Rethinking Manufacturing in America

May 3, 2013
We thought our job was just to innovate and not actually make the stuff. It’s time to think again.

It was all a part of the plan. We were a manufacturing powerhouse, sure, but it was our destiny to move past such mundane realities. Naturally, we’d want to move into higher-level pursuits. “We could spend less time worrying about manufacturing, and that was a good thing,” said Ron Bloom, vice chairman of U.S. investment banking at Lazard, a financial advisory and asset management firm. “It would relieve us of work we didn’t want to do.”

That was the plan. For some 30 years, the decline in manufacturing in the United States was not only economically driven, but also politically supported. “But in the past few years, there’s been a pretty fundamental rethink,” Bloom noted.

Bloom gave a presentation about the political economy of manufacturing recently during a web event called “America’s New Manufacturing,” hosted by Siemens (www.usa.siemens.com/industry) and the Washington Post. In his presentation, Bloom painted a picture not only of how manufacturing has evolved over the past several years in this country, but he also gave some insight into how it might be strengthened again.

He said that during manufacturing’s decline in the U.S., the financial economy has been overweighted, and the real economy has been undervalued. What’s considered the “real economy” is a lot bigger than just manufacturing, he noted, but manufacturing does factor into it.

Part of the problem with creating an economy that is not rooted in manufacturing is that we are still built around a society that perceives manufacturing prowess as overall strength. “The politics around manufacturing, I think, have kind of coincided with people’s anxiety about America’s place in the world—who we are and what we are as a nation,” Bloom explained. “The strength of the manufacturing sector has come to symbolize the strength of the country.”

Ask Americans if the U.S. is No. 1 in manufacturing, and they’ll overwhelmingly say no. People perceive China as that powerhouse now because…well…they make everything, right? Wrong. We’re actually still the top producer, as it turns out. “There’s a pretty direct line between China being perceived as a global manufacturer and being seen as global superpower,” Bloom added.

The U.S. has long been seen as a highly innovative and entrepreneurial culture. I’ve been covering manufacturing from a very global perspective for more than 20 years, and around the world, that has been the perception. At one point based in Hong Kong covering primarily Asian activities, I remember somebody in industry explaining to me that the U.S. was good at inventing, but it was Japan that could turn it into a marketable product, and lower-cost countries like China or Malaysia that could actually get it made. That’s just the way it was.

But that was OK. “For a long time, we said that what America needs to do, what we’re good at, is innovation,” Bloom said. “We’ll invent stuff here and make stuff there.”

But it turns out there’s an interconnectivity between innovation and manufacturing, and people are beginning to understand that. “The thinking and the making are not entirely different processes,” Bloom explained. “If we lose the manufacturing, then the innovation goes with it.”

We’ve been hearing more and more about a U.S. return to manufacturing; about how it doesn’t make as much economic sense to manufacture abroad. Wages are going up in developing countries, and energy is getting less expensive here with the boom in shale gas. “It takes about one man-hour to make a ton of steel. There’s no economics anymore in making steel any place but America,” Bloom noted.

But it’s just as important that we not oversell it any more than undersell it, Bloom added. The jobs gap in America today is very large, for example, and manufacturing jobs are not going to fill that gap. We’re not talking about manufacturing solving all the country’s problems.

Still, a single manufacturing job holds more value than other types of jobs because it brings other jobs along with it. “Manufacturing can lead, and so this focus on manufacturing is logical because it drives more economic activity than other things,” Bloom said.

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