Why made-in-America matters

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"Why made-in-America matters"

The importance and promise of American manufacturing

CAP’s Michael Ettlinger and Kate Gordon summarize their new report.

Manufacturing is critically important to the American economy. For generations, the strength of our country rested on the power of our factory floors””both the machines and the men and women who worked them. We need manufacturing to continue to be a bedrock of strength for generations to come. Manufacturing is woven into the structure of our economy: Its importance goes far beyond what happens behind the factory gates. The strength or weakness of American manufacturing carries implications for the entire economy, our national security, and the well-being of all Americans.

Manufacturing today accounts for 12 percent of the U.S. economy and about 11 percent of the private-sector workforce. But its significance is even greater than these numbers would suggest. The direct impact of manufacturing is only a part of the picture.

First, jobs in the manufacturing sector are good middle-class jobs for millions of Americans. Those jobs serve an important role, offering economic opportunity to hard-working, middle-skill workers. This creates upward mobility and broadens and strengthens the middle class to the benefit of the entire economy.

What’s more, U.S.-based manufacturing underpins a broad range of jobs that are quite different from the usual image of manufacturing. These are higher-skill service jobs that include the accountants, bankers, and lawyers that are associated with any industry, as well as a broad range of other jobs including basic research and technology development, product and process engineering and design, operations and maintenance, transportation, testing, and lab work.

Many of these jobs are critical to American technology and innovation leadership. The problem today is this: Many multinational corporations may for a period keep these higher-skill jobs here at home while they move basic manufacturing elsewhere in response to other countries’ subsidies, the search for cheaper labor costs, and the desire for more direct access to overseas markets, but eventually many of these service jobs will follow. When the basic manufacturing leaves, the feedback loop from the manufacturing floor to the rest of a manufacturing operation””a critical element in the innovative process””is eventually broken. To maintain that feedback loop, companies need to move higher-skill jobs to where they do their manufacturing.

And with those jobs goes American leadership in technology and innovation. This is why having a critical mass of both manufacturing and associated service jobs in the United States matters. The “industrial commons” that comes from the crossfertilization and engagement of a community of experts in industry, academia, and government is vital to our nation’s economic competitiveness.

Manufacturing also is important for the nation’s economic stability. The experience of the Great Recession exemplifies this point. Although manufacturing plunged in 2008 and early 2009 along with the rest of the economy, it is on the rebound today while other key economic sectors, such as construction, still languish. Diversity in the economy is important””and manufacturing is a particularly important part of the mix. Although manufacturing is certainly affected by broader economic events, the sector’s internal diversity””supplying consumer goods as well as industrial goods, serving both domestic and external markets”” gives it great potential resiliency.

Finally, supplying our own needs through a strong domestic manufacturing sector protects us from international economic and political disruptions. This is most obviously important in the realm of national security, even narrowly defined as matters related to military strength, where the risk of a weak manufacturing capability is obvious. But overreliance on imports and substantial manufacturing trade deficits weaken us in many ways, making us vulnerable to everything from exchange rate fluctuations to trade embargoes to natural disasters.

None of this matters, of course, if American manufacturing is too far gone to save. But American manufacturing is, in fact, a success story and it is not a story approaching its end. Notwithstanding employment losses and the relative rise of manufacturing in other countries, the United States led the world in manufacturing value added in 2008. Moreover, the United States ranked third in manufacturing exports in 2008, behind only China and Germany and ahead of Japan and France.

The United States will never again dominate world manufacturing the way it did in the decades immediately following World War II (in fact no country is likely to ever do so again, barring cataclysm) but manufacturing is, can, and should remain an important part of our economic future. There are many other players in the game now but that doesn’t mean America must leave the field.

The purpose of this report is to examine where the United States remains competitive in manufacturing at home and abroad. But we begin our analysis by detailing why manufacturing remains so important to our economy, our society, our national security, and our ability to remain the world’s science and innovation leader in the 21st century. Then we look at our domestic manufacturing base and our top manufacturing export sectors to gauge where U.S. manufacturing remains competitive.

This report does not, it should be said up front, outline a manufacturing policy agenda. There is a broad range of views on what U.S. policy toward manufacturing should be. Some believe, although most say this quietly, that U.S. manufacturing is a lost cause and, as such, should be abandoned. Others, however, see U.S.-based manufacturing as of continuing importance. These people argue that our relatively high labor costs and the growth of manufacturing elsewhere do not sound the death knell. They see our nation as still a great manufacturer.

But even among those who still believe in manufacturing, there is a wide range of views on what should be done to nurture it. There are those who see free trade agreements as a way to help manufacturing by boosting exports and those who see those same agreements as subjecting U.S. manufacturers producing for the U.S. market to unfair competition. There are those who see the need for “industrial policy”””a concerted effort to focus our national resources on industries that we believe will be the key manufacturing areas of the future””and those who see any attempt by the government to “pick winners and losers” as foolhardy and doomed to misallocate economic resources and thus undermine the efficiency of our economy. Other policy issues include the importance of investing in human capital to make U.S. workers more productive, investing in basic research so the big new ideas come from the United States, and a range of assistance that can be provided to manufacturing facilities and corporations.

This report does not parse through the variety of policy paths forward. Instead, we argue the threshold question: whether we, as a nation, should respond to the challenges now facing U.S. manufacturing. Our central question is this: Does domestic manufacturing matter and is there something left to fight for? Our answer is a resounding “yes.”

Download this report (pdf)

Download the introduction and summary (pdf)

Read the full report in your web browser on Scribd

Michael Ettlinger is the Vice President for Economic Policy and Kate Gordon is the Vice President for Energy Policy at the Center for American Progress.

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11 Responses to Why made-in-America matters

  1. Jay Alt says:

    ABC News has been doing a test. If everyone spent an extra $3.33 on US-made products, it would create almost 10,000 new jobs. So they challenged themselves to furnish a home with items made just in the USA.

    ABC’s ‘Made in America” series 3.08.11

    In February, ABC began a series on the World News with Diane Sawyer called “Made in America.” John and Ana Ursy of Dallas, Texas agreed to accept the challenge of working with the ABC team of David Muir and Sharyn Alfonsi to furnish three rooms of their home exclusively with products that are made in America. . .

    ABC Articles & MADE IN AMERICA MAP

  2. Jim Welke says:

    I am truly gratified that you come out in favor of American manufacturing. I have insisted on the relevance of manufacturing for a while, and I often feel as though too many do think it is a lost cause. Living on the outskirts of Detroit, I meet so many people who have essential skills for both manufacturing and R&D (machinists, tool and die guys, plant riggers, electrical engineers and technicians, software coders, etc.), and once lost, it will be an uphill battle to recover them. And at some point, given the right war (trade or otherwise), we will need to recover them.

    Anyway, thanks.

    And, here is my hue and cry on the topic:
    http://completelybaked.blogspot.com/search/label/manufacturing
    http://completelybaked.blogspot.com/search/label/VAT
    http://completelybaked.blogspot.com/search/label/free_trade

  3. Rob Honeycutt says:

    People often fail to clearly understand that it is actually reasonable to manufacture in the US competitively. I did it myself for many years (before I sold my company). I ran a sewn goods operation, in San Francisco, that was 100% domestically produced product, delivered top quality products, and was capable of responding to consumer demands FAR more rapidly than any of my competitors. I was consistently able to turn my inventory 30 days faster than we had to pay for the raw materials.

    It works. It just takes a little more ingenuity and creativity. …and it ain’t rocket science.

  4. Larry Gilman says:

    Response to Jay Alt: The link to ABC is apt, but I think that the people at FAIR legitimately spike the DIsney-owned network for hypocrisy:

    http://www.fair.org/index.php?page=4255

    Bottom line: the biggest reason we don’t buy Made in America is that large corporations (like ABC parent Disney) have decided to put all their manufacturing overseas to maximize their profits. Entering a Disney store or a Wal-Mart determined to Buy American just doesn’t work so well — and it’s not US _consumers_ who have created that setup.

    But it is an important choice and I make it — like the local-food choice — whenever possible.

    Larry

  5. Rob Honeycutt says:

    Larry Gilman… I don’t think it’s quite as simple as blaming corporations for moving production to maximize profits. If consumers purchased based on quality rather than price the equation would be completely different. But for the most part, price rules the day over quality where most consumer goods are concerned. That becomes more of a chicken and egg scenario.

    I believe far more products could be produced domestically than currently are. It’s more a function of interest. Look at how few people even bother to comment on this article. Making stuff is still not that exciting to most Americans.

    My contention is that the tide for manufacturing is about to change due to energy issues. Over the coming decades the falling costs of local energy sources like wind and solar are going to make local production more viable. Long distance transportation (sea and air) are going to remain dependent on fossil fuels and are going to become more expensive, erratic and less dependable. That should be enough to shift the cost structure back to domestic production for a wider variety of products.

    Honestly, I think “Buy American” is the wrong message. The right message should be “Buy Quality.” Or, like W. Edwards Deming used to always say, “Quality is always cheaper.”

    If we could drive home the message that quality actually costs less (and, as counter-intuitive as this sounds, it honestly does) then manufacturing would come flooding back to the US just as fast as it went away.

  6. David B. Benson says:

    Yes, buy quality. That used to be found in the USA (for some products still is) and has consistently been found in goods made in Germany (if you can find those in stores anymore).

  7. Quality has been a consistent characteristic of many of the furniture brands that are still made in the USA too. Granted most of the big American furniture names (Bassett, Broyhill, Lane, Thomasville, Ethan Allen,etc.) have moved their operations overseas but there are still plenty of furniture makers in the US producing high quality goods. One state that has retained their furniture industry throughout the mass exodus to Asia is Vermont. Some 2000+ small woodworking companies still operate in VT and most of them are happy to offer a lifetime guarantee on their furniture. Customers purchasing Vermont made furniture are looking for long term value rather than cheap prices. They are also seeking natural furniture made from local sustainably harvested wood and finished with family-friendly, non-toxic coatings.

  8. Steve says:

    “Made in America” went into decline with the decline of unions which the Republicans are presently accelerating. There was time not that long ago where it was considered patriotic to buy “Made in America”. The idea of what it means to be patriotic has undergone a scrubbing since 911. Nowadays patriotic means demonizing Muslims and cheering on the curtailment of personal freedoms.

  9. Larry Gilman says:

    Rob Honeycutt: I agree that it’s not simple: in fact, that was my point. For ABC to cover the Buy USA story as if it were just a matter of consumer behavior is simplistic and hypocritical, given that corporate behavior — and corporate-influenced government deals like NAFTA — have largely shaped the production landscape on which we run about making our individual choices. That’s a more complex picture, not a simpler one.

    Our individual moves are real and important but if we care about understanding, much less changing, the situation, we’ve _got_ to talk about who shapes the playing field on which we’re making those moves — which ABC omits. Try buying your next computer, camera, or electronic widget of any kind Made in the USA, regardless of quality. (In the high-end audio world, there are some choices, admittedly — I have a Made in USA tube pre-amp.) Or go into any hardware store and see how many Made in the USA tools, mini-blinds, brushes, or whatnot you can buy — without even considering the quality. There is sometimes a choice, depending on the item, but for whole categories of object there is simply no USA-made option at all. And you can buy a USA-made car, but not if you follow the Buy Quality rule too (Toyota, Honda, etc. blow away the US cars on all objective reliability and repair indices).

    Nonsimple picture: Consumer choice is real and important, but importantly constrained. Government and corporate choices largely shape those constraints. Journalism that covers the former but not the latter is self-serving corporate mind-flack.

  10. Rob Honeycutt says:

    Definitely not a simple picture. My wife is Chinese and we always joke about whenever we buy a gift in America to take back to her family it’s generally a product that’s making the round trip flight back to China. It’s hard to find anything these days that is made in America high or low quality.

    But my point is, if Americans were to get into the mindset of buying quality, driven through a major advertising campaign, then that would open the door for domestic manufacturing to come back. It would be a positive shift away from being a disposable culture toward being a sustainable culture.

    I would contend that you find high quality products also coming from off shore because generally they’re being made (for all intents and purposes) in the same factories as the low quality goods. If you are a company who wants to produce high quality goods today, well, the easiest thing is to go to China because that’s where all the factories are.

    There’s a huge barrier here. It’s a generational mindset that’s taken set. How do you get people to start thinking, “Hey, what if I just start up a factory here and make it myself?”

  11. We could not agree more with your resounding “Yes” conclusion. We believe it is essential to our future to fight for and restore US manufacturing and the growing membership of American Made Matters is on a mission to do this. For those US manufacturers who agree, please consider joining us.