> Subject: Production and Innovation > > > NY Times > December 24, 2006 > Economic View > Goodbye, Production (and Maybe Innovation) > By LOUIS UCHITELLE > AMERICAN manufacturers no longer make subway cars. They are imported now, and > the skills required to make them are disappearing in the United States. > Similarly, imports are an ever-bigger source of refrigerators, household > furnishings, auto and aircraft parts, machine tools and a host of everyday > consumer products much in demand in America, but increasingly not made here. > Import penetration, as it is called, worried economists and policymakers when > it first became noticeable 20 years ago. Many considered factory production a > crucial component of the nation> '> s wealth and power. As imports gained > ground, however, that view changed; the experts shifted the emphasis from > production to design and innovation. Let others produce what Americans think > up. > Or as Mark Zandi, chief economist at Moody> '> s > <http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=MCO> > Economy.com, put it: > "> We want people who can design iPods, not make > them.> "> > But over the long run, can invention and design be separated from production? > That question is rarely asked today. The debate instead centers on the loss > of well-paying factory jobs and on the swelling trade deficit in manufactured > goods. When the linkage does come up, the answer is surprisingly affirmative: > Yes, invention and production are intertwined. > "> Most innovation does not come from some disembodied laboratory,> "> said > Stephen S. Cohen, co-director of the Berkeley Roundtable on the International > Economy at the University of California > <http://topics.nytimes.com/top/reference/timestopics/organizations/u/university_of_california/index.html?inline=nyt-org> > , Berkeley. > "> In order to innovate in what you make, you have to be > pretty good at making it > -> and we are losing that ability.> "> > Mr. Cohen is a partisan. He was a co-author of the 1987 book > "> > Manufacturing Matters,> "> one of the first to sound an alarm as imports > began to displace domestic output. But even the National Association of > Manufacturers > <http://topics.nytimes.com/top/reference/timestopics/organizations/n/national_assn_of_manufacturers/index.html?inline=nyt-org> > , which is supportive of members like Whirlpool > <http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=WHR> > and General Electric > <http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=GE> > who shift production abroad, agrees that sooner or later innovation and > production must go hand in hand. > Franklin J. Vargo, the association> '> s vice president for international > economic affairs, sounds even more concerned than Mr. Cohen. > "> If > manufacturing production declines in the United States,> "> he said, > "> at > some point we will go below critical mass and then the center of innovation > will shift outside the country and that will really begin a decline in our > living standards.> "> > As it is with global warming > <http://topics.nytimes.com/top/news/science/topics/globalwarming/index.html?inline=nyt-classifier> > , the crisis is in the future. Manufacturing output is not likely to fall > below critical mass, as Mr. Vargo puts it, in this generation > -> or > perhaps for several generations. The United States is still a powerhouse in > manufacturing, and the output of the nation> '> s factories continues to > rise. The problem is that the craving for manufactured goods in this country > is rising faster than output, and imports are filling the gap, particularly > in crucial industries. > Measuring this growing shortfall is imprecise. The government does not do the > calculation, and outsiders must put together numbers from more than one > federal database to make estimates. Mr. Zandi of Moody> '> s Economy.com > calculates that 20.5 percent of the manufactured goods bought in America last > year were imported. That was up from 11.7 percent in 1992 and 20 percent in > 2004. Only once since 1992 did the penetration rate slip > -> by four-tenths > of a percentage point in 2001, a recession year. > The other big industrial nations > -> France, Germany, Japan, England, > Canada > -> also find themselves importing more and more of what they > consume. In this comparison, the United States is not even high on the list, > reflecting its preglobalization starting point in the 1970s as a much more > closed economy than the others. > But the country-to-country comparisons hide a disturbing trend. Alan > Tonelson, a research fellow at the United States Business and Industry > Council, argues that in this country, import penetration is rising faster in > core industries like machine-tool building than it is in other countries. And > these are the industries that are, or should be, centers of innovation and > invention. > "> If you keep some production here, that is O.K.,> "> Mr. Cohen said. > "> > But a lot of companies are not doing that, or slowly ceasing to do so. It is > a complicated mosaic.> "> > Mr. Tonelson> '> s efforts to document the exodus are part of his job. His > organization represents small manufacturers who keep production at home much > more than a General Electric or a Whirlpool. They suffer from import > penetration more than the multinationals. The Business and Industry Council > even favors tariffs as a protective measure > -> a red flag for many > mainstream Democrats > <http://topics.nytimes.com/top/reference/timestopics/organizations/d/democratic_party/index.html?inline=nyt-org> > and Republicans > <http://topics.nytimes.com/top/reference/timestopics/organizations/r/republican_party/index.html?inline=nyt-org> > , who shun any suggestion that they might be protectionist. > Still, Mr. Tonelson, using the same data and the same methodology as Mr. > Zandi, but delving into individual industries, finds that the United States > is importing more than 50 percent > -> and in some cases close to 90 percent > > -> of the machine tools used in this country, the aircraft engines and > engine parts, the parts that go into cars and trucks, the industrial valves, > the printed circuits, the optical instruments and lenses, the telephone > switching apparatus, the machines that mold plastics, the broadcasting > equipment used for radio, television and wireless transmissions. The list > goes on. > "> It is hard to imagine,> "> Mr. Tonelson said, > "> how an international > economy can remain successful if it jettisons its most technologically > advanced components.> "> > HIS alarm is not widely shared. Most economists and policy analysts say > America> '> s growing service sector and powerful financial sector will > eventually offset deterioration in manufacturing. In the short run, these > optimists count on a falling dollar, particularly vis-à-vis the Chinese yuan, > to put a brake on imports by making them more expensive, and to encourage > exports by making them less costly in foreign currency. Thus will America > gradually reverse its still-ballooning trade deficit. > But implicit in this solution is the belief that industries gone, or nearly > gone, will come quickly back to life, and that skills given up can be quickly > reacquired. > "> Economists assume that the factors of production respond very quickly,> "> > Mr. Cohen said. > "> They don> '> t. If you were a chief executive, would > you build an expensive factory here on the strength of a shift in the > exchange rate?> "> > ========================================== > > >
_______________________________________________ Futurework mailing list [email protected] http://fes.uwaterloo.ca/mailman/listinfo/futurework
