A lead article in today’s The New York Times (Sept.11,2011) questions whether the US can recover from its decline in manufacturing. Was the tipping point reached in 2009 when China ousted America’s century long lead by generating $1.7 trillion of “value added” vs. the $1.6 trillion here? Or was it when manufacturing’s contribution to GDP declined to 11.7% last year, down from 28% in the 1950s? (Countries over the 20% threshold are in Asia and Europe now, with China at 25%).
“We’re going to make sure the next generation of manufacturing takes root not in China or Europe, but right here, in the US”, President Obama told a joint session of Congress this week. An MIT prof counters: “The US today is alone among industrial powers in not having a strategy for thinking through what must be done in manufacturing”. “An advanced manufacturing policy is what this country must have”, adds Dow Chemical’s CEO Andrew Liveris. Liveris believes manufacturing needs government support to expand its dwindling share of the nation’s economy. He even advises the President to “pick winners” and “not let free markets rule”.
And although GE’s Jeff Immelt (co-chair of the President’s Council on Jobs, with Liveris) also expresses concern over the decline in jobs, multinationals like theirs have contributed mightily to the problem by shifting jobs abroad. Half of Dow’s $58 billion in revenue comes from overseas operations and GE has just moved its Medical Imaging HQ from Wisconsin to China. The damage doesn’t end with factories overseas. With 40% of our engineers working in manufacturing, such jobs also decline. Innovation often originates in research centers near factories and “this trend”, writes The Times, “challenges the view that the US has the best scientists and research centers”.
Discussion questions:
1. Do Congress, the White House, and students see making an engine or scissors as important as investment banking or retailing ?
2. Can the trend be reversed, and how?