Dr. Lew underlined the urgency of the panel’s task by reminding participants of how much ground the U.S. manufacturing sector has lost to foreign competition in recent years. In the 1950s, manufacturing’s share of the GDP peaked near 30 percent. Today its share is about 11 percent, a decline that accelerated after 2007. The United States is still the world’s largest manufacturer, with a global share of about 22 percent of global output, but “it faces more challenges from around the world.” There is a growing awareness in this country that thriving manufacturers are critical to America’s economic recovery. “As the president has said, we’ve got to go back to making things.” The United States cannot completely move into a knowledge- and services-based economy, she said; it also has to produce tangible assets.

THE ‘TREMENDOUS RISKS’ THAT FACE NEW TECHNOLOGY FIRMS

A challenge for many American businesses, she said, is to gain access not only to technology, but also to capital. “We keep saying the U.S. government will invest in high-risk technology, but translating that technology into marketable products that consumers will buy requires sustained financial support.” She cited the demise of the solar energy company Solyndra as an example of the “tremendous risks” that face new technologies. “We can invest all this capital in the early stages,” she said, “but if the private markets are not stepping in to fill the gap from there to the market, we can be throwing billions of dollars down a black hole.”

Dr. Lew said she spoke partly from her experience as a venture capitalist in Europe, where governments offered incentives to accelerate the development of promising technologies, including solar, wind, and bio-fuel products. When government subsidies and tax initiatives ended recently, she said, no private investors were willing to step in. The high risk had caused them to pull back, and she predicted that this lack of capital would become a greater problem in the future.

This raises the question,” she said, “of what type of assistance the MEP can and should provide to companies.” She described her recent visit to China, where she witnessed evidence of “its stunning economic growth,” increased GDP, and rising per capita income. She said she saw an “explosion” of universities and “unabashed government investment in R&D.” After touring some SMM facilities, she said that “clearly China is on a march to become a global giant in the manufacturing sector. That is a formidable competitor for the U.S. to face.” The United States must be equally aggressive, she said, and one contribution of the MEP evaluators could be to suggest ways to maximize the program’s benefits and enhance the SME client base.

Dr. Lew then introduced the next speaker, Roger Kilmer, director of the MEP, who had requested the Academies’ study. She expressed the committee’s thanks to Mr. Kilmer for “his visionary leadership” at MEP since 1993, and



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