How to re-invigorate British manufacturing - Business Works
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How to re-invigorate British manufacturing

Peter Kolarz of Francis Hutcheson Institute How might it be possible to re-invigorate manufacturing in Britain, and by extension in all the developed nations who have experienced a slow yet steady downturn in their manufacturing industries? To start answering this question, especially when seeking even a general guideline rather than exact details, it is worth starting with the story of the Italian coffee machine, somewhat of a 'fable' in the manufacturing world, which I have heard from several different individuals, both researchers and business leaders. I shall recount it briefly, for those who are not familiar with it.

Many decades ago, the fable goes, there was a company in Italy which produced a coffee machine. It was made exclusively from sturdy materials with no small or fragile parts; it would make a jug of coffee quickly yet not compromise the flavour. It would neither break, nor rust nor corrode, and it even had a classic, timeless design. It was a blessing to coffee-drinkers everywhere, and since production cost was no higher than that of other coffee machines, most people could afford to buy one. Needless to say, initially the machine sold well; but it was not long before every coffee-drinker had bought one. Since the machine was virtually indestructible, nobody ever needed replacements and since it was so efficient and looked so nice, hardly anyone wanted to replace it with a different one. In a world of finite coffee-drinkers, the company soon ran into hard times. It was taken over by a large kitchenware conglomerate, many jobs were lost at the factory and production of the famous machine ceased.

coffee machine

The moral of this story is of course supposed to be that producing a flawless yet relatively affordable product with long-term customer satisfaction does not lead to a long-term successful business. Though this fable is only partially rooted in reality, many manufacturers are likely to see the educational merits of its content. But what is especially worth noting about the Italian coffee machine is not so much its fate, but the social philosophy implicit in its manufacture. When we consider the story of this coffee machine, we find that the relationship between producer and consumer is completely non-adversarial: where the consumer wants a reliable, fast, practical, high-quality product of timeless design, and the producer delivers precisely that, there is no conflict of interest. Far from being a source of social conflict, this philosophical approach to manufacturing lets the market economy appear as a source of social harmony. Sadly, the fable of the Italian coffee machine leads us to believe that this is impossible.

By contrast, the dominant approach to manufacturing these days presents us with a conflict-model between consumer and producer. Sure enough, even in our fable it is the consumerís interest to have a flawless product and in the producerís interest to run a successful business. But the conflict of interest is dissolved, due to the producerís assumption that making a flawless product is precisely the key to running a successful business. The absence of this assumption creates conflict. Academic research shows us that cost cutting measures are often taken at the expense of quality, that most products are explicitly designed to require regular servicing or replacement and that good advertising and marketing can easily be more decisive than quality of product to the success of a business. Many businesses the world over take such approaches and have been successful as a result. Few products analogous to our coffee machine have come about because of it, but the businesses often survive. Yet, in the process, the market economy easily becomes a target of criticism, because its discernible benefits to society as a whole are diminished. This criticism is compounded when cost-cutting is achieved through wage-dumping and outsourcing of production staff based on the notion that excellence of those who physically create the product in question is not a key ingredient for a successful business. By accepting the fable of the Italian coffee machine and by learning and implementing its lessons, the market economy and the actors within it become vulnerable to a legitimacy-crisis and, ultimately, to wide-spread public opposition.

Francis Hutcheson

This line of thought is by no means rooted in Marxist or general left-wing ideology. Quite the contrary: considerations of this type were made by the founders of the modern market economy, the Scottish Enlightenment philosophers of the likes of Adam Smith, David Hume and Francis Hutcheson. It is in the thought of these philosophers that we find a compelling rationale for why a capitalist market economy is a good organising principle for a society in the first place. With varying emphases, they all concluded that a market economy had the capacity to ensure that the kind of products that populations demanded could be supplied to it and that in the process human virtues such as design, craftsmanship, creativity and excellence would spread. Implicit in this vision is a remarkable philosophical feat, namely a vision of society that entails both harmony and diversity; harmony through the mutually beneficial relationship between customer and supplier, diversity through the myriad of products and innovations that human creativity would yield. If it is at all possible to have a manufacturing sector that is consistent with this vision, then surely it is a direction worth moving into. But if cost-cutting and sub-optimal product design at the expense of customer satisfaction, and negation of excellence in craftsmanship are understood as being conducive to successful business, then the very idealism on which Anglo Saxon capitalism has been based from its inception is lost.

I have pursued this line of thought here in such a way that our resulting picture consists of two distinct 'capitalisms'; one, which is philosophically sound and gives a social vision and legitimacy to the market economy and another, which is generally understood to have been more conducive to business survival. If it were actually a matter of such simple distinction, there would be little need to proceed. The former model has failed and for all its philosophical let-downs, the latter will have to do. But of course it is not the case that manufacturing companies either follow one model or the other and hence either fail or succeed; implicitly, the contest between these two capitalisms rages within every business, often without clear resolution. Crucially, it is also important to understand that these are not simply two different models of capitalism, but that the demands set by one are likely to directly stifle the prospects of the other.

Examples easily come to mind of one model of capitalism systematically damaging the other:

  • if manufacturing staff live with the assumption that their livelihoods may fall victim to outsourcing even if business is going well, quality of workmanship will suffer;
  • if product designers as well as manufacturing staff are viewed either implicitly or explicitly as an unfortunate necessity rather than a potential source of new ideas, innovation and product optimisation, then these qualities will cease to arise;
  • if top-quality apprenticeships are not provided, any spirit of professional craftsmanship will evaporate.

coffee

The term 'crisis of capitalism' has crept up frequently in recent public discourse, most often in relation to financial markets, yet the crisis I highlight here in the manufacturing sector is no less significant, especially in the light of the large numbers of people employed in the sector. But unlike the case of financial markets, which baffles even professional analysts by both its novelty and its complexity, we can ascertain a way forward for manufacturing, based on a sound philosophical understanding of the market economy. If we desire a manufacturing sector that is successful as well as beneficial to society as a whole, it is important to understand the fable of the Italian coffee machine not as a thinly disguised lesson in economics, but as an indicator of a dominant viewpoint that is not necessarily based on truth. Product-centred manufacturing that does not compromise on quality or labour costs is after all alive and well, foremost in manufacturing powerhouses like Germany or Japan. Abundant social research has shown that elaborate apprenticeship systems, elements of bottom-up decision making and expertise, as well as a social understanding that outsourcing and wage-dumping are social ills, have led to highly productive manufacturing sectors in these countries, capable of maintaining long-term market shares even through tough economic crises; moreover, more often than not the results are products with reputations of long-term quality and reliability; products, in short, that make the world a better place to be.

Though it is rarely mentioned, such approaches to manufacturing are not unheard of in the Anglo Saxon world either. From jet engines to guitar amplifiers, UK companies manufacture products that have established a long-term reputation for quality that is second to none, with business models that are not unlike the one behind our Italian coffee machine. These product-centred approaches to manufacturing have come to be seen as belonging to other 'capitalisms', frequently termed the Japanese or the Rhenish models. But nothing could be further from the truth: these approaches are absolutely in the spirit of the Scottish Enlightenment, the philosophical foundation of the market economy. Yet, precisely in the lands of its inception, this approach to manufacturing has been curiously sidelined, and given the results yielded by cross-national comparison, this development has been for the worse.

The conflict that rages in many businesses between product centred and non-product centred manufacturing is profound and devastating. Product-centred manufacturing is not unworkable in and of itself; it has been directly hampered in many cases by complete or even partial implementation of its alternative. As I have highlighted here, there are cultural, philosophical and, indeed, economic reasons why building the perfect coffee machine might be an advisable move after all.



Dr Peter Kolarz is a sociologist with particular interests in globalization, political sociology, political economy and variations of capitalism and is Director of Research of the Francis Hutcheson Institute. He can be contacted by e-mail.




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