Is the USA in 'irreversible decline'?

Note that these figures are cumulative. Over the period 1980-2010 manufacturing output per employee increased threefold. In 2010 11.6 million manufacturing workers were producing almost twice as much as 18.7 million people in 1980.

To put this in perspective manufacturing productivity in China has not quite reached the levels of the USA in 1980.

The process is ongoing. The deployment of technologies already in the pipeline could see US manufacturing productivity grow by another fifty per cent in the coming decade. According to the Economist magazine manufacturing productivity in the US is between three and four times that of China.

This quote from the economist sums it up:

Despite China's rapid rise, America remains a formidable production power. Its manufacturing output in dollar terms is now about the same as China's, but it achieves this with only 10% of the workforce deployed by China,…

(See: http://www.economist.com/node/21552899)

Updating the story, in the year to May 2012 America's manufacturing output grew by 4.7%, Japan's by 6.2% and China's by 9.6%. By contrast manufacturing output in the Euro area shrunk by 2.8% with German output flat.

Myth 2: China is a great manufacturing power.

…One former [Apple] executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone's screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company's dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

"The speed and flexibility is breathtaking," the executive said. "There's no American plant that can match that."

(How the U.S. Lost Out on iPhone Work, NY Times, 21 January 2012).

If you have a skilled and disciplined labour force willing to live in company dormitories and work long hours for low wages you can do things which would be impossible in any rich country. Is this a sustainable model going forward?

But labour costs are growing less and less important: a $499 first-generation iPad included only about $33 of manufacturing labour, of which the final assembly in China accounted for just $8. Offshore production is increasingly moving back to rich countries not because Chinese wages are rising, but because companies now want to be closer to their customers so that they can respond more quickly to changes in demand. And some products are so sophisticated that it helps to have the people who design them and the people who make them in the same place. The Boston Consulting Group reckons that in areas such as transport, computers, fabricated metals and machinery, 10-30% of the goods that America now imports from China could be made at home by 2020, boosting American output by $20 billion-55 billion a year.