Manufacturing Our Way to Success*
From silk to steel, the world’s most successful civilizations have been built on the strength of their exports.
*This is an abridged version of the original article, which can be viewed here.
In an era when screens have become central to our lives, it can be challenging to divert attention away from Google, Facebook, and Snapchat to look at what comes next. Are cloud computing and mobile apps the only things that matter? In Silicon Valley, where tech startups are prized above all else, the answer certainly seems to be ‘yes.’
A huge part of Silicon Valley-style innovation consists of companies that enable people to thrive without traditional human connections. Airbnb allows you to live away from home without ever settling into a permanent community; Facebook allows you to keep up with friends without ever seeing them; Google allows you to find answers without asking people questions; and Amazon allows you to buy everything you need without interacting with a single person.
But if we look beyond the San Francisco Bay Area, we can see artifacts of a time when there was more to life than laptops and cell phones: Detroit’s auto factories, Pittsburgh’s steel mills, Chicago’s printing presses, North Carolina’s furniture plants. These manufacturing centers aren’t coming back, and there’s no reason to try.
Nonetheless, there are consequences to outsourcing manufacturing know-how. Tesla has struggled to establish a profitable auto manufacturing business in the United States. The Pentagon continually misses budget targets in contracts for F-35 fighter jets. Mobile hardware advancements originate largely in China. Dependence on foreign innovation has pulled control over the American economy out of our own hands.
Manufacturing runs in my blood, so the issues are highly visible to me. As a Schuster, it’s likely that my ancestors once made and repaired shoes for their townspeople. One of my grandfathers was a foreman for a printing press shop in Chicago. My uncle followed in his footsteps and ultimately built his own business repairing printing presses. My other grandfather was an engineer and manager in a Pennsylvania bubble gum factory, engine factory, and a frozen food plant.
I hope that I can continue to build upon the contributions of my grandparents and the generations that have come before us.
The future boasts a novel set of opportunities, an intertwined economy built on manufacturing, renewable energy, clean agriculture, digital tech, and biotech. Automation doesn’t stifle these advancements; it enables them. A range of cutting-edge manufacturing industries still lie ahead: bioelectronic human enhancements, gene therapies, artificial organs, personal aerial transportation, battery storage systems, space travel components, and much more.
Without the right approach to globalization, in fifty years we could look back at the remains of Silicon Valley in the same way we look at Detroit.
To capitalize on what makes America strong, we must welcome today’s flourishing industries, support them, and uphold the institutions that enable domestic entrepreneurs to drive the next wave of innovation. That means keeping the newer phases of manufacturing and engineering within the U.S. long enough for them to spawn the next generation of economic booms.
While tariffs might conjure memories of the failure of the Smoot-Hawley Act, we shouldn’t be too quick to dismiss carefully targeted tariffs in 21st century. They could power a new wave of advanced manufacturing industries based on Nobel prize-winning technologies and humanity’s greatest discoveries yet to come.
The United States cannot thrive with the burden of a decades-long series of trade deficits. In 2016, the U.S. had a $734 billion trade deficit with the rest of the world. Like a family buying a house it cannot afford, our country will not succeed by buying more foreign goods than it can afford.
For much of human history, the world’s superpowers have made a concerted effort to place themselves at the center of trade by ensuring that their exports dominate the global economy. Congress won’t have to reinvent economics to work out the difficulties — it can get a solid start simply by emulating the great civilizations that have come before us.
The ancient Greeks exported fine pottery, wine, bronze work, emery, and marble to places as far away as Africa’s Atlantic coast while importing raw materials to sustain themselves. The ancient Greek city-states of Athens and Thasos used taxes and policies to incentivize traders to put these hubs at the center of regional trade networks.
In China, the Han Dynasty built a network of trade routes known as the Silk Road that lasted for nearly 1600 years. The Chinese used the routes to export silk, paper, gunpowder, and other novelties to the West — and these suppliers closely guarded their production technologies to maintain their competitive edge.
The mercantilist formula for success was relatively simple throughout history: import raw materials and export as many high-value goods as possible.
In recent decades, four core factors have enabled the rapid exodus of American factories to foreign industrial centers: low labor costs, weak foreign intellectual property protection, economic espionage, and light environmental, health, and safety standards abroad.
If we allow these forces to continue pulling manufacturing to the countries with the weakest laws and the cheapest labor, there will be a long race to the bottom across all sectors. We must promote a regulatory framework that incentivizes companies to equilibrate upward rather than downward. We cannot enact laws in China, Thailand, or any other country, but we can create a clear message that says we prioritize trade with bold nations that respect their labor forces, protect the environment, and respect our innovations.
One way to protect American intellectual property internationally is through a system of confidential patents designed to protect recent innovations. Weak foreign labor, environmental, health, and safety standards and poor patent enforcement abroad should be mitigated with moderate targeted outcome-linked tariffs designed to raise the standard of living for the rest of the world while simultaneously helping ourselves.
U.S. companies and their employees will be rewarded for buying goods from countries that we can trust. Mexico and Eastern Europe, in particular, have the opportunity to become great trade partners that promote mutual economic benefits over the coming decades.
The ‘skills gap,’ ‘crippling student debt,’ and ‘structural unemployment’ will one day be forgotten from the American vocabulary.
Just as my grandparents and great grandparents helped build a country that promises opportunity to its people, I hope that my grandchildren will know exactly what the American Dream is, not because they read about it in a history book, but because they lived it.
They will not look longingly at the successes of distant cities and wonder what caused the demise of some of our own. They will share the road to prosperity with America’s closest trading partners.
My support for federal action toward globalization is not a partisan viewpoint. It is a rallying call for Congress to enable our great country and its hard-working citizens to thrive and prosper in a new era.