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We Are Paying the Price for Outsourcing Manufacturing

Decades ago we began to outsource our manufacturing of consumer goods to countries such as Japan, Korea, and China. After all, manufacturing was industrial age stuff, very low value in America's high tech, information economy.

Turns out we were wrong. And we are now paying the price in a diminished capability to innovate.

The link between manufacturing and innovation is not well understood, argues Harvard Business School professor Gary Pisano, who coauthored Restoring America's Competitiveness in the current Harvard Business Review.

"Manufacturing and R&D are much harder to separate than we commonly suppose," Pisano says in this HBR podcast. "Very often there is a lot of innovation that has to happen in the manufacturing process."
In other words we learn as we build -- critical knowledge we lose as a country when we turn manufacturing over to others.

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Case in point. The U.S. can make alternative energy vehicles such as the upcoming Chevy Volt, but not a key component: the battery. Turns out that countries such as Korea, which built many of our consumer electronic products for us, also became in the process quite expert at making batteries that are smaller and lighter -- expertise and innovation that today is in great demand. Little of that capability resides in the U.S.

The article argues for new investment by government and business to redevelop our manufacturing smarts.

"Restoring the ability of enterprises to develop and manufacture high-tech products in America is the only way the country can hope to pay down its enormous deficits and raise its citizens' standard of living."
What do you think of this idea? If you were President Obama would you begin an investment program in high-tech manufacturing?

(Chevy Volt image by rockershirt, CC 2.0)