Time to act is now to revive U.S. manufacturing

Just the other day, a friend who works as an engineer for TRW asked me what I thought of Carl Pope’s recent Bloomberg series, “America’s Dirty War Against Manufacturing.” In a word: Scary. The series explores the causes of America’s manufacturing decline and what can be done to right the ship. While many assume that globalization is to blame, Pope argues that wage differences between the U.S. and other countries have little to do with it. For example, he mentions a Silicon Valley entrepreneur now developing a clean-energy test facility. This former NASA engineer is considering going overseas for full production, because taxes, infrastructure, workforce training, permits, and healthcare policies are more favorable elsewhere.

In short, Pope lays the blame on U.S. government policy. “We are not victims of an impersonal Leviathan called globalization,” he says. “We’re the suckers who allowed our government to sacrifice the manufacturing sector while protecting the real winners — commodities, intellectual property, finance, and agribusiness. The U.S. didn’t lose its manufacturing leadership; it threw it away.”

Not surprisingly, other sources contradict Pope, including a January 2012 study published by the Harvard Business School titled, Prosperity at Risk. The authors surveyed 8,800 alumni (including 1,368 leaders in manufacturing) and found that 70% cite lower wages as the primary reason for their decisions to move U.S. business overseas.

No matter how blame is cast, most agree that it’s not too late to improve the situation — but public policy must change to support manufacturing, and allow a broad-based recovery of the American middle class. Pope champions careful government policy as the only way to revive U.S. manufacturing. In an e-mail exchange on this matter, I asked Pope which Presidential hopeful would be most likely to institute pro-manufacturing reform; he doesn’t have a definite opinion yet.

President Obama touched on the issue in his recent State of the Union address, citing tax code as a main hindrance to American manufacturing: “It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America. Send me these tax reforms, and I will sign them right away.” In today’s political environment where nothing seems to get resolved between the two parties, major tax reform seems unlikely.

Responding to Obama’s speech, Jay Timmons, president of the National Association of Manufacturers (NAM), agrees that the cost gap between manufacturing in the U.S versus overseas is “self-inflicted by Washington” and must change. NAM’s roadmap, A Manufacturing Renaissance: Four Goals for Economic Growth, does a thorough job of exploring what’s needed to restore the health of U.S. manufacturing.

— Frances Richards