It Matters Where Things Are Made

To our nation’s peril, the free trade orthodoxy continues to ignore a fundamental economic fact: It matters where things are made.

Over the past decade the U.S. industrial base has suffered an unprecedented decline. The loss of more than 5 million manufacturing jobs and the closure of more than 50,000 manufacturing facilities have undermined our nation’s technical capacity to innovate and to make things, while at the same time decimating our middle class.

Flawed trade and tax policies and a financial system focused on short-term profits drove good jobs offshore, led to record trade deficits, and left the economy in ruins. With the manufacturing share of gross domestic product withering to 12 percent (from 15.9 percent in 1995) and the financial sector growing to 22 percent, the structure of the U.S. economy looks more like Monaco than Germany. This growth model of asset bubbles, low wages, credit pyramids, toxic assets and unregulated out-of-control global capital has been a recipe for disaster.

There is a reason every other developed and advanced developing nation has a manufacturing strategy. Most governments see manufacturing as key to long-term growth, and they target investment in industries and technology. In contrast, our government abandoned strategy to market forces and left workers and communities hanging without a safety net.

There was a time this nation thought big—investing in its people, infrastructure, technology and manufacturing. We must do so again, but we need to recognize that the world has changed. For example, the rest of the world leads in mass transit technology and the U.S. is home to only two of the 10 largest solar photovoltaic producers, one of the top 10 advanced battery manufacturers and two of the top 10 wind turbine producers. If we want to be world leaders in clean technology and have transportation systems to match then we must think strategically and at scale.

Over the next decade our nation is poised to invest $2 trillion in health care, infrastructure and a greener economy. The nation must take tough and strategic steps to create good jobs, fix our trade and tax laws and rebuild our productive capacity. Governments must restructure and regulate financial systems so that long-term investment is rewarded and gambling is not subsidized. We must use our financial resources to develop and deploy domestically produced technology and, if there is better technology overseas, use our financial leverage to get those production systems located here. We must think strategically and regionally about industry development so that we utilize existing pools of displaced skilled workers, engineering talent and idled plants.

And, finally, we must never again lose sight of the fact that it matters where things are made.