Let’s pick more winners in support of U.S. manufacturing

By Bart Taylor | Aug 14, 2018

Conventional economic wisdom holds that policymakers must not "pick winners," something we task instead to a free and open marketplace. President Obama and his lieutenants were famously vilified for "picking" California-based Solyndra and Colorado-based Abound Solar for important loan guarantees, only to see them default and shutter.

It mattered little then that the DOE's loan program was signed into law by President Bush, or that, in hindsight, its guarantees helped launch promising companies and boost new technologies. Today, critics still push back.

Yet President Trump is also intent on picking winners, not only in broad industry categories like American coal, steel, and aluminum, but individual companies as well. Today Harley-Davidson is embarrassed by a Trump-led boycott of its motorcycles.

Company boycotts go too far, but facts are facts: American manufacturing has suffered from economic "conventional wisdom." U.S. companies compete on a global stage, against countries engineering broad support for manufacturing, e.g., Made in China 2025. If support for promising markets and industries qualifies as picking winners, then let's get busy picking more.

With more domestic manufacturing an objective, here’s two that deserve attention:

Outdoor industry: The news this week of VF Corporation moving its global headquarters to Colorado should only pour gasoline on the region's outdoor industry conflagration. The western U.S. is today the de facto epicenter for a new and reimagined OI.

But winning involves more domestic manufacturing. We've said American OI brands can no longer expect to hide offshore production behind an opaque "Asian Wall" at the same time promoting a story of American authenticity and inspiration. A new generation of buyers will eventually push back against the double talk. Brands investing in Asian labor and infrastructure without making reciprocal and credible efforts to manufacture more in the U.S. will suffer.

Win by investing in the OI supply chain -- in new centers of manufacturing excellence, in workforce, in technology and materials innovators. Favor industry, education, and local governments that support 21st century OI.

Agricultural technology -- ag-tech: Even as congressional critics raged at Obama for supporting renewable energy, most had no problem picking agriculture. Farm bills past and present are the playground of congressional favoritism.

Unfortunately, money alone doesn't always translate into a coherent policy, and at least in Colorado, ag-tech is more promise more than key economic driver. The state's workforce professionals work hard to support ag manufacturers, but developing rural manufacturing jobs isn't a priority.

The time may be now to rethink the opportunity. For one, industrial hemp is about to explode.

CBD can be derived from hemp as well as cannabis, and with hemp regulated within the 2014 Farm Bill, a fully functioning industry is about to materialize. Demand will skyrocket. In 2017, more hemp was grown in Colorado -- roughly 10,000 acres -- than anywhere in the U.S. This week's profile of Colorado Cultivars spotlights the state's largest hemp grower and its facilities in Eaton. New processing facilities are underway in Colorado in Wray and Springfield. CBD won't be the only outcome; fiber and food products are already a byproduct.

Cannabis is already an economic winner. Invest in hemp -- and a fully integrated cannabis-manufacturing ecosystem in the West. (In Colorado, start by following California's lead to create a cannabis bank.)

There are other options. RCAM, the Rural Communities Apparel Manufacturing initiative borne from the 2014 Colorado Apparel Manufacturing Summit, established cut-and-sew centers in four communities in eastern Colorado. The hope was to tap underutilized labor in rural towns to meet demand for domestic apparel and production. After growing pains, the concept holds promise.

Here's yet another means: invest in technology, in entrepreneurship, in transportation and water technology to enable local growers to more fully participate in the regional food and beverage supply chain. Food and beverage is the fastest growing manufacturing sector in Colorado. It's a behemoth in California. Let's pick it to win more.

Ag-tech driving hemp production feeding apparel, outdoor industry, and food and beverage manufacturing. What's not to like?

It's a winner.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.