The Toaster Economy

The toaster recently popped into the national conversation, courtesy of Ohio senator JD Vance. Speaking at a rally in Nevada in July, the Republican vice-presidential nominee ruffled more than a few feathers in his defense of American-made toasters: “We believe that a million cheap knockoff toasters aren’t worth the price of a single American manufacturing job. We believe in rebuilding American factories and rebuilding the American dream, and we’re going to stamp more and more products with that beautiful label: Made in the USA.”

Vance’s call for “made in the USA” toasters provoked complaints from both libertarians and liberals about “protectionism” and a supposed nostalgia for the factory jobs of yore. It’s true that the toaster is a common household appliance. It’s not a cutting-edge drug, a large piece of capital equipment, or some top-secret military device. Still, the end of the toaster factory illustrates the decline in manufacturing more broadly.

Today, the toaster market is dominated by imports. The U.S.-made toaster used to be affordable for the average American, while also providing a job for the American factory worker who built it. As recently as 1998, Hamilton Beach / Proctor Silex had a toaster factory in Mount Airy, North Carolina (which used to be called the “toaster capital of the world”).

However, global trade put increasing pressure on the Mount Airy toaster factory, as major American corporations found they could produce toasters (as well as other goods) more cheaply abroad. In the aftermath of NAFTA and the ascension of the People’s Republic of China into the World Trade Organization, factories across the country closed down, leading to massive manufacturing job losses, with domestic totals falling from 17 million in the mid-1990s to only 13 million today.   

These closures slammed Heartland towns and sapped the nation’s overall industrial capacity. As the historians David L. Carlton and Peter A. Coclanis have noted, North Carolina alone lost 44% of its manufacturing jobs between January 2000 and January 2010. And these job-losses cannot be attributed solely to automation. After all, it’s not like the Mount Airy plant is still making toasters—just without any workers.  

When it made laid-off Mount Airy workers eligible for assistance in transitioning to new jobs, the federal government attributed their unemployment to NAFTA. Later, many of those jobs likely moved from Mexico to the People’s Republic of China. According to the Observatory of Economic Complexity, the United States imported around $220 million worth of toasters in 2022—99.5% of them from the PRC. The fact that the United States has to import such a vast quantity of toasters, textiles, and other goods formerly made in North Carolina also indicates that these manufacturing jobs did not just simply relocate to another state within the Union. Beyond the humble toaster, the annual trade deficit in goods exploded, from $115 billion in 1993 to over $1 trillion in 2023. The United States has also shed manufacturing jobs during this time.

Critics of a “made in the USA” manufacturing agenda have alleged that it could result in higher prices for the American consumer, but the continued atrophying of America’s manufacturing infrastructure has long-term costs. In contrast to the “potato chips are the same as computer chips” consensus of 1989, policymakers today are running into the reality that the nuts and bolts of manufacturing matter.

At times, the way policymakers and others talk about manufacturing falls into what we might term the “Athena fallacy,” after the Greek goddess who jumped fully formed out of the head of Zeus: all that matters are the ideas, and manufacturing is simply reproducing those ideas. A core assumption of the Athena fallacy is that the cognitive part of the economy is divorced from the manual part. In reality, though, inventing and making go hand in hand. Thomas Edison knew this, as do some contemporary entrepreneurs. In a 2010 Bloomberg column, former Intel CEO Andy Grove tied the loss of manufacturing jobs to a breakdown in high-tech innovation:

A new industry needs an effective ecosystem in which technology know-how accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer-electronics devices.

Rather than seeing consumer electronics simply as some rung to be jumped over in the pursuit of cutting-edge technologies, Grove instead noticed that they were important in creating an ecosystem for new innovations across products.

It can be hard to separate “high-value” from “basic” manufacturing. Forget toasters—consider the smartphone. An icon of the digital economy, the iPhone is a signature offering from Apple, which used to manufacture many of its products here. But today the People’s Republic of China is the epicenter of iPhone production, and the company’s executives now say that they cannot make the iPhone here.

Why? Partly because of a lack of manufacturing infrastructure for more elementary components. As one executive told the New York Times in 2012: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.” A 2019 Times story documented the way that Apple’s attempt to manufacture the Mac Pro computer in the United States faltered in part because of an inability find a supplier for custom screws.

The robust local supply chains necessary to produce the iPhone—everything from screws to gaskets to glass—give the PRC a considerable structural advantage for advanced product manufacturing. Basic components as well as technical skill at producing and adapting them are close at hand, all of which act as a magnet for production. As the PRC’s electric-car industry demonstrates, that edge in manufacturing can translate to the potential dominance of an economic sector.

Manufacturing policies also have enormous national security implications. In 2021, Congress authorized an independent (and bipartisan) Commission on the National Defense Strategy. This commission’s recently released report foregrounds the challenge of supply chains: “U.S. industrial production is grossly inadequate to provide the equipment, technology, and munitions needed today, let alone given the demands of great power conflict.” As the recent shortages of munitions indicate, the American defense-industrial base has withered over the past twenty years, endangering the ability to the United States to project power abroad and fulfill its international commitments.

The commission’s findings underscore the challenges posed by a hollowed-out manufacturing sector. Among the reasons the commission offers for this weakened defense-industrial base are an “erosion of the broader U.S. manufacturing ecosystem over multiple decades” and “shortages of skilled workers due to educational issues, high employment rates, and other factors.” The ability to produce essential defense materiel is, then, intertwined with the fate of manufacturing more generally. The “shortages of skilled workers” might indicate the importance of reforming the American educational system, but those shortages are also evidence of the broader withering of the manufacturing ecosystem. The decline of manufacturing jobs entails a smaller pool of the trained workers required for a defense build-up.

Restoring the broader manufacturing ecosystem will likely require a full-spectrum effort—from tax reform to AI innovations to a 50-state strategy for rebuilding defense inputs. “Friend-shoring” (locating suppliers in allied nations) and diversifying supply chains might be part of the equation. The United States has relied on imports throughout its long history, and a substantial portion of contemporary imports are used in the manufacturing of other products. But policymakers also have to address the robustness of the national manufacturing ecosystem. Contrary to the Athena fallacy, toasters do not spring fully formed into the world. Neither do phones, cars, or missiles. Ensuring the breadth of the United States’s ecosystem for manufacturing can help revitalize the American economy and preserve the nation’s ability to act as a great power on the world stage.