayed the new American mindset: “As textiles, apparel, footwear, steel, electronics and automobiles penetrate our market, there is increasing pressure for the United States to impose import restrictions… …Our people are increasingly concerned that years of U.S. tariff cuts have not fully realized their value …… People are frustrated with our continued balance of payments deficit …… People are increasingly concerned that our government’s foreign economic policy is under-valuing our economic interests while over-valuing our foreign policy relations, and they fear that this policy is still influenced by the ‘Marshall Plan mentality’.” The Marshall Plan was a set of U.S. economic assistance to Europe after the end of World War II to defend against Soviet expansion, and was a manifestation of the openness of U.S. hegemony. Obviously, the Americans of the 1970s no longer had the same self-confidence and open-mindedness that they had at the end of World War II. The American system, as a system, was destroyed by the Americans themselves, but it never completely disappeared from the American mindset. On the contrary, since the 1970s, the United States has been waging trade wars, first against its allies and then against the emerging developing powers, and trying to revive its manufacturing industry, which is the foundation of the country.
Thus, one of the central problems in the world today is the instability contained in the U.S. hegemony itself. Opening up domestic markets, easing factor flows including technology, and maintaining a global free trade system are things that should be done by the hegemony of the world system, but one of the costs of this hegemony is the dismemberment of its own manufacturing system into sectors such as the military industry, which remains at home, and a large number of sectors and segments that have moved out of the country.
But doesn’t military production require equipment and materials from basic manufacturing industries such as machine tools and steel? After the basic manufacturing industry is hollowed out, assuming a new great power war breaks out, will the United States still be able to mobilize industry as effectively as it did in World War II? These are the questions that no American ruler can avoid.
As a result, the United States is not willing to bear the due cost of its hegemony, and even keeps trying to recast its manufacturing empire in some 19th century way, which leads to an inherent instability in the world system created by this hegemony. This instability and the risks it generates are something that should not be avoided or underestimated by the great powers that the United States sees as competitors.
This article originally appeared on pages 120-130 in Culture, 2022, No. 1, and was originally titled “The American System: The Emergence and Fragmentation of a Manufacturing Empire. Individuals are welcome to share it, and media reprints should contact this public website.