At bottom, the decline of American manufacturing has deep systemic roots. The combined forces of technology and globalization have reduced the number of industrial workers in most advanced economies, but nowhere has the decline been so precipitous and profound as in the United States. What made us different is that these two trends coincided with the rise of the most extreme form of shareholder capitalism—elevating the concerns of investors, the primacy of profits and share value, over those of the workers and communities to which the earlier, pre-1980 form of stakeholder capitalism also paid heed.
It’s no coincidence that Germany, the only advanced economy to expand and upgrade its manufacturing sector in the age of globalization, is also the primary practitioner of stakeholder capitalism. Corporate boards are composed of equal numbers of labor and management representatives, while an entire sector of banking is devoted to funding small and midsized manufacturing ventures, freeing them from the pressure of capital markets. The resulting quantity and quality of German manufacturing have produced an economy that’s the envy of the world. “Germany is socialistic, it’s green,” says U.S. Steel CEO John Surma, “and it’s kicking our ass by any capitalistic measure.”
The United States is not likely to become significantly more socialistic or green anytime soon. But through trade policies and industrial policies that promote domestic manufacturing, we can begin to realign the practices of American business with the urgent needs of the nation and its people.