Manufacturing Must Be a Priority

manufacturing
As un-sexy as it is, and as often as it is overlooked, people who understand the absolute fundamental basics of the economy know that it revolves around manufacturing. All the service sector industries, and the vaunted ceilings of the halls of finance work for manufacturing, rather than the other way around. The absurdly obvious reason behind the almost Taoist simplicity of this somehow mysterious idea, is that a person can not survive, in caloric terms, from eating dollar bills. As a matter of fact, a person can not have a dollar bill without it being manufactured first, or “minted” for specificity, and so manufacturing must be a national priority for a successful economy in the future.

In a philosophical sense, the only acts which can produce wealth are the harvesting of a natural resource, and the resources’ subsequent manufacturing into goods. That of itself must make manufacturing a priority. Investment does not actually create wealth directly, investment is almost like a form of gambling. There is a difference that comes from certain factors, such as that the global population is constantly growing, and there will be consistently more people working more jobs. And technological innovation generationally improves the productivity of factories, to output more goods with less man hours. However, on the philosophical level, all investment capital does is provide a window of leverage, usually used to acquire capacity, at the cost of manageable risk. It is a neat trick, but half of it works like a Ponzi scheme. While a loan to expand infrastructure provides a potential of acceleration to the growth of a business, the laws of physics still apply to money and everything must balance.

While a business would not knowingly take a loan with a debt service payment that it could not bear, any debt service payment is essentially a drogue chute hanging off of the bottom line of the ledger, and they come into play in accordance to Murphy’s Law. There exists a culture today that espouses the belief that if a person hasn’t leveraged all of their equity, than “their money is not working for them.” That was the type of attitude that when mixed with real estate speculation, and certain policies of the Department of Housing and Urban Development, created the bubble that burst between 2007-2008. The good news, is that the bubble was replaced with another bubble.

The exception to the above was built with quantitative easing. Quantitative easing, institutionally, tends to favor those with higher debt service payments at the expense of those who would be in the position to profit from interest, the loaning institutions and those living by drawing off of interest bearing pensions and retirement accounts. It also serves the interesting effect of making vast sums of money, such as the United States’ national debt, representative of less actual wealth via inflation. Thankfully, Federal Reserve Chairman Janet Yellen has recently announced an end of the practice.

Manufacturing, however, remains utterly necessary. The foreign trade deficit is something that has gone out of style to talk about in recent years, but a glance at an easily found graph will show that the last year the U.S. enjoyed a trade surplus was 1976. That means that every year since then, nearly forty of them, the U.S. borrowed money or liquidated assets to gain access to more value in terms of goods than it produced or exported. The U.S. will continue to slowly liquidate its assets until such a time that it produces more with domestic manufacturing than it imports. President Barack Obama recently released a “fact sheet” pertaining to improving manufacturing, and it was full of the usual fluff. Networks, partnerships, loans, the words that sound good on paper. What the president would need to do to improve manufacturing is come out as pro-energy, and talk about tariffs. Hydroelectric dams work fairly well and would coincide with reducing carbon emissions, and the point of tariffs is to make imports more expensive by charging the importer a tax, allowing for domestic outfits to have greater market share despite vastly different expenses from importers in terms of labor overhead. But whatever the president does, manufacturing must be a priority.

Opinion by Brian Whittemore

Sources:
WhiteHouse.gov
Economist.com
Photo by Taras Kalapun – flickr License

2 Responses to "Manufacturing Must Be a Priority"

  1. James D. Sawyer   November 3, 2014 at 8:47 am

    While the city of Detroit may still be bouncing along the bottom, the auto industry–the Detroit Three included–and its supplier base are rebounding strongly, as you can see here:
    http://www.sme.org/MEMagazine/Article.aspx?id=82837&taxid=1433. Even the city is showing some signs of rebirth.

    Reply
  2. simplulo   November 1, 2014 at 6:19 pm

    During the past few decades of lamenting the decline of American manufacturing, it has continued to rise, though manufacturing *jobs* have declined, and production has relocated within the US. Detroit may be in decline, but Tesla Motors in Fremont, California is doing well. There’s a lesson in there somewhere.

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