What's the Root Cause of US Manufacturing's Underperformance?

June 9, 2014
Ten thought leaders debate the source of--and solutions to--US manufacturing's middling performance as the nation's economic growth engine.

What's the root cause of U.S. manufacturing's underperformance as the nation's growth engine? Suzanne Berger, an MIT professor of political scientist and co-chair of the recent MIT Production in the Innovation Economy project, says finance is the culprit.

Making her case in a recent cover story of the Boston Review, she contends:

"Since the 1980s, financial market pressures have driven companies to hive off activities that sustained manufacturing."

"To better understand the decline of American manufacturing, we need to go back well before the last decade to see how [these] changes in corporate structures made it more difficult to scale up innovation through production to market."

The change to corporate structure featured "the break-up of vertically integrated corporations and their recomposition into globally linked value chains of designers, researchers, manufacturers, and distributors..." Acknowledging that this change has had "enormous benefits," Berger assert also has "left big holes in the American industrial ecosystem."

I've summarized her 3,000 plus report in MIT Professor Fingers Finance as Cause of Manufacturing's Underperformance, though the original, How Finance Gutted Manufacturing, is worth the time to read. The issues troubling the nation's manufacturing sector are many, varied and complex--and are made moreso by how each reinforces the other.

Berger's contention, combined with the responses of ten other thought leaders, brings together many arguments regarding the importance of manufacturing to the nation's economy, as well as whether and/or how it could be strengthened.

Importantly, the perspective of the major manufacturing organizations and associations are missing. I'll be seeking other responses from these groups to continue and expand this important dialogue.

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