Tuesday, November 10, 2009

Can Our Own Spending Habits Be Driving the Loss of Manufacturing Jobs?

We’ve all heard the claim…that the problem with the U.S. economy is that America doesn’t make anything anymore. That we’ve gotten away from our manufacturing roots and are exporting high-paying manufacturing jobs to China, Taiwan, Mexico, etc.

Daniel Griswold, Director of trade-policy studies at the Cato Institute and author of the book Mad about Trade: Why Main Street America Should Embrace Globalization, makes a compelling case to the contrary.

Griswold acknowledges studies that project China will surpass the United States as the world’s leader in manufacturing by 2015, but he also states that “Manufacturing long ago ceased to be the chief benchmark of economic might & success.” Nevertheless, American manufacturing isn’t declining. As the U.S. economy comes out of recession, Americans will produce more than ever, albeit less than China.

That is as it should be, according to Griswold. He suggests that American’s own evolving consumption preferences are behind the loss of manufacturing leadership, “As incomes rise, we spend a smaller share on goods, such as food and manufactured products, and a higher share on services like healthcare, recreation, education, research, travel, financial services, and more. These are all signs of growing wealth. Americans have traded up the value chain to a more sophisticated array of goods that play more to our strengths as a nation with an educated workforce and plenty of capital per worker. It is time we adjusted our economic and political thinking & understanding.”

Bottom-line: A major reason why manufacturing is relatively less important to what Americans produce is that it is less important to what we consume. Since consumer spending drives the U.S. economy, monitoring consumption trends can point the way to attractive investment opportunities.

Read the full article here: What America Makes Best

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