Report: Disappearing Factories May Be Biggest Security Challenge

With the Obama Administration moving to put more emphasis on manufacturing policy, the Lexington Institute is releasing a report this week detailing just how severe the nation’s industrial decline has become. Here are some key facts you may not have heard. China produced five times more steel last year than the U.S. The U.S. has not built a single new domestic oil refinery in 30 years. U.S. companies can no longer make antibiotics like penicillin without supplies from foreign sources. American shipbuilders have not produced a single commercial vessel for use in international trade in this decade. China surpassed the U.S. in electronics production in 2006.

Despite all the bold talk a few years back about America becoming a services-based, information-age economy, the reality is that our share of global output is eroding steadily. A CIA assessment says that the shift of wealth from the West to the East is without precedent in modern history, and that America’s future as the world’s dominant economy is now very much in doubt. The problem isn’t really with our science or with our schools — we still have the most scientists and the best universities in the world — but with the disappearance of manufacturing. Over the last 30 years, the amount of domestically consumed manufactured goods made overseas has increased from a tenth to a third of the total.

The report argues that there are many reasons for the decline of manufacturing, and that a multifaceted plan including tax and regulatory changes will be required to halt the decay. But it also argues that the nation cannot continue to make military investment decisions without considering economic consequences, and suggests that policymakers use the defense budget to bolster industrial strength — as it frequently was used during the Cold War. The report warns that if U.S. manufacturing is not revitalized, the negative consequence for America’s well-being at home and abroad will be extensive. You can get the report here.