“The Atlantic” Story of American Manufacturing Renaissance? Think Again

Manufacturing Plant with American Flag

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. energy costs, principally natural gas, are down. But as we point out in Innovation Economics: The Race for Global Advantage, the U.S. still faces serious challenges. Our corporate tax rate is the highest in the world, we have not kept up in investments in R&D and worker training, and we invest little compared to other nations in policies to help U.S. manufacturers become more competitive. This points to the biggest challenge with Fishman’s argument: it breeds complacency. If the rebound is happening, Washington can continue to ignore manufacturing and not put in place needed policies like the President’s proposal for a National Network of Manufacturing Innovation or lower effective corporate taxes. Let’s hope Fishman is right and that Washington takes the action needed to drive a real manufacturing renaissance.

 

Image credit: Chris Fore, Wikimedia Commons

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About the author

Dr. Robert D. Atkinson is one of the country’s foremost thinkers on innovation economics. With has an extensive background in technology policy, he has conducted ground-breaking research projects on technology and innovation, is a valued adviser to state and national policy makers, and a popular speaker on innovation policy nationally and internationally. He is the author of "Innovation Economics: The Race for Global Advantage" (Yale, forthcoming) and "The Past and Future of America’s Economy: Long Waves of Innovation That Power Cycles of Growth" (Edward Elgar, 2005). Before coming to ITIF, Atkinson was Vice President of the Progressive Policy Institute and Director of PPI’s Technology & New Economy Project. Ars Technica listed Atkinson as one of 2009’s Tech Policy People to Watch. He has testified before a number of committees in Congress and has appeared in various media outlets including CNN, Fox News, MSNBC, NPR, and NBC Nightly News. He received his Ph.D. in City and Regional Planning from the University of North Carolina at Chapel Hill in 1989.