DowDuPont’s Andrew Liveris: How America Can Bring Back Manufacturing
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.
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.
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.”
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.”
http://knowledge.wharton.upenn.edu/article/dowduponts-andrew-liveris-america-can-bring-back-manufacturing/?utm_source=kw_newsletter&utm_medium=email&utm_campaign=2017-10-12
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