First, Let’s Do No Harm

Last week, I spent at least eight brutal hours in the course of three visits to a national cell phone store for what I thought was a reasonable expectation – to get my supposed smartphone to accept and process my business email.

Truly, it was a horrible experience, akin to chewing on glass. But if there was any solace to this fiasco, it was that I had found a human bulldog, an employee of the store who simply would not give up. But I didn’t immediately come to trust him.

That’s because on my first visit, I could receive emails on my phone, but could not send. When I left the store three hours later, I could no longer receive emails. So we had regressed.

On my next visit, I reminded store personnel of the Hippocratic Oath that doctors are supposed to take to heart – first, do no harm.  When I left the store the second time hours later, having no contact with Mr. Bulldog on that visit, my business email was still not working.

On my third visit, I was lucky enough to find Spike, who after four hours of pondering,  determined that a software glitch in my phone was causing the problem. He then devised a web-based solution that, while not perfect, now permits me to receive and send business emails.

I tell you this story because the Hippocratic Oath was central to my thinking while I endured this fix. And now I think that concept should be embraced by policymakers and politicians who are now talking more frequently about fixing what is wrong with manufacturing in the United States.

The Forget About It Crowd

When you lose one-third of your manufacturing employment base over a 10 year span – 5.5 million jobs lost from 2000 to 2010, even the daftest of politicians have to conclude that something is not right. Amazingly though, there are others, some of whom are even equipped with PhDs, who advocate that we in essence, “forget about it.” These people would have us believe that manufacturing is not of vital concern to our nation’s future economic health.

Christine Romer, a former Obama economic adviser, and Michael Boskin, an adviser to the first President Bush, contend that government should do nothing to save or promote America’s manufacturing sector but let chips fall where they may and let the market rule.

But reality shows that today’s four greatest economic powers — the U.S., China, Japan and Germany—all became leading countries by fostering policies favorable and protecting their  manufacturing base.

“If market fundamentalists were correct, these countries should be economic basket cases, instead of the world’s leading manufacturing powers,” wrote Michael Lind, policy director of the Economic Growth Program at the New America Foundation.

Our Eroding Ability to Compete

I can only conclude that those who dismiss the idea of the US pursuing a national manufacturing strategy neither recognize nor credit the wealth building capacity and technological innovation that derive directly from manufacturing. They choose not to see or understand the spinoff jobs creating by a manufacturing sector or even fathom how national security concerns would naturally arise if our country were to farm off all industrial production.

But the truth is that we have been doing just that to offshore locations, principally but not restricted to China, for reasons of operational costs. Despite the spate of news stories predicting a re-shoring trend, the truth is that the US has fallen short in its ability to compete in a global marketplace.

Job losses have resulted because production output has actually declined in 13 of 19 manufacturing sectors from 2000 to 2010, according to a recent report by the Information Technology and Innovation Foundation. (ITIF)

Yes, Houston, we really do have a problem.

We Need Some of That Rehaul

Doug Holtz-Eakin, former director of the Congressional Budget Office and now president of a conservative policy group called the American Action forum, says our tax code, trade policy, and regulatory system are all anti-manufacturing and need rehauling. And he is probably right.

But what about all the good news of late? Manufacturers added 37,000 jobs in March and 120,000 so far this year.

“It’s on everybody’s mind in terms of how we are doing, but that’s relative to the dark days of the recession. Manufacturing in this country is still struggling. Some companies are doing well, but it is still struggling relative to 30 years ago or what it could have been doing,” said Stephen Gold, president of the Manufacturers Alliance for Productivity and Innovation. (MAPI)

“The real story is that the environment here is not as competitive for manufacturing as it is in other countries. And that is our fault.”

Part of our problem is cultural, Gold said. Young people, their parents and their high school guidance counselors have inaccurate and off-putting views about manufacturing. Also, young people are no longer being equipped with the prerequisite knowledge needed.

“We actually started looking at manufacturing as something that we didn’t want to do. And our schools at the same time started moving away from teaching math and science,” Gold said.

Couple young people’s lack of interest with many US manufacturers’ de-emphasis of in-house training programs  based on the rather bizarre and short-sighted belief that worker training is somebody else’s job (community colleges) and a skills shortage has become all too real and apparent, with many manufacturing jobs going unfilled.

But the corporate tax rate in America is also to blame as it is the second highest among developed nations, putting manufacturing here at a huge competitive disadvantage.

Finally, the US must get tough with predatory trade practices of certain countries, most particularly China, but also India and Brazil, according to Rob Atkinson, president and founder of ITIF. Trade holds the key, he said.

“ … the central reason why manufacturing matters is that it is a key enabler of traded sector strength. And, in a global economy, it is impossible to have a vibrant national economy without a globally competitive traded sector,” Atkinson told a congressional subcommittee last week.

Why Economic Developers Don’t Do Hair

Traded sector jobs are important, Atkinson said, because they have high employment multipliers.

“This is the primary reason why all 50 states – regardless of whether they are “red” or “blue” states – focus their economic development efforts on traded industries like manufacturing and software, and not on non-traded industries like retail trade and personal services like hair salons,” he said.

All these competitive shortcomings demonstrate a need for a national manufacturing strategy, a means by which we redesign our nation’s tax, regulatory, and innovation policy environments to make the US the world’s most attractive location for advanced manufacturing (including both domestic and foreign direct investment).

“But you don’t put a strategy together the way you put together a leftover stew. You don’t do it in a piecemeal fashion. You don’t say, let’s take this part of the tax code, this part of the regulatory code, and we’re going to do this over here in trade,” Gold said.

A national manufacturing strategy should focus on the larger picture of “creating an environment in which manufacturers want to be here,” Gold said.

Key to success is getting the private sector to invest more in human resources (training) and government providing funding for basic research when the market does not create the right incentives, Gold said.

In his remarks to Congress, Atkinson said to restore U.S. manufacturing competitiveness, America needs a corporate tax code focused on spurring investment in the United States.

Second, the federal government needs to take much more aggressive and determined action to combat and roll back what ITIF terms “innovation mercantilism” practiced by many U.S. competitors, particularly China. And third, the federal government needs to invest in a national manufacturing technology system.

The Four T’s

“ … It would be extremely risky to assume that government can sit back and not do anything and expect a manufacturing recovery to naturally emerge,” Atkinson said. “Effective public policies that support and underpin the U.S. manufacturing economy are required if the United States is to experience sustained recovery and revitalization of manufacturing. We need a comprehensive national traded sector, manufacturing-focused strategy that addresses the “4 Ts” of technology, talent, tax, and trade.”

Both Gold and Atkinson believe that the federal government should play a key partnership role with industry in investing in early stage, pre-competitive manufacturing technologies.

“For a variety of reasons, companies under-invest in key manufacturing technologies. This is especially the case in the United States where financial markets pressure U.S. companies to invest for short-term returns, which means they often skimp on longer-term technology investments,” Atkinson said.

U.S. can compete effectively only if it produces more advanced and complex products in more efficient ways. But the U.S. manufacturing economy is increasingly less high-tech than that of Germany, South Korea and Japan, Atkinson said.

“The solution to this challenge needs to go beyond partisan differences: we need a more competitive tax code and smarter regulations, but we also need increased public investment in manufacturing technology programs and programs to ensure a trained manufacturing workforce at all levels. Absent robust and sustained action by Washington, I fear that in a decade U.S. manufacturing will be have continued its decline, with the negative consequences for jobs, income and GDP growth,” Atkinson said.

Profound Country and Western Analysis

Back in the 1980s, when we had a spate of manufacturing job loss, although nothing compared to the gutting we would experience 20 years later, the great Merle Haggard, who I would rank up there as having as much if not more knowledge most economists, wrote and sang about our national dilemma in the most poignant of terms.

“Stop rolling down hill like a snowball headed for hell.”

The song was called “Are the Good Times Really Over.” Well, we know today that they were not. Prosperity did return. And so it can again if we only vow to do no further harm and embrace a national manufacturing strategy that goes beyond any self-serving politics.

For this, I vote yes.

Dean Barber is the principal/owner of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com

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