Innovation is the key to economic strength

The real key to America's economic strength has always been creativity and innovation. Since this country's founding, Americans have been eager to embrace new concepts and capitalize on them. We've developed ingenious new systems for production and distribution and unlocked mysteries in diverse areas such as health care, technology, engineering and industry.
By John Engler, President, National Association of Manufacturers March 1, 2006

The real key to America’s economic strength has always been creativity and innovation. Since this country’s founding, Americans have been eager to embrace new concepts and capitalize on them. We’ve developed ingenious new systems for production and distribution and unlocked mysteries in diverse areas such as health care, technology, engineering and industry. Americans have always been willing to go beyond the beaten path, experiment with radical new ideas and invest in the future.

All the while, manufacturing has been an important seedbed of America’s creativity. Manufacturing generates nearly two-thirds of industrial research and development, which is a major reason why manufacturing accounts for three-fourths of the nation’s exports and supports more than 20 million high-paying jobs. Innovation has generated the productivity that has accounted for half of the GDP growth over the past 50 years, and manufacturing continues to set the pace. Today, despite unprecedented global competition, total manufacturing output and productivity are at record levels, capital investment is rising and product quality has never been higher. By itself, U.S. manufacturing would be the eighth largest economy in the world.

But while there is no question that our nation’s strength lies in our leadership in innovation and productivity, it is equally true that our leadership is being challenged as never before. A recent National Association of Manufacturers (NAM) report by The Manufacturing Institute found that downward trends in U.S. manufacturing innovation pose a serious threat to America’s long-term economic growth and living standards.

America’s continuing leadership in innovation and the production of high-value manufactured goods is essential to our nation’s long-term economic growth, productivity gains and standard of living. But America’s economic leadership will be at risk if current trends continue. We are being challenged by global competition, a looming skills gap that poses a future worker shortage, and by increased structural production costs. And while the United States continues to spend more than any other country on R&D investment, U.S. growth in R&D has averaged only about 1 percent per year in real terms since 2000. This is a “wake-up” call – a call to invest in America, in our current and future workers and in our ingenuity.

In his State of the Union Address last month, President Bush recognized this core challenge to our nation’s economic leadership, and responded forcefully with his American Competitive Initiative. The President’s commitment to increase funding for R&D in the public sector and improve science and math instruction in our schools is exactly what we need, as is his proposal to make the R&D tax credit permanent. It is simply absurd that we have to fight to have that most basic provision renewed every year.

The NAM is working with the Bush Administration and Congress to advance pro-growth policies to promote innovation, investment and productivity and ensure a healthy manufacturing economy in the future. We are working with government at all levels to foster a new generation of manufacturing workers who can handle advanced manufacturing technologies. America’s glory days are not behind us, but rather are a continuing reflection of our capacity to adapt to a changing world.

But we must be proactive and meet these challenges head on. As manufacturers, the backbone of the U.S. economy, our innovation and ingenuity are being put to the test as we bridge the gap to the 21st century.