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You want proof?

Oct. 8, 2009
Robert E. Brooks Editor Throughout my column-writing career, an annual Buyers Guide issue has been a venue for reminding readers that buying equipment, products, and services improves and enhances their business prospects. In a ...

Robert E. Brooks Editor

Throughout my column-writing career, an annual Buyers Guide issue has been a venue for reminding readers that buying equipment, products, and services improves and enhances their business prospects. In a very broad sense, it was a statement of the theory of supply-side economics: when businesses (and individuals) pursue their agendas and ideals with minimal regulation and complication, they can maximize their growth, i.e., revenue. On the strength of that freedom, the theory goes, businesses and individuals spend and invest as an expression of their determination to improve their circumstances. The volume of spending that results leads to overall economic growth.

Supply-side economics is a theory that proved to be correct for most of the past three decades, and much of the proof was seen in the benefits gained by manufacturing industries, including forgers. Consider all the new and updated forging operations, as well as the demand for forged components from automotive, aerospace, power generation, general industrial equipment, and other markets, over this period. Consider also the expansion of the global market, and the rapid evolution of new products and technologies. The development and growth over this period has been supported by policies inspired by the supply-side theory.

But, it’s only a theory and it’s not perfect. It has had many critics, and their most sustained criticism is that supply-side economics rewards greed. This is a matter of perspective. It is true that under these policies, underperforming business and individuals very quickly lose their standing. When buyers have maximum freedom to make choices, they will choose the best quality products at the most desirable price. Supply-side proponents say the policies promote excellence and reward the best performers. It’s no mystery why the period of supply-side policies has coincided with the spread of management techniques like Lean Manufacturing, Six Sigma, and TQM, and the prevalence of “best practice” analysis. Businesses and individuals that maximize the value of their products and services will thrive, and those that do not, will not.

Over the past year, we’ve entered into a new era. The theory that prevails now is not that business and individuals should have the maximum freedom to make their own choices, but that they should be directed by economic policies implemented to achieve specific goals. More specifically, this managed-growth theory contends that large outlays of public money in particular sectors and enterprises will stimulate economic activity.

This theory contends that managed economic growth will be more stable, and the benefits will be distributed more evenly (or in some explanations, more fairly.) The sectors and enterprises designated for stimulus will employ many people and support many suppliers, and the cumulative effect of all this will be general progress. The policies that follow from this include the $787-billion federal stimulus program enacted in February, and the various investments of federal money in particular companies or industries.

We shall see how well this theory compares to supply-side theory. Early indications are that there is some economic recovery in recent months. The September Purchasing Managers Index presented by the Institute for Supply Management indicates that the U.S. manufacturing sector is in growth mode, with both new orders and production levels increasing for a second consecutive month. The survey also suggests an overall economic expansion is in progress.

Is this growth sustainable? Is it stable? Is the theory that supports these policies a sound one? Are these policies an effective implementation of the theory? How will it change the way businesses and individuals manage themselves? All of these are questions we cannot answer, yet.

But, without more proof I’m staying with the argument I’ve made over many past Buyers Guide issues: Don’t wait for answers to these questions. Act now to improve. Develop a plan for your own growth. Find the suppliers that suit your plan. Stimulate your own activity. It takes too long to prove a theory.

About the Author

Robert Brooks | Editor/Content Director - Endeavor Business Media

Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others.

Currently, he specializes in subjects related to metal component and product design, development, and manufacturing—including castings, forgings, machined parts, and fabrications.

Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)