The new coronavirus outbreak reveals many disturbing facts, the most startling of which is the shortage of basic production capacity in the United States. In the face of unprecedented emergencies, U.S. factories have struggled to produce even relatively simple products such as cotton swabs, masks and protective equipment. Bloomberg notes that there is still a need to learn from China.
The truth is more surprising than the surface. Millions of manufacturing jobs have been lost over the past two decades as low-end industries have shifted to Asia, but real u.S. manufacturing output has hovered near record highs, thanks to U.S. manufacturers dominating high-tech sectors such as wide-body aircraft and semiconductors.
But while Silicon Valley’s star companies are still shining, Detroit’s auto industry has faded. The production network, which once had so much process knowledge, disappeared with the transfer of auto plants. This means that if a company wants to scale up or reorganize production, it doesn’t have as much technical talent on hand.
In China, by contrast, there are a large number of experienced engineers and a flexible manufacturing culture that allows companies to quickly shift production to much-needed epidemic prevention products during an outbreak. Manufacturers such as BYD and Foxconn helped quadruple Chinese mask production at the start of the outbreak.
As Marc Andreessen, a Silicon Valley celebrity, puts it, the recovery in manufacturing is not enough to recognize. The United States should consider bolder proposals, rather than the long-standing modest adjustments to research and development policies, retraining programs and STEM education.
What america really needs to do is rebuild its engineering practice. This requires the value of manufacturing jobs, even low-margin goods, as fundamentally valuable. Silicon Valley’s technocrats should wisely abandon their contempt udby to seeing manufacturing as a “commoditisation” activity as something as valuable as research and development. U.S. companies should not simply see workers as the target of cost-cutting, but as practitioners who maintain the knowledge necessary in the production process.
The U.S. government has a vital role to play. The bill passed by Congress to re-support parts of the health-care supply chain should be just the beginning. U.S. tax law has long encouraged offshoring; it’s time for political leaders to urge manufacturers to bring production lines back to the U.S.
The United States should also learn from China. The U.S. is a major market for many Of China’s products, such as airplanes, medical devices and high-end electronics, and should use its vast domestic market to encourage companies to localize production. For example, while most semiconductor manufacturing is now done in Asia, the US should be a bigger producer, given its vast talent and the huge investment of technology companies in data center construction.
A strong political push to help rebuild America’s industrial base, with reference to China’s state-mandated procurement programs, localization requirements, and the cultivation of a deep workforce. This is a difficult task. However, the outbreak is a testament to how urgent this task is.