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I Want My Manufacturing Policy Back

By now, you’ve heard that President Obama announced the creation of the Advanced Manufacturing Partnership (AMP) – an “innovation policy” of sorts, maintained by a collection of businesses, universities and governmental agencies to spur innovation via coordinated research & development of manufacturing processes and products.

(Wait a minute – didn’t we try this 2 years ago with the National Innovation Marketplace? Whatever happened to THAT? Oh, never mind …)

Just before POTUS announced the AMP at Carnegie Melon on Friday, I watched a C-SPAN video of testimony on Capitol Hill that dealt with an industrial policy for the US and what it would/should address. Testifying on that panel was one of my favorite ‘tweeps’ – Scott Paul, the Executive Director of Alliance for American Manufacturing. During his statement, Scott reminded me of something I hadn’t thought about in years, not since I was a high school student back during the Coolidge administration:

We had a fine industrial policy in this country. And we don’t anymore.

The Report On Manufactures” (ROM) was written in 1791 by then Secretary of the Treasury Alexander Hamilton. It was submitted to the newly-formed Congress to establish trade, economic and governmental support for our manufacturing base. It formed the basis of our industrial policies until just after World War II.

Consider the ROM as the birth certificate of US Manufacturing.

The ROM contains a remarkable breadth of understanding and scope. And unlike our current collection of initiatives, partnerships and disjointed bills, it rightly understood that a policy base had to be established that would properly contextualize and focus subsequent efforts on a common set of premises.

There have been voices raised lately that question whether a comprehensive policy is counter to free enterprise and capitalism. But this isn’t new at all. Hamilton faced a firestorm of debate and resistance to the ROM – it even caused the establishment of a new political party. The argument then, as now, was that to create a policy would put burdens on our economic system by transferring the ‘natural current of industry’ to one of control.

Then as now, to suggest that the management of any sovereign economy should be “made up as we go” is crazy. It’s like leaving on a trip without a map, or a GPS. We need an industrial GPS, with sovereignty and growth as its base.

Instead of putting the cart before the horse – by letting whimsy and the political winds drive policy – Hamilton established tenets that formed and guided our policies. And, hey – we didn’t do too bad with it, did we?

So, let’s have a look at what my US Manufacturing Policy looked like:

  • It acknowledged the impact and influence of manufacturing on the entire economy by using its intertwining with agriculture, the most obvious example of the day.
  • Hamilton wrote it with the premonition that immigration would explode in the US, where the population was extraordinarily small in comparison to its territory. Translated, this policy was constructed with creating and sustaining jobs for a soon to be rapidly expanding workforce. That seems pretty applicable to these days, no?
  • It acknowledged that the role of government – and a manufacturing policy – wasn’t so much to control the natural currents of business and industry, but to create a platform, an environment where business could be done most efficiently and profitably as possible.
  • It managed trade and protected industries and markets via tariffs and subsidies.
  • It acknowledged and addressed a formidable, foreign trade adversary that had numerous economic and linear advantages. It constructed this policy around the strengths of the US, to capitalize and compete – with Europe.
  • It was constructed under the primary premise that countries with strong manufacturing bases serving numerous industries possess(ed) more wealth than those that do not.
  • It acknowledged the emerging contentiousness between the North and the South, and looked to encourage support for regions based on their manufacturing strengths.
  • It identified our most important industrial sectors and products (i.e., iron, coal, cotton, gun powder, printed books), and spelled out the unique qualities of each sector along with what should be encouraged/protected for each, and why.

What Did The ROM Do?

  • Established duties & tariffs (called ‘bounties’ & ‘premiums’ back in the day) on foreign products that were rivals of domestic products
  • Prohibited the exportation of the ‘Materials of Manufacture’ – or, simply put, our industrial policy protected US jobs
  • Established exemptions on certain indigenous products from duties and taxes, and a system to drawback those duties when appropriate
  • Acknowledged and supported a strong commitment to the infrastructure of the country, to enable commerce – not control it

What’s Different – And What’s The Same

  • While immigration has become a much different animal these days, the goal of creating a strong manufacturing base that creates indigenous jobs for the US workforce isn’t.
  • By neglecting advantageous trade policy in favor of trade deficits and initiatives, short-term profit and displacement of our core production and development capabilities, we find ourselves in a similarly exposed position as our nation did in 1791 – we have suitable resources (labor) but a shortage of positions to deploy those resources.
  • And should anyone doubt that a policy based on sound ideals, sovereignty and solid economic and business principles can evolve and remain viable, look no further than the US Constitution.

No one is happier than I am that we’re elevating the level of discussion around manufacturing in this country. That’s what rocks about the AMP. But we’re concocting these projects and plans in the wrong order – we desperately need a comprehensive industrial policy as a foundation, that includes trade, education, intellectual property protections, tax & regulatory reform AND innovation. And that focuses our resources on common goals, rather than committees or partnerships with little authority and a ton of self-interests.

But I’ll give Secretary Hamilton the final word on why this is so important, as he wrote in the original Report On Manufactures:

“Arbitrary taxes, under which denomination are comprised and those that leave the quantum of the tax to be raised on each person to the discretion of certain officers, are as contrary to the genius of liberty as to the maxims of industry. In this light they have been viewed by the most judicious observers on Government, who have bestowed upon them the severest epithets of reprobation, as constituting one of the worst features usually to be met with in the practice of despotic governments. It is certain, at least, that such taxes are particularly inimical to the success of manufacturing industry, and ought carefully to be avoided by a government which desires to promote it.”

I want a manufacturing policy. And the old one will do just fine.

AJ Sweatt
Website
4 Comments
  1. There are some in this country who live by “the market as god” doctrine. Insisting on those purest of pure principles without acknowledging context, history, and trade-offs eliminates complexity for small minds while serving an ideology that doesn’t adapt to an evolving world. Most of us agree that free enterprise is, on the whole, a good thing. But if we leave everything to the markets, it’s sure that the profit motive will continue to erode U.S. industry after U.S. industry. This is what a perfectly free market will do when cheaper labor and resources are available elsewhere in the world. If, as John Lennon wrote, “…there’s no country” a perfectly free market might float all boats around the world, ultimately benefitting the common good, (though I wouldn’t bet on it). On the other hand, a country with a protectionist trade policy can’t sustain a strong economy in a global marketplace (witness the reversal of fortune that the Japanese have experienced over the last 25 years, due in good part to their protectionist trade policy). This is why government must implement business, trade, and manufacturing policy that has vision, that isn’t focused on quarter-by-quarter profits, and considers the countries long term economic health and national security interests. Free enterprise – yes, but not as god.

    • Nick, in my mind you couldn’t be more right – and good point about xenophobic, knee-jerk, feel-good blather. It’s like urinating on yourself when it’s cold – it feels good at first, but …

      We’ve let things go without a foundation for too long. It’s partly what’s gotten us into this mess in the first place.

      There has to be balance in this, and we can’t continue to let everything float without a rudder. If that works for everything, let’s just select an honor system to pay taxes.

      Thanks for the visit, my friend – and for the comment. I hope you and yours are well, and enjoying the NoCal summer.

  2. As it’s been said, “the coldest winter I ever had was a summer in San Francisco,” …but I am not looking forward to January. But anyway… I just opened my mail to find the July issue of “Cutting Tool Engineering” in which George Weimer reviews “Make it in America – The case for Re-Inventing the Economy” by the CEO of Dow Chemical, Andew Liveris. The key take-away of the article is this line by Liveris, “If we let markets rule in every instance, we will become the global economy’s biggest bystander.” So I was pleased to see that a reputable CEO of one of our most notable manufacturers disagrees with the “markets as god” urgings of organizations like the U.S. Chamber of Commerce. Remember, just because it’s good for business doesn’t make it good for the United States. Here’s a link to a Washington Post article on the book: http://www.washingtonpost.com/wp-dyn/content/article/2011/02/12/AR2011021200371.html

    • It IS encouraging to hear that sort of common sense come from what most believe are uncommon places. The fact is, we need a comprehensive manufacturing policy that drives and influences our engagement in the global manufacturing genome. Without one, we’re just a reactionary bystander.

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