Financial Times: Fetish for making things ignores real work
Manufacturing fetishism – the idea that manufacturing is the central economic activity and everything else is somehow subordinate – is deeply ingrained in human thinking. The perception that only tangible objects represent real wealth and only physical labour real work was probably formed in the days when economic activity was the constant search for food, fuel and shelter.
A particularly silly expression of manufacturing fetishism can be heard from the many business people who equate wealth creation with private sector production. They applaud the activities of making the pills you pop and processing the popcorn you eat in the interval. The doctors who prescribe the pills, the scientists who establish that the pills work, the actors who draw you to the performance and the writers whose works they bring to life; these are all somehow parasitic on the pill grinders and corn poppers. ...
... Many of those who talk about the central economic importance of manufactured goods do so from an understandable concern for employment and the trade balance. Where will the jobs come from in a service-based economy, manufacturing fetishists ask? From doing here the things that cannot be done better elsewhere, either because of the particularity of the skills they require, or because these activities can only be performed close to home. Manufacturing was once a principal source of low-skilled employment but this can no longer be true in advanced economies.
Most unskilled jobs in developed countries are necessarily in personal services. Workers in China can assemble your iPhone but they cannot serve you lunch, collect your refuse or bathe your grandmother. Anyone who thinks these are not “real jobs” does not understand the labour they involve. There is a subtle gender issue here: work that has historically mostly been undertaken by women at home – like care and cooking – struggles to be regarded as “real work”.
Where will exports come from, they ask? From exporting “designed in California” or “tailored in Savile Row”. Ask Apple, or your tailor, how they derive their earnings.
There is a persistent misconception that the value of something lays within the thing itself. Economic theorists ranging from Adam Smith to Karl Marx subscribed to the labor theory of value, the idea that the value of a thing is related to the amount of labor put into its production. In fact, the economic value of a thing is determined by the amount someone is willing to pay for it. It is about as simple as that.
Economic value is not a measure of importance. Water is very important to sustaining my existence. A diamond is not. Yet I might $1.00 for a bottle of water but millions of dollars for the Hope diamond. Why? Because water is so plentiful that finding the next bottle of water is no problem. Finding the next Hope Diamond is a big problem.
Rather than imputing intrinsic economic value to things, we need to look at how economic value is created. Joseph Pine explains that most of human economic history was about growing or extracting things from the ground. They were commodities. As commodities are undifferentiated the, big issue was price. Then came the ability to fashion things we take from the ground into goods. The value was in the fabrication. But after a time, competition drove goods into a commodity mode (Henry Ford and the Model T), with people looking for the lowest price for the good. Goods were now commodities. Then came customization. Value came from being able to customize goods to particular consumer needs. It was this service that created value but now the ability to customize is becoming commoditized. Pine suggests that creating experiences for consumers is the next step in adding value. Check out his video at TED for more.
