Can Real Change Come to Manufacturing?

In 1791, Alexander Hamilton, our first Secretary of the Treasury, presented a “Report on the Subject of Manufactures” to the U.S. House of Representatives. The report set in motion some of the key elements of Mr. Hamilton’s vision for establishing our young nation as an industrial player in the world economy. His vision: a free market that allowed entrepreneurs and innovators to thrive with a limited and appropriate level of government involvement.

Most of us would argue that lately, as a nation and more specifically as a government, we have managed to stray from the vision Mr. Hamilton outlined for manufacturing through intervention, regulation, a poor trade policy and a general disregard of the basics of wealth production. For most of the first 200 years of this country’s existence we stayed fairly true to Mr. Hamilton and managed to build an economy, manufacturing base and standard of living that was (and mostly still is) the envy of the planet. As the United States celebrates its 234th birthday in July, my hope is that the industrial engine we’ve “made in America” all these years will be encouraged to continue rolling down the tracks.

In spite of what I read and hear in the media about the decline of manufacturing, the rise of consumerism and the general dysfunction of America, I remain optimistic. Part of that optimism comes from a hope that if the administration and Congress can be made to understand why we need to manufacture here, we can salvage what is still the largest manufacturing economy on earth.

To that end, I was pleased to hear that in December 2009 another report on domestic manufacturing was issued, this time from the office of the president. It’s entitled, “A Framework for Revitalizing American Manufacturing.” Be still my heart—is it possible that somebody, anybody, in Washington might be listening to what we’ve been saying? I’ve read the report, and it lays out many of the issues facing the domestic manufacturing base. These are issues that, in many ways, state the obvious to us, but I’m sure they are news to the politicians.

According to the report, in 2008 manufacturing produced $1.4 trillion in national income, making it one of the largest sectors in the United States’ economy. If it was a free-standing economy, manufacturing would be the ninth largest in the world—roughly the size of the entire Canadian economy.

I know another source that puts this number at $3.7 trillion, more than all four BRIC (Brazil, Russia, India and China) countries combined. But who’s going to quibble about a few trillion dollars? My point is we are still the world’s number one manufacturer, and it is not too late to do the things necessary to stay there for another two or more centuries.
The report recognizes that sustainable domestic manufacturing must be incentivized to continue research and development. It states that manufacturing companies are the source of 70 percent of R&D performed in the United States, which accounted for $147 billion in 2004. Manufacturing is also responsible for 90 percent of all patents. But perhaps some public help can improve that by helping fund basic research and leading edge technologies. It’s embarrassing that in public funding of R&D, we lag Japan, Sweden, Switzerland, South Korea, Iceland and Israel.

I believe and would bet that Mr. Hamilton would concur that the government’s best role is not to get in the way of manufacturing, but it is to grease the ways so manufacturing can do what it does best—make things. We, in manufacturing, know what needs to be done or rather undone to help us sustain this 234-year run.

It’s interesting to me, though, to see these things enumerated in a presidential document. Let’s face it, we have what we have for at least 3 years, and probably more, so I welcome any shout-out to manufacturing. And if we as an industry can keep some pressure on to actually read and act on “A Framework for Revitalizing American Manufacturing,” I see that as good.

When Alexander Hamilton presented his report back in 1791, history would indicate that somebody, not in Washington, but named Washington, must have put some stock in manufacturing. It is time to revitalize American manufacturing because without it, real change is impossible.