Can America achieve manufacturing self-reliance if the nation doesn’t first enhance its cybersecurity capabilities?
By Jerry Ray, COO, SecureAge
Post-pandemic economic isolationism almost appears to be the goal of countries locking down and closing borders until hitting the mythical number of zero infections. Any gains against the virus made by cutting off the rest of the world, though, brings with them at most a fleeting sense of survival and self-determination that will last for a far shorter duration than the virus itself. Some capacity in all aspects of an economy may be good for any country. But none can ever achieve total independence, even a country with all of the resources found in America.
Even if the United States could quickly rebuild vibrant manufacturing infrastructure that resembles that of long before COVID-19, not only will it still face other short and long-term economic hurdles, but it will also experience a new manufacturing threat not around in the past: a spectrum of cyber threats aimed squarely at that newly expanded manufacturing base. Considering the most recent and relevant example of U.S. vaccine and therapeutic research being the target of hackers worldwide, it is clear America cannot rebuild manufacturing capacity unless it first shores up its non-government cyber defenses.
United States Dependence on Foreign Labor and Manufacturing?
Enjoying reduced consumer prices and input costs of imported manufactured goods, the U.S. long ago abrogated its role as a net producer of manufactured goods to become reliant upon cheap, increasingly skilled labor from foreign countries. Post-WWII initiatives that led to tremendous advances in education, equality, and standard of living for Americans also created a workforce unsatisfied with manufacturing jobs that proved repetitive and less upwardly mobile than those offered in the realm of intellectual and creative capital.
Countries that lagged behind in income, social, and lifestyle gains but had relatively educated and large populations excitedly took on those unwanted and increasingly expensive U.S. manufacturing roles. Cheaper labor enticed US businesses to move factories abroad almost as much as reduced operational costs, especially in countries that ignored negative externalities, such as air and water pollution that Americans increasingly refused to tolerate. Absent the virus-induced nationalism, few would have ever missed the manufacturing jobs and processes exported over the past 40 years.
Benefits of Copy and Disrupt Manufacturing Approach
As perhaps the best and most obvious example, China, with its massive and educated population, eagerly built things with tools, machines, and systems designed and refined in the U.S., and did so at a price simply too good for any responsible American company to ignore. Product ideation, management processes, and financing from the U.S. supported the tangible manufacture of items in China. At the same time, the revolution in computing has also brought about a transformation of intellectual capital into digital assets that can be stolen from far away at an embarrassingly low cost.
Having rerouted human capital toward intellectual property, including everything from research to the arts, the U.S. has been the richest target of cyber-attacks from abroad aimed at capturing that knowledge to accelerate design and development of products without having to pay the rents of costly research. Countries with manufacturing capabilities have found it laughably easier and infinitely cheaper to steal plans and designs from others to produce goods with their own branding.
Costs of Rebuilding a Manufacturing Economy
Beyond the growing losses of intellectual property through data theft enabled by cyber intrusions and attacks, the challenges of rebuilding a manufacturing economy producing commoditized and low margin items with labor expenses tied to a hobbled and dysfunctional healthcare system grow bigger with digitization.
First, the percentage of the American population willing to take on manufacturing work pales in raw numbers compared to China and its labor force rival, India. Until incomes and lifestyles in those countries rise to a level comparable to Americans, the comparative advantage of labor-intensive manufacturing in China and India keeps the U.S. dependent on both.
Next, even if the U.S. found a domestic market devout and large enough to stomach higher cost goods made by a return of domestic manufacturing, those foreign actors will not only still target American IP to reduce their development costs, but will now also enjoy a larger attack surface from which to steal: manufacturing equipment materials design, logistics systems, and processes reliant on robots, AI, and data.
Finally, beyond data theft of IP, attacks from abroad on new manufacturing infrastructure itself would inevitably arise. Disruptions or shutdowns of supply chains and manufacturing lines in the U.S. would provide a competitive cost and time to market advantage to those foreign nations or corporations eager to resume their place as the builder of all things for Americans. Defending data and systems from attacks would have to be much more than an afterthought.
Future of US Manufacturing
The U.S. cannot manufacture everything it needs or wants, even if economic isolationism somehow proves to be the only way to survive a global pandemic. The country would still be dependent on the rest of the world for raw materials or other inputs that simply can’t be had at home.
For American workers, any significant return to domestic production of goods would not correlate with an increased number of jobs. The high value, high tech sector that has arguably fueled the U.S. economy amidst dwindling manufacturing since the 1980s would develop and supply manufacturers with better robots, gadgets, and systems to build with, leaving those without irreplaceable technical skills just as far away from manufacturing jobs as they are now.
Massive data breaches from even the most seemingly advanced and wealthy companies in the U.S. have become commonplace. In any scenario by which the U.S. relinquishes its net importer status to become a self-reliant manufacturing hub post pandemic, the new and increased digital systems and data running all of it would be even more vulnerable than the digitally stored IP it currently produces. While is not impossible for manufacturing to come back to the U.S., stability and cost control demands a bolstered cyber defense of digitally dependent systems and processes. But if America does not consider cybersecurity before building anything, it stands little chance of again leading the world in manufacturing or any other coveted field.
About the Author:
Jerry Ray is the Chief Operations Officer at SecureAge, a global enterprise data security and encryption business based in Singapore.