New book from MTN editor: 'Mfg A Better Future For America'.

The United States will not experience a robust economic recovery until its political leadership decides that the country needs to make the products Americans are currently consuming. That is the message from a new book written by Manufacturing & Technology News editor Richard McCormack and eight other authors who investigated the reasons for America's economic trouble and the importance of manufacturing, trade policy reform, training and research to the country's turnaround.

Until there is a shift in thinking away from the idea that manufacturing is not necessary for an advanced economy, the United States will not create enough wealth to survive as a "service" or knowledge economy, the book argues. "An increase in consumer demand will not put Americans back to work," writes McCormack. "Any additional consumer spending will only help workers making products overseas." Unfortunately, it is a lesson that has been lost not only on the previous administrations, but on the current one as well. Those who are involved in domestic manufacturing issues in Washington are in the unenviable position of having to "educate" another group of policymakers.

A number of factors put the country into its current predicament, argue the authors of the book, entitled Manufacturing a Better Future for America. Clyde Prestowitz, president of the Economic Strategy Institute, describes the history of American trade policy. For well over the first 100 years of the nation, import tariffs not only sustained the U.S. government with the majority of its revenue, but allowed U.S. industry to grow into becoming a global powerhouse. In 1828, tariffs on imports rose to 61.7 percent. Abraham Lincoln wrote that "the abandonment of the protective policy" of tariffs would lead to "ruin among our people." Theodore Roosevelt proclaimed, "Every class of our people is benefited by the protective tariff."

Between 1871 and 1913, U.S. tariffs never fell below 38 percent. Congress set the tariff rate at 38.5 percent in 1922.

But everything changed after World War II, when the federal government assumed that U.S. industrial and technological domination would continue unfettered for many years into the future, writes Prestowitz. The United States embarked upon a policy of being the "consumer of last resort" in an effort to rebuild the European and Japanese economies and to align countries with the West during the Cold War. Over the next 60 years, the U.S. virtually eliminated all import tariffs, allowing other countries to run roughshod over American industry with their own tariffs and mercantilist policies. "Today, the world is witnessing the end of the post war system in which the United States serves as the world's consumer of last resort," writes Prestowitz. "The current state of the U.S. economy is fundamentally unsound."

Peter Navarro of the University of California, Irvine, an expert on China trade policy, describes how China utilizes dozens of protectionist and mercantilist policies to its advantage. "While 18th century classical economic theory portrays free trade as a mutually beneficial positive-sum game for all participants, free trade in the 21st century may turn into a zero-sum game with big winners and big losers if the critical assumptions underlying the free trade argument are violated," writes Navarro. That is what has occurred, and the biggest loser is the United States. "Any free-trading country that trades with a protectionist country will see a net loss of jobs to the protectionist country."

Ron Hira, professor at the Rochester Institute of Technology, writes about the shift of R&D and advanced technology to overseas competitors. The common narrative from free-trade theorists and classical economists is that the United States is only losing low-tech production jobs and that the country will generate millions of new jobs in design, research and innovation. That is not happening.

"There is growing evidence that the migration of high-tech jobs will increase," writes Hira, noting that American universities--even land-grant universities--are following directly behind American multinationals in shifting offshore, without regard for the impact on the U.S. workforce.

The most important high-tech trend of the past decade has been the rise of the indigenous Indian information technology outsourcing firms such as Wipro and Satyam, Hira points out. These Indian IT service companies are more profitable than any of their American competitors, and they are now targeting higher-end engineering and software jobs as well. "Anyone who focuses solely on R&D spending or patents is blind to this major loss of American innovation jobs," writes Hira. Instead of investing in American workers with tools, technology and training that would make them more competitive with the Indian firms, companies such as IBM and EDS jettisoned their American workforces "in favor of low-cost workers" in India. IBM's headcount in India grew from 6,000 in 2003 to 73,000 in 2007 and is projected to be 110,000 by next year, according to Hira.

John Russo and Sherry Lee Linkon of Youngstown State University describe what it is like for cities and communities to experience long-term decline and the difficulties associated with renewal. Hundreds of American cities and towns have dealt with the social costs of deindustrialization, a plight that is spreading from the Rust Belt to the Sun Belt. Sun Belt cities, now with the highest levels of unemployment, have much to learn from towns such as Youngstown, Cleveland and Camden, particularly as white collar and professional jobs continue to be lost.

Russo and Linkon describe the stages a city goes through as it deals with deindustrialization, and why so many communities have never recovered. "Disinvestment creates an almost inescapable cycle," they write. As local economies crumble, so too do local government services that are required to deal with the extra burdens of a community struggling for survival. "One of the social costs of deindustrialization is the declining economic security of the entire American middle and working class," they write. "Even workers who were never displaced by plant closings or industry declines have been affected."

James Jacobs, president of Macomb Community College, which recently hosted a visit from President Obama, writes about the elimination over the past eight years of manufacturing workforce training programs. As most economists successfully argued to policymakers that the country was entering a post-industrial period, manufacturing training programs simply disappeared. There was an "abrupt shift taken by companies to provide less training to incumbent workers and to stress more hiring of 'necessary' skills through elaborate processes of assessing potential workers," Jacobs writes.

Only workers with exact skill sets needed for specific jobs were hired in a manner that is similar to the idea of "just in time" or lean production. Many of those skills were associated with specific computer programs from training offered by software companies.

Michael Webber of the University of Texas at Austin describes the need to maintain basic industries if the country wants to remain a military superpower. "The major defense companies no longer carry primary responsibility for innovation," writes Webber. In order to develop innovative new products, these firms are dependent on machine shops, mold and die makers, foundries, printed circuit board fabricators, and companies that manufacture optical instrumentation and batteries to provide them with prototypes that can transition into successful commercial production. Webber looks at the health of 16 of these essential manufacturing industries, and finds that 13 of them are in trouble. Traditional corrective mechanisms such as economic growth, investment in R&D and access to capital and trained workers are no longer working to stabilize these industries.

Irene Petrick of the Pennsylvania State University, an expert in supply chains, describes how globalization has impacted American manufacturing companies. Despite the current economic gloom, many U.S. manufacturing companies will survive, but it will require that they expand their horizons and start experimenting with foreign sales. They must move away from commodity products and start finding niches within "value streams" where they are able to help all of the companies involved in the production of a final product by sharing innovation in product, design and process. "Unlike the traditional top-down OEM supply-chain model, in the emerging value-stream specialized production model, a single firm at the top of the structure does not control the activities of the network," Petrick explains. "Buyers and sellers within the chain exert mutual influence over one another and decisions about sourcing typically balance the need for innovation with the desire to be cost-competitive." It is an excellent chapter for any manufacturing company struggling to succeed in a difficult environment.

Finally, David Bourne, director of Carnegie Mellon University's Rapid Manufacturing Laboratory, describes the trends and technologies that will impact every manufacturing company doing business in the world today. He writes that the United States cannot lose its national manufacturing know-how, and must recommit itself to manufacturing research and development. He recommends that the country run large competitions, where the government creates a series of compelling grand challenges with the inducement of prizes. "This new model allows the government to lead without getting in the way," he writes. There has been an overwhelming response to these competitions in the past from both individuals and companies, particularly those run by the Defense Advanced Research Projects Agency. They have the potential "of carrying research and development results to successful completion and serve as a better model for development and adoption for future industrial technologies," writes Bourne.

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