Monday, June 28, 2010

Capitalism is saving the economy

From the 21 June 2010 Lockport Union Sun and Journal (Lockport, NY)

By Bob Confer

My coworkers and I hit a rough spot when the recession really gained steam in September of 2008. For a 6-month period we worked only 3 or 4 days a week because the demand for our and our customer’s products had tanked as consumers tightened their purse strings.

Since then, we’ve been doing quite well at the factory. Our workforce is the largest it’s ever been, we’ve expanded on 3 occasions and many of our molding machines are booked solid for months. We’re really busy.

We’re not alone. Many manufacturers, from local neighborhood machine shops to some of the largest factories in North America, are seeing the same. I’ve personally heard and read many stories of American plants seeing noticeable gains in orders and output. More than just anecdotal in nature, the statistics show this growth, too, as indicated in recent reports from the Institute for Supply Management, the Department of Commerce and regional branches of the Federal Reserve.

The Obama Administration and Congress have been taking credit for manufacturing’s rebound, relentlessly tossing out the predictable "the stimulus is working" comments. Unfortunately, the press and a good percentage of our populace blindly fall lock-step into believing such prattle.

Manufacturing’s return has absolutely nothing to do with the various stimuli and other government intrusions into the marketplace and everything to do with good old-fashioned capitalism.

I see that happening at Confer Plastics. Had we and our clients sat still, this newfound activity never would have happened. Some of our long-held product lines are still down versus their 2006 highs because consumers are still unwilling or unable to make certain discretionary purchases. But, more than making up for their losses, our growth can be attributed to 2 factors that are capitalist in nature: One, the acquisition of new customers for whom we make a variety of new custom-made goods and, two, existing customers investing in new assets and expanding their product offerings. I’ve had other manufacturers make similar claims about their clientele, even going so far as to say that new projects that seemed dead for a handful of years are finally being given the green light to proceed.

Those companies are making such investments not because the economy is healthy, but because it is down and shows no signs of an immediate return to the way things used to be. They haven’t the faith in Washington’s economic policy or the rest of the world’s financial health. They know that we’re in a down economy for the long haul (kind of like a new norm) and they understand that if they want to increase their revenues (reaching either their old levels or new, higher ones) instead of just getting by at markedly-decreased revenues and profits, they’ll have to claim market share or create new markets. Therefore, they are doing the entrepreneurial thing and spending so they can at once beat-up on their competitors and win new customers. It’s risky, yes, but if they didn’t do it they’d be positioning themselves for either long-term mediocrity or failure.

They are realizing the potential of such projects only with the help of the producers, be it their in-house operations or those of custom manufacturers like our company. New products, especially those that are supposed to be much different than the offerings of the competition, require ingenuity in design, production and final assembly. In most cases, that requires expenditures in intellect and development by the manufacturer and, quite often, investment in new assets (like machinery) and new personnel.

So, as you see, it’s capitalism - investment, assumption of risk, and the resultant technological and operational ingenuity - that’s driving growth in manufacturing and therefore our economy. As one business tries to do outdo the other, each one ends up putting money towards marketing, new assets and personnel, which requires manufacturers to do the same, which then increases final output for the client and the manufacturer and also has a measurable impact on the businesses that serve those market transactions (shippers, box and skid makers and materials and tool suppliers). The myriad workers impacted by that massive business cycle then have money to spend (and they do) and, as a result, economic activity presses forward.

Capitalism, the fervor to beat the competition and make your company and your life better, is a good thing – a great thing – and it’s what’s best for what ails our economy.

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