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Is a Manufacturing Resurgence Within Our Grasp?

Posted By David Brousell, April 01, 2013 at 9:21 AM, in Category: Industrial Policy

Posted by David Brousell on Apr 1, 2013 9:21:43 AM

Based on a number of rather modest policy changes, the United States could experience a manufacturing resurgence that would lead to stronger economic growth, higher employment levels in the industry, and an improved standard of living for the country overall.

That’s the conclusion of a new econometric forecast by the Aspen Institute and the Manufacturers Alliance for Productivity and Innovation (MAPI). Using an economic model developed at the University of Maryland, the forecast – entitled The Manufacturing Resurgence: What It Could Mean for the U.S. Economy, A Forecast for 2025 – projects several positive developments for the industry.

Under the model, 3.7 million new jobs could be created in manufacturing, lifting direct employment to 16.3 million by 2025, from 12.3 million last year and 17.6 million in 1998. Moreover, manufacturing’s share of GDP, which was 11.6% in 2012, could grow to 15.8%, expanding U.S. GDP by $1.5 trillion.

“The robust results presented in the study are achievable with only modest acceleration of current trends, and none of the policy recommendations mark a radical departure from current policy trajectories,” said Thomas J. Duesterberg, ExecutiveDirector of the Aspen Institute’s Manufacturing and Society program and the author of the report. “But they require a willingness to change in a disciplined way.”

To realize the growth projected under the economic model, manufacturers would have to increase investments in equipment and software by more than 12% by 2025, and exports would have to grow at an annual rate of 8.1%. With regard to policy recommendations, the report advocates a number of often-cited changes in well-known areas. These areas include:

  • Trade Policy: the report recommends the U.S. complete more trade-opening agreements, such as the ones currently being negotiated in Asia and Europe;
  • Energy Policy: the study says the U.S. should “sustain” the current energy boom in oil and gas production. It calls the energy boom “a huge wind at the back of U.S. manufacturing;”
  • Regulatory Policy: reduce overlapping and layered regulations;
  • Manufacturing Labor Force: improve K-12 performance, develop nationally recognized skills certification programs;
  • Tax Policy: reduce corporate taxes,adopt “territorial” tax regimes;
  • Basic and Applied Research: expandfederal support for research important to manufacturing.

But Duesterberg, in an interview, said that, while the policy recommendations are modest and are mostly not new, the problem is that many of them haven’t been accomplished.

He said that the most important of the recommended changes involve trade policy. “There are two big baskets of actions that need to take place,” Duesterberg said. “One is trade opening negotiations and the other is in currency valuations.”

On the domestic front, a persistent issue has been that a number of well-known voices in both the government and academia continue to voice skepticism about the importance of manufacturing to the economy and the society at large. In a forward to the report, MAPI president and CEO Stephen Gold names Columbia University Professor Jagdish Bhagwati, former Council of Economic Advisers Chair Christina Romer, and former Labor Secretary Robert Reich as skeptics.

“With all due respect, they’re wrong,” Gold writes. “Our broad challenge, at its most fundamental level, is a sustainable increase in society’s standard of living.”


Category: Industrial Policy
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Written by David Brousell

Global Vice President, General Manager and Editorial Director of the Manufacturing Leadership Council



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