Congressman David Cicilline, in a letter to President Obama ahead of his highly anticipated jobs speech next week, calls for an investment in manufacturing:
Nationally, the manufacturing sector has been a bright
spot even during these trying economic times. If this vital economic
engine is to be sustained, we must continue our investments in programs
that help manufacturers compete in a global economy, retool to be more
efficient and effective businesses, and retrain the workforce so that
skill sets utilized in declining sectors can be transferred to those
that are expanding.
This, of course, fits with the Congressman's larger push to revive Rhode Island's manufacturing sector - and demonstrate his focus on the biggest concern for Rhode Island voters: jobs.
But should the United States be engaged with the sort of "industrial policy" we associate with an earlier time or, at present, managed economies in China and elsewhere? Last week, a well-worth-the-read New York Times magazine article, focused on the Obama Administration's investment in battery technology in Michigan, wrestled with the question:
If nothing else, the Obama administration’s efforts in Michigan
reawaken the conversation about industrial policy. To a large extent,
this is an old war among Washington politicians. In the 1970s, it was
fought over the federal bailouts of Lockheed and Chrysler — and a few
years later during debates over whether the country needed to assist
domestic companies in their efforts to gain ground on the Japanese in
the semiconductor industry. By the time George H. W. Bush ascended to
the presidency, the move away from industrial policy was clear.
“All you had to do in the 1980s was say, ‘That’s industrial policy,’ and
it killed anything it was hurled at,” says Senator Levin, who along
with Senator Sherrod Brown of Ohio is now among the most vocal advocates
of such a policy. “It was the kiss of death. And it
set us back 10 to 20 years in terms of manufacturing in America.” What
is different now, Levin argues, is that “our companies are not competing
with those companies in Korea and Japan. They’re competing with those
governments that are supporting them. It’s naïve to believe that we just
have to let the markets work and we’ll have a strong manufacturing base
in America.” In his view, the lithium-ion investments are tantamount to
repairing a kind of market failure.
The battery executives I spoke to viewed the stimulus money as a
once-in-a-lifetime opportunity. None seemed to think a federal windfall
would come their way again. None saw their business endeavors as
inherently political or ideological. And none seemed to believe they
could survive if they didn’t drive battery costs down and demonstrate
that they could compete with the best lithium-ion factories abroad. “My
own feeling is this will happen just as the government incentives wear
off,” Patil told me. “By then it has to become a self-sustaining
business, and we actually see a line of sight to get there.”
If the battery stimulus ultimately succeeds, does it demonstrate that
expanding the United States’ economy only through knowledge and services
is no longer a viable strategy? “All of the great new American
companies of the past few decades,” says Suzanne Berger, a chairwoman of
M.I.T.’s panel on the future of American manufacturing, “have focused
on research and development and product definition — Apple, Qualcomm,
Cisco.” These were technology companies that could take full advantage
of what she calls the “modularity” of the global economy. Their genius
resided in the design of their gadgets and information systems;
offshoring the industrial work did not leave them at a disadvantage. It
did the opposite, greatly reducing costs and raising profits. “Now I
think we’re at a really different moment,” Berger says. “We’re seeing a
wave of new technologies, in energy, biotechnology, batteries, where
there has to be a closer integration between research, development,
design, product definition and production.”
One challenge to moving in this direction may be that our banks, hedge
funds and venture capitalists are geared toward investing in financial
instruments and software companies. In such endeavors, even modest
investments can yield extraordinarily quick and large returns. Financing
brick-and-mortar factories, by contrast, is expensive and painstaking
and offers far less potential for speedy returns. Berger maintains that
for the economy to get “full value” from our laboratories’ ideas in
energy or biotech — not just new company headquarters but industrial
jobs too — we must aspire to a different business model than the one we
have come to admire.
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