Manufacturing and metros are recipe for success, says guru on cities | Bridge Michigan

Manufacturing and metros are recipe for success, says guru on cities | Bridge Michigan

  20 November 2012

By Derek Melot/Bridge Magazine

Bruce Katz has pushed a consistent message for Michigan: M&M&E.
That’s short for manufacturing, metros and exports. A vice president at the Brookings Institution, Katz has worked in recent years with Business Leaders for Michigan in developing ideas for improving Michigan’s economy.

Bridge Magazine spoke with Katz by phone recently to get his sense of how Michigan’s recovery is doing – and what policy decisions are still lacking to bolster the state’s economy.

Bridge: In your testimony before the House Commerce Committee in May, you noted that Detroit and Grand Rapids ranked highly for export intensity. What is export intensity and why is it important in economic policy considerations?

A: Export intensity is a measure of the share of total output in the metropolitan area that is exported. Nationally, exports are around 11 percent of total gross domestic product, but in strong manufacturing metros, it’s higher. Detroit is about 14.9 percent and in Grand Rapids, it’s 15.3 percent. So there is just greater export intensity in the manufacturing metros and what we found is that 13-14 metros in Michigan are actually more exporting intense than the U.S. economy as a whole.

You know that matters because you know global demand is raising the U.S. economy, which has been underperforming because we have such a large domestic market. So with the Great Recession, the recovery that we have had to date is still not sufficient. What we have had today has mostly been fueled by global demands, particularly in countries like China, Brazil and elsewhere. … As the century unfolds, we are going to find ourselves doing more business abroad and for cities and metropolitan areas, they are going need to understand what they trade and who they trade with.

Bridge: Is it fair to say, based on these export intensity figures, that Michigan is actually further along than the rest of the country?

A: What it shows is that you are a production powerhouse, both in the large metros and smaller metros. For a long time, we have treated manufacturing differently with the old economy; actually manufacturing is completely fueled by technology innovation. … There is a future for manufacturing in the United States for a lot of different reasons and those places that are manufacturing hubs obviously have a jump on everyone else. The question is whether they understand it and are doing what is necessary to continue to move forward.

Bridge: In 10 to 20 years, how big a share will manufacturing carry in the economy and how many jobs will it provide?

A: Well these are the numbers I think are important to start the conversation: Manufacturing in the United States is 9 percent of jobs; it’s about 11 percent of GDP and employs about 30 percent of all engineers in the country. It accounts for about 68 percent of all private research and development and it generates 90 percent of the patents in the United States.

I just came from a tech-economy conference in Detroit, which is a conference on technology innovation. A large portion of the conference was about manufacturing and, again, I think we had almost a cartoon conversation about manufacturing where we talked about the old economy is manufacturing and the new economy is Facebook. This is a completely absurd conversation.
Manufacturing is still very productive in the United States. We are the third largest exporter in the world behind China and Germany and that is without any policy at the national scale that frankly is even remotely coherent.

 Bruce J. Katz is a vice president at the Brookings Institution and founding director of the Brookings Metropolitan Policy Program which aims to provide decision makers in the public, corporate and civic sectors with policy ideas for improving the health and prosperity of cities and metropolitan areas.