Can Manufacturing Come Back?

Joseph Stiglitz, one of my favorite economists, believe that Asia is “decoupling” from the United States and Europe. You see, the United States is a 300 million population but if you sell to India and China alone of the nations in the region, you have 2.6 billion consumers. It’s a better market in the long term than the United States or Europe as well as providing necessary long term benefits to the nations themselves.

But there are other reasons, the great nations of Asia are likely to shift more to domestic production and investment. In the past, China, India, South Korea, Japan, etc. invested in the United States. They as well as many European nations bought into the housing bubble as well as many more reliable investments. They did this in the belief that the United States was reliable investment environment and that, more importantly, Wall Street had great skills in the banking and other investment industries. Of course, the “legendary” expertise of Wall Street was no more than successful propaganda protecting a rotting edifice that through financial “innovation” and simple greed severely damaged the world’s economy.

If you were a government official would you encourage investment in the United States or take the advice of any Wall Street investment firm? I’m sure there are some officials remaining who can hold that view but the long term does not bode well for U.S. investment or purchasing, you see, the development of the domestic market in these countries means a rise in the standard of living, an increase in wages and rise in prices. All of these factor mitigate against the corporate dream of an endless stream of off shored jobs pushing their profits.

But this is an opportunity. As these other nations develop higher standards of living and their purchasing power increases, we can sell them products. We can make things again. If we start now, and by now I mean by the end of this decade, for not only is there no political will, intelligence or leadership, the current business philosophy will not allow the government to encourage such investment. The United States government since the 1980’s has pursued a policy of the financial sector as a priority as opposed to the poor stepchild of manufacturing. The result of this policy are all around us. We can do better.

James Pilant

6 thoughts on “Can Manufacturing Come Back?

  1. Anil Kohli

    This is a hard fact, however as long as USA retains it leadership status in developing new technologies it would still attract investors.

    No country can exist in isolation, we all need each other. Cost of manufacturing of products will determine where the producer will be located.

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  2. Actually the cost of manufacturing is a single element in multi-faceted problem. For instance, the key element in textile manufacturing has been the trade agreement of the years 1995 to 2005 and their expiration. jp

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    1. Anil Kohli

      Hi JP,
      Since textile manufacturing and exports is my area, I have run apparel exports both from India and China

      MFA was restrictive in terms of quantities. WTO regime put an end to that. Let us face upto it EU and US in particular wanted textiles below the prices they were producing locally.

      In order to circumvent the quotas under MFA, submarine ops thru Dubai and other port in West Asia and Singapore became the norm from China. Had the customs authorities in the importing countries been upto the task. MFA would have ensured that the prices did not fall to the levels which made China the favored destination and local manufacturers were priced out by the actions or should one say inaction of their own governments.

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  3. That’s exactly what I read when I checked into. I’m glad my info made sense. I bet you have some ideas. Have you been following the labor unrest in Bangladesh? There is some strange stuff going on there. jp

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    1. Anil Kohli

      You got a response to your blog is proof enough that you made sense. My focus these days is more on Media as it is hell bent on dispersal of fiction, opinionated reports in the guise of news and biased reportage. I have not been following labor unrest in Bangladesh in particular, one thing is for sure being a democracy and given the temperament of these people they will succeed in getting what they want.
      Textiles being a labor intensive low tech manufactured product, guess it is best left to the countries where labor is cheap. I would love to have your view on my blogs this is the link please do read and share your thoughts. http://ioretradingindia.blogspot.com/

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