November/December 2010

Solutions for the China syndrome

Part 2 of a two-part series. The first part of the series ran in the September/October issue of InTech.

By Jim Pinto

The previous "Channel Chat" article (www.isa.org/intech/channel_201010) was about China attaining significant manufacturing market share and already moving strongly into high-tech. Meanwhile, America's industrial base has eroded to a dangerous level, not only in the old segments, but in more advanced tech industries.

Here we will discuss what America can and should do to remain competitive in the face of the China syndrome.

Morley's ideas

Dick Morley is inventor of the PLC, former chair of the National Center for Manufacturing Sciences, and co-author of the book, The Technology Machine - how manufacturing will look in the year 2020. He suggests the remedies require significant social change, a modification of the mind-set into which America has drifted.

Morley points out that during America's early days, engineers like Henry Ford and Thomas Edison were treated as heroes. But today, in the movies and on television, the hero is usually the scrubby squatter who fights to close down the big factory; and the villains are business people. These days, our kids admire sports figures and movie stars. Who wants to be in manufacturing?

This mind-set must change. Higher pay scales will encourage the brightest and best to become engineers and innovators. Kids must "feel" that their engineer dad is working at something significant. Manufacturing people must be considered as professionals; engineers must be recognized and lauded.

Morley, the perennial angel-investor, explains new technology startups are responsible for creation of almost 30-50% of new jobs. This culture and attitude must spread to become a nationwide priority. That is the direction which yields solutions.

Government policies must change

It is significant that science and engineering professionals are dangerously absent from all levels of policy and decision-making in the U.S. Somehow, we have allowed lawyers and professional politicos to take over everything by default. As a result, government is manipulated by lobbying interests, a serious burden for broad progress.

We need to recognize that purely financial manipulations produce no real benefits, except for the wealthy. The short-term financial mind-set must change. Wall Street must stop manipulating company value by demanding short-term, quarterly financial performance.

While Chinese and many foreign governments welcome American manufacturers with big grants and tax benefits, domestic U.S. manufacturing is penalized with high taxes, strict zoning regulations, and burdensome bureaucracy. In many key areas, we are driving manufacturing away because new plants cannot be built and the old ones are not upgraded.

Shift from the old industrial mind-set

Perhaps the primary problem is the thinking of people who want to go back to the good old days of full employment, high wages, overtime and traffic jams-the old industrial mind-set.

In the old "factory production" days, "full capacity" was when three shifts were running, and new labor was expensive. Today, the world is NOT production-limited; it is consumption limited. In the new global environment, people are buying things that suit their own taste-not cookie-cutter commodities.

Manufacturing is a key source of broad-spread wealth; the manufacturing-based middle class is the nation's backbone. It is important to keep investing in manufacturing jobs and upgrading factories to be competitive in a global market. What is needed is new job creation with high-tech, innovation-stimulating, rewarding environments.

More solutions

When cheap, off-shore resources are utilized for short-term benefits, we are giving away our intellectual property and knowledge. We must shift back to domestic manufacturing to gain the longer-term advantages.

Our college texts and business books are problems; many of them spout old-century opinions from academics that have no real-world experience. How much is an MBA really worth? We must start rewarding the innovators, not the managers.

Mini-enterprise zones should be developed-micro-locations supported on a national basis. The country should own them, and they should be leased to meet the needs of engineering and manufacturing talent.

Conclusion

In this global market, nations and regions are engaged in a fight-albeit peaceful-that will impact many generations to come. It is a war of ideas and innovation, of agility and tenacity. China is just one of many countries that will compete with new tools and new ideas. It will take new thinking to stay ahead.

America is still the world's premier producer of high tech and growth services. This country's best assets are innovation, targeted marketing, and rapid change. Those are the ingredients of our response to the China challenge.

ABOUT THE AUTHOR

Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto's Points, at www.jimpinto.com/writings/points.html.