Saturday, December 22, 2012

Manufacturing and Innovation: 'Low Road' Strategy Has Won

A recent piece in the New York Times reported on the potential benefits to innovation "for companies that keep their research and manufacturing employees close together."

This is an important issue but it is hardly news. Back in the 1980's and 1990's there was plenty of writing -- theoretical and empirically-based -- showing the benefits of spatially concentrating research and development, design, and manufacturing to yield innovative synergies. This would then give the United States a competitive advantage based on improved manufacturing and design processes as a way to enhance productivity and profit.

This was described as the "high-road" approach to restoring profitability in this sector. 

Unfortunately -- for workers and the entire US economy -- most US manufacturers followed the 'low road' strategy of reducing costs; particularly labor costs. This was accomplished through offshoring, subcontracting, and forcing US workers to compete with workers in less developed nations, all facilitated by neoliberal reforms.  Wall Street and shareholders also responded positively to this business plan.

The results of this strategy can be seen across the midwest and northeast in what is now called the "rustbelt".  It ushered in the "deindustrialization of America".

So, it is now just a little late to be discovering the advantages of a high road approach. The 'race to the bottom' is too firmly institutionalized in the United States.  The recent action in Michigan establishing the state as a "right-to-work" state sends us to ever new depths. 

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