Recently, a growing number of articles have appeared about the role of manufacturing in the USA. The correlation of this increased interest with a challenging economy, and thus political environment, is not surprising. The 1980s has presented us with an earlier example. As a matter of fact, the Future Professors of Manufacturing Program at Stanford University was an outcome of this interest to revive manufacturing in the US. (I was one of the five PhD students of its inaugural class.) So my first point: nil novi sub sole.
Second, asking whether you believe that manufacturing is important in a developed country is almost akin to asking whether you are a Democrat or Republican. Rather than going there or arguing my own position, I thought it could be interesting to start building a compilation of the views of those who worry and those who don’t. And the recent NYT article “Is Manufacturing Falling off the Radar“ of Sep 10, 2011, provides some interesting starting arguments that I would enumerate as follows (so, the enumeration is mine, the rest are quotes from the NYT article):
Why we should worry about manufacturing in the US:
- The share of manufacturing in the US GDP has declined to just 11.7 percent last year from as much as 28 percent in the 1950s, according to the Bureau of Economic Analysis.
- In this century, the 20-percent-or-more club draws its members mainly from Asia and Europe. In China, in sharp contrast, manufacturing’s share of national output is more than 25 percent. While the United States has a far larger economy — $14 trillion in G.D.P. versus China’s $6 trillion — it has less factory production.
- “You have a culture within the elites of both political parties that says manufacturing does not matter, and industrial policy will do more harm than good,” says Ronil Hira, an assistant professor of public policy at the Rochester Institute of Technology.
- But the stark reality of manufacturing’s shrinking share of national output is beginning to force these questions: Does manufacturing matter? And is the financial sector, which rose as manufacturing declined, an adequate substitute? Each new manufacturing job generates five others in the economy. Shrinking the relative size of manufacturing has undermined that multiplier effect.
- Manufacturing is not simply a market activity, especially not in the 21st century: manufacturers rely increasingly on governments, here and abroad, to prosper.
- “An advanced manufacturing policy is what this country must have,” says Andrew N. Liveris, the chairman and chief executive of Dow Chemical, arguing, in effect, that manufacturing needs government support to expand its dwindling share of the nation’s economy.
- Mr. Liveris, 57, himself a chemical engineer and co-chairman of President Obama’s newly formed Advanced Manufacturing Partnership, a group of outside advisers, would even “pick winners” — that is, select some manufacturers for continuing support. “I would not let free markets rule without also addressing what I want manufacturing to be 20 or 30 years from now,” he says.
- “The United States today is alone among industrial powers in not having a strategy or even a procedure for thinking through what must be done when it comes to manufacturing,” says Thomas A. Kochan, an industrial economist at the Massachusetts Institute of Technology.
- Manufacturers are gradually shifting production abroad.
- “Overseas,” Mr. Liveris said, “I get tax incentives, and I get incentives to go to certain locations where they offer us utilities, infrastructure and land. I get access to human capital. I get all sorts of support to help train that human capital.”
- Innovation often originates in manufacturing, frequently in research centers near factories, which aid in the creation of products and the tweaking of them on assembly lines.
- As multinationals place factories abroad, they are putting research centers near them, with as-yet-undetermined consequences. At the very least, this trend challenges the view that the United States has the best scientists and research centers and is thus the research-and-development pacesetter.
- The intractable trade deficit is attributable in part to manufacturing’s shaken status.
Why we should not worry about manufacturing in the US:
- It isn’t that fewer autos or plastics or steel products or electronics are coming out of American factories. Quite the contrary: output continues to rise, reaching $1.95 trillion last year. But other sectors of the economy have grown faster in recent decades, and that dynamic has reduced manufacturing’s share.
- Location reflects global evolution. “We put things overseas,” Mr. Liveris says, “because markets were growing there and we wanted to be close to them, and that will never change.”
- “The reason you no longer get much of an outcry over this exodus has to do mainly with jobs,” says Heather Boushey, a senior economist at the Center for American Progress. “Less than 12 percent of the American work force is in manufacturing today, down from 30 percent in the 1970s. So there isn’t the same level of public concern.”