Everyone knows story about the goose that lays golden eggs. I was reminded of this fable when news surfaced about a letter sent by Caterpillar’s CEO to Governor Quinn, expressing concern about the direction of the Illinois economy.
In recent years, much has been made of the growth of the service economy and the perceived decline in manufacturing. Pundits assert that our “geese” are now intangible things like knowledge, information, and innovation. While I am not denying the importance of these economic segments, are we confusing the eggs with the geese?
Knowledge, information, and innovation are the outcomes of human activity; and without the underlying activities, they cannot grow and develop. They spring from research and development that is tied to manufacturing. A National Science Foundation study showed that most R&D is conducted by companies in manufacturing and related sectors, and the rest is focused on the development products that somebody, somewhere, will have to manufacture.
You know where I am going. Manufacturing is indeed the golden goose for the state of Illinois and the U.S. economy. Unlike geese that are tied down by static natural resources, manufacturers really can fly. They are mobile. They can easily shift production among domestic and international facilities – to supportive areas where growth is encouraged and possible.
If you study where manufacturers have re-located or expanded over the past 50 years, a pattern emerges. While Illinois has seen some growth in manufacturing facilities in industries such as construction and agricultural equipment, far more growth has occurred elsewhere, in regions that offer an environment seen as more conducive to manufacturing growth.
So we have a choice. We can ignore decades of evidence regarding the effects of our public policies on the attractiveness of our business environment. We can ignore the fact that many new facilities (“goslings”) have been built elsewhere. We can lament the decline in economic activity and lowered standard of living for our citizens. Or, we can acknowledge that we are slowly starving our golden goose.
I believe we must recognize the long term implications of our actions. It is true changing our taxation and regulatory policies to benefit manufacturing would cause a larger burden to fall on individuals and other parts of the economy, at least short term. However, the growth that we will achieve from an expanding manufacturing sector will generate far more wealth for our state’s individuals and service sector business organizations, and will also rebuild our tax base to support needed public services.
Returning to our fable… we can eat the goose now and be fulfilled, but only for a short time. Doing so would deprive us of a prosperous economic future. Now is the time to choose.
*Dr. Weinstein is a professor of economics at Bradley University and is President Emeritus of the Illinois Manufacturing Extension Center.
