New Report: America's Industrial Policy Must Reflect Technological Innovations

The cloud era offers an opportunity for the U.S. to restore its role as a manufacturing giant

NEW YORK, NY – The Covid-19 pandemic has exposed America’s reliance on offshore manufacturers for a variety of critical products, from pharmaceuticals and medical equipment to automobile parts and semiconductors. It’s also reanimated old ideas about industrial policy in response to a larger trend, America’s collapsed share of global manufacturing, which has fallen from 30% in 1980 to 16% today. But as the United States looks to restore its industrial sector, and to expand “made-in-America” policies, a new Manhattan Institute report from senior fellow Mark Mills offers a timely warning: 1950s industrial policy is outdated. To restore America’s manufacturing prowess, policymakers on both sides of the aisle need to avoid “old-think” in the cloud era and follow three key principles to take advantage of the digital elephant in the room: rethink labor accounting, promote risk taking and innovation, and reform regulatory barriers to capital-intensive industries.

This report, the third in a series of Mills’ papers on manufacturing, points out that significant transformations in domestic industries are already underway; outdated mindsets hinder policymakers and the public from recognizing this manufacturing revolution and fostering its growth. Mills points to the fact that many jobs and economic activities being categorized as “services” are in fact part of “industry,” a miscategorization which not only paints a bleaker picture of industrial affairs than is accurate, but which can also lead to creating misguided policies which fail to provide effective solutions. Mills highlights the extent to which the evolving “servification” of manufacturing is now accelerating because of the rapid expansion of the digital infrastructure, the “cloud,” especially in concert with artificial intelligence (AI).

The increased use of the cloud by the industrial sector is a profound opportunity for the U.S. With America the dominant home to the cloud infrastructure and AI development, the nation could reclaim its role as an industrial giant. The technology is ready, but it will be critical to forge tax and regulatory policies that foster—or, at least, do not inhibit—more private investment across the landscape of older industries as well as the new technologies and companies emerging alongside them.

Click here to read the full report.