1/8
This seems like a pretty important study on the decline of manufacturing in the US: "The loss of U.S. manufacturing," the authors argue, "is not due to some inexorable shift to a post-industrial economy."
@ITIFdc itif.org/publications/2…
This seems like a pretty important study on the decline of manufacturing in the US: "The loss of U.S. manufacturing," the authors argue, "is not due to some inexorable shift to a post-industrial economy."
@ITIFdc itif.org/publications/2…
2/8
Instead, "it is due to a failure of U.S. policies (for example, underinvestment in manufacturing technology support policies and a corporate tax rate that is increasingly uncompetitive) and the expansion of other nations’ mercantilist policies."
Instead, "it is due to a failure of U.S. policies (for example, underinvestment in manufacturing technology support policies and a corporate tax rate that is increasingly uncompetitive) and the expansion of other nations’ mercantilist policies."
3/8
One of the lines in the report that struck me was this one: "While manufacturing has declined as a share of GDP in some nations (notably Canada, Italy, Spain, the United Kingdom, and the United States), it is stable or growing in...
One of the lines in the report that struck me was this one: "While manufacturing has declined as a share of GDP in some nations (notably Canada, Italy, Spain, the United Kingdom, and the United States), it is stable or growing in...
4/8
many others (including Austria, China, Finland, Germany, Japan, Korea, the Netherlands, and Sweden)."
Regular readers of mine will quickly recognize that the former group is dominated by deficit countries and the latter by surplus countries.
many others (including Austria, China, Finland, Germany, Japan, Korea, the Netherlands, and Sweden)."
Regular readers of mine will quickly recognize that the former group is dominated by deficit countries and the latter by surplus countries.
5/8
This isn't a surprise at all. Surplus countries run surpluses mainly because they are internationally "competitive", which is another way of saying that their wages are repressed relative to their productivity levels. This is true of all the countries on that list.
This isn't a surprise at all. Surplus countries run surpluses mainly because they are internationally "competitive", which is another way of saying that their wages are repressed relative to their productivity levels. This is true of all the countries on that list.
6/8
As a result, these countries have necessarily absorbed manufacturing away from countries that have not repressed wage growth to the same extent. Countries that repress growth in wages the most, in other words, "win" the global trade competition.
As a result, these countries have necessarily absorbed manufacturing away from countries that have not repressed wage growth to the same extent. Countries that repress growth in wages the most, in other words, "win" the global trade competition.
7/8
Of course one consequence of this kind of beggar-thy-neighbor globalization is that wages stagnate everywhere. The authors didn't include France in the first group, but in one of my recent tweets, I discuss just this problem in the French context.
Of course one consequence of this kind of beggar-thy-neighbor globalization is that wages stagnate everywhere. The authors didn't include France in the first group, but in one of my recent tweets, I discuss just this problem in the French context.
https://twitter.com/michaelxpettis/status/1491329786874298377
8/8
This is a broken system. Either the countries that want both to retain manufacturing and encourage higher wages should create a new global trading regime along the lines proposed by Keynes in 1944, or they should begin to impose capital controls.
carnegieendowment.org/chinafinancial…
This is a broken system. Either the countries that want both to retain manufacturing and encourage higher wages should create a new global trading regime along the lines proposed by Keynes in 1944, or they should begin to impose capital controls.
carnegieendowment.org/chinafinancial…
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