Basis for a US manufacturing strategy

Yesterday, the Obama Administration announced the stimulus package grants to develop components for electric vehicles. As the New York Times story on the grants notes:

Sarwant Singh, a consultant at Frost & Sullivan, said the business should work well in the United States, because only 10 percent to 15 percent of the cost of a battery was labor. "There's no reason that this battery should be manufactured in China," he said. "There's no reason to look for a low-cost manufacturing base; you should look for a high-tech manufacturing base."

Exactly! And there are a lot of other areas besides green and clean where there is no reason why the manufacturing plants should be located simply because of low cost labor. In fact, I would argue that we need to move aggressively away from the era where manufacturing needs to rely on low cost labor as its competitive advantage. Our manufacturing strategy should be pushing the "high-road" strategy.

By the way, I prefer the concept of "high-road" to "high-tech." High-tech implies a limited set of outputs. "High road" puts its emphasis on all upgrading of the inputs to the production process: technology, worker skills and cooperative/collaborative organizational structures. By its definition, only some industries can be "high-tech." All industries can be "high-road." And it is the productivity and innovation gains from "high road" companies that spur economic prosperity -- not an emphasis on the latest "high-tech" gadget. (For more on "high-road" see earlier posting.)

The Obama Administration is correct in pushing green and clean as an example of the type of manufacturing we should hold on to in the US. It needs to also expand that so that all manufacturing makes the "high-road" transition to the I-Cubed Economy.