For years, politicians have debated about how to make America prosper. Some argue that the role of government is to loosen the reins on corporations by relaxing regulations and lowering corporate taxes so that companies will create jobs here in the U.S. Others – including much of organized labor – note that one role of government is to create the best conditions for both companies and workers to thrive: to have a strong industrial policy that creates good jobs, builds a solid infrastructure, educates the workforce and protects our environment and communities. This epic debate has been the backdrop of politics in the modern era.
And so it comes as a bit of a surprise that a major management consulting firm would come down heavily on the side of a strong industrial policy. In Making it in America: Revitalizing U.S. Manufacturing, McKinsey and Company has come to the conclusion that we must rebuild U.S. manufacturing by developing a national industrial policy:
Today, individual firms and local governments spend millions of dollars annually on isolated initiatives. Taxpayer incentives go toward attracting or retaining a single firm or production facility, effectively picking winners and losers while the pie shrinks. But revitalizing the entire sector will take coordinated action and long-term investment on a much bigger scale(emphasis added).
What prompted the change? McKinsey looked into the future:
This is not about protecting the status quo or restoring what has been lost. It is about how to compete in the future…
But it is worth fighting to retain a healthy production base, which is closely linked to the nation’s ability to bring new innovations to market.
So what does McKinsey recommend? Multiple solid ideas aimed at building capacity in the U.S. to support domestic manufacturing:
- New jobs will require advanced skills and training. McKinsey argues that the U.S. should develop a program that provides paid apprentice training and credentials that workers can take with them across jobs and sectors. According to the report, it would be expensive, but worth it: $40 billion a year for apprentice training for one-million workers.
- Factories need new machines and new technology. The average U.S. factory is 25 years old. McKinsey calls for dramatically increasing support for successful programs that promote long-term investments.
- When it comes to luring companies with subsidies, McKinsey warns that too often the packages given by governments do not ensure a sufficient return on investment. “Incentives are most effective as part of a solid and more holistic economic-development plan targeting growth industries that complement a region’s legacy strengths.”
The policy recommendations in the report make sense. But the agenda should not be driven just by businesses or management consultants: working people and communities must also be a part of the discussion.