Andy Grove on Manufacturing

Bloomberg Business Week published an important commentary from legendary former Intel CEO Andy Grove. They also published a response by Duke’s Vivek Wadhwa. Both are worth reading and debating. The case Grove makes is so important, my next few posts will be on the issues he raises.

Grove argues that keeping manufacturing jobs in American is a national priority and we should do whatever it takes to keep those jobs here. His focus is on tech sector factory jobs. But I think he is making a broader point about factory jobs in general. Which is countries that don’t provide work for their citizens are countries with major social and political problems as well as economic. Grove clearly believes that without factory jobs, America will not provided work for too many of its citizens.

He believes this challenge is so important that he suggests moving away from free markets. When a successful capitalist like Andy Grove suggests free markets may not be in the best interest of Americans we need to pay attention. Groves writes: Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best of all economic systems—the freer the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.

Grove makes the additional case that not making high tech products puts America at risk of losing the ability to stay in the lead in the next generation of those technologies. His story goes we invent the technology here, our venture capitalists finance the start up, but then the scale up is done elsewhere and the country where the scale up is done – not us – dominates the industry going forward.

Grove advocates that America needs to make job creation its #1 priority. His policy recommendation is a form of both protectionism and picking industries (government targeting new technology industries.) Specifically he proposes: The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.

Wow! Clearly a set of ideas worth exploring.

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