Part I
Commodities and Manufacturing

Commodities, which are generally understood to be the most basic, relatively unprocessed products of agriculture, forestry, fisheries, and mining, have gradually diminished in relative importance in the United States since the 1950s. In terms of product value, commodities today account for little more than 5 percent of output, about half the level found in the 1950s.

Because commodities can be characterized as relatively homogeneous goods, these industries are more likely to have effective competition. The broiler industry has remained effectively competitive despite a gradual increase in concentration, but it is experiencing rapid growth in demand for more convenient forms of product that are more highly processed and more amenable to differentiation.

In terms of product value, the relative importance of the manufacturing sector in the U.S. economy has declined from just under 30 percent in the 1950s to less than 20 percent in the 1990s. In terms of employment, the relative importance of the manufacturing sector has diminished from just under 25 percent of the labor force in the 1950s to less than 15 percent today. Among the more developed nations, this pattern has not been unusual, as manufacturing has become more capital-intensive.

Although the manufacturing sector can be divided into broad subsectors or product groups, the lines drawn are seldom distinct. For example, durable goods are frequently distinguished from nondurable goods, despite the simplistic nature of this dichotomy. Direct competition between firms must be examined in more carefully defined industries and markets. In many well-defined industries throughout the manufacturing sector there is more effective competition today than there was in the 1950s. Increasing imports and antitrust actions have frequently made a difference.

Competition in each of four manufacturing industries--automobiles, beer, pharmaceuticals, and steel--is examined in the studies that follow. The automobile industry, long regarded as a tight oligopoly in the transportation equipment group, has become more competitive as the foreign- based transplants have applied superior managerial techniques in their U.S. manufacturing operations. Among the industries in the food products group, the brewing industry was once regarded as effectively competitive but has been transformed into a tight oligopoly through innovative marketing practices. For pharmaceutical producers, the rich technological opportunities for product innovation (to be expected in the chemical products group) have been offset (at least in part) by regulatory controls on the testing and marketing of new products. In steel, unlike some other industries in the primary metal group, ongoing process innovation by smaller firms (not the traditional leaders) has rejuvenated what had appeared to be a declining industry in the United States.

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