Jump to-
Recent key developments in MAKE│NZ
•As you will remember as a regular reader, last week we started our GuessMasters® competition. This week’s question: In what decade of which century and in which country was the mechanical press break invented? To be clear, we are talking about a machine that was designed to incorporate mechanical power for bending metal, as opposed to a device bending metal using mechanical force.
Please email your guess to dieter@makenz.org . For the answer to last week’s question, and our first entry to the MAKE│NZ GuessMasters’ Honours Board, please go to the end of this newsletter.
• A return to our member company introductions, this time with the previous owner of Metalcraft Engineering, Bryn Thompson
MAKE│NZ: What was the first product manufactured by your company?
Bryn: 1990 the first item fabricated was a Steel structure for a canvas awning.
MAKE│NZ: What role did the initial product play in establishing the company’s market presence?
Bryn: Nothing, but we still to today custom manufacture items for the domestic and Commercial sector.
MAKE│NZ: Can you share an example of how early customer feedback influenced the development of your company’s products?
Bryn: Customer feedback at all levels, CE to factory floor user allowed us to custom design solutions that meet the need of the customer. This allowed for Metalcraft to focus on Flat glass and Window handling / Transport solutions that became world leading.
MAKE│NZ: What were the key factors that contributed to the success or failure of the company’s early manufacturing efforts?
Bryn: Failing and making mistakes early, as we look back, we can see the lessons learnt from the early days. Failing fast allowed us to have a focus on product design and usability for the customer, then we were able to standardize the products to allow the customer to also standardize and implement safe and productive handling and transport solutions.
-Bryn Thompson, Previous Owner of Metalcraft Engineering
• We are excited to have found – with the help of the good people running the MBA programme at the Business School at the University of Canterbury – a full-time MBA student who will do research on the reasons why (young) people in Canterbury choose to take up a career in manufacturing – and why many others choose not to.
Over the years, there has been no shortage of casual observation and subjective impressions on the reasons behind (not) taking up a career in manufacturing. But there has been very little hard data. Hopefully, this project can move things along on this important question – see also below. Part of the project work will involve interviewing apprentices and others who have recently entered our industries. We hope that we can count on you to help the student with that aspect of the study by making access available to your employees in that category.
Clip of the week: Every now and then we’ll provide a link to video clip that might be of interest to our readers. We’ll start with a recent Bloomberg TV interview with the CEO of ASML, Christophe Fouquet – https://youtu.be/UvnhLZi-f_A
Recent key developments in New Zealand
• Saw this – another lament about New Zealand’s poor productivity – on Thursday, rolled my eyes inwardly and thought “Oh no, not again!” https://www.rnz.co.nz/news/what-you-need-to-know/531816/what-s-productivity-and-why-do-we-keep-hearing-about-it
But then this quote by Eric Crampton caught my eye: “I think the single biggest impediment to productivity improvement is our land use planning and regulation system. It hurts productivity directly, by making it far too costly to build anything, and indirectly, by completely messing up urban land markets.” … and there was also an indirect effect: “If you don’t let people build more housing in places where people want to live, or more restaurants and offices and supermarkets in places where those businesses make sense, nothing in a city will really work right.”
Now, Eric Frampton isn’t just any old economist. He is the chief economist at the NZ Initiative, and an expert of some renown with a Ph.D. in economics. If he says, in essence, that the best way to improve productivity in New Zealand is to build more houses and the associated restaurants and supermarkets, that’s worth taking a look at.
To do so, let’s start with how productivity stats used when we compare ourselves with other countries are measured. It’s simply the country’s GDP, divided by the size of its population – quite a crude measure, indeed; a slightly more refined measure would be GDP per hour worked.
So, New Zealand’s productivity is the total GDP divided by the number of New Zealanders. Here is the breakdown for selected industries for last year, comparing manufacturing and industries that are entirely, or at least partially, related to “building more houses”:
At first glance, Dr Crampton’s argument appears to make sense. Let’s build more houses – it’s something we appear to be really good at, and it’s the biggest part of our economy anyway. And we need more houses, so they become more affordable, right? Well, it gets a bit more complicated than that, reflecting the idiosyncrasies of how GDP calculations work. If we were to build a lot more houses, significantly driving down house prices, New Zealand’s productivity would initially go up, due to the construction boom, but then drop back, because all of the above – apart from construction, are positively linked to house prices. Cheaper housing, with lower rents and mortgages, and lower real estate fees, would lower the sector’s contribution to GDP and, given its importance for our economy overall, drive down productivity.
However, we do need affordable housing for everyone – it is an essential part of our quality of life. How much of it may be another question. Not far behind Australia, and on par with the USA, New Zealand has the second-highest median area of residential living space per household (~202m2) and per person (~ 75m2) in the world. Nothing wrong with that, as long as we are conscious of the associated opportunity cost.
There are a couple of fundamental considerations that come into play here:
* The way we calculate GDP in New Zealand, it is essentially a value-added measure (Production Approach); details can be found here
* If we take a very simplistic example of an owner-occupied, mortgage-free home at median value (currently $781,000), that asset’s contribution to GDP will mainly come from the imputed rent, and all the cost of all the services associated with home ownership
* If we invest $781,000 in a new machine in a high-value manufacturing operation, that machine – year-after-year – is likely to create value (output minus inputs) at a (much) higher rate than the home mentioned above. It is a more productive asset. Not to mention employment for an operator likely to get paid significantly more than a job in a restaurant, or a supermarket, as suggested by Dr Crampton
* All of the activities associated with ‘housing’ are part of the non-tradeable part of our economy – unless it’s rented to an overseas tourist via Airbnb. Manufacturing activities are part of the tradeable sector of our economy, meaning its output can be exported – and much of it is, of course. And that is something we’ll need (much) more of if we want to tackle our balance-of-payment deficit, mentioned in our newsletter. #14.
But all of this has been said before, of course …
Recent key developments in the World
• Sometimes three pictures are enough to tell a story:
The graph above shows the proportion of children in higher education (> year 6, usu. 15 year-old) in each country who have not attained the knowledge in mathematics and sciences required for PISA Competency Level 1. That means these students cannot demonstrate even the most basic types of mathematical literacy that PISA measures. They are likely to be seriously disadvantaged in their lives beyond school. For science, that means these students are not at a level where they can use basic or everyday scientific knowledge to recognise aspects of familiar or simple phenomenon. They are unable to identify simple patterns in data, recognise basic scientific terms and follow explicit instructions to carry out a scientific procedure. Data for the above were compiled combining the results from the following evaluation frameworks: PISA, SERCE & TERCE for Latin America, and SACMEQ & PASEC for Africa.
The graph above provides an indication of the age distribution for each country across the world by representing the largest age cohort in each country. Unfortunately, this data indicates a fairly strong trend – the younger population, the lower educational levels are, at least for maths and science.
Total Female Fertility Rates in the graph below indicate which populations in which countries will grow, and which will shrink, in the future– the green shading indicates populations that are stable at their current level.
I’m sorry, this is not a good news story. What it means is a future trend where the world’s population in total will – at least for many years – become less well-educated in mathematics and sciences. What that means for manufacturers all over the world is that the global competition for talent will become more intense. Even more reason to educate our own well and make it attractive for them to stay once they have completed their education and training.
• And the correct answer to last week’s GuessMaster® question is – GOLD!
This also makes for an interesting lesson in the care required when interpreting statistics. There is, of course, not much gold being dug up in the Swiss Alps. That’s why, when we look at the net data (export value minus import value), gold pretty much disappears and the real powerhouse of value creation in Switzerland comes to the fore – chemical and pharmaceutical products, with a strong contribution from machinery and equipment (including watches, of course) as well, still contributing more than insurance and financial services.
But back to gold – how come? Switzerland refines approximately 70% of the world’s gold. The country imports unrefined gold and exports it in its refined form, with very little value actually added. Why Switzerland? A combination of tradition and the reputation of the country’s banking system, and the country brand in general, making it a safe place for the gold itself – and the information where it’s coming from, and where it’s going. As a newsletter published by the Swiss Broadcasting Corporation put it “A discreet crossroads for the world’s gold.”
There are various reports on the level of illegal gold mining, with some estimates saying that 80% of the 20% of gold mined in small-scale operations should be considered illegal. In many African and South American countries where gold mining occurs close to or more than half of it is considered illegal.
And the winner is:
Leave a Reply
You must be logged in to post a comment.