In 1674, Antoine van Leeuwenhoek looked at a drop of water under a microscope for the first time and discovered a range of microorganisms never before seen, setting biology on a trajectory that claims today's remarkable life sciences as its descendant.
Economists are now having a similar moment, thanks to remarkable data developed at the Department of Commerce' Bureau of the Census. By tracking tens of thousands of manufacturing plants for as long as two decades, Census research demonstrates that economic growth and the struggle for competitive success are inextricably intertwined, and that technology lies at the heart of that process. And that finding, in turn, has important implications for the way we develop policies for economic growth at all levels of government.
Here are some examples of what we've learned. Almost one in ten jobs in manufacturing is created anew each year, and a full one in ten is lost. But a full two-thirds of those new jobs occur in plants that either start up anew or that expand their hiring by at least 25 percent in that year. And two-thirds of all the jobs destroyed each year are lost in plants that either shut down or shrink by 25 percent or more.
Moreover, two-thirds of total manufacturing productivity growth occurs because plants with high productivity growth rates supplant less productive rivals.
In short, the economy creates jobs and increases its productivity -- and therefore its standard of living -- because some plants and firms race ahead in the competitive struggle and displace their competitors.
A further look through the microscope shows that advanced technology -- particularly the tools of the Information Revolution -- lies at the heart of this process. Manufacturing plants that use information technology to design or manufacture goods, configure their plant floors, coordinate with suppliers, or handle materials hire workers with more skills at over 14 percent higher wages, even when worker skill levels and other plant characteristics are taken into account.
Advanced technologies also enhance plant survival and thus job security. Advanced-technology plants had failure rates 22.6 percent lowers over a four year period relative to their counterparts. And they're more profitable: their gross margins are three percentage points higher than their competitors.
And employment at plants using advanced technologies grew about 14 percent more than their low-tech twins, even after taking other plant characteristics into account.
Growth and job creation, therefore, depend on our firms' abilities to innovate, compete, and win. And, in other research, Census data yields preliminary evidence that firms that export play the same dynamic role as do firms that innovate.
These finding tells us to rethink the way we help our economy grow. For too long, our nation's economic policy has been caught in the throes of an outmoded debate between two ideological camps. The "trickle down" devotees generally oppose government involvement, unless it's to subsidize all our firms through the tax system, be they winners or losers. At the other extreme, "industrial policy" advocates seek to pick both winners and losers: they like jobs, but seem to distrust the private sector that creates them. The laissez-faire side says that government and business need to stay at arm's length, that we need to put government in the stands as the game is played. The industrial policy types advocate putting the government on the field to be the quarterback -- and all too often on Monday morning.
But this new research outlines a third strategy -- creating the environment and the tools that let more "winners" flourish. And in a world in which economic growth depends on our firms' ability to innovate, that means working in partnership with the private sector to advance the technological frontier and to help our firms -- particularly small and mid-sized ones -- to reach it.
The Clinton Administrations' technology programs are designed to realize these twin goals. The Department of Commerce' Advanced Technology Program, administered by the National Institute of Standards and Technology (NIST), shares with private companies the cost of developing high-risk but powerful technologies that underlie a broad spectrum of new applications, commercial products, and services. The Commerce Department is also establishing a nationwide network of more than 100 manufacturing extension centers to assist manufacturers in learning about opportunities to modernize their production capability. These programs, working in partnership with the private sector, will help more U.S. firms become the job-creating "winners" that drive our growth.
And what's true at the national level is true at the local level as well. Toledo's local economy is expanding as new plants in the steel and aluminum industries come on line. These new plants deploy the cutting-edge technologies that their predecessors lacked. And they are tied to an auto industry that is also rapidly learning these new ways of producing.
And the strategy of "creating winners" is underway at the National Center for Tooling and Precision Components, the first tenant in the University of Toldeo's R&D park. The Center brings together local firms and the University to build a new technological base for economic growth in the area.
The American people too often look at technology as a source of dislocation and disenfranchisement.But we can find opportunity amidst these changes if we have the will and the wisdom to promote technology as an engine for economic growth.The old debate no longer serves us.We have embarked on a new, third path, one of providing our firms (and our families, through President Clinton's Middle Class Bill of Rights) with the tools to become winners.The economy is growing under President Clinton's program.Let's not revisit the old debate when this new path is just beginning to wo
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