Can the "German Model" for Promoting Manufacturing Be Imported to the US?

The Institute’s Manufacturing and Society Program’s Executive Director Thomas J. Duesterberg addresses the application of the German Model to the American manufacturing sector, and introduces a high-level convening to examine the possibilities.

The United States is enjoying a resurgence of its manufacturing sector. With manufacturing production expanding by over 10 percent in the first quarter of 2012, compared to 2.2 percent in national GDP, the manufacturing sector is continuing its productive trend from previous years and providing a vital engine for growth in an economy where it has persistently stalled in construction and finance. Stronger export growth for US-produced capital goods (building blocks of further production, such as factory machinery and long-lasting products like airplanes and turbine engines), petrochemicals, and even automobiles is an indication that the terms of trade favor US production and will support continued growth. However, despite strong performance in recent quarters, production and employment still lag behind pre-recession levels, and increasingly sophisticated competition from China, Brazil, and Southeast Asia hinders confidence in the growth potential of American manufacturing in coming years.

Analysts often look to Germany, a wealthy “social market economy” with a notably robust manufacturing sector as a possible source of ideas to strengthen the US manufacturing sector. The attention to Germany is well earned. After going through a difficult transition in the 1990s with the re-unification of the country, and the rise of global competition from Asia, the German manufacturing sector has become a global star in recent years. Despite being challenged by an aging and stalled workforce, often rigid regulatory standards, and high labor costs, German manufacturers steadily increased their productivity and introduced greater labor and production flexibility while keeping up their technological leadership in fields like machinery, transportation equipment, chemicals, and household equipment. Manufacturing production levels have returned to their pre-recession peaks, driven largely by superior export performance. German producers enjoy substantial trade surpluses both with their intra-European trading partners and their global competitors, including the United States. Aided not only by the quality and prestige of their products, but also by aggressive market-opening trade policies, Germany has even gained market share in Asia, drawing buyers away from the United States and Japan. German exporters were also assisted by the introduction of the euro, which bolstered purchasing power in Southern Europe along with Germany’s exports to the region.

How did Germany achieve this outlier success against the backdrop of a tough global economy and demographics? In order to better understand the roots of German manufacturing success, the Aspen program on Manufacturing & Society in the 21st Century will offer a half-day program on the two pillars of the German model for manufacturing excellence: systematic tailoring of scientific research to the needs of industry,and a historically-grounded system of skills training through an apprenticeship system. The Institute is partnering with the German Embassy, the German Center for Research and Innovation, and the Representative of German Industry and Trade to provide top-level experts from German industry, government, and the scientific community to explain how Germany has promoted continuous excellence and improvement in the manufacturing sector while meeting the high standards of the labor market.

Much of the German’s manufacturing success is anchored in its unique history, culture, and political environment, which cannot be replicated in the United States. To integrate the American perspective into the discussion, top representatives from US industry, government, and research organizations will also be featured in the May 16 program. We hope to focus on current efforts of the Department of Commerce to promote innovation and competitiveness, and we will hear from Commerce Under Secretary Rebecca Blank and Associate Director of the National Institute of Standards and Technology for Innovation and Industry Services Phillip Singerman. Senior US manufacturing executives will also comment on both American policies to support innovation and on workforce training. Finally, representatives of leading American workforce training organizations will comment on the German apprenticeship system. Learn more about the event and download the complete agenda.

Join the live audience for this high-level conference by watching it online starting at 9:00 a.m. on May 16 at www.aspeninstitute.org/live and participate in the discussion on Twitter @AspenInstitute and #mfgUSGermany.