Let’s Build Some Stuff (Again)

If you maintain the right perspective, it’s an exciting (although rollicking) time for American business. The combination of dramatically disruptive technologies (and their ever-escalating effects), uncertainty in overseas markets, and – ironically – the looming threat of the removal of current income incentives by the loss of the “Bush-era tax cuts” has lit a wildfire of entrepreneurship, both in individuals and corporations. What’s really interesting in this megatrend is the emphasis on bringing manufacturing back “onshore.” While manufacturing never truly left us, the flight of heavy industry from the U.S. over the past couple of decades is undeniable, as our economic emphasis shifted towards services and intellectual property/information-based industry verticals.

In a recent speech at the Aspen Institute, Dr. Peter Ammon, German Ambassador to the United States, noted the error of our ways, calling our shift to a service economy a “grave mistake.” In contrast, in Germany, the manufacturing sector is on a percentage basis about twice that of U.S. , and its percentage of the world market share in manufacturing is growing. Dr. Ammon expects continued solid growth in this sector because the incentive to “offshore” processes for labor arbitrage is now counteracted by automation and specialized micro-manufacturing; as a result, labor is now a smaller percentage of total cost. Furthermore, when you factor in the increase in shipping costs over the past few years, offshoring just makes less sense.

This is great news for America, as manufacturing adds long-term, high-paying jobs to the community, both directly and indirectly. Furthermore, with advanced technologies, corporate commitments to sustainability, and the avoidance of shipping-related pollution and energy expenditures, the environmental impact of today’s manufacturing concerns is dramatically different than that of the Rust Belt days.

The U.S. government also recognizes that a return to manufacturing is good for our economy. At the same event, Rebecca M. Blank, Deputy Secretary of Commerce, noted that a strong manufacturing sector “drives exports” – more than 60% of exports are manufactured goods – and “one-third of GDP growth since the end of the recession” has come from manufacturing sector. As a result, the Administration is “working really hard” on an Advanced Manufacturing Partnership, focused on how to swiftly move ideas from research to applied products, and it has recently re-launched a U.S. – German foreign exchange initiative on trade.

So, what’s the catch? According to Dr. Ammon, “growth is constrained by a lack of qualified workers.” As our focus shifted to building a services and intellectual property/information-based economy, we moved away from Science, Technology, Engineering, and Mathematics (STEM)-based education and technical training (hands-on teaching in trade skills). As a result, event though German companies have created over 750,000 jobs here, according to Dr. Ammon, “more qualified, trained personnel” are still needed. Secretary Blank agrees, noting that the U.S. is “clearly behind” in STEM education, particularly for female students, and that the Administration has recently proposed an $8 billion fund for technical education.

Dr. Ammon’s remarks to the Aspen Institute were consistent with those he made to the German-American CEO forum in Atlanta in the fall of 2011. At an event sponsored by Porsche Cars North America and hosted by Reece & Associates, its outside legal counsel, Dr. Ammon met with leaders of various German and American corporations, along with federal and state legislators and officials from Georgia’s Department of Education, its University System, and its Technical College System.

Dr. Ammon addressing business leaders and governmental officials in Atlanta

At this meeting, the business leaders unanimously expressed concerns that significant gaps exist in the technical training of our high school and post-secondary students, and that these gaps must be remedied to enable their companies to expand and to leverage our students as productive workers. In response, officials from the education community acknowledged the historical shift in focus away from technical training in secondary schools and practical skills instruction in our post-secondary curriculum, and showed how this is being remedied in Georgia through, among other things, a forward-leaning effort to develop occupation-based educational pathways.

Panel discussion with Dr. Ammon in Atlanta

These initiatives are timely: officials from all of the major German automobile manufacturers were present at the meeting with Dr. Ammon last fall. These companies, which have invested heavily in the southeast region of the U.S., are now exporting the majority of their production, and they pledged to continue to increase their investment and production here. Furthermore, these executives asked Dr. Ammon for his help in getting German manufacturers of critical component parts to build plants here. Again, more great news; however, all of this is contingent upon these manufacturers getting access to qualified workers at all levels.

As a result, in Georgia, the Department of Education is now working to build public-private partnerships with German and other international companies to enhance its STEM and international business-based career pathways. These pathways will provide critical technical training and skill-based learning, along with contextual foreign language and overseas cultural experiences. As with any developmental initiative, these efforts are investments in the future, however, we know from polling a number of executives that we have jobs today that are going unfilled due to the lack of a qualified workforce. So, our “new” economy actually has a demonstrated need of an “old” fundamental (folks building stuff). We view this as a building block for a better “new” economy and, thanks to programs like the Georgia International Workforce Development Initiative and the cooperative effort that it represents, are therefore optimistic about the future.

Thanks as always for reading, commenting, forwarding and tweeting.

Take care.

About Denis

Business Leader, Consultant & Social Entrepreneur. Proven senior executive leader with deep experience guiding companies throughout various lifecycle phases including start-up, rapid growth and maturity. Principal of YellowPark Garden, providing executive leadership expertise and assistance in economic and societal development initiatives.
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