America should focus on rebuilding manufacturing

March 4, 2013

President Obama shut down his infamous “jobs council” at the end of January after very desultory efforts and no substantive outcomes. Reuters reports on what comes next:

In place of the jobs council, the administration said it will begin an expanded effort to work with the business community and other groups to boost economic growth, cut debt and fix a broken immigration system.

“It’s a broad engagement strategy to make sure the president’s message is getting out to the American people, because with their voices involved we think that we can still do big things,” Obama adviser Valerie Jarrett, his point person on working with business, told Reuters in a recent interview.

This sounds like political flim flam to me. President Obama’s team should look to Australia for example and focus on rebuilding and strengthening America’s manufacturing core. This is not an easy task, but manufacturing was the nation’s economic engine for 100 years, and it has been left to languish and be exported offshore.

Australia faces many of the same challenges that America’s manufacturers face. Here are some snippets from the report of the non-government members of the Australia Prime Minister’s Manufacturing Taskforce on what to do:

First, the report lays out the multi-generational presence of family-owned manufacturing and its role in an economic network:

More than 100,000 jobs have been lost since the start of the Global Financial Crisis and many workers, their families and communities are facing tough times and many family-owned businesses and factories that have been here for several generations are under pressure and some have closed. Many parts of the industry are operating at well below full capacity. Critical links in supply chains have been weakened and the businesses around them have been weakened.

The report highlights the segments of the Australian economy that are part of the manufacturing network (many of these are mirrored in the U.S. economy):

  • Upstream processing that capitalizes on our strengths in extractive, forestry and agricultural industries.
  • As suppliers of machinery, equipment and consumables particularly to the mining and construction sectors.
  • In niche areas of knowledge-intensive manufacturing including medical and scientific equipment, pharmaceuticals, transport equipment including aerospace and advanced materials and in niche products that use creative design and marketing to establish unique brands and reach new markets such as cosmetics and high value fashion.

The report outlines many specific steps that the non-government groups have recommended. The most important seems to be that the government must take a leadership role in promoting manufacturing to all stakeholders:

On May 25 when we met with the Prime Minister and Ministers Combet and Shorten we said to them:

“We are particularly concerned that leadership and judgement is brought to bear on the ‘perceptions issue’ about Australian manufacturing. With the loss of over 100,000 jobs since 2008 and more structural adjustment ahead, the Manufacturing Leaders Group is particularly committed to exploring how the good news story about Australian manufacturing success can be presented.

We need it to reach everyone from the young student considering an apprenticeship in manufacturing and his or her parents, to the careers guidance councilor giving advice to students at the local school, to the entrepreneurs, engineers and scientists in other parts of the global economy considering Australia as a location for pursuing a career or setting up and running a business in manufacturing.

They need to know that Australian manufacturing represents a good choice for a rewarding working life with many opportunities for advancement and many opportunities to be part of working for organizations that innovate and compete globally to win international business opportunities. The perception issue also matters for retaining existing employees, encouraging retrenched workers to stay in the industry and to better inform financial institutions about the reality rather than the myth of the risk profile of manufacturing businesses.”

American manufacturing jobs have shrunk from about 20 million in 1974 to about 12 million in 2011. But that is still a good base to build upon using the Australian model.

Finally, Australian non-government groups ask that “tangible and realistic” goals be set for the effort:

A useful discipline would be for the Commonwealth Government to set some bold and ambitious, but also tangible and realistic, goals for the years ahead. Clear objectives and monitoring of progress towards them impose a useful discipline on all parties, and support the stewardship and evolution of the policy agenda itself.

I appreciate President Obama’s team wanting to “get a message out,” but it needs to be well chosen. A message that focuses on the advantages and resources available for U.S. manufacturing would likely benefit the economy more than anything the government could do.

Map source: Investigative Reporting Workshop, American University

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