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View Diary: A Manufacturing-centered economics, part one (40 comments)

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  •  Germany says bugger all... (0+ / 0-)

    To those who say America can't compete in manufacturing...

    From the WAPO article above:

    Most Americans, I suspect, believe we're losing manufacturing because we can't compete against cheap Chinese labor. But Germany has remained a manufacturing giant notwithstanding the rise of East Asia, making high-end products with a workforce that is more unionized and better paid than ours.

    Those who croon the tired meme that we can't compete have yet to explain how Germany does it. This is where "theory" and "reality" collide.

    Further... on Krugman:

    Making Things in America
    Published: May 19, 2011


    And one potential disaster has been avoided: the U.S. auto industry, which many people were writing off just two years ago, has weathered the storm. In particular, General Motors has now had five consecutive profitable quarters.

    America’s industrial heartland is now leading the economic recovery. In August 2009, Michigan had an unemployment rate of 14.1 percent, the highest in the nation. Today, that rate is down to 10.3 percent, still above the national average, but nonetheless a huge improvement.

    I don’t want to suggest that everything is wonderful about U.S. manufacturing. So far, the job gains are modest, and many new manufacturing jobs don’t offer good pay or benefits. The manufacturing revival isn’t going to make health reform unnecessary or obviate the need for a strong social safety net.

    Still, better to have those jobs than none at all. Which brings me to those right-wing critics.

    First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed.


    Germany protects itself against artificially cheap imports from China by using a VAT tax to level the playing field and as a result they have a trade surplus.

    Suggestions that we do the same have been met with charges of "protectionism" but in reality it is nothing more than self defense.

    That also doesn't explain how other countries find their prices on manufactured goods to be affordable though.

    The Chinese howled over QE I & II because they knew this would happen, but Obama went ahead with it and is also calling for an overhaul of our business tax structures because he knows where this must go if we are to preserve our manufacturing base.

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