On the face of it, the recent bankruptcy of U.S.-based solar panel maker Solyndra, which occurred two years after receiving $535 million in federal loan guarantees, is a perfect opportunity for those seeking to discredit President Obama and cast his green jobs program as a bust. My hope is that while short-term political scores are being settled and important questions are being asked of those involved with Solyndra, one company's failure and partisan posturing does not end up effectively derailing one of the Obama administration's most promising long-term economic strategies of supporting American high-tech manufacturing.
According to reports, in the last decade alone, the United States lost some five million manufacturing jobs to low cost havens such as China, India and Mexico. And while the sheer volume of job losses and consequential economic hardship on affected local communities are hard enough to stomach, what's even more disconcerting is the number of jobs that were not created after the relocation of our manufacturing hubs to the other side of the world. It is a vicious cycle -- not only is the economic base eroded, but in many cases, the engine of innovation to secure the future relevancy of manufacturing regions goes with it.
As a country, we are finding out the hard way that when one industry packs up and leaves, other industries (often relevant companies within the supply chain) are soon to follow, including the unimagined industries of the future. Innovation and job creation that would have happened in the United States, that could have helped shape and secure our economic future, goes abroad where the manufacturing infrastructure and talent is already in place.
For example, California's Silicon Valley was once the hub of the global semiconductor market, generating tens of thousands of jobs and massive wealth for that region. More importantly, it serves as the foundation of an innovation and entrepreneurial ecosystem that directly or indirectly enabled the creation of what have become the largest companies in the world today (for now). However, gradually over the last two decades, Silicon Valley and the U.S. government have let our transformative semiconductor industry migrate west to the shores of Asia, with damning consequences.
Semiconductors are the foundation of nearly all modern electronics, and electronics and silicon-based technologies are now driving some of the fastest growing global industries. So where are most of the new high-tech manufacturing jobs in rapidly growing industries like solar energy and LED lighting? You guessed it--Asia, or more specifically, China.
Alas, the hidden cost of "Made in China" is tomorrow's American jobs.
There is at least one ray of light shining through the ominous macroeconomic clouds-- the efforts of the Obama Administration and some state governments to support the advance battery manufacturing industry in the United States. Here in Michigan alone, we have seen the positive impacts of such efforts with the creation of thousands of new jobs across 31 advanced battery companies in the state.
The good news is that federal and state governments are leveraging truly world-leading battery technology from America's finest research universities and they are supporting a high growth industry that requires manufacturing. Two critical pieces for massive commercial success are nailed - unique technology and large, growing global markets - future American economic stability requires a dominant role in industries like this.
The bad news is that with nearly any effort to foster new companies and develop a new industry, some failure will be experienced along the way. Despite the government's financial support, we should expect a Solyndra-like failure within the battery sector one day as well. Even the world's best venture investors do not have 100 percent efficiency rates for every dollar that they invest - there will be some loss along the way, but such is the price of building a strong domestic high-tech manufacturing industry. We, as Americans, need to have the stomachs to know that job creation and industry-building will come with some losses of our hard-earned tax dollars along the way, political posturing be damned.
That said, though I am supportive of government financial efforts to bolster high-tech manufacturing, I do have some qualms with how governments typically decide to which companies its dollars flow (which naturally becomes a political process and not one solely based on merit, and therefore is doomed to be flawed when bureaucrats fashion themselves as investors). In short, I believe we would have better results putting government investment decisions to experienced investors who also risk some of their own capital and are incentivized to deliver performance above the goals of the program - effectively following the venture capital model which has been an important engine in America's economic growth over the past generation.
The early indicators in the advanced battery sector give me hope that it is not too late for the United States to get back into the high-tech manufacturing game and serves as an acknowledgement that outsourcing our manufacturing industries to other nations for short-term financial gain can have dire long-term economic consequences for our nation. Rather than "the gift that keeps on giving," the exportation of manufacturing is "the loss that keeps on losing" -- we pay the hidden costs of manufacturing loss across generations as the new high-growth industries of tomorrow emerge as the fruits of those industries we jettisoned overseas.
The high-stakes game of industry-building requires tremendous resources - well more than what any one company or even the private sector alone can support. Even though many free-marketers are loathe to admit it, when competing with the Chinese, American success is very likely only to come if business and government can work together. Doing anything less to satisfy partisan ideologues is willfully disadvantaging ourselves and our companies in the face of ruthless competitors that are all too happy to take away our manufacturing jobs of today, and thereby, the high-tech manufacturing jobs of tomorrow as well.