The Birth of a New Industrial Revolution

Peter Marsh (Charlie Bibby/FT)

Peter Marsh is a top Financial Times journalist and author of The New Industrial Revolution: Consumers, Globalization and the End of Mass Production, an upbeat analysis of the imminent manufacturing revolution. Here Marsh discusses the history of global manufacturing, the effect of the financial crisis and the social and economic benefits that a new industrial revolution could bring.

Article by Peter Marsh

How the world makes things has always been important. But in the past couple of years it has becoming a big political topic also. The manufacturing agenda has started to force its way from being an item of technical debate into the media headlines.

In the 2012 national elections in both the US and France, the issue of how to revitalise domestic manufacturing has become a big part of the discussion. In Britain the revival of production industries is one of the key goals of the coalition government formed in 2010. Top industrialists and politicians in Japan are trying to work out how to make the country’s manufacturers – renowned for their technical skills but frequently lacking in boldness and global ambition – more competitive.

In Germany – where the economy in he past few years has performed a lot better than in most comparable nations – manufacturing has held up rather well since the early 2000s. But few Germans seem to understand fully why this has happened. Also the country as a whole is desperately seeking new policies and ideas aimed at ensuring this period of ascendancy continues.

Dominating the entire debate about the future of global manufacturing is China. In 2010 China took over as the world’s biggest manufacturing country by output. Looked at from a long enough perspective, this was history repeating itself. In 1800 China had held the same position. But then the country suffered close to 200 years of decline.

By the middle of the 19th century Britain had replaced China as the global leader in industry. The main reason for this was the stimulus provided by the first industrial revolution – normally referred to as the Industrial Revolution – that started in the textile mills of northern England in around 1780.

Britain’s stint as the number one nation in this field lasted for barely five decades. By the end of the century the US had become the top global goods producer, after which it held on to its role for roughly 115 years, ceding the top of the tree position to China after the country’s spectacular return to economic health.

Meanwhile other ’emerging’ economies led by India and Brazil are also trying to expand their manufacturing industries in an effort both to match China’s prowess in this regard and to close the gap in living standards and incomes with the developed western world.

Much of the current interest in manufacturing worldwide has been driven by the 2008/09 global financial crisis. This was triggered by a huge overdose of bank lending and an overextended financial industry in a number of countries, led by the US and the UK but also extending to much of the rest Europe.

The events led to a serious global recession which affected not just the main rich nations but many emerging economies too. Another result was a massive injection of funds from governments to prevent the world financial system from collapse. The shockwaves from the subsequent soaring public sector debt in many countries, necessitating in many cases in big cutbacks in government programmes, will be felt for much of the coming decade.

In this environment a natural consequence has been for political leaders, business people and social thinkers to work out went wrong. There has been a tendency – especially in the US and UK but shared also in many other nations – to ask whether economic strategists have placed too much faith in finance based businesses as economic drivers rather than ‘traditional’ companies based around making things.

It would very neat at this point to say I started writing The New Industrial Revolution as a result of this build up of anxiety about the world economy and how to get it in better shape.

In fact the genesis for the book goes back some time further. It was stimulated by my interest in the late 1990s in trying to understand properly how global manufacturing worked. I felt this was a fascinating aspect of the modern world economy that had never been properly explored.

I also felt that if anyone was in a position to produce a decent account of this part of human activity, it was me. This was not driven by any immense ego. Rather I sensed that my position as the main manufacturing reporter on the Financial Times gave me a unique and privileged position to inquire into the topic.

In the 10 years or so it has taken me to write the book I have had the benefit of thousands of discussions with industrial managers and technologists in all the world’s main manufacturing regions extending to some 30 countries. I must pay tribute to Financial Times for giving me the opportunity to find out so much about an area of the world’s economy so vital to the continued well being of the human race yet so poorly analysed.

The thesis that I came to as result of my inquiries is, I believe, of immense interest. It is that the world is going through a new period of change – a New Industrial Revolution – that will have immense ramifications. The opportunities for creating health, happiness and wealth creation from the new era will be spectacular. The social benefits and economic rewards from the emerging epoch will be shared not just by a few countries (as happened in the original Industrial Revolution) but by many.

In recent years it has become fashionable to think that the period of economic and productive ascendancy of the rich countries – chiefly consisting of western Europe, north America and Japan – is finished as more of the world’s manufacturing momentum switches to China and other fast growing nations. This view is nonsense.

In the era opening up, there will be a chance for many countries and individuals to excel, so long as they understand fully the nature of the changes, have the correct degree of skills and motivation and act with the necessary imagination and creativity. The world contains huge numbers of people with this mix of attributes. These individuals will the ‘shock troops’ of the New Industrial Revolution. They will deal an upward push to the world economy unparalleled since the first Industrial Revolution almost a quarter of a millennium in the past.

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The New Industrial Revolution by Peter Marsh

Peter  Marsh is manufacturing editor at the  Financial Times. He lives in London.

The New Industrial Revolution is available in May from Yale University Press