My opinion of current events are very positive across all aspects of the US economy. The US is in a significant change under the current administration. It began a little in Trump’s first term but in reclaiming the Presidency in 2024, he has entered with a forceful series of policies that are likely to have a very long-term positive impact on US economics and politics for decades to come if we are able to learn from it. First some history.
Much of the hand-wringing we hear today is based on patterns established since WWII under the Marshall Plan which in effect never stopped. The Marshall Plan was designed to rebuild countries whose domestic industries had been destroyed but then we never stopped it. It morphed into a global distribution of US control; “distributing Democracy” is what it was called. What this did in effect was use the innovation of the US that was responsible for supporting out consumption economy but export part of its value creation by building foreign manufacturing sites and hiring their labor to rebuild their societies for our consumption. The 70yr+ concept has been the “value” is in the initial innovation, not in the conversion of that innovation to improvement in our standard of living. This perception has been fostered by the mathematics of our financial decisions, by those who have never created things with their own hands. We relied on our business efficiency experts who have been trained in universities without any practical experience in operating manufacturing operations till they had been hired as corporate consultants and management experts. They saw cheaper labor cost in foreign lands and the choice was made. That we accepted tariffs on our exports to these countries to keep out our competitive products also became accepted practice. The US meanwhile had very low or non-existent tariffs on products imported against our own producers. Again, we were seeking the low-cost option for goods available. We, in essence, built up less successful countries by exporting our best ideas. But, there was another side to this entire saga.
Also, post-WWII was William Edwards Deming (October 14, 1900 – December 20, 1993) was an American business theorist, composer, economist, industrial engineer, management consultant, statistician, and writer. Educated initially as an electrical engineer and later specializing in mathematical physics, he helped develop the sampling techniques still used by the United States Census Bureau and the Bureau of Labor Statistics. He is also known as the father of the quality movement, known as “Lean Manufacturing” today, and was hugely influential in post-WWII Japan, credited with revolutionizing Japan’s industry and making it one of the most dominant economies in the world. He is best known for his theories of management.
It was while working under Gen. Douglas MacArthur as a census consultant to the Japanese government, he was asked to teach a short seminar on statistical process control methods to members of the Radio Corps, at the invitation of Homer Sarasohn. During this visit, he was contacted by the Union of Japanese Scientists and Engineers to talk directly to Japanese business leaders about his theories of management, returning to Japan for many years to consult. He met the Toyoda family. Its vehicle business post-WWII had access to limited markets and parts suppliers yet needed to make smaller lots of several models profitably to be a competitive company and rebuild the family’s assets. Guided by Deming’s lectures, leaders like Shoichiro Toyoda and Eiji Toyoda embedded Total Quality Control deeply into Toyota’s (TM) operations during the early 1960s. Toyota history. Having limited factory space and assembly lines, they manufactured multiple vehicles on the same lines and needed to develop not only impressive quality control but just-in-time-delivery supply chains. Deming became a primary consultant. The Toyota Production System(TPS) was born. The Deming Prize: Toyota adopted these principles so effectively that they became the first automaker to win the prestigious Deming Application Prize in 1965. Toyota has become the #2 Brand in the US Light Weight Vehicle market. Toyota’s quality is well known and even today has high brand loyalty in a flat market such that buyers will wait 2-3mos for the desired vehicle rather than go to competitors which are over-supplied.
Toyota was very effective in penetrating the US market because its TPS helped it weather economic downturns. The company garnered nearly all the value associated with manufacturing including production efficiencies by tapping its workforce innovations who were rewarded in turn and in proportion to the impact to Toyota’s profitability. While US manufacturers were heavily unionized and routinely experienced strikes, Toyota relied on management/employee loyalty seeing less disruption.
US business schools do not teach “Lean Manufacturing” and my experience indicates the concept is nearly unknown but for very few in the academic world. However, the success of Danaher(DHR), Wabtec(WAB), Heico(HEI) and others clearly demonstrate its prowess in manufacturing delivering for shareholders. “Lean” to be successful requires well-lubricated communications between manufacturing floors and end-customer experiences such that every individual knows their impact on the ‘value proposition’ that leads to corporate profitability year over year. The net/net is that not only has value been extracted from innovation occurring in the US, but full value was also extracted during the manufacturing process domestically. This is opposed to sending that portion of value overseas and then paying foreign manufactures for it to get the innovation back again.
What the current administration is doing is, in crucial industries, we want all of the value created by our own innovations including that which occurs in supply chains and during the manufacturing process. This is a total-value recovery concept which leaves us with a healthy and actively trained, intellectually alert manufacturing base that leads automatically to more innovation. With key industries, we do not want to leave anything on the table including the thought processes that lead to our next innovations.
Look at the current administration’s efforts in the light of these concepts and much makes sense.
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