Houston Economy – Manufacturing and Transportation Sectors
Ayn Rand’s John Galt could not have built a better machine than Houston’s sturdy economic engine of today. In her epic novel, “Atlas Shrugged,” published 50 years ago, manufacturing and transportation were Rand’s focal points in the plot to stop the engine of the world. Rand understood the importance of business growth, entrepreneurialism, and free market capitalism as the sparks that empower commerce and economic health of a society. The same precepts are true today and are alive and well in Houston.
Houston’s current standing as one of the “hottest cities for business in the nation” is due, in large part, to its business-friendly culture, its position as the No.1 manufacturing employer, having one of the most rapidly growing populations, and its strategic geographic location for conducting international commerce and transportation.
Between 1990 and 2005, a time frame long enough to encompass an entire business cycle, Texas’ overall factory output eclipsed all other major manufacturing states and is currently the country’s leading exporter of manufactured goods. A longer-run perspective shows that Texas’ share of the nation’s manufacturing base has been rising for over four decades. As a result, Houston is well-positioned to enjoy continued growth in its manufacturing sector and has significant advantages that favor this industry. Among them are a stragetic geographic location, excellent distribution facilities that include one of the world’s largest seaports, a fast-growing and flexible labor market, economical land and construction costs compared with other parts of the country, as well as an affordable cost of living. In addition, the proximity of Mexico’s assembly-for-export plants, known as the maquiladora industry, has influenced many manufacturers to locate or expand their operations in the state in order to utilize these nearby partners as effective links in their highly efficient supply chains.
Houston’s commitment to investing in research is clearing the way for continued prosperity for manufacturing as well. With more than 400 public research centers scattered throughout the state, Texas has a formidable scientific research base from which to feed. In May, the National Project on Emerging Nanotechnologies announced that Texas joins California and Massachusetts as the states with the highest number of nanotechnology entities. Why is this a boon to Houston? It is predicted that by 2014, 15 percent of all manufactured goods, roughly $2.6 trillion worth, will incorporate nanotechnology. This should help people realize that this “nano” thing is big and Houston’s manufacturing presence is ready to play a strategic role in this emerging technology. Another windfall result of Texas’ proactive approach to emerging technology, is its newly achieved position as the nation’s top producer of wind energy, surpassing California. Evidenced by University of Houston’s federal grant award for wind turbine research, Houston is positioned to play a leading role in this evolving sector that promises new manufacturing opportunites for the city. “This is the birth of a new industry here in Texas,” said Texas General Land Office Commissioner, Jerry Patterson. “Once we build these test facilities, the wind turbine and blade manufacturers will come.”
As with manufacturting, Houston’s international commerce and transportation sector is trucking along in the speed zone and will not be putting on the brakes anytime soon. Houston’s Gulf Coast has long powered the growth in southeast Texas and has seen its trade activity more than double since 2003. The Port of Houston is a primary port of entry for goods coming into the US market ranking first in the country in foreign tonnage, second in total tonnage, and is the sixth largest port in the world. Houston’s upward movement as a major player in international commerce, continued influx of business relocations, increasing worldwide trade, the benefits and advantages associated with Houston’s Foreign Trade Zone, and the city’s ongoing investment in the expansion of port terminal facilities paves the path for continued acceleration to a lead position in international commerce.
Texas’ business friendly slogan, “Open for Business,” and Houston’s pro-growth, no nonsense politics are major factors driving developers and other capitalistic-minded investors to Houston. The city’s upward movement as a major player in international trade and transporation and its deep-rooted emergence as a top manufacturing hub, will keep Houston’s economy a target of interest for those who are looking for acquisitions in these industries. Houston is already experiencing a high level of business transfer activity of privately-held enterprises as reported by area business brokers and is expected to continue for the foreseeable future as individuals, private equity groups, corporations, and business owners from other countries look to Houston, and Texas in general, in order to take part in its expanding economy and promising future outlook. In Wall Street Journal’s May article, “The Realignment of America,” the graphic used to illustrate the story looks like everybody is headed to Texas.
There is a Small Business 101 lesson to be learned from Rand’s fictional village, Galt’s Gulch, that she invented in “Atlas.” It was a refuge for industrious, ambitious people — the pistons that drive the engine of society — to continue their chosen fields of endeavor without the yokes of over taxation or regulation. While Houston is not a hidden sanctuary as was the Gulch, it “is a land of buccaneering capitalism” (The Economist, 2002) and embodies practical principles by which to realize the same ideals in today’s global marketplace.