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Originally Posted by Sexxxy Sites
Of course the other scenario is that the Widget factory simply moved its operation overseas to reduce its overhead and increase its profits. Either way the town dies as it no longer has an agricultural/manufacturing base to provide services to.
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Yeah. In that case you are fucked whether your economy is service-based, agro-based *or* manufacturing based. ;-)
It should be pointed out that US manufacturing is not shrinking. It is that the services industry is growing much faster.
Manufacturing
1987 $2.4 trillion
1997 $3.8 trillion
2007 $5.0 trillion
In many cases it is American companies that are using Asian labor to manufacture goods which are then being imported to the US and being sold by those same American companies.. Apple and Nike manufacture shoes and iPods in Asia and then import them to the US. Apple and Nike benefit from that. Overall so does the American consumer in that the price of many goods is cheaper than it would otherwise be. Of course there are great Asian companies too; Mitsubishi, Toyota, Samsung and so on. The American consumer is voting with his wallet though. We prefer those cheaper goods and are happy with the quality. That is fine with me. And of course once that dollar makes it overseas it has to be invested back in the United States (Other than those dollars held in Eurodollar accounts, I believe). This is because of the identity Current Account = Capital Account + Financial Account. And since the capital account is so small the current account is roughly the financial account. In other words, those dollars come back to the US to purchase assets and financial assets (bonds, stocks, Radio City Music Hall).
My point of view is that the US cannot excel in every area of every industry. It's an intensely competitive world. US manufacturing has managed to grow faster than the inflation rate. Some of the greatest manufacturing companies in the world are in the US and they look to have a great future especially in combination with the growth of the BRIC countries. An example being a company like Caterpillar that looks to benefit greatly from Chinese and Brazilian growth by selling them equipment that will be used to mine commodities once the commodity bull-run resumes. There are hundreds of other such examples.