View Full Version : US industrial decline?
So are GM and Ford on the way out, or to paraphrase Mark Twain has news of their death been greatly exaggerated :?: With IBM selling out their PC side to Lenovo, and another Chinese company's failed bid for Unocal 76, can US industry recover :?: :?
Domestic (http://www.er3.com/firebird/67firebirdT.htm)
http://www.cogulus.com/archive/charger/simpsons/bandit/tilt001.jpg
&
Import (http://www.luk-korbmacher.de/Autos/Honda/Kleinwagen/City/city1turbo.htm)
http://www.honda.co.jp/HOT/ModelData/civic/cv-ka1-210a/image/cvc02top.jpg
Jason Dunn
02-09-2006, 08:31 PM
Interesting topic. I think it's the shift from an industrial economy - one focused on building things - to the knowledge-based ecnomony where nothing is built but intellectual property. I don't think the US industry can recover, but mostly because it's part of a long-term economic process.
Everything involving manufacturing is outsourced to countries with lower wages, lower education etc. But that doesn't stay static - the same countries that have uneducated, low-paid workers are rapidly evolving themselves and eventually they move to a knowledge-based ecnomy. Look at Japan. The real question is, who builds our cheap goods when every country in the world is educated and won't work for 50 cents an hour? :? The answer might be that we no longer have/buy cheap goods...or that robots build everything.
It's a complex issue, and kind of points out the ugly side of consumerism.
Somebody call Noam Chomsky! :lol:
Looking at my two Atari 2600 consoles the first one bought at the start of the 1980s was US made, the second made in 1991 was assembled in China (hmm, Atari ahead of its time again lol). I suppose there is the problem of frictional unemployment when the factory workers that used to make the goods in one country lose their jobs through outsourcing. The period of time it takes for those workers to find new work may be a long time, and during that phase they won't be spending as much as they used to, just relying on savings. It's a new problem for developed countries.
PetiteFlower
02-13-2006, 09:25 PM
Well if price starts to rise above what the market will pay after labor costs start to rise, the answer will be that profits will go down, and corporations will try to make up the lost revenue in quantity. If it is no longer profitable at all to make some products though, it could be that some items will either stop being made or will become luxuries.
Just about everything might be classed a luxury shortly. Colgate toothpaste and Lenovo PCs imported from China, what's left :?: Lol. :D GM tried to make more by their big discount scheme, but they couldn't sell enough extra to compensate for the price drop.
Interesting topic. I think it's the shift from an industrial economy - one focused on building things - to the knowledge-based ecnomony where nothing is built but intellectual property. I don't think the US industry can recover, but mostly because it's part of a long-term economic process.
I welcome w/ open lungs the decline of the industrial complex in the US to a more service-based economy just for enviromental reasons.
Cleaner air to breath, and as time elapses, hopefully more toxic-free water to swim in. 0X
http://www.fao.org/docrep/t7750e/t7750e0s.jpg
Looking at an article on Silicon Valley from 1982's National Geographic it shows all the Apple IIs running down the Californian factory assembly line, and Steve Jobs riding his BMW motorcycle. Where are those people that worked that line today (obviously many will have retired or gone to work at Starbucks, lol). Will the move to a service industry discourage US entrepreneurship in the future :?: :?
Where are those people that worked that line today (obviously many will have retired or gone to work at Starbucks, lol). :?
You might be right about that 8bit. Back then Steve Jobs was a miserly skinflint that didn't reward line workers w/ company options. Only top-tier engineers and management got on that particular gravy train. Steve Wozniak was different however, and would sell employees stock options out of his own cache if asked.
Will the move to a service industry discourage US entrepreneurship in the future :?: :?
I'd think not, especially if one uses 2005 statistics as a guiding point..
" The positive news seems to be on the job creation front. The unemployment rate fell to 5.2% in March 2005, down from 5.4% in February. The current unemployment rate is lower than the 5.5% registered in 2004. Additionally, the economy has added 477,000 new jobs so far in 2005. Incorporated self-employment has grown to 5.4 million, up 500,000 for the year. All industries except for manufacturing, which lost 20,000 jobs during the first quarter, contributed to the gains.
The four industries with the largest percentage of small business employment -- construction, other services (business, IT, health, etc.), wholesale trade, and leisure and hospitality -- added 135,000 new jobs. "
http://www.inc.com/criticalnews/articles/200505/economy.html
A large factor hurting industrial business, amongst other things, are the pension plans they must pay to retired workers.
Whats really dinging small business owners such as myself are escalating energy costs coupled w/ employee health care benefits. I can deal w/ the former by increasing the cost of goods, while in the latter theres not much recourse but to have the employees share in their health care costs.
More statistics
Small businesses: ( Entrepreneurs )
Represent more than 99.7% of all employers
Employ half of all private-sector workers and 39% of workers in high-tech jobs
Provide 60% to 80% of the net new jobs annually
Pay 44.3% of total U.S. private payroll
Produce more than 50% of nonfarm private gross domestic product, or a GDP of roughly $6 trillion
Are 3% franchises
http://www.entrepreneur.com/sbe/glance/0,7562,,00.html
Couldn't resist but to add the #1 fasting growing US franchise in 2006 as it may be relevant to some that use this site...
Geeks On Call America
On-site computer services
http://www.entrepreneur.com/franzone/details/1,5885,12-12---289269-,00.html
It's well known what an entrepreneur Steve Jobs was, even in Atari days, getting the credit and most of the cash for reducing the no. of chips on the game Breakout, while Woz did most of the work. I suppose you could say the same about Bill Gates and his partner, Gates was the guy with the business knowledge.
Competition is all about level playing fields, and I don't think we have that. China is getting a lot of slack by growing without spending money to curb the environmental consequences of its economic growth, if the sight of Beijing's poor air quality in preparation for the 2008 Olympics is anything to go by. :( Something tells me legacy costs aren't really an issue for Chinese industry. :mrgreen:
Competition is all about level playing fields, and I don't think we have that. China is getting a lot of slack by growing without spending money to curb the environmental consequences of its economic growth, if the sight of Beijing's poor air quality in preparation for the 2008 Olympics is anything to go by. :(
Record US trade deficits back up your statement...
" In 2005, the trade deficit with China was $201.7 billion, a record. This was up from $162 billion in 2004. "
http://www.baltimoresun.com/business/bal-id.trend19mar19,0,167898.story?coll=bal-business-headlines
The double-edged sword to...
" Manufacturers are particularly hard-hit by this subsidized competition. Since 2000 - through recession and recovery - the manufacturing sector has lost 3 million jobs. "
... is the countries that are gaining these manufacturing jobs also get the pollution that goes along with them. The toll to human lives in countries like China are unsettling at best. :(
http://www.worldbank.org/nipr/work_paper/survive/image169.gif
Nurhisham Hussein
03-20-2006, 04:08 AM
Record US trade deficits back up your statement...
" In 2005, the trade deficit with China was $201.7 billion, a record. This was up from $162 billion in 2004. "
There's a flip side to this argument, as there is in anything to do with economics. You're all refering largely to the production side of things - but there's a consumption (and savings) story here as well:
1. As much as 40% of the collective growth of the global economy over the last ten years has come from one factor - US consumption. That demand has pulled in production from everywhere - not just China, though for obvious reasons they have the highest profile.
2. Because income growth has been largely flat, this consumption dynamic has been accompanied by it's corrolary - the US savings rate is virtually zero (note: I'm refering to the marginal rate of savings, not the accumulated amount which is obviously still quite substantial).
3. If the two points above hold, and the trade balance is in deficit, then there must be a counterbalancing flow elsewhere (by definition the balance of payments MUST balance, and the trade balance is just one component of this equilibrium).
4. Services is one component in favour - but covers only about 15% of the deficit on trade in goods. Investment income balance is flat - incoming covers outgoings. That leaves one major source of funds - capital.
5. The US is the largest recipient of capital (direct and portfolio investment) in the world, bar none. Not even China comes close. In a very real sense, the US trade deficit is being financed by the importers - export receipts are saved and invested in US securities. From another point of view (and this is the Federal Reserve's take on things), the US is importing savings to finance its own consumption. From (again) another point of view, the development of China as a low-cost manufacturing base is being financed in turn by US demand for goods. This has had the additionally unwelcome effect of keeping the Dollar strong, just when it should turn down - and that's where the international competitiveness of US industry has been affected, not 'unfair' competition.
6. Now, this is an obviously unstable equlibrium - you can't continue making up for the shortfall in domestic savings, nor can you rely on foreign investors continuing apetite for US securities. And the adjustment, WHEN (not IF) it comes is going to be painful - for everybody. Arguments for relative price adjustments (i.e. Yuan up, Dollar down in relative terms), is really a short term populist bandage over the real problem, the one factor that's exogenous to this analysis - US consumption and savings, and by extension the rest of the world's (lack of) consumption and (excess) savings. That's why there's so much pressure from the US to improve consumption in countries like China - it's a lot easier to improve consumption when you already have excess savings to rely on. But this avoids the other necessary side of the adjustment - so long as US consumption continues to exceed income...and the longer it goes on, the worse the consequences...the whole global economy is one policy misstep away from an economic disaster.
- so long as US consumption continues to exceed income...and the longer it goes on, the worse the consequences...the whole global economy is one policy misstep away from an economic disaster.
You make very good points hishamh.
So much so that I'm tempted to take a scissors to at least 5 of my 8 credit cards! :|
Using China yet again as an example, even if the dollar were to devalue and the yuan appreciate in value to close the deficit gap, how ...
" Among differently educated people, the group enjoying the highest incomes in the capital city in 2004 were master's and doctorate degree holders.
Their average annual income was 23,600 yuan (US$2,900) per person, according to figures released by the bureau.
In contrast, the incomes of the uneducated was the lowest.
Their average annual income per capita was 9,050 yuan (US$1,100), only 38 per cent of that for those with master's and doctorate degrees. "
http://www.chinadaily.com.cn/english/doc/2005-02/22/content_418101.htm
... these folks could afford to buy American ( or others ) goods even at reduced costs?
Really makes me count my ( financial ) blessings, no matter how broke I feel at times. Thanks for the conversation. Enlightening! :)
Nurhisham Hussein
03-21-2006, 09:20 AM
:) Thanks, you're welcome! Looking at stuff like this is unfortunately a professional concern for me.
US consumption and savings, and by extension the rest of the world's (lack of) consumption and (excess) savings.
This was the challenge a generation ago when the trade battle was between the US and Japan/Germany. It was a case of people in the US demanding goods from Japan, but, the demand was one way with Japanese consumers buying little from the US.
One big change from the situation 20-30 years ago seems to be in the attitude of US industry. In the past US industry tried to fight the imports head on with equivalent products,e.g. the GM X car and Chrysler K car and some electronic goods, and they had some success doing so. Now US industry seems resigned to the position of scaling back the size of its operations, accepting the concept of joint mergers and the rise of the service sector. Is discretion the better part of valor, or should industry in the US and other developed countries put up more of a fight :?:
Chrysler Corp.'s 1980s import fighter (http://www.shelbyforums.com/photogallery/data/500/59tn_Picture_031-med.jpg) :lol:
Nurhisham Hussein
03-25-2006, 07:11 AM
This was the challenge a generation ago when the trade battle was between the US and Japan/Germany. It was a case of people in the US demanding goods from Japan, but, the demand was one way with Japanese consumers buying little from the US.
Trade reciprocity was only one aspect - there were other factors involved like quality and value for money, especially given that the world had undergone two major oil price shocks in less than 8 years. The current runup in oil prices doesn't have any thing like the same impact - on an inflation adjusted basis, crude oil is still 1/4 below the values seen in 1980/81.
One big change from the situation 20-30 years ago seems to be in the attitude of US industry. In the past US industry tried to fight the imports head on with equivalent products,e.g. the GM X car and Chrysler K car and some electronic goods, and they had some success doing so. Now US industry seems resigned to the position of scaling back the size of its operations, accepting the concept of joint mergers and the rise of the service sector. Is discretion the better part of valor, or should industry in the US and other developed countries put up more of a fight :?:
Chrysler Corp.'s 1980s import fighter (http://www.shelbyforums.com/photogallery/data/500/59tn_Picture_031-med.jpg) :lol:
I'm not sure I fully subscribe to the hypothesis that the US is in industrial decline - the numbers are certainly showing pretty healthy growth, at least as far as output is concerned. Quick comparison - US industrial production is 75% larger today than it was in 1985, Japan's is only 25.3%.
The other big difference between then and now is that in many cases it is not foreign companies responsible for imports - it's US corporations. Take the case of my country - our total trade dwarfs our GDP, we've run a trade surplus for the last nine years - but our exports are being made by companies with names like Intel, Seagate and Western Digital.
Take the case of my country - our total trade dwarfs our GDP, we've run a trade surplus for the last nine years - but our exports are being made by companies with names like Intel, Seagate and Western Digital.
True, I think it might take 10-15 years before the whole thing shakes out and the final result is seen. There are some US companies that are plainly not doing well, like GM and HP (cutting 10% of their global workforce) but others are the strong companies that they have always been. I also don't know what the net effect for the average person in terms of standard of living will be when it comes to being employed by an overseas subsidiary. E.g. Toyota in the US is behaving much like GM and Ford did in the past as a company employing a large number of people in industry and making products in factories. Apart from the fact that the profits go back to the company HQ in the home country, it looks like industrial production will continue in developed countries, even if the owners are overseas based. :?
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