The Important Role of Manufacturing in Economic Development (+gone wrong)

Manufacturing plays a crucial role in economic development. 

It’s what provides for the local economy, the culture, and the population to thrive.

In fact, manufacturing is what generates employment, fosters innovation, drives exports, and stimulates growth. Plus, manufacturing does far far more.

When done right, manufacturing produces free cash flow that can 

• Create a wonderful lifestyle 
• Give back to the community
• Give you freedom 
• Give you more choices 
• Let you achieve sovereignty, and 
• Much more.

What could be more important than this, to an individual, local, regional, or national economy?

Nothing. 

Manufacturing, and the infrastructure for private ownership, is arguably the most important activity of any sovereign nation.

Without this, a dangerous environment of anti-free enterprise, communism, monarchy or worse could be the alternative.

For an excellent resource on what a world without manufacturing in a free enterprise environment might look like, go here:

What Would Happen Without Free Enterprise? (6 bad things)

Onward.

Manufacturing in a healthy environment fosters strong competition among producers  and gives customers more options. It creates more opportunities for manufacturers to improve, and manufacturing gives countries the ability to create and deliver a better product to the marketplace while crafting better trade deals for all parties involved.

As we get started, here are some excellent resources that will be very helpful for you to better understand the important role of manufacturing and how it impacts how we do business locally and around the world:

• What is the Deglobalization Trend? (vs Globalization)
• The Advantages and Disadvantages of International Marketing (+benefits)

Today, while the amount of opportunity and breakthroughs are at an all-time high, history has taught us that manufacturing success is not a given and not always “rainbows and unicorns”.

In this article, we look at why manufacturing is so important in economic development. 

We also review why I think you need to be in manufacturing and why your future and the future of your children and their children literally depend upon a robust manufacturing environment.

With that, we also briefly review some of the most devastating examples in history of what has happened when monopolies, communism or outright theft in manufacturing is allowed to occur. 

Let’s get started.

The Role of 6 Incredible Economic Development Benefits of Manufacturing

In this article we explore six ideas behind what makes manufacturing truly wonderful, and the driving force of freedom of choice, sovereignty and wealth and prosperity creation.

These factors are literally the driving force behind human creativity, innovation and virtually provides a reason for existence by delivering better products to the market.

Let’s dive into the significance of manufacturing by briefly examining Ford Motor Company. 

While it may sound antiquated to you, Ford Motor Company serves as a solid example because they provide a great example of leading a positive change in economic development through manufacturing. 

With profound impacts on the U.S. economy, Ford's manufacturing operations have revolutionized industries and shaped economic advancement -- and highlights why manufacturing is pivotal in driving economic development.

1. Job Creation:

Manufacturing is a key driver of employment generation, offering numerous direct and indirect job opportunities. 

The Ford Motor Company trades on the NYSE: F and provides an excellent example of this. Established in 1903, Ford became a catalyst for a significant increase in employment levels in the automobile industry. 

While I am not a fan of NPR largely because they come across as a propaganda tool, they do a decent job of proving a few of the products lines and major purchase in a timeline here.

At a very high level, and through its mass production techniques, such as the assembly line, Ford created jobs in assembly, manufacturing, engineering, design, research, and development.  This helped Ford advertise and promote some very creative methods of hiring workers with better pay, less hours and out in place some innovative techniques for scaling up production.

As Ford expanded its operations across the United States, workers relocated to find employment, resulting in the formation of regional hubs that benefitted from the influx of job opportunities. 

This led to an improvement in living standards, increased disposable income, and overall economic development in those areas.

2. Technological Progress:

Manufacturing also drives technological progress, fostering innovation and setting the stage for advanced industrial practices. 

The Ford Motor Company's contributions in this regard are notable. 

Ford's manufacturing techniques, such as the assembly line, revolutionized the production process, significantly reducing the time and cost required for car manufacturing. 

This innovative approach not only revolutionized the automobile industry but established a benchmark for other industries to adopt similar production methods. 

The advent of automation, robotics, and artificial intelligence further demonstrates how manufacturing fuels technological progress. 

These advancements have led to improved efficiency, precision, and productivity, allowing manufacturers to produce goods faster, cheaper, and of higher quality. 

Consequently, technological progress spills over to other sectors of the economy, propelling innovation and growth.

In fact, it was many of these innovations, incluiond the Just-In-Time method that fueled auto makers in Japan to develop the Toyota Prodution System. Also inspiring Lean Manufacturing and Six Sigma.

All these concepts have profoundly and positively impacted the world of manufacturing over the last 120 years, and are responsible for inspiring countless billions of dollars.

3. International Trade and Export Growth:

Manufacturing acts as a vital engine for international trade by creating goods that can be exported and, in turn, contributing to economic development. 

Ford's manufacturing operations have played a pivotal role in fostering international trade growth for the United States. 

By producing vast quantities of automobiles at affordable prices, Ford established itself as a global exporter, propelling the growth of the country's export sector.

This, consequently, led to a significant spike in foreign exchange earnings, balance of trade surplus, and economic development. The export of manufactured goods generates revenue and also enhances a nation's global competitiveness. 

By exploring accessible foreign markets, manufacturers like Ford create a domino effect, encouraging various supporting industries to develop, such as:

•  logistics, 
• distribution, and 
• marketing, further stimulating economic development.

For two excellent and very helpful articles, go here:

• What Does a Free Trade Agreement Do? (examples)
• How Will CAFTA-DR Benefit Consumers? (Costa Rica vs Honduras vs US)

4. Economic Growth and Multiplier Effect:

Manufacturing drives overall economic growth by creating opportunities for investment, improving productivity, and strengthening the overall economic fabric. 

The Ford Motor Company exemplifies how manufacturing acts as a catalyst for economic development. 

By generating profits and reinvesting in research and development, Ford stimulated economic growth. 

The company's expansion led to the growth of ancillary industries, including steel, rubber, glass, and petroleum industries, among others. 

This multiplication of economic activity, commonly known as the multiplier effect, enhances employment generation, boosts demand for raw materials, and stimulates local economies. 

The development of a strong manufacturing sector generates more revenues for the government through taxes, contributing to public investments in infrastructure, education, and healthcare. 

5. Flow of Capital

Now we get into two topics that are at the core of especially healthy economies and vibrant societeies.

The first is a robust flow of capital.

This topic is not discussed too much as it realtes to manufacturing.

But it is absolutely crucial and top of mind for the biggest policy and decision makers on the planet.

Flow of capital simply means exactly as you think it would: the flow of money for the purpose of investment, trade or business.

And this is where you need to expand your thinking.

One of the most important benchmarks for any economy is how much capital is entering, and how much is exiting.

There are several tools for measuring this, but one of the largest is the Bond Market.

Don’t worry, this sounds complicated, and can quickly become very complex, but at its core, it is very simple.

The Bond Market is a reflection of the health of national economies, and, more importanly, how a national economy relates to other economies.

For example, the US 10 year bond yield is currently trading at 4.23%. This is known as the risk-free rate and is a benchmark against all other investments. 

For example, if you are going to purchase a share of AT&T stock which currently yields 7.56%, is the risk of putting your money into AT&T worth the return as compared to the no-risk of putting your money into a US treasury earning a lesser, but more stable return? This is a question every investor asks themselves.

With a history of innovation and growing manufacturers in a free enterprise environment, including Ford, Apple, Boeing and more, the US is known as being a stable economy where global capital offers a safe, reliable return on capital.

This means that when people and institutions are looking for a place to park their money, the risk is less than if they put it in a country such as Uganda which is currently offering 16.03% on their 10 year bond. This is not to say Uganda is bad, far from it, Uganda is a wonderful producer of tea, coffee and sugar among a lot of other necessary products. 

For this example, the question becomes, is capital more apt to flow to the United States earning 4.23% or Uganda earning 16.03%. The answer isn’t always just about who wants the highest return.

It’s also about the risk of the investment, the foundation of the economy, the political environment, the stability and history of the manufacturing infrastructure and more.

In this case, many institutions prefer to put their capital into the safety and reliability of the US 10 year bond.

This core concept is quite literally one of the most important results of an economy’s highly fucntionaing manufacturing environment.

And unfortunately, this flow of capital is at the heart of many international conflicts (more about that at another time).

The final and second that is also not talked about too frequently as it relates to manufacturing in an economic development, but it is quite possible the most important of them all, is #6.

6. Personal rights, freedoms, and sovereignty

What in the world does manufacturing in economic development have to do with personal rights, freedoms and personal sovereignty?

Everything.

Without the ability to freely make your choices and live a sovereign life, you have nothing.

Just look at history.

The United States was founded on a new idea of personal sovereignty and personal rights, and it wasn’t that long ago.

It was built on the foundation of a Constitional Republic, giving citizens the freedom of choice, freedom of speech and the freedom to make their own way in life.

This had never been done before, and the Empires resisting this movement were not enthused. Far from it. 

This means the United States is a country of laws and not a country of men.

For example, not that long ago, people that lived in Britain did not want their lives to be ruled by a King void of personal rights and who wanted the ability to chase opportunity of their choice -- literally desiring to manufacture what they wanted in order to take care of their family.

They quite literally got on a boat and left the tiny British island -- who has no natural resources -- and traveled to the Americas.

It didn’t take long for the British Empire to realize they were losing control of what they deemed were their property -- their people -- and capital would flow elsewhere, out of the control of the British Empire.

The British Empire saw that manufacturing and innovation was on the rise in the Americas.

And this is why the British Empire created the American revolution, they burned the White House down in 1812, they created the Civil War, and they did far worse early in the 20th century (1905 - 1945) -- again, all for the main reason that they wanted to stay in control of capital and keep it from leaving the British Empire and moving to the United States (and other parts of the world). 

After all, the US was rapidly becoming a more friendly business environment based on free enterprise, a legal structure that empowered personal rights and freedoms and a healthy manufacturing economy -- all of which the British Empire despised.

So, the British Empire did not simply give up at the moment Cornwallis lost the Battle of Yorktown. Far far from it. In fact, this was simply “the last battle” of the American Revolution and the source of the British-inspired historical narrative (as part of their strategy to frame the history books to the young people of the US). 

In fact, Cornwallis losing to the Americans at Yorktown was just the beginning in how the British began to fight the Americans in many other ways. 

They immediately set plans to begin attacking the United States banking and financial system, political system, education system and even the media in order to change the flow of global capital away from the US and develop manufacturing controls over the Americans in the 18th century (but more about this as it relates to manufacturing in economic development at another time).

Here’s an example… 

A classic example of a monopoly is the De Beers company (founded by Cecil Rhodes also of the Rhodes scholarship initiative of the University of Oxford, started in 1902), who had the monopoly on the supply of diamonds, chiefly from extracting the natural resources from South Africa using many less than ethical strategies (to say it mildly). (Important: Remember this infusion into the education system and very poor manufacturing procedures that only an Empire could do).

De Beers and Cecil Rhodes once had 80% of the diamond market and could control the market and the prices. Over time, when additional diamond mines were discovered buy other producers, their monopoly position dwindled to about 30% of the market share and forced them to focus on producing more value in other areas of the market.

For more information about monopolies, go here:

Monopoly vs Monopsony: The difference (+examples)

Onward.

Is this the Single Greatest Innovative Role for Manufacturing in Economic Development?

One of the most important inventions that was introduced in the 1800’s was the Limited Liability framework. This has quite possibly done more to lift people out poverty and enter upper echelons of income, capital, wealth, freedom and personal sovereignty than almost any other government program.  

A little more than 100 short years after the Civil War, America’s first LLC started in Wyoming in 1977 (Thank you Wyoming -- entrepreneurs in the US and from acros the globe are eternally grateful to you!). 

Today there are over 21 million LLC’s that have been formed. Most people assume that an LLC stands for Limited Liability Corporation, but LLC stands for Limited Liability Company.

The LLC is so important because it creates a business entity that gives protection against personal liability, provides options for obtaining credit and capital financing, has flexibility for management and ownership, and is easy to form and provides for flexible taxation.

For very helpful resources about gaining capital and money for your manufacturing business, visit these two articles :

• The best places to get operating capital for a manufacturing business
• How Do You Finance a Marketing Campaign for Business Growth? (7 ways)

It is the LLC legal structure and the foundation of manufacturing in the United States, the control of capital, free enterprise, personal sovereignty and the opportunity to create the life of your choice which is so critically important. 

It is these important systems that is 100% anti-thetical to the history of the British Empire and their feudal system that they have worked for over 300 years to develop and (re)gain control over.

This is why it is absolutely critical for you to build and market your manufacturing business. 

You can develop the life of your dreams and help secure your future generations by your manufacturing plans you develop today.

For more information about the importance of having an LLC, and for setting up your manufacturing company in one, go here:

What is the Point of Having an LLC? (+Pros and cons)