INSIGHT: Dow’s Liveris stresses why US needs manufacturing

01 February 2011 15:51  [Source: ICIS news]

By Brian Ford

Dow Chemical CEO Andrew LiverisHOUSTON (ICIS)--Can Andrew Liveris save the American dream?

In his new book, Make It In America: The Case for Re-Inventing the Economy, the Dow Chemical chief executive says the US must re-invent its manufacturing base to bolster the country's long-term economic health.

At just over 200 pages, the book is written for the lay person, with lots of real-life examples of how the US has lost lucrative businesses to job-hungry countries with long-range economic policies.

He argues that sustained economic growth and the dream of upward social mobility are closely tied to a robust manufacturing sector.

The US used to be the world’s greatest manufacturer, and for 30 years after the Second World War “experienced a post-war boom driven by manufacturing that helped build a vibrant middle class, not just in the United States, but around the world”, Liveris says.

“That was the great era of upward social mobility - always a proud feature of American life, and never more so than in the boom years of the 1950s and 1960s,” he says.

“Indeed, the prosperity of that period allowed millions of young Americans to get a better education than their parents, and ultimately, to get a better paying, higher valued job.”

But the country “fell out of love with manufacturing”, and began a transition to a services-oriented economy that graduates 18 new lawyers and 50 new MBAs (masters of business administration) for every PhD in physical sciences or engineering.

“Over the past several decades, the United States has watched entire industries disappear from its shores - only to reappear abroad” in countries that vie much more actively for manufacturing jobs, according to Liveris. A third of all manufacturing jobs (5.5m) disappeared in the last decade, while US companies shuttered more than 42,000 factories.

The US needs manufacturing jobs a lot more than it needs service-oriented jobs, Liveris argues. Manufacturing, more than any other sector, creates jobs outside its own sector.

“Even in 2009, a year when manufacturing was experiencing its sharpest decline to date, the sector still supported nearly 7m non-manufacturing jobs - jobs outside the plant,” he says.

Liveris dismisses the idea that the US can keep its economic standing by being a wellspring of technological ideas while outsourcing its manufacturing. Research and development (R&D) tends to go where the manufacturing is, he says.

Conversely, he says the idea that the US will always lose jobs to countries with far lower wages is a myth, noting that high-wage counties such as Germany and Japan manage to keep their manufacturing sectors robust.

The issue largely boils down to the fact that other counties have stepped up their game in attracting businesses through lower corporate taxes, R&D subsidies and other goodies, according to Liveris.

Other countries don’t have “long-held preconceptions, as we do”, he says. “When they think of manufacturing, they don’t think of their fathers leaving for the steel plant in the morning. They see high-paying, skill-intensive jobs.”

Liveris offers a wide range of remedies to what he sees as a growing crisis in the US. These include a permanent R&D tax credit instead of one subject to the yearly whims of Congress; a “National Economic Growth Bank” to offer incentives to growth industries; simplified regulations; rebuilding the nation’s infrastructure (which won’t come cheap) and overhauling the education system to include national instead of the current patchwork of state standards, and a new emphasis on skills training and customised training programmes.

Liveris says he’s not pushing to restore the manufacturing sector of the past, but rather wants to see the country with high-tech industries and renewable energy.

Whether Dow's Liveris is just another voice crying in the wilderness remains to be seen.

But he was one of several company executives who met with President Barack Obama in December to talk about ways to spur economic growth. Liveris has praised Obama’s new focus on economic and regulatory issues.

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Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Brian Ford
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