We have a decided bias towards manufacturing, especially this week where we started on the topic of manufacturing (and education) with Tuesday’s post, and end the week talking about manufacturing too – this time with a hat tip to the editors of the Wall Street Journal and their June 8, 2016 article on “How to Revitalize Manufacturing.”
The Journal points out the significant impact manufacturing has on the American economy – in fact, like no other. Among manufacturing, transportation, education, health care, construction, information, retail and professional services (and others)… only manufacturing boasts a return of more than one dollar ($1.08) of “additional transactions” for every dollar spent. Most of the others weren’t even close. Manufacturing is truly America’s greatest economic engine.
The Journal’s editors note that “reviving the manufacturing sector won’t be easy… but it’s crucial.” As Notre Dame engineering professor Steven Schmid points out, “manufacturing and design drive each other… if you lose one, you lose the other too.”
That said, the article proposes nine strategies for getting U.S. manufacturing back on track…
- Make exports more valuable. Warren Buffett proposes that exporting companies would earn “certificates” equal to the value of their exports, while importers would have to purchase certificates from exporters. This creates two benefits: with the cash cushion of those certificates, exporters could offer goods abroad at lower prices, making them more competitive… while imports would become more expensive (to pay for the certificates), making U.S. goods more competitive against imports.
- Impose a value added tax. 130 countries already do. Most countries with VATs waive them on exports at each step of production, imposing them only on imports.
- Deal with an overvalued currency. The U.S.’s status as the world’s reserve currency drives demand for dollars and “intrinsically keeps it 10% to 15% above the value of other currencies,” thus making U.S. exports expensive and imports cheaper.
- Look at the true cost of offshoring. The Journal notes that if companies took into account the hidden costs of foreign production (transportation, reduced product reliability, undependable supply chains and the need to hold greater inventory in case of delays…) our U.S. made goods would become more cost-competitive.
- Purge duplicate regulations. When new rules are imposed, old ones are rarely repealed. The National Association of Manufacturers estimates manufacturers pay $139 billion annually in regulatory compliance costs.
- Look at more than jobs. Head counts too often tend to ignore the benefits of automation. Investments in tech automation need to be encouraged in order to ensure the U.S. remains a desirable destination for manufacturing in the future. Tax breaks would help.
- Turn community colleges into career factories. Better collaboration between industry and schools would produce more productive graduates ready for the workplace. A plan pending in Congress would authorize the creation of 25 “manufacturing universities.” It all helps.
- Spend more on manufacturing R&D. Advocates say greater spending on applied research to solve specific problems in manufacturing would bring new products to market and boost manufacturing output.
- Create regional centers of expertise. The U.S. has already lost entire industries (think garments and consumer electronics) to other countries. Regional centers of expertise could leverage existing skills or an industrial legacy, like machining or casting, thereby taking advantage of current talent to seed future manufacturing expansion.