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Insourcing via Innovations

By Eric A. Spiegel
January 30, 2012

When I recently met with President Obama I told him that I believed the conventional wisdom about manufacturing's inevitable decline was wrong. For too long, We've operated under the assumption that because labor is cheaper elsewhere, and because no company, however well-intended, would choose to build something for more when they could build it for less, manufacturing here was more or less doomed.

That conclusion assumed a couple of things that have turned out to be wrong: First, that cheaper wage rates would translate to lower production costs. Second, that products of the future would essentially be commodities, the kind that could be built of equal quality and technology, anywhere in the world. And third, that the productivity of workers in low-cost countries would be comparable to workers in the U.S.

These assumptions were right when it came to making things like textiles and furnitureólow-end, low-technology products that require little innovation on the front end, and minimal precision on the back end. But they are largely wrong when it comes to high-end products. High-end products require skilled workers, precision assembly, intensive research, and complex technology.

But there is, as always, a catch. If we can't improve the products we build here, through each new generation, we won't succeed. We must work together to make the right kind of investments, right nowóin STEM education, in research, in infrastructure. If we get this right, the story of the next decade won't be another one about the decline of manufacturing. It-ll be about how American manufacturing, once again, saved America.