Staff Reports
A newly circulated NBER working paper argues something simple and inconvenient: America’s manufacturing didn’t just slow because of robots or recessions. The paper by Robert J. Gordon, Stanley G. Harris Professor in the Social Sciences at Northwestern University, and Kenneth Ryu of Northwestern (NBER Working Paper No. 35285, May 2026) says an “import invasion” hollowed out the factories, suppliers, and know‑how that once drove productivity gains.
What the NBER paper found
Gordon and Ryu show that manufacturing labor productivity grew briskly for years and then stalled. They point to a structural break near 2000, not 2010. From about 1987 to 2010 productivity rose roughly 3.3% per year. From 2010 to 2023 it fell slightly, about −0.3% per year. At the same time imports replaced more and more U.S. production. That rising import penetration left output flat while overall GDP climbed.
The industrial‑ecology explanation
The authors call the channel an industrial ecology problem. When plants close and workers leave, supplier networks shrink. Process tricks, engineering fixes, and on‑the‑floor learning walk out the door. In some fields the shift was extreme. Computers and electronics saw import shares climb into the 80% range. That is not just lost jobs. It is lost ability to make things better and faster at home.
Why this matters for policy — tariffs, reshoring, and industrial policy
If the paper is right, the standard free‑trade argument needs flipping. The claim that reshoring will ruin productivity assumes productivity floats above the factory floor. Gordon and Ryu argue the opposite: productivity grows where things are made. That gives real cover for tariffs, reshoring incentives, targeted industrial policy, and direct help for supplier networks and factory R&D. In short, bringing production home can rebuild the very ecosystem that creates productivity.
Washington should wake up. Republicans who care about real growth and working Americans should push tariffs, tax incentives for domestic investment, and funding for manufacturing R&D and vocational training. Call it smart patriotism or common sense economics. Either way, letting imports eat our industrial base and then lecturing voters about “inevitable” decline was a bad playbook. Time to rebuild the plants, the suppliers, and the know‑how that actually make productivity happen.
