Industrial competitiveness

[Basementdweller]

Double post (This message has been edited by a staff member.)

[Proud Eagle]

Industrial competitiveness is a complex issue.

 

To a very large degree the falling behind of American industry was a combination of circumstance and self-inflicted injury. History is a very important part of this picture. You really have to look at when America industrialized vs when other countries did, the cycles of rebuilding, etc with a particular focus on both world wars, the depression, and the post-war period. To make it way over simplified, the US came on-line as an industrial power after Europe did, thus we had newer, more innovative ways of doing things (this is more than just tech, it is business practices, government, labor agreements, natural resources, the whole package) that could compete very well in a world where the demand for industrial products was greater than the total supply. Fast forward and the US dominates due to being spared the worst of the world wars and making itself the arsenal of democracy. The trouble was in the post-war period our entire system was exhausted. Our industries were largely worn out by the war and hadn't had sufficient capital investment since pre-Great War other than a brief period in the 20s. Our population and labor pool experienced a major shift as did our politics, all the while we still had in place a great many Depression and War related rules, regulations, and practices that were not very market efficient. Our corporate, labor, and government leaders basically assumed we were the natural dominators of the world economy and would always be so.

 

Next thing we know the devestated countries of the world are rebuilding using newer technologies plus everything else about their post-war systems was generally more modernized than ours. Thus it wasn't long before these countries were real competitors, and then just about the time we started to notice this, the 3rd world started to really industrialize, thus meaning that there would no longer be an entire planet relying on only US and European industrial output.

 

To my mind the biggest issues are innovation and capital. We must become more flexible, efficient, responsive, and innovative at every level. Our industries that were prone to collapse largely have, now it is time to rebuild with a fresh approach that can allow us to make real progress. There is danger of making the wrong choices and making things worse, but this is the great thing about a free market, many approaches can be tried at once. As to capital, we must focus on long term investment, not short term speculation. We must understand that savings and investment may lead to delayed gratification, but greater gratification in the end. The economy must be less consumer driven, less profiteering driven, and more driven by sound investment.

 

I could go into a lot of particular ideas and theories, but just a few other things that must be mentioned:

1. Regulation must be changed not to decrease safety, but rather to allow innovation. Most regulations are coopted by big established interests to protect their position thus making market entry and innovation difficult. This must change to an approach with a playing field that is fare to the innovators trying new things and the small up and coming players.

2. The tax system must change so consumption is not the default choice and so that American goods don't incur a tax penalty. American goods sent to Europe face an average 19% extra tax that European goods sent here don't, and this is a result of the European VAT vs our own tax systems. Other examples are nearly endless.

3. We need both fair and free trade. Currently we let the deck be stacked against us on one hand, and then get into one-sided free trade agreements on the other. We need to get access to markets for our products and sources of materials we need while leveling the playing field. Lefty sounding ideas like international treaties on wages, labor, environment, etc could help as long as there were strong verification procedures and so long as we didn't once again let ourselves be had in the negotiations.

4. Externalities must be considered. Buying the cheap Chinese junks saves you money today, but how much does it cost you when your kid can't get a decent job? etc. There are no free lunches, there is an opportunity cost to everything, and there are unintended consequences to virtually everything.

[perdidochas]

While compared to last century, our manufacturing seems to have gone downhill, we are still the biggest manufacturer in the world, in terms of dollar value of products (yes, even more than China). Yes, we don't make nearly as much consumer products as we have in the past, and our lead over other countries isn't as great as it was, but we are still the largest manufacturer. Those machines that China uses to produce junk for us are made in America.

 

http://investing.curiouscatblog.net/2009/10/13/data-on-the-largest-manufacturing-countries-in-2008/

[packsaddle]

What a bunch of crybabies! When Reagan moved the world toward a global market and talked about the unseen hand and the "magic of the free market" you people swooned! What the heck did you think was going to happen?!! This is the system we as a people voted for. It's the system we said we wanted...by a landslide. It's the American Economic System that we chose to have. To paraphrase a slogan I heard often during the Vietnam days, "The American Economic System, Love It Or Leave It".