Eunuchs and industrial planning
July 13, 2011 99 Comments
We would all do well to listen to the new co-chair of Obama’s Advanced Manufacturing Partnership initiative that is tasked with building a roadmap for reviving American manufacturing. The Economist this week details the thinking of Dow Chemical CEO Andrew Liveris, an Aussie transplanted to Michigan, who believes that some national industrial planning would help the US compete against China and other nations. Just the word “industrial policy” sends shudders down the spine of the Republican Party, Wall Street and MNC boardrooms. But we aren’t talking about a planned economy, just a bit of planning on where the US needs to go as an economy that will provide good jobs for its citizens. The Cold War killed real economic or industrial planning in America. That is what the Commies did. In America, the “miracle” of the free market is all that we need.
With the best and brightest of our top universities flooding to Wall Street to enrich themselves playing with money but do little good for anybody else, and our free market politicians engaging in an ideology driven free-for-all over taxes and spending in the face of a possible US default, sober-minded US business leaders should join Mr. Liveris in some strategic thinking about the US as an economy if we hope for our children and their children to be employed. The “Chinese model” has many flaws, but it is focused on creating ever more sophisticated and rewarding jobs for the country’s 1.3 billion people. China has a plan and is executing on it while US politicians resemble eunuchs in a dying dynasty arguing over spoils in a crumbling palace.
Mr Liveris is not arguing for protectionism. (Dow Chemical earns two-thirds of its revenues abroad.) On the contrary, he wants America to retake the lead in toppling trade barriers. But he does want the government to develop a strategy to help American firms compete with foreign rivals. Other countries are acting like companies, he worries. China and its imitators are following deliberate strategies to create manufacturing jobs. America should behave like a company, too, he argues…
For decades, American manufacturing has given way to services. Mr Liveris thinks this is neither desirable nor inevitable. Making things and innovation go hand-in-hand, he says, and manufacturing jobs have a higher multiplier (ie, each manufacturing job creates more additional jobs than a job in services). Not all economists agree.
The sector’s image as outdated may have discouraged young Americans from acquiring the skills needed for a career in advanced manufacturing, says Mr Liveris. “Americans are used to thinking about manufacturing jobs as a caricature of what [they were] decades ago: jobs that required relatively little skill and even less critical thinking,” he grumbles. Getting America to train more engineers and the like is a key part of his plan.
He also thinks America should try harder to attract foreign talent. A good start, he points out, would be to issue more work visas. Over 1m jobs in science and technology will open up in America this year, but only 200,000 new graduates will have the skills to fill them, he calculates. That is why chemical engineers are among the best-paid new graduates.