Yesterday’s posting talked about the renewed interest in manufacturing. This has been building for some time. At the end of last year, the Obama Administration released a “manufacturing framework” (see earlier posting). As I noted in my Policy Brief–Intellectual Capital and Revitalizing Manufacturing, the framework included intellectual capital but needed to be expanded.
Unfortunately, not everyone gets its. There is still a misunderstanding on this point. For example, one witness testified at the House Energy and Commerce Committee (the hearing I mentioned yesterday) that we didn’t need manufacturing because value of intangible assets was greater than the value of tangible assets.
This is such a misreading of the economic transformation as to be breathtaking.
As I have noted many time before, moving up the value chain does not mean abandoning manufacturing. It means transforming manufacturing from mass produced low-price commodities to higher value added goods and services.
As Aneesh Chopra, the Obama Administration’s CTO, said in his prepared testimony at that same hearing:
The manufacturing sector is undergoing transformative change. We can help foster and facilitate this change and ensure that workers and communities thrive in the midst of this change if we take certain critical actions. Past manufacturing strategies have largely failed. Two different views have dominated these past approaches. One view was that manufacturing industries needed to be protected and insulated. Not only was this approach ineffective but it was also counterproductive. An alternative view was laissezfaire, cutting critical research and support programs and hoping the market will take care of problems. This approach has contributed to the steep job losses over the last decade but more importantly threatens to rob us of the potential for greater innovation over future decades. An alternative to these two poles is a strategy that recognizes that change is inherent in the economy and necessary for productivity growth. Evidence-based policy can help foster and channel this change and ensure that workers and communities can thrive in the midst of it.
As a report from the MEP advisory committee Innovation and Product Development in the 21st Century notes:
So how does U.S. manufacturing remain competitive? An important factor will be to more clearly define a central constraint on the growth of the manufacturing sector – the ability to translate innovation into commercial products. Federal policy can help renew manufacturing in America by improving the process of transition from research and development to domestic product design, manufacturing, and product deployment. Unfortunately, many of today’s manufacturers suffer from a lack of access to new technologies, new processes, new markets, and a skilled workforce to make this transition. Many firms have knowledge about what needs to be done but need help in taking appropriate action. Other firms must be educated toward new opportunities. Current public policies can do more to assist U.S. firms at the scale needed to compete.
In other words, companies need to build on their intangible assets — and government policy is needed to help them do that.