Three Reasons for Made in America

Thursday Apr. 1st, 2010

August Uhl

The number of jobs tied to manufacturing in America has declined steadily for decades and now stands at about 10%. Nowadays we hear that America has a service economy or that we are a nation of consumers. Honestly being defined as a nation that services and consumes doesn’t sound nearly as cool as being a nation that makes stuff. A lot of the really cool stuff in the world was invented and first made in America. Today, we take cars, airplanes, and electric guitars for granted but there was a time when these things didn’t exist. At some point they were invented and made by someone. For the purposes of this article, all of the above came out of the good ol’ USA. Lots of times, with any really cool invention, there is someone, somewhere claiming that it was invented in their country. Instead of where? America. America is a nation of innovators. No one needed the electric guitar. But when the first vibrations of those strings were carried by the pick-ups through the amplifier and out the speakers, minds were blown around the world and suddenly… what musician could live without one? Next thing you know some guys in Germany would “rock you like a hurricane.” Oh yeah, where was rock and roll invented? America. Let’s stake a claim to the hurricane while were at it. America may not have invented the hurricane, but, according to Wikipedia, something like 488 of them are known to have hit in Florida alone. Now we fly aircraft, made in America, into hurricanes just to learn more about them. It’s just the American way.

But for a while now the trend has been to “outsource” manufacturing jobs. With globalization and all of that, labor is just viewed as an input to a process. For many company executives, looking at the bottom line, if labor can be found somewhere else for less… why not?  Unfortunately, we are learning that there can be a price to pay for outsourcing manufacturing to the next Mexico, Malaysia, or China. So here are three reasons why it’s important for America to grow the number of jobs tied to manufacturing:

The innovation gap:  If Americans are removed from manufacturing we will be removed from innovation too. A good part of innovation comes from the experience of doing something one way and innovating a better way to do it. Experience is the key. Okay, admittedly, there are those innovations that come out of nowhere. Supposedly Henry Ford once said “if I had asked people what they wanted they would have said ‘faster horses.’ ” So it’s true innovation can not only improve existing things but it can also create things that are entirely new. But a good part of innovation comes from experience and thinking of new ways to do something better. A nation that makes nothing will soon only be able to innovate better ways to make nothing.

A diverse economy:  A diverse economy is a healthier economy. According to a speech made to the Detroit Economic Club by Jeff Immelt, of General Electric, the percentage of S&P 500 earnings that comes from financial services has grown from 10% in 1982 to 45% in 1997. So more and more of the earnings in America’s economy are due to the financial services sector. The latest economic bubble collapse has shown us that this is dangerous. It’s risky to have too much of any economy tied to one sector, especially if the profits from that sector can be illusionary. If that sector collapses then the damage and job losses are great. Mr. Immelt also has stated that he wants to see “manufacturing jobs be no less than 20 percent of total employment, about twice what it is today.” This is the CEO of a conglomerate that has actually practiced outsourcing talking about the importance of reversing the trend. Diversifying America’s job base and earnings base across multiple sectors will help to minimize the effects of future bubbles and make America’s economy healthier.

The coolness factor:  Americans are really good at consuming. We should be really good at producing too. We need to ensure that we remain a force for innovation and making cool stuff and boring stuff. Do we want to live in a world where we are the biggest consumers but everything that we consume is made somewhere else? Being among the biggest consumers on Earth brings about its own set of issues, but it’s a bit easier to justify if we are making more of what we consume.

Some say that the fact that American employment in manufacturing is dropping is no big deal because our productivity is steadily increasing so that really offsets things. It’s true, America’s manufacturers are becoming more efficient and productive per capita. But the same can be said of our global competition. Everyone in the world is becoming more efficient and producing goods of higher quality. Constant improvement and increased efficiency is just what it takes to stay in the game today. The fact that we are more efficient than we used to be shouldn’t be a reason to allow our manufacturing sector to continue to shrink. The makers of Met-Rx Sports Nutrition products use a slogan during the annual World’s Strongest Man competition that could serve America well if applied to our manufacturing sector.

American manufacturing: Bigger. Better. Stronger.