6 Million Jobs Lost, 42,000 Factories Closed. It’s time for a National Manufacturing Strategy


Earlier this week I participated in a panel hosted by the Information Technology & Innovation Foundation (ITIF) where we discussed the need for a National Manufacturing Strategy with members of ITIF, International Trade Administration and the National Association of Manufacturers.

ITIF’s recent report, “The Case for a National Manufacturing Strategy for the United States”, outlines key arguments for why the U.S. needs to act quickly and boldly to revitalize America’s manufacturing sector.

According to the report, manufacturing plays a critical role in the U.S. economy for five key reasons:

1)     It will be extremely difficult for the United States to balance its trade account without a healthy manufacturing sector.

2)     Manufacturing is a key driver of overall job growth and an important source of middle-class jobs for individuals at many skill levels.

3)     Manufacturing is vital to U.S. national security.

4)     Manufacturing is the principal source of R&D and innovation activity.

5)     The manufacturing and services sectors are inseparable and complementary.

Our panel had a raw and honest conversation about the challenges we face as manufacturers and as a country.  Over the last 10 years, we’ve lost almost 6 million manufacturing jobs and 42,000 factories. While those figures are terrifying, what is most alarming is that we are losing control of our future.

From my experience I have seen national manufacturing strategies that work.  Specifically, South Korea has an extremely focused strategy one that is focused on the value chain relationship and strong government support.  The degree to which the South Korean government has organized to support their manufacturing section is phenomenal.  I believe we have much to learn from other countries and I look forward to the next ITIF in the series focused on just that.

The bottom-line is that it is time for our leaders to create and implement a National Manufacturing Strategy.  I fully support the proposal laid out by The Information Technology and Innovation Foundation.

I urge you to read the report and provide comments.  The government is asking for our thoughts, it’s time for us to tell them what we think about the importance of manufacturing.

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  1. Your exactly right! Innovation is important but manufacturing is key. Much of innovation happens because of manufactures. It’s not only about about the next “big idea” but about all the little ideas, the product improvements, process improvements, material improvements that make our lives better. Take a look at your cell phone. This is a miracle of innovation but each and every part, screw, circuit board, microphone and speaker was manufactured by someone. It might have come from a huge plant or a two man shop but it was made by a manufacturer. Big or small, manufacturers are vital.

  2. I quite agree with most of the observations and recommendations in the ITIF document. But I think it overlooks what is perhaps the most important reason why manufacturing is critically important to the US. The manufacture of goods creates new value in economies, and where the goods are produced is where most of the benefits of the value accrue. It is not about simply saying we must move to higher value goods, but that we must also produce them.

    There has been a dramatic growth in public sector jobs in the United States since WWII, both federal and state, while at the same time the number of traditional manufacturing jobs has declined. If we expect the trend in government growth to continue, we must figure out how to pay for it. Manufacturing is an important part of the answer and should be brought into the current public discussion about government spending and how to fund it.

    It is the creation of new economic value that is the engine of growth which ultimately fuels public spending. Products and services that are produced and consumed in the private sector of the United States generate the revenue streams to make government run; through taxes on their sales & profits, through income and payroll taxes on the labor of production, through property taxes paid by corporations on their production facilities and by employees on their homes & cars, etc, etc, etc. It is important to note that this is not true for products and services consumed by government. A government does not create new economic value. All products and services procured, all pay roll, all government expenditures of any kind must come from taxes of one kind or another. Ultimately, it is private sector taxes that pay the lion’s share of these costs.

    For simplicity, let us limit our discussion to only the federal government. It is true that a government employee pays income taxes like anyone else but the wage upon which the tax is paid is funded by taxes. Therefore, those taxes paid by the government worker are themselves paid by private sector taxpayers and they really just reduce the government employee’s cost a little.

    I would further argue that products and services in support of the military or other government activities do not generate the same kind of economic benefits as those produced in and consumed by the private sector. Are they important? Of course! A strong national defense is one of the most important functions of the federal government. The point is that we should not be fooled into thinking that the defense dollars spent by the government are creating new economic value for the nation’s economy as a whole. They are necessary dollars to spend but they benefit the states and communities that have bases and government contractors located in them. They do not benefit the nation’s economy as a whole.

    Private sector manufacturing is the only viable activity I see available to us to use as our engine of growth. We need to improve our standard of living and maintain our place on the world stage. Manufacturing creates new economic value; manufacturing encourages R&D activities; manufacturing generates demand for support services from other sectors; manufacturing offers a path for workers to improve their situation and enter the middle class; manufacturing creates demand for trained workers; and manufacturing helps to pay for necessary government activities.

    We need to get busy, but ‘innovation’ is merely one facet on the gem of economic growth. A recent article in the Economist http://www.economist.com/node/18621224 reinforces this in its last few paragraphs, noting that US-based R&D activities which develop new technologies and products, do not necessarily lead to significant numbers of US jobs. The fact is that many times the resulting products are manufactured elsewhere because that is where the “…skills, the suppliers and the economies of scale…” are found. In other words, when our economy gives up industries to other countries the loss is far bigger than one factory or two. And our ability to re-enter in related fields becomes compromised, costly and complicated.

    It requires more to make things than a just few R&D knowledge workers in their labs developing theories and prototypes. The rubber hits the road in many other ways too, and we must have skilled workers to plan and build factories and production equipment, to manage and supervise and continuously improve manufacturing operations, and to carry out production, turn the screws, and think about how to do it better.

    If we fail to recognize the concepts discussed in this essay and if we fail to answer them in our National Manufacturing Strategy then we will have wasted our time.

    • I am one of maybe thousands of entreprenuers that have good ideas for new products. Many of the products are for niche markets and can be manufacturered in the US profitably. Investment in R&D is certainly needed but the real show stopper is capital to begin production. I have designed, built, tested and patented a new light weight engine but I cannot find the capital to begin production. The problem with the US is that all the capital providers are looking for something sexy to invest in and industrial manufacturing isn’t it. If we are to ever grow manufacturing, we will need to get the banks out of the picture and figure out how to provide capital to deserving startups. I am ready to create hundreds of good paying manufacturing jobs. All I need is for someone to “SHOW ME THE MONEY”.

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