Manufacturing Should Be Called: The Art of Import Replacement (and The Art of Saving Our Economy)
Posted by Bert Maes on May 3, 2011
So many times people are asking me: “We are living in a service-based economy. Manufacturing is not viable anymore. So what the **** are you doing there?”
Well, my answer typically is:
Yes, we are living in a service-based economy: in high-income countries 75%-87% of the economic growth is generated by services. 13%-25% comes from goods-producing industries.
But the problem is: this is not creating wealth — it actually fuels our national debts.
We cannot live from services alone. Poor regions and nations typically import more than they can afford OR they fail to produce a wide, diverse, creative range of physical products and export them. Economic success is simply the result of a process of constant, new & differentiated exports.
What we should be doing is follow a very old concept invented by Jane Jacobs: the import-replacement theory. That would make us earn money… Today, we stay behind with importing stuff, losing money, governments that have to loan, and in the end can’t pay for the interest anymore, bringing us close to bankruptcy.
Also the banks still haven’t learned anything: they still have the luxury to play around with other people’s money. When they screw up, and lose millions, they don’t care. The government doesn’t mind. A manufacturing business instead gets the raw material in, and makes a finished product. “When you screw up, you pay from your own pocket,” says Franc Coenen “The economy is at risk when you count on companies that just sell ‘air’ and don’t add value.”
“An economy based more on making things and less on debt-fueling services would help to avoid domestic financial bubbles and add balance to the global economy,” Tom Saler adds. Only by restoring manufacturing “can historic trade imbalances and high unemployment levels be expeditiously reduced and economic growth expanded to generate sufficient tax revenues to help ultimately balance the budget deficit.”
Is there a reason why we cannot be the best in the art of ‘import-replacing’ again?
The Chinese are not the problem. Jobs and industry always move to the cheapest and easiest manufacturing market.
In the 60s and 70s it was Japan, then South Korea, Taiwan, Singapore, Malaysia and Hong Kong took the manufacturing lead in producing ‘junk’ products in large quantities. Those countries got better in higher quality products, the people grew richer, workers demanded higher wages and benefits and the local standards of living were raised, resulting in higher costs of production.
Now India and China are the biggest and best at this game. “But recently rising labor costs have pushed some Chinese manufacturing to places like Vietnam,” Tom Saler reports.
In her 2004 book Dark Age Ahead Jane Jacobs argued that our civilization shows signs of spiral of decline comparable to the collapse of the Roman empire. We depend on 5 pillars to stand firm, she says: family and community, education, science, representational government and taxes, and corporate and professional accountability.
So to be the industrial and innovative leader, we have to pay the costs of new technologies and the corresponding training. Being more innovative means having better people. The source of better skills and better productivity is better education and better training in science.
Our greatest resources for innovation are many young, independent, highly-skilled hands-on thinkers and creators. We can’t grow our economy if we can’t attract younger generations to our industry and if we keep forcing many of our schools to close their metal shops.
Key is the investment and involvement of companies into local technical schools. We must help our young people get interested in ‘making things’, in becoming leaders in manufacturing, in saving our economy.