Manufacturing—or more specifically, smart manufacturing—will be one of three drivers of a significant technological transformation that in the coming years will have the impact that electrification, telephony, and the advent of the automobile age had a century ago. That's according to Mark P. Mills, a physicist and founder of the Digital Power Group, and Julio M. Ottino, dean of the McCormick School of Engineering and Applied Sciences at Northwestern University. (The other two drivers they cite are cloud computing and wireless communications. I address some aspects of those here.) Those earlier innovations, they write, initiated “…a century of phenomenal economic growth. Americans in real terms are 700% wealthier today.”
Whether we can expect to see a similar increase in wealth over the coming century may depend on where smart-manufacturing capability resides. But at least one economist believes the case for supporting manufacturing in the U.S. may be overrated.
As for Mills and Ottino, they write that smart manufacturing represents “the first structural shift since Henry Ford launched the economic power of 'mass production.'” This shift will augment automation and information systems applied to supply-chain management with revolutionary advances in emerging materials science, they say, adding, “Engineers will soon design and build from the molecular level, optimizing features and even creating new materials, radically improving quality, and reducing waste.”
Combined with 3-D printing, or direct-digital manufacturing, they say, materials science advances “will unleash as big a change in how we make things as the agricultural revolution did in how we grew things. And it will be defined by high talent, not cheap labor.”
The authors aren't specific about where the talent and smart-manufacturing capability will be located, but they do say, “The American culture is particularly suited to times of tumult and challenge,” although “America's success isn't preordained.” They advise that U.S. politicians foster “liquid financial markets, sensible tax and immigration policy, and balanced regulations.”
But how important is it that manufacturing be located here? Christina D. Romer, an economics professor at the University of California, Berkeley, and former chairwoman of President Obama’s Council of Economic Advisers, writes that pundits frequently cite a crisis in manufacturing, which prompted the President in his State of the Union address to call for special tax breaks and support for manufacturing industries.
However, Romer writes, “A successful argument for a government manufacturing policy has to go beyond the feeling that it’s better to produce 'real things' than services. American consumers value health care and haircuts as much as washing machines and hair dryers. And our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada.”
She concludes, “As an economic historian, I appreciate what manufacturing has contributed to the United States. It was the engine of growth that allowed us to win two world wars and provided millions of families with a ticket to the middle class. But public policy needs to go beyond sentiment and history. It should be based on hard evidence of market failures, and reliable data on the proposals’ impact on jobs and income inequality.”
So far, she writes, “a persuasive case for a manufacturing policy remains to be made, while that for many other economic policies is well established.”
Perhaps the need for a manufacturing policy hasn't been made, and perhaps what such policy should entail hasn't been adequately described. But I think maintaining a U.S. manufacturing capability is critical. I have previously cited Andy Grove's comments from a Bloomberg Businessweek article, in which he says that equally important to “that mythical moment of creation in the garage” is the transformation that occurs “as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.”
Grove's recommendation is as follows: “The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.”
We ignore this advice at our peril.