Since productivity gains in manufacturing are greater than in most other sectors, the relative dollar value of manufacturing output and its share of GDP inevitably decline. To get a more balanced picture of the status of manufacturing I think we should also look at the trends in _physical_ output (despite the difficulty in measuring this, given quality changes, etc; think of computers). I was following this a couple of years ago and was struck by the growing gap in the trends of dollar output and physical output (the Federal Reserve published a series on physical output by sector and somehow aggregated it into an index for all industrial sectors).
can anyone cite the most recent trends in physical production? I'm guessing they provide a rather different image than that of US-manufacturing-is-a-sunset-sector-and-now-its-the-new-economy-that-really-matters.
The other angle on this is to stay with dollar value data but look at industrial output divided by _stage of production_, i.e., crude materials vs. final products. Again, when I looked at this a couple of years ago I was struck how the value of materials production within the US was rising faster than the value of final products. Since I assume that the US is not a big exporter of crude materials, it seemed to me this also indicated that 'real' output of final products was rising more than their dollar value suggests (also, from another angle, how circulating constant capital is probably rising faster than fixed constant capital). I just clicked on the Federal Reserve series on output by stage of production (see http://www.federalreserve.gov/releases/G17/ip_notes.htm ), and without studying it too carefully it seemed this trend has continued into 2002.
Can anyone cite recent data on either trend (physical production and stage of production), or do you have any thoughts on their significance for the 'future of manufacturing'? Although I realize that the comparative trends with other countries are also important, is it not true that in 'real' terms, US domestic manufacturing is bigger than ever (of course, not as big as capacity, especially as the depression bites)? For example, if trade barriers went up, doesn't the US still retain the capacity to be _relatively_ self-sufficient in most manufactured goods (compared to other advanced capitalist economies)? When the new economy bubble really bursts and the relative prices of 'real' goods rise? won't there still be a very large base for this increase in 'value'?
Bill Burgess
At 04:34 PM 15/08/2003 -0700, you wrote:
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
