Friday, February 17, 2017

Why manufacturing in Maryland matters

The Business Journal held an event title the Future of Manufacturing in the Museum of Industry, a contradiction that was probably intended, after all the new economy unfolds right in front of the museum's picture windows. The other irony, an entrepreneur of the future talking about the making of candles (Chesapeake Candles) was probably founded on the fact that the owner, Mei Xu, a Chinese immigrant illuminated vividly the reverse transfer of jobs from low wage countries back to the shores of the Bay.
Slogan or a useful strategy?

But manufacturing doesn't play a big role in Maryland's economy and many of the folks milling the reception at the museum were related to the financial industry or services, insurances etc which, combined, have long surpassed manufacturing in employment and contribution to the GDP.

Maryland's manufacturing share on the State's GDP is only 5.5% (2015) and its share of MD employment is only 3.8%. So why care about manufacturing? Is it really important to Baltimore or the State? Or the Country? Here some attempts to find an answer:

First, as I pointed out in my detailed piece about the future of work, manufacturing hasn't lost much of its importance in terms of its share in the GDP: A Brookings graph shows that between 1960 and 2010 manufacturing maintained a pretty stable share of about 12% of GDP. That is not high compared to Japan (18%) or Germany (23%) or South Korea, which has the highest rate of manufacturing among industrialized nations with 30%, but it is stable and significant, even if now only 8-10% work in manufacturing nationally.
Makerspace Baltimore: Open Works (Photo: Philipsen)

The precipitously diminished share of manufacturing in employment,  in other words, a lot fewer people making about the same amount of stuff that was always "made in America" should not make us believe that manufacturing in 2017 is less important than in 1960.

Constant share of GDP but lower share in employment (Brookings)
There are economical, technological and security reasons that make us pay attention to manufacturing. To touch on each very briefly:

Economy: As a country we need to balance our trade deficit as a means to reduce our national debt. A restructuring of our economy with less dependence on the financial market, less financing from other countries and more export of  manufactured goods is a good way to do that, as Germany and South Korea demonstrate.

Technology: Future industries need a foundation of sound basic manufacturing capability for anything that involves any physicality at all, from autonomous cars, robots, satellites, power plants to batteries, wind turbines and solar cells. Full dependence on software won't work  if there is no corresponding hardware capability.
Baltimore Company Blueprint Robotics: Machines from
Germany (Photo: Philipsen)

Security: One can make the same argument that has been made about farming: The ability of a country or region to grow food is important for resilience in crisis, whether it is a climate crisis or a security crisis. The ability to make essential stuff is equally important. There won't be a time soon in which we are not dependent on physical things to be at our disposal, trains, refrigerators, bricks, chainsaws or computer chips. I would go even as far as to say that each individual should be able to grow, make or repair something on a basic level.  Trade and specialization have driven progress for some time, that is good and well. But it also has made the entire complex networked system eminently vulnerable to attack, failure or malfunction for any number of reasons during peace, war or violent weather. While the vulnerability may have a peace-saving function, it should scare anybody how easy it is to bring down a fully networked society increasingly dependent on cloud-based data and satellite data transfer.
The new water taxi: Made in Baltimore (photo: Philipsen)

Finally, why Maryland? Aside from the region's strong manufacturing past which is still present in form of a lot of infrastructure suited for manufacturing (rail, a deep-water port, plenty of vacant warehouses, a culture tuned to making), the State has an unhealthy dependency on military and other federal spending. The high level of knowledge industry in Maryland should have an underpinning of high technology manufacturing that give the non physical products of bio-tech,and software development legs.

A resurgence of Made in Maryland that is more than most of the current gimmickry and is seriously promoted by Democrats and Republicans alike, would not be a pivot back to some smoke-stack past nor would it focus on simple consumer products like bath soap and candles, but a pivot forward to sophisticated goods can unite a divided country, mine the remnants of a skilled workforce still around, tap into highly educated Maryland graduates that tend to leave the State, and, not the last of it, can re-use a lot of the vacant hulls marring our landscapes. Fostering the ability of building stuff right here in the State has really no downside at all.

Klaus Philipsen, FAIA

CityLab article on manufacturing (the article appeared after this one)