U.S. manufacturing may have reached a tipping point. After decades of outsourcing and offshoring, the country has lost much of its production base. The number of manufacturing companies has fallen by 100,000 in the last ten years and, although recovering a little bit recently, manufacturing employment has dropped by more than 10 million people.
The cause of the lack
Economists and policymakers argue that these shifts in manufacturing are the natural progression of an advanced, post-industrial economy. But it is possible, even essential to have both. Other advanced economies — Germany and Japan, for instance — continue to have strong manufacturing sectors despite having higher wages than the United States.
The U.S. has lost manufacturing because too many managers, driven solely by financial goals, moved production abroad, failing to recognize the long-term implications of our shrinking manufacturing sector. The nation has not only lost high-paying jobs and companies that have supported communities, it has also the knowledge and productive capacity needed to manufacture many products. For example, almost all consumer electronics are made in Asia. The United States no longer has the supply chains or the production know-how to produce common devices such as smart phones and large flat screens. Many of the most advanced U.S. microchip makers are “fabless” — the chips are actually made in Asia. Overall, the only advanced manufacturing industry with a U.S. trade surplus is aerospace.
Continuing trend
This trend cannot continue. As the pace of new technology development accelerates, the nation must make the necessary investments to create and lead production of emerging technologies. The U.S. spends more than $150 billion annually on R&D. Investing just 5-10% of that to convert lab prototypes into commercial products can build new domestic industries. If we don’t, be assured that someone else will.