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Who Will Make the Nails?

 It’s May and our economy is searching for a bottom thanks to malfeasance, mismanagement, greed and stupidity of people disconnected from the basic wealth production mechanisms.

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 It’s May and our economy is searching for a bottom thanks to malfeasance, mismanagement, greed and stupidity of people disconnected from the basic wealth production mechanisms. Through this economic storm, I can’t seem to get this old proverb out of my head. Perhaps I can exorcise it by sharing it with you. It’s called “For Want of a Nail:”

For want of a nail the shoe was lost.

For want of a shoe the horse was lost.

For want of a horse the rider was lost.

For want of a rider the battle was lost.

For want of a battle the kingdom was lost.

All for the want of a horseshoe nail.

I see the nail as a metaphor for manufacturing. The innocuous nail represents what the vital role of making things plays in the grand scheme of things. Without manufacturing, the whole thing comes tumbling down. And as this ditty points out, all may be lost before anyone realizes why.

It’s tiresome to continuously hear about business entities that are designated “too big to fail.” What about business entities which are too “vital” to fail? That would be us, and nobody except us seems to be talking about it.

As a nation, if we fail to recognize the contribution that manufacturing makes to the health of our economy we do so with great peril to our future. Manufacturing creates wealth by adding value to a less valuable raw material. In addition, there is a significant multiplier effect that impacts the rest of the economy.

According to the National Association of Manufacturers (NAM), each manufacturing job supports as many as four other jobs, boosting the health and viability of local economies. For example, every 100 people employed in the steel industry or automotive manufacturing sustain 400 to 500 jobs in the rest of the economy. Contrast that with the retail sector where 100 jobs nets us 94 new jobs elsewhere in the economy. Not such a great exchange.

If we are indeed moving into a so-called new economy, there is simply no way that our standard of living can be sustained by health care, finance, retail and tourism alone. Perhaps this fact is beginning to dawn on some of our leadership. The simple, undeniable fact is someone still has to create the wealth that these services serve. Our economy cannot rely on discretionary spending when there are no discretionary funds to spend.

Our economy is way out of balance with 70 percent of GDP coming from consumers. Our leaders are telling our consumer nation to consume in order to get the economy moving again. What seems wrong-headed about this is that unbridled spending and debt accumulation is a large part of the issue we’re dealing with.

The race we’ve been collectively running is about trying to maintain a standard of living, wherever one is in the pecking order. First, this maintenance effort created the need for two-income households. That staved off the wolf for a while, but ultimately with stagnant wages, people turned to credit to stay where they were. We need better jobs!

As we forward through this recession, perhaps we will see a move back to some semblance of economic stability based on sustainability. It has always been the goal of capitalism to smooth the boom/bust cycles inherent in the system. Can we find our way out of cyclicality this time? Probably not.

But I submit building on the fundamental capitalist tenet of wealth production can help recoup the wealth we have lost with real progress rather than paper profits. According to the Department of Commerce, every dollar of manufactured products supports $1.37 in other economic sectors. Wholesale and finance contribute 50 cents to economic activity. In the long term, holding what you made will be worth more than reading what you made.

This is a connection between our financial meltdown and making nails. To paraphrase Bill Clinton’s first campaign mantra, “IT’S MANUFACTURING, STUPID!” 

Campro USA
YCM Alliance
SW North America, CNC Machines and Automation
World Machine Tool Survey
SPC Innovations, In-machine gaging and attachments
Techspex
Horn USA
SolidCAM

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