Document Type

Master's Culminating Experience

Publication Date

1996

Abstract

Manufacturing is the primary driver of major wealth formation and competitiveness in every significant economy. Therefore, it would appear that the more dominant role in manufacturing plays in overall Gross Domestic Product (GDP), the greater is the annual comparative growth rate of the economy. Manufacturing is 19 percent of GDP for the United States, 30 percent for Japan, 31 percent for Korea, and 35 percent for Germany, as of 1987.

The term "manufacturing" as used here does not include construction, mining, forestry, fishing and other similar activities. There are two general definitions (See footnote, OECD/2/World Bank. U.N. SNA).

This paper contends that manufacturing, as a percent of GDP, is a disproportionately significant contributor to national wealth and competitiveness. For example, the percentage of Gross Domestic Product (GDP) in the United States is only two-thirds of Japan's and about fifty-five percent of Germany's. On the international scale, both Germany and Japan enjoy faster growth, the greater prosperity, the stronger currencies and also the greatest export market volume.

This paper further considers the linkages that are compliments to manufacturing. The author contends that manufacturing is the economic wellspring of leading nations' progress, around which most other economic segments support and enhance. Manufacturing drives the entire economy. When considering the upstream and downstream services of a country and the infrastructure necessary to make manufacturing effective, it is calculated that in the United States over fifty percent of the GDP is attributable to manufacturing and manufacturing-generated activity. Without manufacturing, much of the upstream and downstream services would be unnecessary. Therefore, in addition to the idea that manufacturing is the most profitable sector of the economy, manufacturing is also the one sector in which there is the greatest synergy for increasing the general prosperity of society.

This paper postulates that there is a positive correlation between the percentage of manufacturing and the prosperity level of the total economy [Economic Report of the President 1993], The corollary of this proposition is that there is not a similar positive correlation to services. Therefore, it follows that as the percentage of manufacturing increases, so does GDP. However, as the percentage of services increase, if manufacturing does not follow, then the GDP does not necessarily go up or at least not at the same rate. This clearly implies that manufacturing is the driver of prosperity, as well as the integrating factor that makes many sectors of the economy more productive.

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