Meaning Is in the Eye of the Beholder: Defining Today's Western Economy

Recently, when speaking to journalists about the make-up of the Irish and European economy, I found myself amazed at the way we use certain words and the subsequent meanings we attach to them.

At a mid-year media briefing in Dublin, investments by a slew of Ireland's major overseas companies were featured during the presentation. The companies cited were: Cisco, Microsoft, PayPal, Allergan, Boston Scientific, Apple, Eli Lilly, Abbott, De Puy, Amgen, Cook Medical, IBM, PepsiCo and Hewlett Packard.

An attendee noted that the list was a very impressive as a corporate roll call, but pointed to the heavy representation of service companies, rather than manufacturing companies, in the list.
While this would seem undeniable, it bears further examination.

In Europe and the U.S., the word "manufacturing" is used often and the need to create more jobs in the sector is an ever-present challenge. However, because of the word's frequent use, we never reflect on what we mean by this.

Today's use of the word evokes images of an old style industrial manufacturing where a physical item, most likely a machine part or a component, is produced from an assembly line.

When it comes to connotations on the service side, we tend to lean towards tradition as well. It usually involves an individual seeking services such as legal advice, an oil change, or even a haircut.

Statistical agencies and economics departments of course have their own more rigid definitions and categorization models, but the whole process seems very subjective.

Countries like China and Germany are described as "manufacturing'' economies, while countries like the U.S., the U.K. and Ireland are described as service economies.

Of course, these terms are very loosely applied to each respective country.

Statistics show that China is a major services economy, just as the U.S. is still a major manufacturing economy. Germany is likewise a powerful competitor in both economic arenas.

It is the same for companies. Many of the world's leading pharma and bio-pharma companies are not seen by many observers as manufacturers, but that is precisely what they do, alongside their research work. The case is even more compelling for the big IT and ICT players, many of whom produce very utilitarian products like chips, hard drives, screens and, in Apple's case, a whole suite of innovative personal devices.

Increasingly, the economics profession cannot keep up, as most global corporations nowadays are stretched over a range of disciplines, from manufacturing, to services, to merchandising. In Ireland that is certainly the case, as many of the Ireland's long list of foreign companies do services and manufacturing, often mixing the two at the same site/facility.

Of course manufacturing has long been written off in the western economies, but it remains durable. It is just that the process is often categorized in a different manner.

The sector in the U.S. and Europe is also currently proving resilient despite a slowdown in many global economies. This might explain why in recent days, private industry in the Euro Zone expanded for the first time in more than a year in July. This month was also a good month for U.S. factories.

So manufacturing, in all its forms and types, is likely to remain a major lynchpin of economies all over the western world for some time, even if we like to use different words to describe the activity.