This week, the Brookings Institution released three papers with recommendations to revitalize the domestic manufacturing sector. One proposes the creation of a national network of advanced industries innovation hubs, which would “focus on cross-cutting innovation and technology deployment challenges …by drawing universities, community colleges, state and local governments, and other actors into strong industry-led partnerships.” Another paper calls for an annual, $150 million national “Race to the Shop” competition involving multidisciplinary proposals “to address the manufacturing workforce and skills challenges” of states and regions. Finally, the third paper, authored by ITIF President Robert Atkinson and ITIF Senior Analyst Stephen Ezell, recommends the designation of 20 U.S. “manufacturing universities,” which would receive an annual, federal award of at least $25 million and be obligated to “revamp their engineering programs much more around manufacturing engineering, with particular emphasis on work that is relevant to industry.” The release of the reports helps highlight the need not only for a robust domestic manufacturing sector in general, but a robust clean energy manufacturing sector in particular.

As Atkinson and Ezell note in their book, Innovation Economics: The Race for Global Advantage, “Perhaps no canard … Read the rest

American manufacturing is in crisis. Over the last decade the United States lost one-third of its manufacturing jobs, more than any other industrialized nation, and our total industrial production was actually less in 2010 than at the start of the 2000s. And for those who think the movement of manufacturing to lower cost countries is simply the natural order of things, you only need to look at the impact of manufacturing loss on innovation to see the true danger in this decline.

As industrial production has moved overseas, the engineering, product development and technology innovation that are key components of manufacturing has gone with it. And it is getting worse. Countries like China and India are pumping millions into their R&D and university infrastructure, while adopting mercantilist trade policies that are only enhancing our loss of intellectual property and technical know-how. Given this environment, the United States is in serious jeopardy of permanently losing the race for innovation advantage, further hampering our overall economy and the standard of living of our citizens.

In an effort to address this potential catastrophe and restore American leadership in manufacturing, the Information Technology and … Read the rest

Image: Countries in Recession as of 2009. Red indicates countries officially or unofficially in recession.

There is a booming cottage industry among neoclassical economists to explain the Great Recession and unprecedented lagging US economic recovery as simply a function of the business cycle. The view is that this is just a deep down cycle and if we are patient all will be well. They believe this of course because the very nature of neoclassical economics cannot acknowledge structural change in economies.

The latest addition to this group-think comes from neoclassical economists Edward P. Lazear and James R. Spletzer in a non-peer reviewed article in the NBER Journal titled The United States Labor Market: Status Quo or A New Normal?. They argue that “[T]he current recession does not appear fundamentally different from prior ones, except that it is worse.”

And their logic behind such a claim? They claim that the relative decline in U.S. manufacturing jobs has been under way for a half century. Wow, this is truly stunning. U.S. manufacturing employment declined by just 2 percent in the 1990s, but as ITIF has pointed out, it fell by one-third in … Read the rest

The cover story of this month’s The Atlantic is titled “Comeback: Why the Future of Industry is In America.” The lead article by Charles Fishman argues that the outsourcing wave is largely over and now U.S. companies, exemplified by GE’s appliance division doing more work in the U.S., are seeing the light and moving work back to the U.S. Given the decimation of  U.S. manufacturing over the last decade,  I sincerely hope Fishman is right.

But I fear he is not. If he’s right, one would expect to see the results show up in the trade statistics. But according the Bureau of Economic Analysis, the quarterly trade deficit in goods is 22 percent higher than it was in the first quarter of 2010. But maybe appliances are the exception and are indeed coming back. Not so. In fact, the trade deficit in appliances (Household and kitchen appliances and other household goods) has grown even faster, up over one-third (34 percent) over the same period. Hardly evidence of a mass return of manufacturing to American shores.

To be sure Chinese wages are rising somewhat, their undervalued currency is up a tad, and U.S. … Read the rest

Today, October 5, is National Manufacturing Day. The day is being marked with events around the country highlighting the importance of manufacturing to the U.S. economy and celebrating innovations in fields ranging from aerospace and automobiles to nanotechnology and medical devices.

Manufacturing remains a vital component of America’s economy. However, as Neil Irwin wrote Monday in the Washington Post in “The manufacturing recovery that wasn’t,” despite claims that U.S. manufacturing sectors have recovered and put the United States on track to regain its status as a global industrial powerhouse, the reality is that U.S. manufacturing recovery—just like broader U.S. economic recovery—has a long way to go. As Irwin points out, while “the U.S. manufacturing sector isn’t collapsing, it’s definitely flat-lining.” Industrial production by U.S. manufacturers fell in June, July, and August at a 1.4 percent annual rate and the factory sector added an average of 5,000 jobs nationally each month this summer compared to 19,000 per month during those months in 2011.

In other words, American manufacturing has a long way to go to recover from the 5.7 million jobs it lost and 11 percent decline in output it … Read the rest

A BCG report out today claims the United States is on course to regain its status as a global industrial powerhouse, arguing that several forces—including lower U.S. energy costs, rising labor costs in competitor nations, and idle port capacity—will empower the United States to boost goods exports by up to $130 billion by 2012, creating 5 million jobs in the process. But as ITIF explains in Worse Than the Great Depression: What Experts Are Missing About American Manufacturing Decline, in the last decade the United States lost one-third of its manufacturing jobs (5.7 million—a rate of loss worse than during the Great Depression) and 11 percent of its manufacturing output due to structural weaknesses that won’t simply be rectified by market adjustments.

Chinese manufacturing wage costs are still a small fraction of the United States’, and the hollowing out of the U.S. industrial base over the past decade has meant that the United States simply cannot manufacture a range of high-tech products (from LCD screens to electrophoretic displays to polycrystalline solar panels), explaining why the United States still runs a trade deficit in advanced technology products approaching $100 billion annually. … Read the rest

Originally posted on The Atlantic’s Ideas Roundtable.

A new poll suggests there might be hope for American manufacturing – if democracy actually works. The poll said 89 percent of Americans think we need a national manufacturing strategy – 89 percent! Two-thirds of respondents said China’s trade policies hurt U.S. employment and 62 two percent said Washington needs to do something about it. Those were some of the results of a bipartisan survey released this week by the Alliance for American Manufacturing. ITIF has championed the need for a national manufacturing strategy for quite a while and spearheaded an effort to bring labor, business and economic thinkers together to adopt a Charter for Revitalizing American Manufacturing. But sometimes it seems hardly anyone in Washington is listening.

Pundits and policymakers across the political spectrum keep arguing that we’re still a manufacturing powerhouse and that we’ve simply become more productive and shifted to higher-end products. Factories are roaring back from the recession. Besides, who cares?  Manufacturing was yesterday’s economy and the services sector is where the action is now, they argue. No need for special treatment for manufacturing. Fortunately, it appears voters are ahead of the elites on this issue.  Fifty-three percent understand that … Read the rest

One hundred and fifty years ago this month, President Abraham Lincoln signed the Morrill Act, sponsored by Vermont Congressman Justin Morrill. Officially titled “An Act Donating Public Lands to the Several States and Territories which may provide Colleges for the Benefit of Agriculture and the Mechanic Arts,” the Morrill Act provided each state with 30,000 acres of Federal land for each member in their Congressional delegation. The land was then sold by the states and the proceeds used to fund public colleges that focused on agriculture and the mechanical arts. Sixty-nine colleges were funded by these land grants, including Cornell University, the Massachusetts Institute of Technology, and the University of Wisconsin at Madison. These colleges played a key role in enabling the United States to later lead in the mechanization of agriculture and the industrialization of the economy.

But today, the challenge is even greater as America is competing against a wide array of nations seeking to win the race for global innovation advantage, including in manufacturing. A new Morrill Act for the 21st Century, can be part of the solution. But this one should be focused on revitalizing U.S. … Read the rest