By Susan Helper and Howard Wial, “Strengthening American Manufacturing: A New Federal Approach.” (Washington: Brookings Institution, September 2010).
Manufacturing is essential to America’s economic well-being. It accounts for the bulk of United States exports, is key for innovation, and provides many high-wage jobs, especially for less educated workers. It is the economic lifeblood of much of the Great Lakes region. Yet the United States has lost manufacturing jobs for the last three decades, and manufacturing output has grown much more slowly than GDP. During this time, federal policy has done little to stem the loss of manufacturing jobs or improve the economic performance of U.S. manufacturing plants. Manufacturing’s decline has contributed to the nation’s huge trade deficit and worsening earnings distribution, and puts America’s innovation potential at risk. To address these problems, the federal government should adopt policies to improve the performance of manufacturing firms in the United States. It should support the development and diffusion of improved manufacturing technologies, ways of organizing work, and relationships between final goods producers (typically, assemblers) and their suppliers; help groups of manufacturers within an industry work together to improve performance; and promote understanding of the importance of the economic and geographic ties that among U.S. manufacturers that contribute to U.S. manufacturing performance. These policies would not favor any particular industries, but would help solve problems that exist in both newer manufacturing industries (such as solar panels) and older ones (such as auto assembly).
