Ecnonobrowser, via Counterparties, looks at the current economic malaise in the U.S. and examines what possible sectors may help lead the economy out of its current slump.
Through most of the early part of the last century, America was considered a manufacturing powerhouse. But surprisingly, the author notes, the resource sector was a major contributor to the economy. And it was not just being blessed with rich natural deposits, but rather it was the U.S. applying business know-how to maximize production.
For over a century, the U.S. produced more oil than any other country, and even today we are still the third biggest oil producer in the world. The U.S. today is the world’s leading producer of items such as lumber, corn and poultry, number 2 in coal, oranges, soybeans, and gypsum, and third in cotton and lead. Our abundant natural resources have always been an important advantage for America, and are still an important advantage today.
Remember that the U.S. was the home to Big Muskie in the mid-1900s, the biggest dragline ever built.
The report notes a number of instances where regulation may be hampering investment and new jobs, rare earths being one where the U.S. gave the market to the Chinese due to environmental regulation and high labour costs. However, the authors find that it is demand, not problems with regulations, that is the main cause of the ecnomic slump.
Obviously what we need to do is weigh the costs of regulation against the benefits. Just because the costs are higher in a recession, that does not mean that new regulations during a recession are always a bad idea. But I do believe Americans need to acknowledge that, both because of the current economic weakness, and because of the longer-run challenge in finding a basis for future economic growth and current-account balance, we are poorer than we used to be.
3 Comments
donx65
The apparel trade has been offshore for years, because of labor costs and regulations, but mills should still be almost totally American since labor is less of an input. But we are not even major producers of cloth – again restrictive labor/regulations.
FoodProcessorVillain
Donx65, I don’t think you’re right with your argument. The high labour costs and the removal of trade barriers in the mid-2000s are what played a role in the US’ decline in importance in the apparel business. Regulations had little to do with it, especially since apparel isn’t as red tape intensive as other industries (think mining, finance, pharma…). If you are this nostlagic of the era of “all american made affordable clothes” (because US still does well in the upscale department) just remind yourself that Forever 21 competes with Chinese mill with manufacturing operations largely located in the US. It manages that by employing irregular migrants, infringing property and workers’ rights. I don’t know why you’d be so nostalgic when looking at those facts… they hint that Americans wouldn’t be interested by those jobs anyway.
TheEngineer
I grew up in the Menominee Iron Range – which shut down nearly overnight because of far cheaper iron coming from Brazil and Australia. Billion lbs of copper near there too – but more expensive to mine as the good stuff is now gone. Last week in Arizona, the Rosemont copper development was just handed a set-back for environmental reasons, and if copper doesn’t stick around $3/lb, more mines in the USA will be kaputski. Nice to know the Chinese can now walk into Afghanistan and Arica and get all those materials for next to nothing and make prices go back down to further unprofitable levels – yep, we got that going for us. I wonder if we lived on Mars would we try to fit in with the economy of Earth? or have our own money and economic system? so I also wonder why North America just can’t have an economy of its own, but, that’s just me. God save the Queen? for what?