Bringing Manufacturing Back in America

Another BusinessWeek piece, this time about efforts to shift the tide of manufacturing plants back into the United States. As one of the foundational pillars of a vibrant economy, this effort is important, and is one of the reasons we need to fix R&D (as noted in my post of a few days ago).

Much of the blame lies with U.S. government policy. Nations in Asia and Europe aggressively court strategic high-tech industries with generous tax breaks, cash grants, cheap credit, low-cost utilities, and speedy regulatory approval. Governments prize such plants because they serve as broad economic catalysts. Besides skilled jobs, they spur parts suppliers, construction work, services, and the creation of big engineering forces that are the pillars of new industries and companies.

By comparison, the U.S. has been indifferent to manufacturing. Even when tax breaks are factored in, American corporate taxes are among the highest in the industrialized world, according to a World Bank study. Nor does the U.S. simply exempt certain industrial investments from taxes, as does much of Asia.

Most U.S. states do offer tax breaks and financial aid to lure big plants, hoping to recoup the cost with income taxes generated by new jobs. But state taxes pale beside federal levies, and state budgets for subsidies are limited. “The states are playing with peanuts, while other countries play with real money,” says Clyde V. Prestowitz Jr., president of the Economic Strategy Institute, a Washington think tank. Also, it can take two years to obtain all the environmental, health, and safety permits for a modern electronics plant—a lifetime in the tech world.

“The political guys in Washington don’t have their minds around the fact that the climate for manufacturing here is really hostile,” says Joseph R. Laia Jr., CEO of Santa Clara (Calif.) solar cell startup MiaSolé, which is trying to decide whether to build its first major plant in the U.S., Europe, or Asia.

Building a wall around the United States won’t work. We’re going to have to make our systems be competitive so we can be a magnet for the high-margin innovation and manufacturing that we used to lead the world in.

One effort close to home is the Sierra College Center for Applied Competitive Technology, where we’re working to help manufacturers with technical training and workforce development. These are great efforts, and I applaud them, but it’s going to take work at the state and federal level to make a dent in this problem — and we need to, quickly.

» Read the Entire Article