Politicians start to favour real engineering instead of financial engineering

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Many western governments have not seen manufacturing as a major priority in recent years. Instead, they have favoured moves to boost services, particularly the financial sector.

US manufacturing employment, for example, has fallen from 19.6m in 1979 to just 11.8m today – the lowest level since 1941. Over the same period, China has taken the opportunity to become the manufacturing capital of the world. Understandably, companies have preferred the more welcoming environment there, and in other emerging economies.

Now, however, there are signs that the politicians’ love affair with financial services is coming to an end. British deputy prime minister, Lord Mandelson, has said the UK “needs an economy with less financial engineering and more real engineering“. And according to Bloomberg, President Obama is considering the appointment of a new manufacturing “czar” to oversee the development of new policies.

The question that Boards need to consider is whether this new interest will be benign, or disruptive. The blog’s worry is that the politicians will not just focus on support for the low carbon economy, and green technology. Instead, they may move to disrupt current patterns of world trade by encouraging companies to repatriate jobs to western countries.

Already the President’s economics head, Larry Summers, has called for the US to become “export-oriented“. And as Fred Bergsten notes in the Financial Times, Summers is sowing the seeds of future conflict by effectively arguing that “China can no longer behave like China, because the US intends to behave much more like China“.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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