Reviving the U.S. manufacturing sector
Basic manufacturing—however that is now defined—has fallen on hard times in the United States. Much of our manufacturing base has either been neglected, subject to outsourcing or simply taken over by other countries—especially those that are classified as emerging economies. Prevailing conventional wisdom says that the U.S. is now in the post-industrial age in what can be classified as a service economy.
To counteract the prevailing wisdom, Andrew N. Liveris, in his book “Make it in America: The Case for Re-inventing the Economy,” argues that it is crucial to our global competitiveness that we rebuild the manufacturing sector in the United States because at the minimum there is a job multiplier and “job ripple” effect. Liveris is Chairman and CEO of The Dow Chemical Company, a $45-billion global specialty chemical, advanced materials, agrosciences and plastics company based in Midland, Mich. Liveris’ 34-year Dow career has spanned manufacturing, engineering, sales and marketing since he began with the firm in Australia in 1976.
He notes that, based upon data provided by the Manufacturing Institute, “every dollar in final sales of manufactured products supports $1.40 in output from other sectors of the economy,” whereas the figure for the service sector of the U.S. economy is only $0.71 for every dollar (Liveris, 2011).
Liveris posits other criteria that contribute to the importance of reinvigorating the manufacturing sector in the United States. The first has to do with, as President Obama noted in the Jan. 25, 2011, State of the Union address, the need to reinvigorate the process of innovation in our society. Liveris agrees with this but recommends that the manufacturing component of this process of innovation must be located in close proximity geographically to manufacturing centers within the United States. In the recent past, prototypes and ideas have been created in the U.S. but, because of the lack of domestic manufacturing capabilities, have been produced elsewhere owing to better incentives provided by our national economic competitors.
The Liveris argument also stresses the need to improve our infrastructure as well as develop a coordinated National Economic Framework where government is an integral player in the process along with business. Government, Liveris suggests, must provide permanent and scaled tax incentives for manufacturing startups and other businesses to remain within the U.S. so they can plan appropriately beyond the short-term incentives and tax credits. Finally, he argues government must not act “as an overzealous regulator, but as a thoughtful partner to thoughtful business—in a shared effort to strengthen our economy.”
Liveris’ approach to the creation of a National Economic Framework argues for policies that have both an immediate and long-term impact. Policies with an immediate impact would include: harmonizing and simplifying rules, enacting performance standard regulations, accelerating and making more permanent the business permitting process, and benchmarking our regulations against those of our main competitors to provide a more fertile field for redeveloping and then maintaining our manufacturing base with globally competitive and innovative products.
Liveris’ recommendations of a longer-term nature (the end game) focus on improving our workforce competitiveness by revitalizing education in all areas: in K–12, in the post-secondary sphere and in the workplace itself through innovative, competency-based job-training efforts. Further, he supports creating products reflective of 21st century competitiveness. He places particular emphasis on “green” jobs that help to deflect the effects of climate change by efficiently using and creating new sources of energy, and most importantly revenues that are not yet on the horizon.
Liveris’ argument is compelling and even novel. However, it could have been used more effectively to create a groundswell of popular and populist opinion for the important ideas that Liveris advocates about protecting and projecting U.S. competitiveness in the emerging economies, as well as developed ones such as Germany. The latter point is important because Germany, with a similar development pattern to the United States, has created a climate of innovation where its exports are extremely competitive in the global marketplace. Liveris notes that Germany achieved this by offering incentives to innovative businesses within its borders.
This book serves as a clarion call for rebuilding the United States’ manufacturing base. He argues this can and must be done by a novel partnership between government and business. Further, this partnership must provide long-term incentives and opportunities to increase innovation in the U.S. manufacturing sector that until recently was given up for a loss.
This book is a must-read for policy makers and forecasters of global economic trends.
References
Liveris, A. (2011). Make it in America: The case for re-inventing the economy. Hoboken, New Jersey: John Wiley & Sons, Inc.
