Saturday, March 1, 2014

Is Small Urban Manufacturing Really Manufacturing?

I often hear vague talk of a new manufacturing renaissance in cities, one driven by technologies like 3D printing and robotics and sometimes grouped with various hipster-bobo artisanal products. But how similar is this new class of manufacturing to traditional categories like automobiles in terms of positive spillover effects? A few thoughts:
  1. The stated promise of this new sector is to radically increase productivity in manufactured goods by lowering initial capital expenditures, increasing customizeability (thus increasing potential aggregate market), reducing inventory costs (thus reducing short-term financing demands), increasing responsiveness to changes in market demand, and reducing transportation and infrastructure costs by producing close to market.

  2. Manufacturing has historically been advantageous in growth and development because using machines to make stuff has allowed big productivity gains without big education and skill gains. Factories can employ low-skill/low-education workers, and teach them how to operate equipment. 

  3. But much of the hot new manufacturing in rich cities is more like the service or tech sectors--it requires high existing levels of skills and education (creativity, computer skills, etc.). This makes me very skeptical about claims regarding the race/class/employment benefits of any urban manufacturing renaissance. These businesses will draw their workforce away from existing high-skill/high-education jobs instead of hiring from low-skill/low-education labor pools. In fact, fast food restaurant jobs share more similarities to the urban manufacturing/factory jobs of old in terms of skill requirements and advancement opportunities.

  4. These new industries aren't geared as much around trading. That's one of the biggest advantages of traditional capital-intensive manufacturing: the barriers to trade are low compared to other sectors like services. Focusing more towards home markets reduces the need for firms to develop flexible marketing and supply-chain systems, limiting knowledge learning and the ability to scale up.

  5. I worry that if local urban manufacturing really takes off the reduced demand for imported goods will put developing nations at a disadvantage because they won't be able to rely as much on manufacturing for export as a development path.

  6. The fact that expensive high-rent cities like New York have so much primo land (on the water, near retail hubs, etc.) still devoted to comically-low-value uses like warehouse storage and parking is a sad reflection of how screwed-up the land market is (zoning restrictions, excessive veto power over new construction by local residents etc.). Maybe the urban manufacturing renaissance can use these spaces and get the land closer to its highest and best use. This to me seems like the most undervalued benefit of small urban manufacturing. But never forget, these low-productivity spaces shouldn't even be there any more! By far a more optimal use would be to change zoning and building restrictions to allow developers to just demolish all the warehouses and old blighted factories and build housing and office towers and stuff.

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