Imagine that on a sunny Saturday morning the phone rings. You have a question: What would it be like to host the President of the United States at your manufacturing plant? Well, that happened to one Kathie Leonard, an owner of Auburn Manufacturing based in Maine. It was none other than Pres. Joe Biden himself called, and Leonard was not to turn him down.
Biden spoke about something big when he stopped by Leonard’s facility: the resurgence in American manufacturing. Well, it won’t be political puffery; the data actually does support that. Construction spending by manufacturers had jumped about 71 percent in July from the past year, while more than 106,000 new manufacturing jobs had been added as of August. Most importantly, economists, possibly even the Nobel Prize-winner Paul Krugman, estimated—along with analysts from Goldman Sachs—that this boom actually had the potential to generate up to 250,000 new jobs over a two-year period.
What’s driving this surge? First, billions from federal spending on infrastructure and renewable energy projects have been poured into the industry. Biden rammed through big spending packages, most prominently the bipartisan infrastructure bill and the CHIPS and Science Act, in a bid to rejuvenate America’s industrial base with incentives for the construction of new factories.
Now, while the influx of money brought optimism, it wasn’t exactly plain sailing. Higher interest rates, put in place by the Federal Reserve as part of their battle against inflation, are making borrowing more expensive and have hampered growth plans. “The Fed factors into everybody’s thinking,” said Lou Pektör, a developer for River Pointe Commerce Park in Pennsylvania. Plans slow as firms delay and wait for more economic clarity.
Many manufacturers, however, are less pessimistic. Kathie Leonard’s company has weathered a variety of economic ups and downs – and she thinks it can absorb them all; for interest rates to finance the first factory in early 1980 were much higher than now.
This new wave of manufacturing is not some quick blip. It’s instead rooted in broader economic shifts and public policy changes designed to create long-term resilience. How did it all happen, and why is this resurgence so important?
Understandably, to understand this moment, one has to look back. Right after World War II, America really was a powerhouse in manufacturing. Increasingly, over the years, it shifted its attention to a service-oriented economy. Attention to this move threw manufacturing to the periphery of America’s innovation system built mainly on scientific research and technological progress. According to Vannevar Bush, basic research was necessary; he masterminded this particular system. Manufacturing was just not given similar consideration, consequently the sector found itself gasping.
By 2010, the US had bled out more than 5.8 million manufacturing jobs from 2000. The public markets had pressured companies to cut costs, rankling toward focus on core competencies, normally meaning outsourcing of manufacturing jobs to low-cost regions. What that meant was an erosion of America’s industrial commons—an intertwined resource of labor, technology, and partnerships—leaving less and less for the small- and medium-sized manufacturers to fall back on.
This, therefore, is a story of the past and also a warning for the future. Indeed, for the survival of the manufacturing sector, its current leadership has to make peace with past omissions and take up tight commitment towards sustenance of this resurgence. That includes nurturing a healthy industrial ecosystem—integrating manufacturing with innovation, technological development. For example, Harvard Professors Gary Pisano and Willy Shih have strongly argued in their work that the presence of robust industrial commons is supportive not of one industry but of many and lends resilience.
Also in decline are local banking relationships, once a critical source of capital for small and mid-sized manufacturers. Federal policies in the 1990s that allowed large banks to merge and conduct interstate business reduced the quantity of banking services available locally. Scores of small and mid-sized manufacturers found it hard to invest in new technologies and maintain global competitiveness.
This current resurgence gives reason to reverse these very trends. Through investment in modern advanced manufacturing technologies and support for a comprehensive innovation ecosystem, America can again be recognized as the global leader in manufacturing. The issue here is not just economics but also concerns national security, jobs, and technological leadership.
Another level of complexity and opportunity stems from the secular shift to renewable energy and sustainable practices. So, single-use consumer products made by manufacturers such as Terravive are well-positioned against surging demand for eco-friendly products. Founder Julianna Keeling believes her business may suffer in a recession but that demand for sustainable products will keep from experiencing a deep slump.
It can also be seen as a multi-dimensional story of economic resilience, strategic investment, and policy intervention. More than anything else, it testifies to the lingering relevance of manufacturing within America’s economic landscape. Kathie Leonard and other manufacturing leaders draw from their experiences in this new era, couched in an optimistic attitude toward the developments in process, to chart the course for a more resplendent and sustainable future of American industry.
