Made in America: A Brief History of U.S. Manufacturing

VIDEO: Her Dad talked about buying American made products, and now shes trying to do so.
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With the country still mired in high unemployment, more people are asking tough questions about American manufacturing and what it means for jobs.

In recent months, President Obama has made his case for a reinvigorated manufacturing base.

"We want to create and sell products all over the world that are stamped with three simple words: 'Made in America.' That's our goal," the president said last December.

For Full Coverage from the "Made in America" Series, Click Here

As "ABC World News With Diane Sawyer" launches our "Made in America" series, it's a chance to look back at the history of American manufacturing and the gradual shift away from assembly lines toward high-knowledge service industries.

Through much of the 20th century, American manufacturing functioned as the nation's economic engine and formed the basis for a large middle class. The country rose to its place as a global economic superpower as customers clamored for the latest American-made products, from cars to refrigerators to television sets.

"By providing opportunities for people not just to farm, it helped raise average income and average living standards," said Doug Irwin, a professor of economics at Dartmouth. "By the 1920s and '30s, a solid 20 percent of the labor force was in manufacturing."

Industrialization changed the fabric of American life, encouraging workers to leave behind family farms and move closer to factories in cities and eventually suburbs. Communities built up around industrial hubs, from Detroit's auto boom to Pittsburgh's steel mills.

New industries and manufacturing jobs allowed workers to move up the economic ladder and increase their income without needing high levels of education. Even with limited skills, workers could leverage their experience in low-paying industries like textiles to take higher-paying jobs on assembly lines.

"The transition from low wage to high wage manufacturing jobs was much more open to people," Irwin said.

1970's See Widening Trade Imbalance

The United States recorded trade surpluses for decades until the late 1970s when the pattern began to shift. Due in part to the change from a fixed exchange rate to a floating rate, as well as new trade agreements, the value of goods imported into the country began to outpace the value of exports.

The statistics tell a story of drastic change: In 1960, foreign goods made up just 8 percent of Americans' purchases. Today, nearly 60 percent of everything we buy is made overseas. In 2010, the trade deficit totaled $497.8 billion, according to the federal government.

The United States has fewer manufacturing jobs now than it had in 1941, the same year as the attack on Pearl Harbor. Boosts in productivity from technology gains meant that even goods still made in the U.S. required fewer workers on the assembly line.

For decades, the share of the labor force employed in manufacturing has been on a gradual decline as more Americans have taken jobs in service-based industries.

"That's not unusual. If you look at what happens to a country as it becomes wealthier, you totally expect to see an increase in the share of services and a decrease in the share of goods," said Martha Olney, an adjunct professor of economics at University of California at Berkeley.

While the early years of the 20th century America may have been built on manufacturing, economists say that growth in the 21st century will almost certainly depend on services, from design to banking to technology.

U.S. Remains Top Producer of Manufactured Goods

But sometimes lost in all the debate over imports is an important fact -- the United States remains the world's largest producer of manufactured goods.

From Harley-Davidson motorcycles to Steinway pianos, Scotch tape to Louisville Slugger Baseball Bats, plenty of products still roll off our assembly lines for purchase by American consumers.

As a result, more than 11 million Americans still get their paychecks from working in factories, and what U.S. consumers buy can have a big impact. According to Moody's Economy.com, if every American spent an extra $3.33 on U.S. made goods, it would create nearly 10,000 new American jobs.

Company's Leader on Value of American Workers

Some executives say they get more by employing American workers than just hands in a factory. At Louisville Slugger, the company's leader says that when he faces a problem, he "swims with the fishes" and learns a thing or two from his employees.

"Dive in with the fishes. Find out what's going on and ask them what to do," said Jack Hillerich, chairman of Hillerich & Bradsby Co, the parent of Louisville Slugger.

"Actually, when you give them a problem, it's like giving your fish food. They'll eat it right up and give you a better answer than you ever have had. We always go to our people, ask them what they would do, and they have the right answer," Hillerich said.

Next week, ABC World News begins a challenge to see what it's like to support those American workers with purchases.

With the help of one Texas family, we'll empty their home and fill it back up with only American-made products. What will it look like? How much will it cost? And what can we buy in America right now that will save jobs and possibly even create new ones?

Online and on our broadcast, we invite you to join us and learn what it really means to be "Made in America."

Click here to return to the "World News" page.

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