THE AVENUE SEPTEMBER 9, 2009
On Labor Day, President Obama appointed Ron Bloom, head of the administration’s auto industry task force, as his manufacturing “czar.” A former United Steelworkers staffer, Bloom recognizes the importance of high-wage manufacturing to the U.S. economy and to the well-being of the Great Lakes metropolitan areas that have been its center for more than half a century. But his experience is mainly in structuring financial deals. Does he understand the non-financial obstacles to reviving American manufacturing? If he is to help the administration craft an effective manufacturing policy, he’ll need to advocate for the following policies:
- More balanced trade. Undervalued currencies and artificially low wages in China and other East Asian countries have put U.S. plants at a competitive disadvantage and contributed to the economic woes of much of the Great Lakes region. Moreover, economists across the political spectrum, as well as the Chinese government, now recognize that the U.S. will have to export more while China will have to consume more. Getting to more balanced trade will require a new international agreement about currency values and international labor standards. The federal government needs to start laying the groundwork for such an agreement.
- Higher quality products. Toyota and Honda make top-notch cars by involving their production workers and suppliers in a never-ending quest to root out quality problems and reduce waste in the production process. Many U.S. manufacturers, from GM and Chrysler to the smaller suppliers that are the backbone of American manufacturing, haven’t quite figured out how to do this, even though the basic principles have been around for decades. The federal government can help by expanding its Manufacturing Extension Partnership program--which now helps small and medium-sized companies--and using its resources to get assemblers, suppliers, and unions to work together to improve quality.
- Diversified manufacturing capacity. Many suppliers make parts exclusively for one industry. This is fine when that industry is expanding, but when it’s declining, as the auto industry is now, it puts the suppliers--and the regions in which they operate—in jeopardy. At the same time, the nation has important unmet manufacturing needs in renewable energy. If the administration is serious about renewable energy, it will not only provide the subsidies needed to get it off the ground but also help companies that now make auto parts to compete for business supplying the alternative energy industries.
- More innovation. Any agenda for reviving American manufacturing has to include not only existing products but also the products of the future. Unlike in the past, large manufacturers no longer do all their R&D in-house. Creating new products now involves collaboration among large manufacturers, suppliers, universities, and venture capitalists, among others. The federal government could best help this process by creating a new National Innovation Foundation. But even without such a far-reaching effort, the federal government could expand its support for innovation by adding new grant programs--including a competitive program of grants to regional industry clusters--to existing agencies in such departments as Commerce and Labor.
We shouldn’t expect miracles from a manufacturing “czar.” Although some criticize the president for creating unaccountable centers of power in “czars,” the real problem with them isn’t that they’re too powerful but that they aren’t powerful enough. With no budgets, few staffers, and no real authority over federal agencies, they’re not in a position to move mountains. What we can expect from Bloom is that he’ll use his position as a bully pulpit to advocate for high-wage manufacturing policies within the administration. What we can hope from President Obama, in appointing a manufacturing “czar,” is that he’ll take Bloom’s recommendations seriously.