Dr. Ronald E. Müller, a gifted economics professor at American University, died this past May. In 1969, I was a student in his international economics class. He taught many useful lessons, but one I remember in particular.
“No developed economy can sustain itself without heavy industry,” he asserted.
At the time, he was lamenting the looming decline of the American steel industry. Foreign producers had begun making and exporting lower-cost steel. By 1975, American steel production had plummeted 37 percent.
“Heavy industry” generally refers to industry sectors like steel, chemicals, plastics, oil refining, mining, industrial machinery, and ship-train-plane-truck-auto builders. America was once a leading world producer in all these groups.
No longer. Manufacturing as a percentage of both jobs and gross domestic product has fallen from about 26 percent in 1960 to 11 percent today.
In contrast, another democratic developed nation has maintained its commitment to heavy industry and production. In Germany, advanced manufacturing continues to make up more than 20 percent of its economy. High- value manufacturing exports helped Germany achieve a $267 billion trade surplus in 2008, compared to our $569 billion deficit. Germany, with a quarter of our population, exports more than the United States.
Perhaps nothing better signifies the different paths taken by the German and American economies than two companies that manufacture equipment for the electric industry. Germany’s Siemens is a bigger exporter than ever, while America’s General Electric has shuttered U.S. factories in favor of outsourcing. Germany kept its eye on domestic production while we focused on profit.
Why is this relevant?
As America and Mississippi look to revitalize economies and grow jobs, we may have to change course. Since the late 1980s, consumer spending drove job growth in America. Falling interest rates, easy credit and cheap foreign products fueled this spending.
The fuel for a consumer-driven economy blew up with the financial crisis. Interest rates can’t go lower. Credit ain’t easy. And the weakening U.S. dollar makes imports more expensive.
Our best hope for economic redemption may be to return to a production economy and bring heavy industry jobs back to America.
In 1996, the Phil Hardin Foundation helped pay for Mississippi educators to go see the German education system. While there we learned a fundamental truth about the German economy: German schools emphasize skills and craftsmanship over academics.
If Mississippi wants to be competitive in a production economy, we must compete for heavy industry and prepare a workforce competent in advanced manufacturing.
The lesson from Germany says that means skills training and work experience for all students, greater emphasis on technical training at community colleges, and university focus on industrial research rather than student recruitment.
The governor and economic developers seem to get it, but few educators.