On Mon, 01 Dec 2003 14:01:55 GMT, Fred Ziffel wrote:
We don't make much of anything anymore, and we are
becoming poorer because of it.

Not true. The value of our total manufacturing output is higher today
than it has ever been. Our productivity is the highest in the world, and
our manufacturing output is greater than that of any other nation in
the world.

Sure, manufacturing is a smaller percentage of our GDP today than in
the past, but that's because the service sector has grown so much faster
than manufacturing. In other words, our GDP is much larger than in the
past, so while the value produced by the manufacturing sector has
increased, the value produced by the service sector has increased
much more, leaving manufacturing a smaller percentage of the total.

Manufacturing employment is down about 2 million from its peak in
the 1970s, but still higher than it was in 1950. Mainly, those jobs have
been lost to automation and increased productivity. In other words,
output per worker is larger than in the past. That's generally a good
thing, because it means a manufacturing worker today is worth more
than he was in 1950, and that means he can be paid more than in
1950 without being inflationary.

The median US worker income today is also higher than it has ever
been ($32,200), and with the present low rate of inflation, it represents
an absolute increase in buying power over wages of times past.

The one cloud on the horizon is our trade balance. To put it bluntly,
we buy a lot more from the rest of the world than we sell to the rest
of the world. We can only do that because we are so much richer
than the rest of the world. This won't become a problem for us
as long as our GDP continues to grow at a rate of 2 to 3 percent a
year (we've just had a 3rd quarter with an annualized growth rate of
8.2%, that isn't sustainable, but we're on track for 2 to 3 percent
growth for the year, which is where we need to be).

We have been sloughing off our low profit low productivity industries
(for example, textiles, basic steel, etc) to countries with lower absolute
cost structures. That's also generally a good thing, because it lowers
the costs of our businesses which depend on those things, and it frees
our capital and our workers to pursue higher value activities. This causes
displacements, which can be painful to those workers who aren't adaptable,
but it is necessary if we are to retain our comparative advantage vis the
rest of the world.

Our current unemployment is hovering around 6%. That's a couple of
percentage points above what economists consider full employment.
But because of demographics (baby boomers are nearing retirement)
that will rapidly change. In fact, without immigration, we'd be facing
severe labor shortages by 2023.

Gary