Friday, June 13, 2008



In the long run, I think we should expect Americans to continue manufacturing goods. The idea that manufacturing was shedding jobs primarily because of trade with low-wage countries is something of a misunderstanding. There's less cheap labor in Europe than in the USA but there's plenty of manufacturing over there -- rich countries just tend to manufacture higher-end goods. Even during the manufacturing drought, Americans were still "manufacturing" plenty of buildings. But the economics of cheap mortgages + construction boom + strong dollar + large trade deficit weren't sustainable over the long run and now we need to rebalance toward manufacturing fewer buildings and more stuff to sell abroad.

1 comment:

Stephen Downes said...

The balance is shifted when transportation costs match wage differentials (holding things like the cost of resources, value of the dollar, etc, stable).

This balance will shift again in the near term, resulting in an improvement in the North American manufacturing industry.