Yahoo Finance Article: U.S. Economy “De-evolving”: An Industrialist’s Plan to Revive American Manufacturing
I think her conclusion is correct, but the argument she reaches that conclusion with is full of falsities – like sighting American jobs as a reason we need manufacturing due to services not producing enough ‘jobs’ for everyone.
The reason we need manufacturing and other non-services making up a good percentage of our economy is because it creates real value. We often tie manufacturing to jobs because traditionally manufacturing uses a lot of people. But outsourcing, automation, and ‘green’ energy all have the same affect on jobs: They turn a building full of laborers into a room full of technicians.
In other words, manufacturing != jobs. (does not equal) If the US increases manufacturing it might (should) heavily include automation and might not produce one extra job or might even reduce overall manufacturing jobs.
The reason we need manufacturing is to maintain a solid value-creating infrastructure. It’s convenient – and good – to import goods and outsource labor. That’s how we’ve raised our standard of living from shoveling coal every morning to taking a hot shower and jumping online.
Heavy imports only work when we have a strong dollar and lots of technology and other non-thing things to export – and you
can’t export services. Standard of living in China and other places is growing. The dollar is weakening. And the rest of the world is more-or-less catching up technologically.
What if we developed some magic device that would make anything we wanted? We could just dump raw material in one end and cars, computers, and bottles of shampoo came out the other? Would that be bad? Of course not! Everything would be so cheep! But the magic machine would “kill” jobs – meaning the laborers would have to find other work.
But actually, the magic machine would increase jobs. How??? Well, all the money consumers save they could use for services and other things – increasing those jobs. And the money the owners and operators of the magic machine – they would have money to spend and invest too – which comes out to more value for less effort: Increased efficiency. Indeed, for a while – as the economy made the transition – those former laborers would be spending less money. But once they found a job, or made a job, they would again start spending on the same things – plus extra stuff they can now afford thanks to the magic machine = more overall jobs.
But in reality, our magic consumer-goods machine is China and other developing nations. They won’t always be developing, and our dollar won’t always buy a whole day’s worth of a China man’s labor though.
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Raging Kitty