Manufacturing: The New Economy

Manufacturing Automation (Moad) - Manufacturing is suddenly a hot topic in Washington. As anemic new-job creation continues to retard the economic recovery, politicians, policy experts, and national journalists have suddenly recognized that manufacturing has been a relative bright spot, one of the few sectors showing growth and the potential to increase exports and generate new, high-paying jobs.

...That recognition is not universal, however. Perhaps predictably, as the national spotlight has begun to turn to manufacturing, naysayers have begun popping out of the woodwork to argue that manufacturing isn’t worth saving. In some cases, their positions reveal a profound misunderstanding of what manufacturing is all about.

Take Kevin Hassett, for example. Director of economic policy at the American Enterprise Institute and a Bloomberg News columnist, Hassett this week wrote a column in which he called the increased attention being given to manufacturing issues an “unhealthy fixation.” The decline in manufacturing from 28% of the gross domestic product in 1950 to 11% today is not a crisis, he said, nor is it “necessarily a cause for concern.” This trend, he insists, is simply “economic evolution, a natural and positive force.”

But here’s where Hassett goes way off the rails. He says the “new economy”—unlike the old, manufacturing-centric economy — is “ideas economy.” “Over the past few decades, our economy has transformed dramatically, and the importance of innovation has increased sharply,” Hassett asserts. The implication, of course, is that manufacturing is not driven by new ideas and innovation.

This, of course, is completely false. In 2007, U.S. manufacturing companies made $157 billion worth of investments in research and development, representing 58% of all private R&D investments. Those investments have enabled an unprecedented level of productivity improvement in the manufacturing sector, one of the many factors that has depressed manufacturing employment.

...Before writing off manufacturing as a lost cause, Hassett and people like him need to spend some time outside of the Beltway, meeting with some of the manufacturers on the PM100 list. They’ll learn that manufacturing is all about innovation.