Burgers to the Rescue? (Ron Goforth Commentary)

The decline in manufacturing jobs is clearly a national issue and a bit of a political hot potato. Beyond the political verbiage, the loss of such jobs is closely linked both to increasing U.S. productivity and to the globalization of the economy, and it looks like it’s inevitable. It is a trend that parallels and is analogous to the last century’s culture-shifting decline in jobs in agriculture — a decline that also was driven in large measure by increases in productivity.

At the Quarterly Business Analysis meeting on April 29, Jeff Collins, director of the University of Arkansas’ Center for Business and Economic Research, again discussed the general decline in manufacturing and noted that in Arkansas the average weekly hours in manufacturing have consistently trended downward since early 1998. However, Collins now anticipates a “modest rebound in manufacturing” in the state. And “modest” certainly seems to be the operative word. Manufacturing in the classical sense is no more likely to regain its former role as a contributor to the state economy than it is to the national economy.

I had originally thought about titling this commentary “Manufacturing Jobs?” That would have not referred to jobs in manufacturing, but to the manufacture of jobs. How might this be done? Would you believe by the simple expedient of redefinition of manufacturing and reclassification of existing jobs? Manipulating the statistical base, if you will.

N. Gregory Mankiw, the chairman of the President’s Council of Economic Advisers, in his report to the President Bush proposed reclassifying fast-food workers to count them as manufacturing jobs. They’re manufacturing hamburgers! Such a move would instantly create millions of manufacturing jobs.

David Huether, chief economist for the National Association of Manufacturers, has taken note that some economists want to count hamburger flipping as manufacturing, which he went on to conclude would produce statistics showing more jobs in what has been a declining sector of the economy. Now that should cool the potato.

This reclassification might not be all that lacking in foundation in economic analysis. The Economist’s BMI (Big Max index) is based on the theory of “purchasing-power parity.” Under the theory of purchasing-power parity, exchange rates should adjust to equalize the prices of a basket of goods and services across countries. In The Economist’s basket is, in fact, the Big Mac!

There is another great advantage to such reclassification. Not only would it provide a one-time improvement in the numbers, it would also provide an opportunity to grow them even further. After all, commercial money is available for the start-up of hamburger joints (which would generally have banker-attracting tangible assets as collateral).

Unfortunately, there is a limit to how much manufacturing — including or excluding burger-flipping numbers — can do as a contributor to economic prosperity. In truth, the future lies with knowledge-based and technology-centric business development and prosperity with those where it is taking place.

It is further unfortunate that Arkansas’ upward move in the State Technology and Science Index (Milken Institute, March 2004) only moved us to an unimpressive 49th in the ranking of states. Two quotes from that report illuminate the issue:

“The engines that propel state and regional economies forward today differ dramatically from the engines of the past … The new engine of regional economic prosperity is based on how successful a given location is in attracting and expanding technology and science assets and leveraging them for economic development.”

Investment activity in Northwest Arkansas is dominated by real estate. Local and regional investment in new technology-centric or knowledge-based enterprise development is vanishingly small. There is an urgent need for more aggressive movement in providing the financial resources needed to encourage economic development in this century’s domains of economic growth.

As taxpayers, we should expect efficiency in government, and we should hold bureaucrats accountable for their actions or the lack thereof. I would urge, for example, that the administrator(s) of Arkansas Department of Finance Administration’s Arkansas Institutional Fund get off their collective duffs and actually start producing results. We need venturesome, patient capital, without which we are unlikely even to be able to maintain even our 49th ranking.

Are more hamburger joints going to be the solution of choice for Arkansas? I could cry. But I would rather fight.

(R.R. (Ron) Goforth, Ph.D., is the President of Beta-Rubicon Inc. of Fayetteville, a firm that specializes in independent technology assessment and due diligence services. He may be contacted at www.beta-rubicon.com.)