U.S. needs to get back to the business of making things

Posted: August 28, 2011

Kent Hughes

is director of the Program on America and the Global Economy at the Wilson Center in Washington (www.wilsoncenter.org)

Can America make it without making it? The likely answer is no.

The Philadelphia Fed's most recent Business Outlook Survey, announcing a precipitous drop in manufacturing and the attendant fall in the current employment index, highlights the weakened state of the industry and its crucial links to employment and economic growth. Similar reports from the New York Fed demonstrate that this is not simply a regional issue. Manufacturing is a vital pillar of the U.S. economy, a critical symbol of American innovation, and a central component for job creation and national security. It has a key role in the nation's future.

Manufacturing and innovation are closely intertwined, with two-thirds of our research and development spending in the private sector. Manufacturers turn innovations from our universities and national laboratories into commercial products, driving growth, attracting investment, and creating jobs. Without a robust and diversified domestic manufacturing base, too many American innovations will be commercialized overseas.

Kodak recently had that problem when it decided to build a digital camera in its U.S. facilities. So many of the components needed to produce the cameras had already left America that Kodak shifted production overseas. That worked out fine for Kodak, but not for American workers and innovators. And Kodak is not alone.

In the last two decades, manufacturing employment has fallen dramatically - a loss of almost five million jobs since the turn of the century, 2.5 million jobs since 2007. That drop, coupled with the near-stagnation in construction, has sharply increased unemployment and contributed to the emergence of long-term joblessness, particularly among men.

Steady growth in manufacturing will create high-skilled jobs and drive other economic activity by stimulating demand for a host of services - from research to design to supply-chain management. As manufacturers develop new products, they often encounter challenges - the need for new production techniques, sophisticated parts, or new materials - that drive further research and job creation.

The link between innovation and industry has also helped give America an edge in national security since the end of World War II. We no longer depend on a defense-industrial base alone. Virtually all the Defense Department's electronics come from the commercial sector, with some needing to be adapted for more demanding military conditions. The same is true of most military IT applications.

The federal government is deadlocked on many issues, but manufacturing provides an area where Congress and President Obama can come together to grow our economy and stimulate job creation.

The president has taken several steps in the right direction: impressive white papers on innovation and manufacturing, the Advanced Manufacturing Partnership, and the appointment of an assistant for manufacturing, Ron Bloom. Now is the time to learn from our successes and take the next, decisive steps to regain America's manufacturing base.

In the mid-1980s, America faced another crisis of competitiveness as resurgent Japan and Germany challenged much of U.S. industry. John Young, then the CEO of Hewlett Packard, responded by forming the Council on Competitiveness. He drew together leaders from industry, the academic world, and organized labor, and they helped define the policies that drove the prosperity of the 1990s.

The president's Council on Jobs and Competitiveness and the Advanced Manufacturing Partnership provide a similar set of leaders. The president should charge them with strengthening and broadening America's industrial base. Manufacturing deserves a long-term, permanent spot in the White House and a cabinet department charged with creating a support system. Manufacturers translate innovations into jobs and long-term growth, provide a foundation for national security, and undergird our position in the world. We neglect them at our peril.

E-mail Kent Hughes at kent.hughes@wilsoncenter.org.

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