Make it in America by Andrew N. Liveris

My son is going to graduate USF this May 5th in chemical engineering. He has had an interview with Dow Chemical already. So when I saw Dow CEO Andrew Liveris on C-Span talking about the decline of American industry I could not turn away. His book, Make it in America, is a must read for all politicians. Liveris is an extremely compelling and persuasive speaker, easily in the top 1%, and made a compelling case for America getting out of the doldrums and back into the manufacturing game.

Liveris is a CEO and not an economist. He is a chemical engineer by training and a Fortune 500 CEO by profession. His politics are decidedly Democrat Party, big government orientated but that does not diminish his arguments, some more valid than others.

Curtis Thompson will graduate May 5th, 2011 from the University of South Florida with a chemical engineering degree. He has already had one interview with Dow.

The first part of the book is a look back at our history in manufacturing. Manufacturing employment has declined from 19,553,000 in June of 1979 to 11,667,000 today. A 40% drop. Today manufacturing jobs make up 9% of the work force as compared to 21.7% of the work force in 1979.

Manufacturing is important for a couple of reasons. First is the contribution to the wealth of a society or multiplier affect. Yes this is a Keynesian term Liveris recycles for his argument. It so happens that the multiplier effect for manufacturing is $1.40 for every $1.00 of production compared to only 50 cents for every $1 of retail sales. This 1.4 multiplier is higher than agriculture, forestry, farming, transportation, professional and educational services. In other words if America is to sustain its military as well as economic dominance in the world manufacturing should be priority number one.

To most the problem would seem to be cheap labor in China, Singapore and other countries. And you would be wrong. Labor is one part of the problem but as Liveris points out there are several problems that are sending jobs overseas. Some of them are legitimate, some are a corporate CEO’s wish list, and some are downright frightening. Here they are:

Andrew N. Liveris, Chairman and CEO of The Dow Chemical Company

First Liveris correctly points out our national education is in the dumps. He correctly points out that in the 50’s and 60’s we were the best in the world and have fallen to the bottom 20% of nations in performance, especially in science ad math. His prescription of one national system with one standard size fits all is frighteningly naive and downright scary. The problem these past 50 years has been centralization. One size does not fit all. The number of school district declined from 83.624 in 1950 to 15.987 in 1980. The last thing we need is a national school system. Maybe a national law requiring local school district to offer no strings attached vouchers for every student of at least 80% of the money that is collected and paid to educate that child. Liveris gets a “F” on this issue.

Second Liveris pushes for increased immigration of the best and brightest. Most Americans would not argue with that. If we can attract the best and brightest to America that would be economically and culturally to our nations benefit.

Third is a national energy policy tilted in favor of green jobs. By this Liveris means energy laws that promote green homes, tax breaks for research and development, reducing the cost of energy for manufacturing and other corporate gimmies. Here is a corporate give me, no corporate tax and no capital gains taxes. End of gimmies.

These corporate guys always crack me up. They want all the tax breaks for their industry and their company but consider other competitors and industries as unworthy. Of course the politicians like high corporate tax rates so they can sell the gimmies to corporations like Dow Chemical. It is a stupid game that has to stop. The bottom line is we collect 11.3% of our taxes from corporations. Eliminate the tax and the increase in jobs, taxes from individuals and increased economic activity will more than pay fro the losses in revenue. Liveris is even bright enough to give some examples of revenue feedback when corporate taxes are cut. I will give him a C+ on this one. Kill any idea of subsidies.

Fourth is regulation. Liveris correctly points out that it is extremely costly to comply with several national regulations and 50 state regulations. Florida Congresswoman Sandy Adams has identified the elimination of duplicate services at the national level as one of her top priorities and with this she should combine eliminating duplicate national regulations and definitions from competing departments. As for the 50 state regulations it is clear that there needs to be one regulation not 50. This is a legitimate function of the federal government that often gets lost in bureaucratic turf wars costing business millions of dollars in research and clarifications.

Fifth is infrastructure. Liveris wants to spend $2.2 trillion over five years. If we could trust our politicians to not steal the money for their friends that would be a great policy. But as we saw with the Obama “American Recovery Act of 2009” less than 12% went towards infrastructure. No reason to expect any improvement with a new bill. With the political corruption going on it would take a $11 trillion bill to get $2.2 trillion of infrastructure improvements from the current crop of thieves in Washington. To add to the unrealistic expectation Liveris would create a national infrastructure bank like in Europe. It would take about three seconds before the bank was inundated with fraudulent characters and contracts. Thanks but no thanks. We have enough corruption without a $400 billion slush fund for contractors.

While Liveris is not a economist I do give him a “A” for his excellent presentation and realistic assessment of what a CEO looks for when they build a multi million dollar plant. He makes it clear to politicians that they need to quit playing games and make America business friendly. China, Singapore, Germany, Japan are all out there competing for our manufacturing industries and jobs. If we do not get serious and reform this economy then the jobs, industries, brilliant scientist, engineers will be gone. They will live lavish lifestyles in China, Germany and elsewhere. The Americans who remain will see the country become a second rate tourist destination. Much like Rome was the world power so too will America be. A once great nation who’s time has passed.

As for the economics Mr. Liveris here is an assist.

Zero corporate and capital gains taxes.

National regulations for goods and services.

Infrastructure funding returned to the states. Why should Texas receive 83% of every dollar they pay into the highway fund? Let the states compete with their own resources.

School vouchers must be mandatory for all children with no strings attached paying 80% of the funds collected for the child going to the child’s parent for the child education and benefit. Competition works.

Eliminate the Federal Reserve and return back to gold and silver. If not the elimination of the central bank then a balanced budget amendment and a monetary growth target for the Federal Reserve that cannot be exceeded. A stable money supply would greatly reduce the volatility of energy prices and create a stable price structure to facilitate international trade.

Industrialists hate the gold standard because they are required to pay back loans in “hard” currency and not inflated paper money. One of the reasons the Rockefellers supported the Federal Reserve.

Free trade agreement whenever and wherever we can get them.

A national energy policy that is all the above. We need all forms of energy and no industry should be given special subsidies or treatment.

Entitlement reform. End Social Security, Medicaid and Medicare. If not then the 9.4% unofficial inflation we are seeing today will seem like a fond memory in five years. Although from Liveris point of view a weak dollar would help exports.

Liveris is weak on economics; his policies would bring America closer to “State Capitalist” aka fascism like what now exists in China.

His ability to communicate the problems that face corporations, especially manufacturing corporations in America is a breath of fresh air. He does a superb job of communicating the very real danger that faces America right now, today. We all need to thank him for his contribution to our economic debate that we will all face in the next decade.