Top critical review
Disappointing. Doesn't Deliver the Goods
Reviewed in the United States on April 25, 2019
Given the glowing reviews (including Bill Gates) of Vaclav Smil's works, I was anticipating a well researched and considered text on US manufacturing and the economy. This book falls short.
The premise is that the decline in US manufacturing has resulted in the huge trade imbalance and a concomitant decline in well-paid employment. 80% of the book is a description of the past, of the US's rise to manufacturing dominance, and its subsequent decline. IMO, much of this could have been condensed with tables and charts, with some added context, rather than the author's long-winded descriptions. The author makes much of the self-inflicted relative decline in manufacturing by contrasting the US with Japan and Germany which have strong trade balances, and with China, a nation that has become a trade powerhouse.
I should note that the previous global hegemon, Britain, also has a negative trade balance in goods, partly offset by [financial] services. As a former Brit, I lived through much of Britain's post-war decline, a path that the US is apparently following.
However, the author misses his targets in a number of ways. His evident hostility to China, while partly true, hinges on China's currency manipulation. Yet since the book was written, China's currency has continued to appreciate, the US no longer considers the currency undervalued due to manipulation, yet the trade imbalance with China continues to grow. Part of that is due to China becoming the offshore manufacturing hub for the US. One can see that in California's trade balance, which is hugely negative with China, as most of the electronics manufacturing has been outsourced to that nation. Are we really importing from China, or just reimporting finished goods that originated in the US?
The author believes that a country must produce enough goods to ensure that consumption is ultimately met with a balanced trade in such goods. Britain may be an argument that this should be the case, although how a country gets there without hugely depreciating its currency to reduce imports (in teh long term) is unclear. Again, Britain went through a long period of currency depreciation and it did not stop the decline.
One of the author's solutions is to reduce corporate taxes to encourage more US manufacture. Well the US has done just that, with no result at all in terms of renewed US manufacturing investment. So perhaps strike that as a solution.
The second issue concerning employment also misses the mark, IMO. The decline in wages in the US started in the 1970s when productivity gains were largely starting to be captured by businesses, not shared with employees. What has kept wages high in some cases was strong unionization, especially in teh auto sector. Yet the author later explains that part of the demise of the US auto sector was due to those high wages and accompanying benefits! You don't get to have it both ways.
My final critique is about employment. Agriculture now employs just 2% of teh US workforce, yet produces more than the country consumes. Yet we know that agricultural wages are so miserable that it requires cheap foreign labor. Suppose teh author is correct and that the US should manufacture enough so that with trade, our goods trade balance is neutral. Why should that require more than a fraction of the population, just like agriculture, especially as "robots" and other fabricators are replacing humans? Why should manufacturing guarantee employment and high wages? As the author admits, the problem is not so much that the US does not manufacture, but rather that manufacturing employment has declined, primarily through automation. The story is similar to agriculture in this regard.
Overall I find that while the author makes a case that I can sympathize with, he has not made a strong, logical case that can be used as a policy. Some of his ideas are even contradictory, and one at least is now proven wrong.
Having said that, there is no doubt that the US is in relative, although not absolute, decline. Its economic path seems to be that of following Britain. I would say that the US is like Britain in the late 1960s, early 1970s. Britain never recovered from its relative decline, although its trading union with Europe helped, as did the North Sea oil bonanza. I don't know what the solution is for the US, but perhaps it needs a better way to organize a modern economy?