Cheap labor became the drug of Western economies.

And I'd say that if you look in nearly every country from Canada to the UK that imported large amounts of cheap labor, you've seen productivity stagnate.

And I don't think that's not a total happenstance.

I think that the connection is very direct.

I'd say that globalization's hunger for cheap labor is a problem precisely because it's been bad for innovation.

Both our working people, our populace, and our innovators gathered here today have the same enemy.

In the long run, it's technology that increases the value of labor.

Innovations like the American system and the interchangeable parts revolution it sparked, or Ford's moving assembly line that skyrocketed the productivity of our workers.

That's how American industry became the envy of the world.

There were two conceits that our leadership class had when it came to globalization.

The first is assuming that we can separate the making of things from the design of things.

The idea of globalization was that rich countries would move further up the value chain while the poor countries made the simpler things.

You would open an iPhone box and it would say, designed in Cupertino, California.

The implication, of course, is that it would be manufactured in Shenzhen or somewhere else.

Yeah, some people might lose their jobs in manufacturing, but they could learn to design or, to use a very popular phrase, learn to code.

But I think we got it wrong.

It turns out that the geographies that do the manufacturing get awfully good at the designing of things.

There are network effects, as you all well understand.

The firms that design products work with firms that manufacture.

They share intellectual property.

They share best practices.

And they even sometimes share critical employees.

Now, we assume that other nations would always trail us in the value chain, but it turns out that as they got better at the low end of the value chain, they also started catching up on the higher end.

We were squeezed from both ends.

Now, that was the first conceit of globalization.

I think the second is that cheap labor is fundamentally a crutch.

And it's a crutch that inhibits innovation.

I might even say that it's a drug that too many American firms got addicted to.

Now, if you can make a product more cheaply, it's far too easy to do that rather than to innovate.

And whether we were offshoring factories to cheap labor economies or importing cheap labor through our immigration system, cheap labor became the drug of Western economies.

And I'd say that if you look in nearly every country from Canada to the UK that imported large amounts of cheap labor, you've seen productivity stagnate.

And I don't think that's not a total happenstance.

I think that the connection is very direct.

Now, one of the debates you hear on the minimum wage, for instance, is that increases in the minimum wage force firms to automate.

So a higher wage at McDonald's means more kiosks.

And whatever your views on the wisdom of the minimum wage, I'm not going to comment on that here.

Companies innovating in the absence of cheap labor is a good thing.

I think most of you are not worried about getting cheaper and cheaper labor.

You're worried about innovating, about building new things, about the old formulation of technology is doing more with less.

You guys are all trying to do more with less every single day.

And so I'd ask my friends, both on the tech optimist side and on the populist side, not to see the failure of the logic of globalization as a failure of innovation.

Indeed, I'd say that globalization's hunger for cheap labor is a problem precisely because it's been bad for innovation.

Both our working people, our populace, and our innovators gathered here today have the same enemy.

And the solution, I believe, is American innovation.

Because in the long run, it's technology that increases the value of labor.

Innovations like the American system and the interchangeable parts revolution it sparked, or Ford's moving assembly line that skyrocketed the productivity of our workers.

That's how American industry became the envy of the world.

And that's what I really want to talk about today, why innovation is key to winning the worldwide manufacturing competition, to giving our workers a fair deal, and to reclaiming our heritage via America's great industrial comeback.

And I believe that's what we're on the cusp of, a great American industrial comeback.

Because innovation is what increases wages.

It's what protects our homelands.

I know we have a lot of defense technology companies here.

It's what saves troops' lives on the battlefield.

And I know everyone here today largely agrees.

It's why we have some of the greatest inventors and thinkers in energy, precision machining, countless critical high-value industries just in this room.

And I think the other thing that unites all of you is that you're builders.

And I use that word, deliberate.

I was very moved by Mark's manifesto from a few years ago about America.

We are a nation of builders.

We make things.

We create things.

Each of you came to this summit, not because you developed some flash-in-the-pan application, but because you're building something very real.

You're raising new factories.

You're turning profits back into R&D.

And you're creating new, good-paying jobs for your fellow Americans.

And this is why I'm such huge fans of yours, of Ben's and Mark's, and of the entire endeavor.