Government Investment in the Future of Manufacturing
We are constantly reminded as we hear the news of the contributions of government to research and development in the manufacturing arena. For years, we heard about the government’s role and contributions promoting ethanol manufacturing and we saw laws mandating its use as an automotive fuel. With the rapid decline in oil prices we don’t hear much about ethanol any longer. Electric and hybrid cars aren’t on the forefront the way they used to be either. Government funding for wind farms is on the decline. But solar is faring better and tax subsidies have been extended. Overall, there have been reductions in defense and aerospace research and development (R&D), increases in energy-related research, life science research and information technology. All of these are efforts by the federal and state governments to help to promote U.S. manufacturing and create U.S. jobs. But the U.S. is not the only country investing tax dollars into research and development to promote manufacturing. There is an effort worldwide to promote manufacturing and manufacturing jobs.
The United States is the leading investor in R&D worldwide, but there have been reductions in our R&D because of pressure to reduce government spending and the deficit. China’s investment has continued to grow in spite of the turmoil in its economy. Worldwide, ten countries spend about 80% of the total $1.6 trillion invested on R&D around the world. The combined investments made by the United States, China and Japan make up more than half of this amount. Weak economies in the Middle East, Africa and South America (even Brazil) have limited their investments in R&D. Germany, South Korea, France, the UK, Taiwan, India and Russia are other major contributors to worldwide R&D.
Innovation isn’t possible without funding it appropriately. Politics as well as economic conditions around the world have a huge impact on support for R&D. And the politics, economies and research and development are inseparably linked. R&D can create new industries and foster industrial growth. This in turn can nurture the creation of a middle class, in developing nations and the stability and growth of the middle class in developed nations. Both of these can in turn build political stability for those in power. Governments are motivated and incentivized to create good middle class manufacturing jobs. The United States is no exception to this rule.
We are entering an election year. There will be a lot of finger pointing by candidates on both sides about why manufacturing has faltered and a lot of promises made about how it will improve. Manufacturing accounted for nearly 20 million jobs in 1979. Today the number of manufacturing jobs is about half that number. The picture is even bleaker if we consider that the labor force is considerably larger today. This has led to a widespread conviction that the core of the potent U.S. economy is eroding.
In spite of all the money the government spends on R&D, the number of manufacturing jobs continues to decline. In part this is because good jobs move off shore. But it is also caused by more modern manufacturing techniques that use higher levels of automation and robots to reduce costs and in turn the number of employees needed.
Over a period of time some individuals will develop new skills and become a part of this new modern manufacturing initiative. It is likely that the economic system created by newer technologies will generate a next wave of prosperity. In the mean time, it is likely that in spite of strong investments in R&D by the government, the average factory job for the average middle class worker will never return.
We should continue to support government investments in new technologies and embrace what they can do for our future in spite of the fact that they will never bring back lost jobs or industries. And unfortunately they cannot solve the employment challenges for millions who have been displaced over the past decade.