First Up -- Sweating the Big Stuff -- and It's All Big Stuff

May 17, 2009
It's time to put manufacturing on the list of national issues we must address now.

"We are a nation that has seen promise amid peril, and claimed opportunity from ordeal. Now we must be that nation again." In his Feb. 24 address to Congress, President Barack Obama rightfully observed that neither Americans nor their government have shown much appetite for tackling the big stuff. We knew we had problems with deficits, entitlement programs such as Social Security and Medicare, education, oil addiction, health care, climate change and a host of other issues. But time and again, we decided they were too big, too politically risky to solve.

Add U.S. manufacturing to that list of big stuff -- a problem evident to all but not effectively addressed. Last December, the Manufacturing Council, the advisory group established by the U.S. Department of Commerce, issued a series of recommendations aimed at calling attention to the "urgency of the nation's manufacturing situation." The report noted that the United States has lost 3.5 million jobs in manufacturing since 1997, and that manufacturing's contribution to U.S. GDP had fallen from 24% in the 1970s to 12% today.

Since World War II, the council explained, manufacturing had served well as a wealth-producing machine because "it was based on the making of things that others valued and for which they were willing to pay money." But first with the bubble and then with the current real estate mess, the report noted, "the U.S. made two dangerous national bets on 'get-rich-quick' schemes that enticed investors and consumers with the promise of great wealth creation without producing sustainable value."

The Manufacturing Council identified two top priorities -- commit to energy independence and correct trade imbalances. It also said broad national initiatives were needed to build a skilled workforce and to eliminate domestic cost disadvantages.

In his annual letter to shareholders, General Electric CEO Jeff Immelt took a similar view of the need to re-examine our national relationship to manufacturing: "I believe that a popular, 30-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering."

Immelt went on to call for an improved educational system and more value placed on innovation. "We must discover new technologies and develop a productive manufacturing base. Our trade deficit is a sign of real weakness, and we must reduce our debt to the world," he wrote. "GE will always invest to win globally but this should include a preeminent position in a strong U.S."

Back in 2004, the Bush Administration created a "manufacturing czar" position at the urging of business leaders. Unfortunately, that job did little to reverse manufacturing's decline. As an NAM spokesperson told me: "There is merit in having such a position, but as presently constituted the job doesn't have direct line authority. We would like to see someone aggressive in the job who would make an effort to have a stronger voice for manufacturing within the councils of government."

That strong voice also needs a coherent national manufacturing policy to articulate. While some worry that such a policy foreshadows Big Brother decision-making, the failure to have such a blueprint is a sure path to failure in a global economy. One veteran manufacturing expert told me: "It's absolutely critical that we have a national manufacturing policy to preserve manufacturing as a key wealth creator, or we'll see our kids and grandkids living under a lower standard of living than we have enjoyed."

Promoting green manufacturing and restructuring the ailing auto industry are necessary, but they are not enough. Manufacturing needs a seat at the table -- preferably directly across from President Obama.

Steve Minter is IW's editor-in-chief. He is based in Cleveland.

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