Is North America headed down the creek without a paddle?

Do you care about the loss of American manufacturing jobs? It sure bothers me. The statistics that describe this economic shift are shocking to say the least.

For instance, read the Congressional Research Service Report for Congress, titled: China's Trade with the United States and the World, published on January 4th of this year. U.S. manufacturing jobs declined in the 10-year and 7-year periods ended this past July, by approximately 14 and 18 percent respectively.

At the same time, in the ten-year period ended July 2007 jobs in the U.S. In the economy, the service industries grew by approximately 22%. Given the comparative labor rates between the U.S. and the emerging economies do you really expect this dismal trend to be reversed?

I know of one American company that produces a wonderful product that assists in the "green revolution" that is taking place in most western democracies. I really didn't think the price for this "made-in-America" item was so bad. Heck, it did a great job, conserving energy and solving a nasty problem at the same time...it was worth the price ...and then some.

However, I was perturbed and saddened to hear that the price of this equipment would be coming down drastically because it would soon be made in China. That might be good ‘competitive news' to the small American firm making this product in the U.S. It sure didn't brighten my day. Obviously this firm will then be more price-competitive. But this then starts a chain of dominos falling – in my opinion – backwards. Sooner than later, this small firm will be copied by others who will produce their prodct in Asia. In order to survive, the smaller firm will be forced to do likewise. As consumers of this particular product, we will go happily along, stroking ourselves for having generated so much more earnings per share for us and our shareholders. Our short term orientation is only to the bottom line.

But in the long term....don't you think we might be headed down 'Smith's Creek' without a paddle?

Maybe I'm all wrong here; but if we're going to export most of our manufacturing jobs, who the heck is going to provide employment for all the displaced workers? Who is going to have the money to buy the inexpensive (read: cheaper) similar items that are deliberately made in those countries with much lower labor and manufacturing costs? If there are not jobs, there will be no disposable income to buy the "hamburgers we will be selling to ourselves" as paraphrased from Thomas Friedman's The World is Flat. I've been involved in the services industry my entire career and from my own experience, I believe services cannot possibly replace the manufacturing sector in this economy.

So one might say it is now obvious that America's dependence on other economies is growing...much too quickly. Historically, if a country or society is not strong enough, economically, it usually is not be strong enough to protect itself. Speaking of all those manufacturing jobs, do you remember just how the United States and Canada were able to arm themselves quickly and efficiently in the early 1940s? They each had a heavy manufacturing sector that was quickly transferred over to wartime equipment and materiel production to provide the items necessary to take on the 'Rome-Berlin-Tokyo Axis'.

If we have finally exported our last means of manufacturing equipment and other heavy items, what could happen if we have to face off with a group of enemies that can obviously out-produce us? What if we have almost ‘forgotten' how to produce heavy equipment, ships, aircraft, vehicles, armaments or even soldiers' army boots? What if the average consumer has so little buying power, he can no longer afford even the cheap goods flowing in from Asia? Can you see where this might be going?

Food for thought, I'm sure.

©Copyright, Roy MacNaughton, 2007

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