by A. Michael Noll

[Posted with the permission of the author.]

The United States has been predominately a service economy for the past decades. Manufacturing is dead. The assembly lines of the past are mostly gone, with automated machines and robots having replaced humans. Yet, some politicians are promoting manufacturing, even using tariffs to try to return to the past. Are they trapped in the past?

I recall decades ago when Western Electric manufactured telephones for the old Bell System in the United States. Raw materials went in the front of the factory and telephones out the back. Humans assembled the telephones at assembly lines.

The management at AT&T was trapped in the past and saw value in physical things and in manufacturing them. AT&T retained Western Electric long after the days of manufacturing were over. AT&T even dreamed of being in the computer business – not the service and software portion, but the physical manufacturing of computers. This misguided dream resulted in ill-fated excursions with Olivetti and NCR. Today, Western Electric is no more.

Now the United States is adopting industrial policy and protectionism with tariffs against foreign manufactures. Government has a history of protecting losers – and seems to be doing so again. If a country wants to subsidize and be the world’s manufacturer with cheap prices, then let it, since the world benefits. Ultimately, its workers will force change. If the United States dreams of manufacturing, then it will suffer a fate like that of Western Electric. Tariffs are protection of the past – a form of taxation – a big mistake.

Today, services matter – the engineering and design of things and software, and provision of services, such as education and medical aid and police and drivers. Young people no longer want a career in working in a factory or steel mill.

A. Michael Noll

February 11, 2025