Smokestacks belching hazardous gases, rivers so polluted they catch fire, workers in identical overalls turning bolts with wrenches: For many Americans, the word “manufacturing” conjures up negative, old-fashioned images. Or, we think of it as something that takes place in less-developed nations, as has increasingly been the case. Many have said that factories will continue to locate wherever the work can be done most cheaply, despite political messaging about bringing back manufacturing jobs.
Manufacturing accounts for about 13% of the U.S. economy. Should we even focus on trying to “bring it back,” now that information and services — the “knowledge economy” — seems a more promising path? Andrew Liveris firmly believes we should. In fact, he said in a recent talk at the University of Pennsylvania that manufacturing is essential to our knowledge economy, and to America’s competitiveness on the global stage.
Liveris is the executive chairman of DowDuPont, a $73 billion holding company (the two giant chemical companies merged in September), and Chairman and CEO of The Dow Chemical Company. He has advised both the Obama and Trump administrations on manufacturing issues. (Liveris was head of Trump’s now-defunct American Manufacturing Council.)
The author of Make It in America: The Case for Reinventing the Economy, in which he writes that America’s economic growth and prosperity depends upon a strong manufacturing sector, Liveris was interviewed at Penn’s Perry World House during Penn Global Week by Wharton School Dean Geoffrey Garrett. Garrett referred to Liveris “the cheerleader of advanced manufacturing.”
A Key Difference
Garrett stated that President Trump has been talking about bringing U.S. economic growth back up to the level it was before the 2008 Great Recession. Since World War II the economy has typically increased about 4% a year, but in 2016, the economy grew just 1.6%. What would it take to see those higher numbers again, he asked?
Liveris commented that the very nature of growth has changed dramatically because human civilization is going through “one of its every-few-hundred-years massive tipping point,” due to digitization. He said this phenomenon was as disruptive as Ford’s introduction of mass-produced cars in the horse-and-carriage era. This tipping point is causing enormous dislocation, including the elimination of jobs and the loss of meaningful work. Moreover, he said, “the job of 20 or 30 years ago is paying less — wage rates are down and all of that — so there are a lot of unhappy and angry people out there.”
And America is under-prepared, including from a policy point of view, he said. Liveris talked about the profound implications for business leaders as the forces of globalization collide with the forces of digitization. He said most corporations are not yet nimble enough to re-design themselves to accommodate these trends.
Yet, he said, substantial economic expansion is possible. “In the immediate term, can we get 3.5% growth in this country? You bet we can,” said Liveris. He noted that instituting policies to spur foreign direct investment would help as they did in the Clinton and Reagan eras. He also cited tax reform, infrastructure spending and business deregulation as important factors. He added, though, that the U.S. currently has “a massive, massive issue in how our government is functioning,” so change is not likely to happen overnight.
According to Liveris, there is a widespread lack of understanding among the public of what today’s manufacturing — which he referred to as advanced manufacturing — actually consists of. (Definitions vary, but the OECD defines advanced manufacturing technology as computer-controlled or micro-electronics-based equipment used to make products.) Liveris stated, “We are generating a new wave of technology to generate a knowledge economy. And a knowledge economy will need things made. They’ll just be made differently.”
Advanced manufacturing might include making smartphones, solar cells for roofs, batteries for hybrid cars, or innovative wind turbines. Liveris said he had visited a DowDuPont factory the previous week that is working on advanced compasses to enable wind turbines with blades the size of football fields. The goal is to produce blades light and efficient enough to make wind power a viable reality. “That’s technology. That’s advanced manufacturing,” he said.
“In the immediate term, can we get 3.5% growth in this country? You bet we can.”
He asked the audience to envision “a knowledge economy based on the collision and intersection of the sciences.” Those who think the tech revolution is only about “the Facebooks and the Googles, connectivity and all that,” are dead wrong, he said.
Not Enough Work, or Not Enough Workers?
Doesn’t the use of more robotics and automation lead to job loss? Garrett asked. Or, is the problem that workers aren’t appropriately skilled to fill new kinds of jobs? Liveris said he was firmly in the second camp. “I have job openings now at Dow and at DuPont that I can’t get the skills for. And engineering jobs open.”
He elaborated that the way machines provide insights is changing, and noted, “We humans will have to read those insights. I can’t [find] enough of those humans. That’s the issue we’re dealing with in this country.”
Liveris said that 7.5 million technology jobs left America between 2008 and 2016 because the country wasn’t supplying appropriate candidates. The reaction of many businesses was to re-locate to “the Chinas, the Indias, the places that were supplying that sort of skill.” In the United States right now, he said, there are half a million technology jobs open, but American educational institutions are only graduating roughly between 50,000 and 70,000 candidates per year, so there’s a “massive under-supply.” In the next three years, there will be 3.5 million jobs created, and Liveris said the U.S. might only be able to fill about 1.5 million of them through a combination of graduation and immigration. “Unless immigration is fooled with, which is a whole other issue.”
According to Liveris, a critical reason for America to revive its manufacturing sector is to promote innovation. “Something that we at Dow and many of us in manufacturing know: If you have the shop floor, if you make things, you have the prototype for the next thing, so you can innovate.” Conversely, if you stop making those things, your R&D diminishes dramatically, he said.
Liveris said that 7.5 million technology jobs left America between 2008 and 2016 because the country wasn’t supplying appropriate candidates.
The U.S. should be incentivizing the technologies that America is good at, said Liveris. Everybody knows about Silicon Valley, Liveris noted, but fewer know that the U.S. is prominent in advanced sensors, which are critical to the progress of the Internet of Things (IoT) sector. Other areas in which America stands out are lightweight compasses and 3D printing. He noted that technologies like these have been developed at various institutions “in a somewhat haphazard way, which is very American. That’s great. That’s creativity.” But, he said, shouldn’t we as a country double down on the things we do best and become the world leader?
Liveris called advanced manufacturing “the best path for the United States” and said, “We’re so naturally suited for it if we’d just get the policies to help us.” He believes that the U.S. should already be at the most advanced layer of economic development based on technology. “We have cheap money, we’ve got skills, we’ve got low-cost energy. We should be having an investment boom in this country,” he said.
He noted, though, that we have created barriers to investment that are preventing this from happening. Borrowing an expression from Indian Prime Minister Narendra Modi, Liveris said that there were two kinds of countries in the world: red tape countries (hampered by bureaucracy and over-regulation) and red carpet countries (welcoming to investors). The U.S. has unfortunately become a red tape country, he said.
He called investment “the biggest job creator out there,” and stated that Germany for example has figured out how to do this. “It’s the poster child of investment in Europe.” China, too, has mastered it, and “other countries who want to trade with the United States are mastering it because they incentivize it.”
“If you have the shop floor, if you make things, you have the prototype for the next thing, so you can innovate.”
Closing America’s Education Gap
A big proponent of STEM education, Liveris said that American schools are not graduating the workers we need. “We have convinced ourselves that a four-year college degree of the skills we used to have in the last century is what we should still keep producing.” He said that re-tooling American education needs to happen immediately, with STEM education incorporated at every level including elementary school.
Liveris said DowDuPont is funding a STEM-dedicated school, in conjunction with Michigan State University, in Dow Chemical’s home base of Midland, Michigan. The school will offer curricula for kindergarten through 12th grade, with MSU course offerings for college students, according to the Michigan news site MLive.
The pilot school will also provide teacher enrichment programs. Liveris said that American teachers need to be better trained and rewarded. “We do something very bad in this country, which is we don’t celebrate teachers at the elementary, middle and high school level. We should be putting them on pedestals. And giving them the skills to teach STEM.”
Article by Knowledge@Wharton