Vice Chairman, U.S. Investment Banking, Lazard Frères & Co.;
former assistant to President Obama for manufacturing policy
For a long time in America, we believed that the decline of manufacturing was both inevitable and good. We thought it was our destiny to move past manufacturing. We thought that represented both America’s natural competitive place, and as wealth accumulated and we had more time to do other things, we would have to spend less time worrying about manufacturing, and that that was a good thing. It would relieve us of work that we didn’t want to do, and we’d have other people do that kind of work. And it was our natural evolution to a better and better place in terms of the overall economy.
So on the political side as manufacturing declined, nobody worried about it. There was a small group of passionate advocates who argued otherwise, but the broad political consensus was it was inevitable and good. And the economics were not unsupportive of that. There was a series of economic developments in the world that did lead to basic reasons why manufacturing was in decline. The activities that we undertook that we lost were activities where America was really not competitive. So we had an economically driven decline and we had a politically supported decline. And that went on really for the last, let’s just say, 30 years.
Three reasons why I would argue the political class rethink has happened: One is coming out of the Great Recession, I think there’s been a rethinking of what kinds of economic activity are important to drive sustainable prosperity. Second, the politics around manufacturing, I think, have kind of coincided with people’s anxiety about America’s place in the world. As we have tried to think about kind of who we are and what we are as a nation, for many people, the strength of our manufacturing sector has come to symbolize the strength of the country. And third, there’s what I call the innovation issue.
So for a long time time we said what America needs to do, what we’re good at is innovation. That’s our core competency. And so we will invent stuff here, and we will make stuff there. And that’s how the global economy will spread itself out, and that’ll work for everyone. What people have begun to understand, however, is the interconnectivity between innovation and manufacturing. And this isn’t true in all aspects of the manufacturing economy, but in important parts of manufacturing, where you make something is related to where you think about it, because the thinking and the making are not entirely different processes.
We have a problem because if we lose the manufacturing, then the innovation leaves with it.