Over the months that I have blogged about our energy and chemical industries I have focussed much of the discussion on what has now been called the “renaissance” of American manufacture. For these industries, this has largely related to the relatively recent development of techniques to produce vast quantities of natural gas and liquid hydrocarbons from very extensive shale deposits in several regions of our continent. This is already creating a large number of jobs, not only for drillers, but by manufacturers of drill pipe and construction of extensive new infrastructure and housing in areas where oil and gas are now produced, etc. There are no comparable “breakthroughs” in other areas of domestic manufacture, as far as I can tell, and a lot of concern continues to be expressed about the loss of manufacturing jobs to countries in the developing world, including the large amount of “outsourcing” still practiced by domestic corporations and the fact that U.S. firms are continuing to set up manufacturing plants in China, Brazil, Mexico and elsewhere.
Let’s look at a practical example – automobile manufacture. Innovations in the application of car paints and finishes were made in the U.S. as well as in Europe in response to the need to reduce or eliminate the smog-producing solvents used for spraying paint resins on cars. This led to the development of powder coatings that could be applied electrostatically and then cured under heat to form a “skin” that is tougher than conventional paint. This technology is now used worldwide, undoubtedly including the manufacture of Buicks by General Motors in China and by VW in Mexico. But Honda, BMW, Volkwagen, Toyota and other “foreign” firms are also using it to build cars in the U.S. That’s how the system works.
Development of a biofuels industry to make corn-based ethanol was developed here and led to the construction of many plants in the Middle West, creating many thousands of jobs.
While some of you may have read Tom Friedman’s article “Made in the World” in the January 28th issue of the NYTimes, it is worth highlighting a point in his article that bears on this subject. In this age, he says, multinational companies no longer consider themselves beholden to their home country when making a decision as to where to locate their next plant. They will locate where their customers are and where they can best participate in the global supply chain for the products in question. And here, Tom says, America is well placed when it comes to innovation and new product development. He goes on to say,” in a world in which protection for intellectual property and secure capital markets is highly prized by innovators and investors alike, there is no country safer than America…..a world in which returns on innovation are staggering, government funding of bioscience, new technology and clean energy is a great advantage…..a world where logistics will be the source of a huge number of middle-class jobs for ( U.S. firms like ) FedEx and UPS. ” Tom could have mentioned the breakthrough advancement known as horizontal drilling as a prime example of U.S. innovation that is now “exported” by U.S. firms to many other countries. “We need a national strategy”, he says, “to enhance our national advantage: more immigration of talented scientists, more education, better infrastructure, more government research and a long term plan to fix our debt problem.”
That’s certainly one of the important answers to our “outsourcing” problem. The old jobs will not come back. We must create the new jobs in part with government help and by innovative corporations and venture capital firms.