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  • Made in the USA

    Written by Jeff Jacoby and recommended by Mr. Mankiw in his blog. Mr. Jacoby as I understand it is a conservative columnist in the Globe to balance out liberal views.

    Made in the USA - The Boston Globe

    IN ECONOMICS as in apparel, most fashions come and go. But like the navy blazer or the little black dress, bewailing the decline of American manufacturing never seems to go out of style.

    “They’re closing down the textile mill across the railroad tracks

    Foreman says these jobs are going boys and they ain’t coming back.’’

    So sang Bruce Springsteen in “My Hometown,’’ a hit song from his 1984 album, “Born in the U.S.A.’’ More than a quarter-century later, that sentiment (if not the song) is as popular as ever.

    “You know, we don’t manufacture anything anymore in this country,’’ says Donald Trump in an interview with CNNMoney. “We do health care; we do lots of different services. But . . . everything is made in China, for the most part.’’

    The Donald has his idiosyncrasies, but on this issue he is squarely in the mainstream.

    A recent Heartland Monitor survey finds “clear anxiety about the decades-long employment shift away from manufacturing to service jobs,’’ National Journal’s Ron Brownstein reported in December. The “decline of US manufacturing’’ is giving Americans a “sense of economic precariousness’’ — only one in five believe that the United States has the world’s strongest economy, versus nearly half who think China is in the lead. “Near the root of the unease for many of those polled is the worry that the United States no longer makes enough stuff.’’ When asked why US manufacturing jobs have declined, 58 percent cite off-shoring by American companies to take advantage of lower labor costs.

    There’s just one problem with all the gloom and doom about American manufacturing. It’s wrong.

    Americans make more “stuff’’ than any other nation on earth, and by a wide margin. According to the United Nations’ comprehensive database of international economic data, America’s manufacturing output in 2009 (expressed in constant 2005 dollars) was $2.15 trillion. That surpassed China’s output of $1.48 trillion by nearly 46 percent. China’s industries may be booming, but the United States still accounted for 20 percent of the world’s manufacturing output in 2009 — only a hair below its 1990 share of 21 percent.

    “The decline, demise, and death of America’s manufacturing sector has been greatly exaggerated,’’ says economist Mark Perry, a visiting scholar at the American Enterprise Institute in Washington. “America still makes a ton of stuff, and we make more of it now than ever before in history.’’ In fact, Americans manufactured more goods in 2009 than the Japanese, Germans, British, and Italians — combined.

    American manufacturing output hits a new high almost every year. US industries are powerhouses of production: Measured in constant dollars, America’s manufacturing output today is more than double what it was in the early 1970s.

    So why do so many Americans fear that the Chinese are eating our lunch?

    Part of the reason is that fewer Americans work in factories. Millions of industrial jobs have vanished in recent decades, and there is no denying the hardship and stress that has meant for many families. But factory employment has declined because factory productivity has so dramatically skyrocketed: Revolutions in technology enable an American worker today to produce far more than his counterpart did a generation ago. Consequently, even as America’s manufacturing sector out-produces every other country on earth, millions of young Americans can aspire to become not factory hands or assembly workers, but doctors and lawyers, architects and engineers.

    Perceptions also feed the gloom and doom. In its story on Americans’ economic anxiety, National Journal quotes a Florida teacher who says, “It seems like everything I pick up says ‘Made in China’ on it.’’ To someone shopping for toys, shoes, or sporting equipment, it often can seem that way. But that’s because Chinese factories tend to specialize in low-tech, labor-intensive goods — items that typically don’t require the more advanced and sophisticated manufacturing capabilities of modern American plants.

    A vast amount of “stuff’’ is still made in the USA, albeit not the inexpensive consumer goods that fill the shelves in Target or Walgreens. American factories make fighter jets and air conditioners, automobiles and pharmaceuticals, industrial lathes and semiconductors. Not the sort of things on your weekly shopping list? Maybe not. But that doesn’t change economic reality. They may have “clos[ed] down the textile mill across the railroad tracks.’’ But America’s manufacturing glory is far from a thing of the past.
    Everybody sing this song, DooDah, DooDah

  • #2
    Originally posted by random_reader View Post
    Written by Jeff Jacoby and recommended by Mr. Mankiw in his blog. Mr. Jacoby as I understand it is a conservative columnist in the Globe to balance out liberal views.

    Made in the USA - The Boston Globe
    What does his political leanings have to do with the fact that US manufacturing output is still the world's largest and continues to trend upward?

    "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

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    • #3
      Originally posted by Shek View Post
      What does his political leanings have to do with the fact that US manufacturing output is still the world's largest and continues to trend upward?[/IMG]
      Nothing, I just wanted to give background to people and articles. Honestly, I thought the fact that Mr. Mankiw whom I consider a respected economist recommended it was more important than his political background. I apologize if it seemed like implied I was suggesting something wrong and not objective by mentioning his political leanings. Please understand, that was not my intent.
      Everybody sing this song, DooDah, DooDah

      Comment


      • #4
        Originally posted by random_reader View Post
        Nothing, I just wanted to give background to people and articles. Honestly, I thought the fact that Mr. Mankiw whom I consider a respected economist recommended it was more important than his political background. I apologize if it seemed like implied I was suggesting something wrong and not objective by mentioning his political leanings. Please understand, that was not my intent.
        No sweat - just wondering why you had mentioned it.
        "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

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        • #5
          Does the U.S make more 'stuff', or 'stuff' of more worth? It's a key consideration, when determining whether your country has a robust economic output/foundations for productivity. Productivity is the biggest determinant for increasing living standards. The same way that China's economic prosperity is responsible for lifting more people out of poverty than any other event in world history.
          Ego Numquam

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          • #6
            Originally posted by Devonte
            The statistics that is given here are based on the facts and figures and it has depicted real picture of the international economy.The graphs represent that it is true the Chine is the emerging economy and the growth rate is so intense that it will become the greatest economy in about 2-3 years.
            Wow, I have met some pretty raging China bulls in my day, but you take the cake. 2-3 years? Seriously?

            Comment


            • #7
              Originally posted by HKDan View Post
              Wow, I have met some pretty raging China bulls in my day, but you take the cake. 2-3 years? Seriously?
              Extrapolation of that chart three years into the future would show:

              U.S. --> 2.2 trillion @ zero growth
              China --> 1.7 trillion @ continued high growth

              I'm not an economist, but periods of extreme growth don't last indefinitely. Wage pressure will rise, output will level off, and I'd suspect the Chinese output curve will flatten significantly in this next decade.

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              • #8
                Wow, you have no clue what true extrapolation is, unless your version involves using the very last two points on a trend as the entire picture. Zero growth for one year does not equal a trend.

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                • #9
                  If we keep Obama in charge, ZERO growth will be a trend.
                  "Only Nixon can go to China." -- Old Vulcan proverb.

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                  • #10
                    Originally posted by ErrantVenture11 View Post
                    Wow, you have no clue what true extrapolation is, unless your version involves using the very last two points on a trend as the entire picture. Zero growth for one year does not equal a trend.
                    You missed my point. I took a pessimistic U.S. estimate and a very optimistic China estimate to show that in 3 years, the U.S. will still be (by far) well above China in manufactured goods. I was replying to Devonte's assertion that China would surpass the U.S. in that time-frame.

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                    • #11
                      Originally posted by Chogy View Post
                      I'm not an economist, but periods of extreme growth don't last indefinitely.
                      Yes, but they tend to last much longer than anyone expects.
                      Judging by Japan's or Korea's experience, the period of extreme growth rates in China will not stop until wages of Chinese workers exceed at least the 50% level of the average wages in China's main export markets.
                      And by that time, the manufacturing output in China will be two to three times bigger than in the US.

                      Comment


                      • #12
                        Originally posted by andrew View Post
                        Yes, but they tend to last much longer than anyone expects.
                        Judging by Japan's or Korea's experience, the period of extreme growth rates in China will not stop until wages of Chinese workers exceed at least the 50% level of the average wages in China's main export markets.
                        And by that time, the manufacturing output in China will be two to three times bigger than in the US.
                        Wages in China are under tremedous pressure and some manufacturing will shift offshore. Both of these will serve to dampen growth rates.

                        FT.com / Asia-Pacific - Rising Chinese wages pose relocation risk
                        Chinese wages and the turning point in the Chinese economy | East Asia Forum
                        http://www.nytimes.com/2010/06/08/bu...l/08wages.html
                        "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

                        Comment


                        • #13
                          I beg to disagree.
                          The wage pressure will initially cause a shift of lower-skilled jobs to the poorer neighboring countries.
                          That will transform the structure and quality of the growth. The bigger share of higher-skilled jobs means that the bigger share of the value-added will stay in China. And higher-paid workers will have much more purchasing power. That will translate into a much bigger internal market than in the previous years.
                          In fact, the growth rates may be even higher for the next decade.

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                          • #14
                            Originally posted by andrew View Post
                            I beg to disagree.
                            The wage pressure will initially cause a shift of lower-skilled jobs to the poorer neighboring countries.
                            That will transform the structure and quality of the growth. The bigger share of higher-skilled jobs means that the bigger share of the value-added will stay in China. And higher-paid workers will have much more purchasing power. That will translate into a much bigger internal market than in the previous years.
                            In fact, the growth rates may be even higher for the next decade.
                            Andrew,

                            China has a whole host of issues to solve - the 4-2-1 demographic problem, the banking sector, piracy laws, and quality control issues, all of which will serve to make their entry into higher level markets difficult. If someone has a choice to import Chinese goods vs. South Korean or Taiwanese goods at similar price points, I doubt that many will choose China over SK or TWN. Very few folks will want to offshore their higher intellectual property processes to China because of piracy issues. Also, demographic isses and banking issues will soak up private dollars into public safety nets to dampen political unrest that might otherwise follow - this will dampen growth in internal Chinese markets.

                            China's at the tail end of the beginning stage of their catch up growth and have all the above factors above that will serve to further dampen growth rates that would already dampen naturally based on economic growth theory.
                            "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

                            Comment


                            • #15
                              Originally posted by Shek View Post
                              Andrew,

                              China has a whole host of issues to solve - the 4-2-1 demographic problem, the banking sector, piracy laws, and quality control issues, all of which will serve to make their entry into higher level markets difficult. If someone has a choice to import Chinese goods vs. South Korean or Taiwanese goods at similar price points, I doubt that many will choose China over SK or TWN. Very few folks will want to offshore their higher intellectual property processes to China because of piracy issues.
                              Also, demographic isses and banking issues will soak up private dollars into public safety nets to dampen political unrest that might otherwise follow - this will dampen growth in internal Chinese markets.

                              China's at the tail end of the beginning stage of their catch up growth and have all the above factors above that will serve to further dampen growth rates that would already dampen naturally based on economic growth theory.
                              Right now, China is moving to the next stage of economic development, from a model based on cheap labor and production of junk or assembling foreign-designed products to a model based on indigenous innovations and production of higher value-added products.
                              As for the issues you list above, all developing countries have their own problems. Some countries overcome them, others don't.
                              Yes, it's a big challenge for China. But I expect a much brighter future for that nation than most doom-sayers in the West.

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