I have a question about the U.S. economy and a comment to make about FDI to the third world.
We all know the U.S. is running a huge and growing trade deficit. Moreover, the manufacturing sector has lost jobs for some thirty-five consecutive months. That is pretty amazing. My question: are these developments tied and can we confidently say that the U.S. industrial sector has been hollowed out? In other words has the job loss been largely the result of the continually increasing import of manufactured goods, many of which are produced by U.S. firms in other countries? And has this development gone long enough that there has been significant structural damage to U.S. manufacturing such that it is unlikely that anything, including a falling dollar, will promote its renewal? Or is it just productivity that is causing this job loss or is it ...? I would really like to know what people think about this. As to on FDI, I cannot remember who the person was, but in response to someone I had mentioned that FDI is becoming more and more concentrated. That person had argued the opposite and asked for some supporting information for my position. I just came across something relevant from the World Investment Report 2002. On page 9 the report says: “In spite of the substantial liberalizing measures of the past decade, developing countries still attract less than a third of world FDI flows, and these flows remain highly concentrated. In 2001, the five largest host countries in the developing world received 62 percent of total inflows and the 10 largest received three-quarters. The level of concentration of FDI in developing countries has in fact risen in recent years.” On page 11 there is a chart that shows the share of the top 5, 10, and 30 host developing countries. The increased share of FDI flows going to each of these groups shows a marked gain beginning in 1996. Marty Hart-Landsberg
