The economy needs both

Modern Machine Shop, Feb, 1992 by Ken Gettelman

These have no been the best of times. Although this is not the depression of the 1930s, for many people and business it has the earmarks of a recession. Nervous politicias are debating what should be done. There are currently two schools of thought. One insists that we must first restore consumer confidence. There is a good point to this argument. If cautious consumers reduce spending, economic activity is slowed, which leads to layoffs with further reduced spending, setting in motion a vicious cycle that even discourages investment.

The other viewpoint holds that the real problem in this situation is the falling competitiveness of American industry. If our industrial base were truly world-class, there would be adequate demand for all our manufactured goods. Those who put forth this argument insist that we must have industrial modernization, backed by adequate capital investment, as our primary key to economic recovery.

Which of these views is correct? Actually, they both are. A wise national policy would recognize the validity of each argument and put in motion activities to satisfy both.

To restore consumer confidence, we could have a national program of employment geared to restoring our basic infrastructure. Many of our roads, bridges, waterworks, sewers, parks, streets--even transportation systems--are old and wearing out more quickly than they are being renewed. This sort of program could make use of both skilled and unskilled jobless people. It would be a sound investment in our country's future and well-being.

It is no secret that our capital investment in industry has been running at a dangerously low rate for many years. We need, and should have in place, every possible incentive for manufacturing enterprises to invest in productive capital equipment. Modern equipment is expensive and ties up liquid capital for long periods of time.

It is not only costly but different. Cells and systems are replacing individual machine tools. Numerical controls are taking the place f handwheels. Automatic gaging systems are superseding dial indicators. Off-line palletization is replacing the machine tool table as the setup area. Computers are doing the work of enless manual data entry. Automated part handling is taking place of human push and shove, and electrical discharge machining is doing the job where other operations were ineffective. Investors must feel confident that they will receive an adequate return for their risk, if such investments are to be made.

The incentive that did have an excellent record of success, was the Investment Tax Credit. Unfortunately, it got lost in the political shuffle. We could start by restoring it. Other stimuli worth considering include accelerated depreciation write-offs, depreciation schedules geared to the realities of inflation, and low-cost industrial bonds. These are not give-aways to industry, but incentives to stimulate the economy, increase employment, and improve our standard of living. They should be recognized as such.

As professors and politicians debate the appropriate actions for government to take to stimulate the economy, the CEOs and Boards of Directors in industry should understand that there is one thing that their government, or any government, cannot implement, and that is the concept of modern manufacturing technology. By this concept, I mean the move away from a series of sequential isolated steps, to an integrated whole, where every step in design and manufacturing is related to the whole process.

Our government has the power to create incentives for confidence and investment. Now is the time for implementation.

Our industrial leaders are the only ones who can translate modern manufacturing concepts into reality. They have an obligation to move in this direction.