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Written by Mike Buetow   
Sunday, 31 May 2009 18:37

Caveat Lector

In the wake of the economic meltdown, countless trees have been felled in the name of the great debate over the role government should (or should not) take in aiding businesses. It’s a timeless question, with its modern origins dating at least to 1925, when President Calvin Coolidge told the American Society of Newspaper Editors (in a quote much butchered by history and journalists since), “[T]he chief business of the American people is business.”

The debate ensues. North Carolina recently awarded Henkel a $206,000 grant to expand a company facility that produces electronics adhesives. Henkel plans to invest nearly $24 million and create 103 jobs at an average annual wage of $54,763, plus benefits, during the next three years, so it would seem likely the state will come out ahead in its gambit.

Not every such effort pays off. A May 17 story in Detroit Free Press revealed that in more than half of Michigan’s 195 tax credit incentives between 1999 and 2005, the company received either partial benefit or none at all because it failed to create the promised jobs. One company specified was Jabil, whose potential $14.5-million tax break went unrealized because the company never reached the goal of 451 workers. This we know: Every time government steps in, the hue and cry is sure to follow.

Elsewhere, China’s government, whose businesses for decades were effectively closed to the outside world, decided the winners and losers among its tens of thousands of companies. The heavy-handed approach didn’t stop when China began its not-quite-finished transition to capitalism. Until recently, in fact, China determined which of its domestic companies would be permitted to pair up with multinational firms. That’s not what Adam Smith had in mind when he coined his “invisible hand” hypothesis, yet China is the poster child for some who wish to take issue with every move the American government makes.

What, if anything, should government do? One possible model is that of Singapore, whose legislators are bent on solving the infrastructure problems that industry cannot crack on its own. As longtime circuits assembly contributor Susan Mucha details this month (pp. 13-16), no fewer than four standalone organizations (not to mention a pair of sub-units) under the city-state’s Ministry of Trade & Industry help to foster the businesses located there.

These agencies manage every angle from top-down economic strategies to individual company financing, capabilities and management development, technology and innovation, and access to international markets. Some are aimed at small- and medium-sized enterprises, loosely defined as less than S$15 million ($10 million) in net assets or fewer than 200 employees. For example, the Growing Enterprises with Technology Upgrade (GET-Up) program seeds SMEs with engineers and scientists for up to two years, providing them with R&D and technology expertise to improve production processes or develop products. (IP created during the engagement often is owned by the host company, says Stephen Wong, director, Industry Development Office at the Singapore Institute of Manufacturing Technology, or SIMTech.)

The process for engaging is quite simple, Wong says. A company submits a request for help, including data demonstrating how the seed engineers would enhance growth. Suitable candidates are identified, and they visit the company to scope out the work to be done, and an assessment is made as to the fit and viability. Much like the National Institute of Standards and Technology in the US, the researchers are full-time staff, although unlike NIST, their charter extends beyond that of standards and technology transfer to more company-specific technology development.

The agencies are not-for-profit and measure their success on the research outcomes that lead to economic benefits and enhance industry competitiveness, Wong says, ticking off a series of specific items: “The economic impact created; the technologies transferred to industry and through staff attachment; revenue received for R&D and service projects; researchers’ spin-off to industry; high quality scientific publications and patents, etc.”

It says here the US falls short in its support of basic research and core manufacturing processes. SimTech addresses this by working in concert with universities, which tend to do more blue sky research, while its parent, the Agency for Science, Technology and Research (A*STAR), researches cutting-edge, industry-targeted technologies.

What’s instructive here is that Singapore has established a formal infrastructure to help smaller companies improve at a much lower cost than they could on their own. Unlike China and, perhaps, the US, Singapore’s government appears to be listening to its manufacturers and not trying to determine who wins and fails. Still, it’s unclear whether such a model would work in the US, which is divided by sharp differences in its business-government philosophy, size and geography, which often can make just getting the word out an impossible task.

Yet isn't doing the impossible what Americans are good at? Coolidge historians claim his true motive was to impress that American idealism, not the pursuit of wealth, is our chief motivator. As a characterization of our citizenry, he may be right. But isn’t that the right investment for government, too?

 

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