Wishing the G-20 Well, but U.S. First Needs Growth Strategy

By September 25, 2009Economy, Trade

The leaders of the G-20 meeting in Pittsburgh might make headway in promoting world prosperity by reducing trade barriers and encouraging aggressive exporters like Germany and China to focus more on consumption, but after they have come and gone, our domestic challenges will remain. We are struggling to emerge from the longest and deepest recession since The Great Depression, and though there are signs of recovery, we are not out of the woods yet.

Manufacturing as always is a bellwether for the economy. The manufacturing dynamic where raw materials are forged into finished products is where our economy creates wealth. When the economy turns down and consumers lose confidence, manufacturing is first to feel the contraction. To date, one half of the jobs lost in the recession have been in manufacturing and construction, with most in manufacturing. Right now, the manufacturing capacity utilization rate is 65 percent, which means 35 percent of our capacity is idle. Until our factories are working full throttle again, the economy will continue to struggle.

Of course, when the economy comes out of recession, employment is the last thing to turn around. The unemployment rate is still climbing, albeit at a slower rate, and will likely top 10 percent by mid-2010. We don’t expect to start seeing meaningful improvement in employment until 2011. And consumers without jobs are unlikely to return to the marketplace. (See the NAM’s 2009 Labor Day report.)

In the long term, between now and 2014, we expect to see up to a million manufacturing jobs return, but that will depend at least in part on decisions made in Washington that will have tremendous impact on our ability to grow our economy and put people back to work.

Regrettably, our government today is focused not on making manufacturing more competitive and encouraging growth, but rather on priorities that – so far at least – seem likely to increase the cost of production. As currently being discussed, reforms to our health care system and climate change legislation would greatly increase the cost burdens of manufacturers who already shoulder a 17 percent disadvantage compared to our major trading partners.

Our greatest opportunities for growth lie beyond our borders. A full 95 percent of the world’s consumers are not in the U.S. To grow and prosper, we need a much larger commitment to increasing exports. Yet our government cannot bring itself to enact the free trade agreements with Panama, Colombia and South Korea that would greatly expand exports and create jobs.

We can all wish the G-20 attendees in Pittsburgh well. But in the final analysis, our economic future will not be determined in Brussels or Beijing, it will be determined in Washington. And so far, our leaders are not rising to the challenge.

Leave a Reply