Commentary on Gregory Tassey’s “Rationales and mechanisms for revitalizing US manufacturing R&D strategies”

Abstract

Gregory Tassey is one of the country’s leading experts on technology issues and his article on the problems with US manufacturing and technology policy deserves respect. I agree with much of what he says, but in the spirit of constructive criticism I will focus on the ways in which I disagree. The current state of the US economy and of the manufacturing sector is terrible. There is over 10% unemployment and manufacturing has lost over two million jobs in the downturn. The cause of the current economic downturn has nothing to do with technology and everything to do with the financial crisis. The loss of jobs in manufacturing since 2007 was the result of the global collapse in demand for capital goods, and the sharp decline of demand in the US for construction materials, cars and other goods. The recession was made here at home. A variety of economic policies to address the recession has already been undertaken and they are working so far. The Federal Reserve and the Treasury have restored the large Wall Street banks and the fiscal stimulus package has contributed to a recovery in overall demand. GDP grew at 2.2% in the third quarter of 2009 and is expected to grow at well over 4% in the fourth quarter. Many questions remain about the strength of growth in 2010 and beyond, and it is virtually certain that high unemployment will be with us for many years to come. We are paying the price for lax regulation, greedy and foolish bankers and excessive borrowing by households like yours and mine. Let us not confuse our current economic disaster with problems with technology policies. Employment in manufacturing was declining well before the current downturn. Over three million jobs were lost in the sector after 2000 and they did not come back even with economic recovery. Most Americans blame international trade for this loss of jobs and there is some truth to that. The US manufacturing sector has faced a deficit in international trade that widened steadily in the late 1990s and early 2000s. The trade deficit reduced manufacturing employment in two ways. The first and most important is that industries such as clothing, footwear, leather goods, toys and a variety of other low-tech manufactures became much smaller and many such products pretty much stopped being produced in the US, ending up in China, Mexico or other low-wage countries. Few if any of those