Why Is Manufacturing Important to the Economy?

Manufacturing has been a critical part of the economy for centuries, and we still often look to the state of manufacturing and manufacturing companies as an indicator of the state of the economy. But why are manufacturing and the economy so closely linked? Why is manufacturing so important to the economy?

Here are several of the most important reasons.

1. Manufacturing is Innovation

Some of the most important inventions in history were invented primarily to facilitate manufacturing, even if they were later repurposed for other means. Furthermore, the fact that a country has the ability to manufacture can spur people to invent new technology outside of manufacturing, with the knowledge that there will be a means of mass-producing their product once it is perfected.

2. Manufacturing Is Power

The ability to manufacture — to actually have the tools to effectively mass-produce goods — has always been inexorably linked with power on the global stage. It is not military might or population or the amount of land that primarily determines which countries are considered global powers — it is manufacturing.

For the first half of the 20^th century, the United States’ rise to becoming a global superpower was characterized by its producing half of the world’s factory machines. Today that number is closer to 15 percent, behind China’s 16 percent.

3. Manufacturing Makes Things

This may seem like a self-evident statement, but the point of the economy is that goods can be traded for virtually anything, while services are not nearly as commodifiable. It is manufactured goods that drive economies, not services. Services are very often the luxuries that follow. A country that provides services but is weak on providing goods will be extremely dependent upon the economies of other countries to survive and thrive.

Furthermore, most services usually rely upon manufactured goods. Everything from a masseur needing a massage table to a car for a taxi driver illustrates the need for goods in order to provide services.

4. Manufacturing Means Jobs

It is with good reason that the opening of a new manufacturing plant is met with great hope and excitement by the community that welcomes it, especially if that community has been struggling economically. Manufacturing plants mean new jobs.

And it’s not just jobs for people working in and managing the plant, either. Manufacturing means jobs for the people who transport the manufactured goods, sell those goods, supply services to the plant and more. In fact, the Economic Policy Institute states that every manufacturing job supports three other jobs.

There has been a concern in recent years that the economic focus of the United States and other countries have moved away from manufacturing. As you can see, this could be a big mistake. No matter what form manufacturing takes, we must support it and allow it to thrive if we want to continue to enjoy a robust and flourishing economy in the future.