When the history of this era is written, observers may marvel that a country as wealthy, knowledgeable and technologically advanced as the US allowed itself to pursue a lowest common denominator economic strategy - for decades - rather than building on its strengths by investing in the future.
Ironically, the downfall of the Soviet Union is often attributed to (relatively) conservative Republican President Ronald Reagan's decision to pour resources into military tech. It is believed that decision broke the will of the Russian leadership, who understood they had neither the financial wherewithal nor the technology to compete.
However, when it became clear that the Chinese were determined to rev their economic engine, rather than stepping on their proverbial necks in true capitalist fashion, US businesses rushed to accommodate the Chinese. The sugar-plum dreams of access to the vast Chinese market blinded them to the realities of the logistical, technological and political challenges ahead. Though executives speak bravely of investing for the long haul, that is a smoke screen covering the reality that there was - and quite possibly, is - simply no short term return to be had.
Fast forwarding a generation, it is becoming apparent that the Chinese may be more honest about their problems than global corporations. Virtually every deal signed by foreign companies in China - including a recent one with the US movie industry - involves significant technology transfers in return for access to the Chinese market. China's leadership has spoken explicitly about evolving from a 'brawn' to a 'brain' economy. They are even keeping score as to the number of Silicon Valley start-ups founded by Chinese versus Indian ex-pats (the Indians are ahead...).
But aspirations are not facts. As so often happens, the past two decades manufacturing failures have inspired a host of technologically-driven innovations aimed at reducing the Asian cost advantage in labor, taxes, currency manipulation and demographics. This is not to suggest that China's day is past; they will remain a fearsome competitor, but as energy prices make shipping costs more of a problem, that manufacturing edge may finally reversing itself and returning activity to the locus of the first industrial revolution.
Vivek Wadhwa reports in Foreign Policy:
Seduced by government subsidies, cheap labor, lax regulations, and a rigged currency, U.S. industry has rushed to China in recent decades, with millions of American jobs lost. It is these fears, rather than Olympic uniforms themselves, that triggered the recent congressional uproar.
But Ralph Lauren berets aside, the larger trends show that the tide has turned, and it is China's turn to worry.
Many CEOs, including Dow Chemicals' Andrew Liveris, have declared their intentions to bring manufacturing back to the United States. What is going to accelerate the trend isn't, as people believe, the rising cost of Chinese labor or a rising yuan. The real threat to China comes from technology. Technical advances will soon lead to the same hollowing out of China's manufacturing industry that they have to U.S industry over the past two decades.
Several technologies advancing and converging will cause this.
First, robotics. The robots of today aren't the androids or Cylons that we are used to seeing in science fiction movies, but specialized electromechanical devices run by software and remote control. As computers become more powerful, so do the abilities of these devices. Robots are now capable of performing surgery, milking cows, doing military reconnaissance and combat, and flying fighter jets. Several companies, such Willow Garage, iRobot, and 9th Sense, sell robot-development kits for which university students and open-source communities are developing ever more sophisticated applications.
The factory assembly that China is currently performing is child's play compared to the next generation of robots -- which will soon become cheaper than human labor. One of China's largest manufacturers, Taiwan-based Foxconn Technology Group, announced last August that it plans to install one million robots within three years to do the work that its workers in China presently do. It has found even low-cost Chinese labor to be too expensive and demanding.
Then there is artificial intelligence (AI) -- software that makes computers, if not intelligent in the human sense, at least good enough to fake it. This is the basic technology that IBM's Deep Blue computer used to beat chess grandmaster Garry Kasparov in 1997 and that enabled IBM's Watson to beat TV-show Jeopardy champions in 2011. AI is making it possible to develop self-driving cars, voice-recognition systems such as the iPhone's Siri, and Face.com, the face-recognition software Facebook recently acquired.
Neil Jacobstein, who chairs the AI track at the Silicon Valley-based graduate program Singularity University, says that AI technologies will find their way into manufacturing and make it "personal": that we will be able to design our own products at home with the aid of AI design assistants. He predicts a "creator economy" in which mass production is replaced by personalized production, with people customizing designs they download from the Internet or develop themselves.
How will we turn these designs into products? By "printing" them at home or at modern-day Kinko's -- shared public manufacturing facilities such as TechShop, a membership-based manufacturing workshop, using new manufacturing technologies that are now on the horizon.
A type of manufacturing called "additive manufacturing" is now making it possible to cost-effectively "print" products. In conventional manufacturing, parts are produced by humans using power-driven machine tools, such as saws, lathes, milling machines, and drill presses, to physically remove material until you're left with the shape desired. This is a cumbersome process that becomes more difficult and time-consuming with increasing complexity. In other words, the more complex the product you want to create, the more labor is required and the greater the effort.
In additive manufacturing, parts are produced by melting successive layers of materials based on three-dimensional models -- adding materials rather than subtracting them. The "3D printers" that produce these parts use powered metal, droplets of plastic, and other materials -- much like the toner cartridges that go into laser printers. This allows the creation of objects without any sort of tools or fixtures. The process doesn't produce any waste material, and there is no additional cost for complexity. Just as, thanks to laser printers, a page filled with graphics doesn't cost much more than one with text (other than the cost of toner), with 3D printers we can print a sophisticated 3D structure for what it would cost to print something simple.
Three-D printers can already create physical mechanical devices, medical implants, jewelry, and even clothing. The cheapest 3D printers, which print rudimentary objects, currently sell for between $500 and $1,000. Soon, we will have printers for this price that can print toys and household goods. By the end of this decade, we will see 3D printers doing the small-scale production of previously labor-intensive crafts and goods. It is entirely conceivable that, in the next decade, manufacturing will again become a local industry and it will be possible to 3D print electronics and use giant 3D printing scaffolds to print entire buildings. Why would we ship raw materials all the way to China and then ship completed products back to the United States when they can be manufactured more cheaply locally, on demand?
Other advances in the next decade will likely affect manufacturing, particularly advances in nanotechnology that change the equation further. Engineers and scientists are today developing new types of materials, such as carbon nanotubes, ceramic-matrix nanocomposites, and new carbon fibers. These new materials make it possible to create products that are stronger, lighter, more energy-efficient, and more durable than existing manufactured goods. A new field -- "molecular manufacturing" -- will take this one step further and make it possible to program molecules inexpensively, with atomic precision. "Over the next two decades," Jacobstein says, "molecular manufacturing will do for our relationship with molecules and matter what the computer did for our relationship with bits and information -- make the precise control of molecules and matter inexpensive and ubiquitous."
All of these advances play well into America's ability to innovate, demolish old industries, and continually reinvent itself. The Chinese are still busy copying technologies we built over the past few decades. They haven't cracked the nut on how to innovate yet.
It's a near certainty that robotics, AI, and 3D-printing technologies will advance rapidly and converge. American companies are already finding the rising cost of labor, shipping costs and time lags, and intellectual-property protection to be major issues in doing business in China. And the Chinese government has done itself no favor by hoarding key raw materials such as rare-earth minerals, forcing Western manufacturers to start looking for alternatives. The most advanced automobile of today -- the Tesla Roadster -- is already being manufactured in the United States using robotic and AI technologies. Google just announced that it will produce its highly-acclaimed Nexus 7 tablet in the United States. This is just the beginning of the trend.
So, let me predict a future headline: "Protests break out in China over 2020 Summer Olympic uniforms, 3D-printed with U.S.-made technology."
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