WORK BLUES: Only 12 per cent of the workforce is in manufacturing, compared to a 30 per cent in the 70s

Just outside the Prairie town of Pella, Iowa, seven vast buildings, each painted brick red, are lined up along a highway bordered by grain fields. These single-storey structures have no smokestacks or any other indication that they are, in fact, very busy factories.

Three shifts of workers produce machines that bale hay, dig trenches, reduce tree branches to wood chips, grind stumps into sawdust, and drill tunnels to run electric wires and pipes underground. Most were the creations of Gary Vermeer, a farmer and inventor who died two years ago, at the age of 91.

The company he founded bears his name, but for all its American roots, the Vermeer Corp. put its newest factory — and the wealth that goes with it — not here but in the capital of China. And Vermeer’s daughter, Mary Vermeer Andringa, the chief executive, presides over a manufacturing operation that relies increasingly on government support.

As America tries to revive growth and create jobs, one crucial corner of the US economy — manufacturing — has largely fallen off Washington’s radar screen.

Vermeer earns nearly one-third of its annual revenue from exports — counting on the US government for trade agreements, favourable currency arrangements and even white-knuckle diplomacy to make exports happen.

In China, the government in the form of free land supports businesses, tax breaks, cheap credit and other subsidies helps industries to grow. With its share of the market falling precipitously, Vermeer in 2008 opened a plant in Beijing, taking a Chinese partner and drawing help for the venture from the Chinese.

“I am a very big proponent of making the US a great place from which to export,” said Andringa, 61, who is also chairwoman of the National Association of Manufacturers. But she added, “But things are easier in China. That was the reality.”

Manufacturing is not simply a market activity, especially not in the 21st century: manufacturers rely increasingly on governments, here and abroad, to prosper and expand. Vermeer, family owned, business thrives with such help, as do big multinationals like Dow Chemical. In each region of the world, multinationals produce much of what they sell locally. European and Asian governments support this strategy, but the US has been slow at doing just that. As a result, most factories are now shifting to China.

Vermeer employs 140 engineers, seven per cent of its staff, in a constant effort to upgrade the various machines it exports. But it runs into an obstacle. For all the desire to make things in America, manufacturers increasingly rely on imported components, diluting the label “Made in America,” and Vermeer is no exception.

“We would prefer to buy everything in the US, but some of our transmissions come from Europe and China,” Andringa says. “They are not made here in the sizes and capacities that we need.”

“An advanced manufacturing policy is what this country must have,” says Andrew N. Liveris, chairman and chief executive of Dow Chemical, arguing, in effect, that manufacturing needs government support to expand its dwindling share of the nation’s economy. That is particularly so when demand for new products like solar shingles and batteries is not yet enough to justify the investment. (Three solar companies recently filed for bankruptcy.)

Despite its goals for manufacturing, the US administration lacks an explicit plan for achieving them. “The United States today is alone among industrial powers in not having a strategy or even a procedure for thinking through what must be done when it comes to manufacturing,” says Thomas A. Kochan, an industrial economist at the Massachusetts Institute of Technology.

Manufacturing’s muscle helped make the US a world power, but its contribution to national income is dwindling as more and more industries shift base to China.

A tipping point may already have been reached. Manufacturing’s contribution to gross domestic product — roughly equivalent to national income — has declined to just 11.7 per cent last year from as much as 28 per cent in the 1950s, according to the Bureau of Economic Analysis. In this century, the 20-per-cent-or-more clubs draw its members mainly from Asia and Europe.

Relying on World Bank figures, some economists suggest that China moved into first place in manufacturing last year. It may seem remarkable that America’s fall — or impending fall — from first place in manufacturing isn’t generating all that many headlines, certainly not when compared with the controversies over the national debt or persistent unemployment. One reason may be that the nation’s political leaders don’t see manufacturing as a problem. Put another way, they don’t necessarily regard making an engine, a computer or even a pair of scissors as having as much value as investment banking or retailing or a useful website.

“You have a culture within the elites of both political parties that says manufacturing does not matter, and industrial policy will do more harm than good,” says Ronil Hira, an assistant professor of public policy at the Rochester Institute of Technology.

But the stark reality of manufacturing's shrinking share of national output is beginning to force these questions: Does manufacturing matter? And is the financial sector, which rose as manufacturing declined an adequate substitute? The financial crisis may have answered that last question with an emphatic no. Certainly, many experts maintain that manufacturing’s contribution to the national health is significantly underappreciated.

Recovery from the recession, they say, would not be so sluggish if there were still enough manufacturers to jump-start an upturn by revving up production and rehiring en masse at the first signs of better times. What’s more, each new manufacturing job generates five others in the economy. Shrinking the relative size of manufacturing has undermined that multiplier effect.

In fact, as US multinationals become ever more global, they are placing sophisticated research centers near their overseas factories, partly to keep R&D close to assembly lines and partly because of enticing government incentives.

“In China, we have launched several products sold around the world that were designed and invented in China and are now made in China,” Liveris says. He cites as examples a protective coating with properties that neutralise the corrosive effects of formaldehyde and an epoxy-based laminate used in printed circuit boards.

That sally into industrial policy, some economists say, is like closing the barn door after the horse has escaped - the horse in this case being America’s possession of the world’s biggest mass market. That ended in the late 20th century with the rise of millions of consumers in Asia and Europe with ample disposable income or access to credit.

The upshot is that governments in these markets pile on subsidies to gain or keep as much production as possible. Whirlpool, for example, makes most of its microwave ovens in southeastern China, with help from local subsidies.

“The reason you get much of an outcry over this exodus has to do mainly with jobs,' says Heather Boushey, a senior economist at the Center for American Progress. 'Nearly 12 per cent of the American workforce is in manufacturing today, down from 30 percent in the 1970s.