Could a major cause of the US’ manufacturing troubles be simply a case of a broken financing system?
That’s the case made by Robinson Meyer of The Atlantic magazine, writing recently on the NextGov.com web site.
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| Meyer notes that many of the biggest improvements to a given technology aren’t achieved in a university lab, but on the factory floor. |
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He starts with some provocative questions: “Why is Tesla the only major high-tech manufacturing company to emerge from the United States in the past decade or so? Why have politicians been trying and failing since the Clinton administration to turn the US into a powerhouse of clean-energy exports?”
Here is what is happening, Meyer says. When new technologies are in the basic research stage and a long time from reaching a market, US companies can often raise considerable capital from venture funds, government grants and the like.
But, Meyer says, when those same technologies are on the verge of commercialization and being prepared for mass production, American financial support dwindles.
“No bank officer or venture capitalist will write their inventors a loan; no local manufacturing hub will help work out the final kinks in their production line,” Meyer states
Trying to get to commercialization and producing in the US, the entrepreneurs, are forced to either license the technology abroad or go bankrupt, selling years’ worth of intellectual property for pennies on the dollar.
Jonas Nahm, a professor of energy and environment at the Johns Hopkins University School of Advanced International Studies, told Meyer that the government has put money into the R&D pipeline at the top and hope that it would eventually trickle out into the market in the form of viable businesses.
“But that hasn’t worked,” Nahm said.
“The US doesn’t have a high-end manufacturing sector because nobody will finance one,” Meyer writes.
But now, Meyer sees hope in a proposed new bill floating around Congress.
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 A group of Senators has proposed chartering an Industrial Finance Corporation (IFC), a bank owned by the US government that would finance high-tech production here in America.
The bank would have the ability to make long-term loans, buy equity, and make purchase guarantees for firms.
Meyer also sees a strong Green angle here as well, accelerating what Meyers calls the “green vortex,” a mix of policy, finance, and technology that is actually driving American decarbonization.
If the US is not careful, then financing issues could thwart its attempts at decarbonization and market leadership.
“If an American steelmaker wanted to slash carbon pollution by switching from a coal-fired furnace to an electric arc furnace, it would require tens of billions of dollars of credit on a decades-long repayment schedule,” Meyer writes, adding “Such an investment could be in the company’s interest, the country’s interest, and the climate’s interest - but almost no bank would write that loan. The Industrial Finance Corporation could step in and provide it.”
Meyer notes that many of the biggest improvements to a given technology aren’t achieved in a university lab, but on the factory floor, in an exchange of knowledge between engineers and machinists called “learning by doing.”
The U.S. lost its lead in the solar-panel industry, Meyer says, not because it was outspent on R&D (it wasn’t), “but because it outsourced solar production abroad and failed to build up expert ecosystems of inventors, designers, and workers.”
“In principle, I think this approach is so much better than what we’ve been doing,” Nahm told Meyer relative to the IFC. “This would be, like, a real game changer.”
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