It seems to me that the government needs to stop trying to reorganize free enterprise, especially the agencies, politicians, and bureaucrats who don’t exactly understand it. Now, I would like to give you an example if I may: it has to do with the concept of cluster manufacturing. Here in the US they seem to form spontaneously as it provides synergies and that helps to make more profits and also solves business challenges. OK let’s talk.

If you’ve ever been to Collierville, TN, you’ll realize there are a ton of online catalog companies there. Why do you ask? Simple, it’s next to Memphis, TN, which is the FEDEX hub. That is, those companies can take orders up to 10 pm and still ship them with guaranteed delivery anywhere in the US by 10 am the next morning. That solves a problem, it gives carriers an advantage, and no government agency told any of those companies to do this, they just did it because it makes sense: it solves a problem and fills a need. Ok, another point maybe.

According to a press release from the DOE (Department of Energy); “Obama Administration Launches $26 Million Multi-Agency Competition to Strengthen Advanced Manufacturing Clusters Across the Country,” published May 29, 2012, which read;

“to foster innovation-driven job creation through public-private partnerships. These coordinated investments will help catalyze and leverage private capital, build an entrepreneurial ecosystem, and promote cluster-based development in regions across the US.” This is the third round of the Jobs Accelerator Competition, which is being funded by the EDA and NIST, the DOE, the Department of Labor’s Employment and Training Administration, the SBA, and the NSF.

Well, Holy Toledo with all these big and powerful agencies involved, is it sure to be a winner? Are you kidding, what a bureaucratic mess? Apparently this administration can’t get anything right, and they take credit for trying, never blaming for the actual outcome. After all, when these things go wrong, well, it’s always someone else’s fault, never the Administration. Now, how has the “cluster industry” strategy worked in China? Pretty good, but not as good as you might think.

First, if a company is tied to buying only from companies in its own city or region, it lessens the competitive effect of bargaining for the lowest price or best technology: those are unfortunate limits that don’t have to happen. Does it make sense to have companies close to resources, mines and complementary manufacturing? Sure it does, but you don’t need a government to do it, nor should the government give special treatment to certain companies for doing it, that’s very much like crony capitalism and frankly makes companies weak, unable to compete. .

If one of the companies in the region dies in the supply chain, it puts a lot of pressure on the rest. If the government is involved, it goes to great lengths to lighten the load so it doesn’t get burned on grants, loans, pet projects, or have its reputation drugged in the mud by failure. See that point too. Ok, that’s all for now, but please consider all this and think about it.