Granted, "manufacturing is rebuilding" doesn't have the same ring as the apocalyptic "manufacturing is dead." Unlike the latter, however, the former is true. Equally true, and more astonishing, is this: far from being irreversibly moribund, our manufacturing sector is now the most innovative portion of the U.S. economy.

The idea of manufacturing's death is yet another instance where the mythmakers and the facts have had a hard time getting together. In the midst of gloomy press (about plant shutdowns, trade deficits, and a supposed inability to compete), it is difficult not to conclude that we are losing manufacturing jobs on a daily basis. But the conclusion would be wrong. In 1966, on average, 19,214,000 people were employed by manufacturing concerns; only 20 years later, in 1986, manufacturers employed 19,186,000. In statistically significant terms, we haven't eliminated a single manufacturing job.

So while there can be arguments about what caused the trade imbalance (how large a part has an overvalued dollar played?), there can be no question that we've maintained our manufacturing work force. To do so, we've had to alter the mix of what we make. It is clear that we have shifted from the mundane to the more exotic (see figure 1). The percentage of our work force turning out basic materials and midrange goods has fallen, while we employ more people making computers, magazines, and satellites.

We have, in essence, gone to our strength: innovation. We are making more and more of the kinds of things that require high levels of innovation -- such as instrumentation and fabricated metal products -- and have relinquished to others the production of items that have not changed a great deal in the past 20 years: automobiles, television sets, shoes, clothes, and paper.

The switch has not been without its agony. The stories of tragic plant closings have not been made up, or even exaggerated. Thousands of workers have been let go at a clip, decimating the communities in which larger closings took place. Comparable jobs were frequently not available for those affected -- they suffered real losses of income and, in many cases, had to leave familiar surroundings and families simply to find work at all. We have not paid a small price for this dislocation -- it has been costly. But we have not, on balance, eliminated any jobs.

How can this be? We don't read about any plant openings. We know that from 1980 to the end of 1986 our 500 largest industrial companies (the Fortune 500) alone have eliminated 2.8 million workers. How can we be breaking even?

The answer becomes obvious when you take the manufacturing sector apart company by company. You notice immediately that for every large declining company there are a host of younger, smaller, highly innovative businesses that are surging ahead -- even in the oldest, most "mature" segments of the sector. Manufacturing is hardly dead. It is bubbling with activity and innovation.

Looking beneath the aggregates, we can see that it is, in fact, being reborn. We should think in terms of a changing of the guard -- a replacing of the old with the new. Apple and Compaq are challenging IBM and Digital Equipment. Florida Steel and Nucor are picking up some of the slack left by USX and Bethlehem Steel. Laser-cut blouses are challenging the efforts of Korean seamstresses.

The phenomenon is also reflected in older companies being rekindled by new ways of doing things. Anyone who has visited the automated dishwasher plant General Electric Co. has constructed in Louisville realizes that GE is not giving up on appliance manufacturing. A visit to the United Merchants & Manufacturers Inc. factory in Fall River, Mass., is equally impressive. Through the computer-controlled designing and printing of color on cloth, 59-year-old United Merchants now produces many of the curtains sold by Sears, Roebuck & Co.

Surveying the top 50 industrial business segments in terms of each one's proportion of fast-growing/highly innovative establishments (see box, "Measuring Innovation," and figure 2 on the following page), one finds that many of the most innovative businesses in the economy are engaged in manufacturing -- 40 out of the top 50, in fact. Every broad group within the manufacturing sector ranks above the national average for innovation. This is hardly a collection of businesses sinking gradually into their graves. It is a vital, innovative collection of companies struggling mightily to find new ways to do things -- and, in many cases, succeeding.

Figure 3 reveals why we don't seem to know too much about this phenomenon -- most of the innovative manufacturing establishments belong to smaller companies. Apple and Compaq are thus the rare exceptions to the rule that most innovation is now coming up from the bottom. And keep in mind that Apple and Compaq were very small companies a few years ago; Compaq was started in 1982. The United States is not going out of the manufacturing business; we are simply rebuilding it from the bottom up.

The rebuilding process is not likely to add many manufacturing workers to the U.S. economy. The whole point of the process is to substitute brains for brawn -- to produce more things with fewer people and better machines. But it is not likely that we will eliminate that many jobs, either. Probably we'll repeat the pattern of the past 20 years over the next 20.

But we'll produce different products in different ways with an increasingly skilled labor force. Though that may sound good, it is not without its challenges. Think, for example, about the difficulty of selling to growing manufacturing concerns, whether you are an accountant or a computer maker or a distributor of office supplies. You can no longer set your sights on the Fortune 1,000 and coast home. Most of the growth in demand for your product or service will now be found among thousands of smaller businesses you probably have never heard of -- at least not yet. So as the manufacturing sector changes, so must all of us who are trying to market our wares to it. There are a great many more opportunities, but they come in smaller packages and are tougher to find.

Communities that have relied on large manufacturers are in a much more serious bind. It is of little solace to them that the plant they have just lost is being replaced by 100 small companies spread out over the rest of the United States. It does Cleveland or Youngstown, Ohio, little good to know that dozens of smaller, high-tech scrap-steel processors are flourishing in such places as Florida and South Carolina and Nebraska. In most cases, the loss of the big plant is a permanent loss, forcing major hardship upon the community where the plant was. We must find ways to help those places cope with the stress being placed upon them.

Much of the plant-closing stress falls directly on the shoulders of those being laid off. Innovation and dislocation, while essential to the preservation of a healthy manufacturing sector, take a very heavy toll in terms of the pressure they put on the manufacturing workers to learn new skills, to change employers often, to leave the place where they grew up in order to stay employed, and, in general, to live with a degree of uncertainty and anxiety unprecedented in the past 150 years.

Assuming that we can be as innovative in easing the burden on the manufacturing worker as we have been in developing new products and processes for him to work on, the prospects for making things in the United States are not all that gloomy. Manufacturing will never be the source of employment growth it once was. On the other hand, there are strong indications that the workers who remain will have the opportunity to perform increasingly skilled tasks for an increasingly progressive, innovative collection of companies that will be making things for this country and the rest of the world for some time to come. Manufacturing isn't dead. It's simply being rebuilt, and the new model promises much for the future.