This is a thought provoking contribution submitted by Paul Thomas. It deserves to be published. Be warned it explains some of the last three decades of economic demise, attributes blame, is highly opinionated but finishes with hope. The conclusion is that cheap labor will become a losing economic strategy in the face of additive and distributive manufacturing. In fact 3D printing could be just what our economies need.
The means of production
This is not a long winded academic essay worthy of an MBA nor an exhaustive pamphlet on economics. It is a series of observations and an attempt to present a scenario for how 3D printing should be changing our economies. Hopefully in the near future and for the better. Indeed, many in the West who have seen work leave for Asia due to the low cost of labor in China and India are going to like it. So will anyone who cares about the continued environmental damage caused by the transportation of those goods or the unfriendly ways in which they are often made.
There are a few assumptions in what follows. None seem so contradictory, that they would not appear likely outcomes as opposed distant possibilities. Perhaps the means of production is about to change, sooner rather than later. Karl Marx was right and not being facetious that power lies with those that control production.
Food for thought but one thing is for sure; history shows that technology drives economic change and major shifts in those economies which embrace it. Time and time again this has proven to be true. Whether it was the steam engine, a national grid for electricity , the automobile, jets capable of crossing continents in hours or the digital computer. In fact, the list of innovations is endless but many (not all) on that list have something in common.
They have reduced distances in the context of time and cost.
3D printing or let’s call it additive manufacturing is no exception and it also promises a third dimension: a reduction in environmental damage.
The fashion driven by the media is all about consumers buying their own 3D printers and producing items at home. Anything you want and when you want it – all created in your garage or on the kitchen sideboard at the flick of a switch. Want a widget? There we go, it is programmed in and we can have it in about an hour after dinner. That is a great vision, we can all hope it happens but let’s move away from that idea for just a moment. We can look at a more likely scenario than one propogated by media hacks in Midtown NYC or Fleet Street in London. One which could be just around the corner.
And here is the interesting part – it will not be macro-sized chunks of capital in billion dollar investment funds that delivers that change but players with smaller targeted investments.
At present a large part of the world’s manufacturing of finished consumer goods, components, sub assemblies and general assembly is carried out in Asia. Specifically in China and increasingly in India. It is a low cost mass production model, pushed to extremes and based on an abundance of cheap labor. The driver has been to gain efficiencies from producing the greatest volumes of anything and everything. It has been the policy of those governments to be ‘producer’ led. They worry little about fostering consumer demand within their own respective populations. There has been even less concern shown for the environmental impact caused by their industrial polices – witness the ubiquitous air pollution in most major Chinese cities. The cost of production (using cheap labor and automation) has been greatly reduced on almost everything except big ticket items. That is not just finished consumer goods but components and sub assemblies used in all types of industrial products.
Asian products have flooded Western markets, creating great social change and economic imbalances, chiefly within ‘consumer led’ economies like the United States. It is difficult to overstate how many jobs have ‘gone east’ over the last 25 years, neither the loss in skills which added value to those economies. Capital searched out the lowest cost base and shipped those products back to what were affluent populations in the United States and Europe. It has basically been a one way street. The only response has been to print more dollars and hope as if by magic it will reduce the true value of the debt.
In simple terms, production based economies have won over consumer led ones. That is not a political statement. It is demonstrable and factual. It is also doubtful that the vast majority of peoples in either the East or West have actually won and both have lost. It cannot be said that the Chinese worker ever gained what the American worker lost. Reflect on that for just a moment because it says so much about where the difference went and who has benefited.
China’s economy will be larger than the United States this year, surpassing EFTA shortly afterwards – game over but not quite. There are exceptions like Germany in the West and Japan to consider. However, these countries, focussed on providing Asian factories with the tooling to make all this stuff? This is not a poke at Germany but their Mittelstand (small and medium-sized enterprises) has been the most successful in tooling-up Asia’s mass production machine. Germany has reaped the rewards of such an industrial policy. They are one of the few successful economies in the Western hemisphere with a trade surplus, a highly skilled workforce, low unemployment, a broadly based high standard of living and a social welfare system that most would admit works.
In truth, big capital, mainly based on the dollar funded the imbalances. Again it is not a political statement but just a fact. We did it to ourselves and that is of course a statement of political consequence.
3D printing (additive manufacturing) is on the verge of being able to readdress some of the trade imbalances and the social consequences which have followed. It is a bold statement and one that many will argue with.
The change when it comes will be in taking out the distance in terms of time and cost. When it no longer makes financial sense to ship products around the world. When the United States and Europe as a whole make their own Mitelstands, serving their own corporations and most importantly consumers.
Imagine the effect if each town had their own 3D printing factories. A place where you could get some of what you want made locally. Call them concessionaires with professional grade 3D printers capable of additive manufacturing in a broad range of materials, perhaps making moulds for small batch runs and bringing the unit cost down to a competitive price point. It is obvious that even if a very small amount of demand was satisfied by local 3D printers, a mere 5% of demand, the economics of the world start to look different.
If locally based additive manufacturing enters the supply chains of major industry, it becomes even more significant. The United States would certainly be in a different place economically and its trade statistics would move in the right direction. It would be like a mini-renaissance for all consumer led economies, rather than deflating the dollar to reduce national debt.
Is this possible? And if yes why is it not happening faster? There are several possible reasons even though the technology exists and it is improving. It would appear to be mainly a case of a will to do so:
1. Education and the loss of skills to make it happen.
Manufacturing is a hard and often gruellingly boring business – sometimes even dirty. It requires skills, long set up times and capital to run it. There is little doubt that the manufacturing base (the skills and knowledge) has been decimated since the mid 1980s. Yes there are exceptions but generally speaking the facts speak for themselves in terms of the proportions of GDP. An exaggeration but a generation of children know nothing about manufacturing. All they know is when they turn over a product it says Made In China. Those in work are more likely to be working in the retail sector and soft services, keeping this overseas mass production machine working at full speed.
2. Availability of capital & investment.
The readiness of capital and investment is very much tied to the former point. Getting investment for a local manufacturing business is difficult. Private funding may be forthcoming but financial institutions such as banks, generally speaking, are less than enthusiastic. They are not clued up or warm towards long term investments they know little about like 3D printing. For them it is easier to sell a fund which invests in … they perceive only a small risk in doing so. It is not without notice that crowd funding has become one route to market for innovators and those with products to sell who are locked out.
3. Government and the education system.
There may be exceptions and a few schemes but what are Governments really doing beyond making media statements and throwing out crumbs? Where are the grants and the serious tax breaks which lead to investment? Education is trying but 3D printing should be part of every school curriculum; backed with machines and teachers with the necessary skills. Manufacturing should be a mandatory subject and not an option if you are running a country. Not some afterthought tacked on for a few children that show an interest.
If you are sitting in the United States or most of Europe, look at the economic or industrial policies with regard to manufacturing. It is hard not to ask an obvious question. Why are governments not pushing harder in promoting additive, local and distributive manufacturing at every opportunity with policies and money behind it?
We have very good reasons to develop additive manufacturing, both for the economic well being of our nations as whole and the environment we share. It is a winning strategy. Additive manufacturing which is undertaken locally can satisfy many types of demand closest to the point of consumption. It has an important part to play in bringing our economies and the environment into better balance.
In the words of one of history’s greatest thinkers and philosophers: