I've had cause to travel around the world in recent years. London. Dubai. Bangkok. Hong Kong. Shanghai. And if there's anything that struck me about the general state of the materialistic world, it's the utter lack of American finished products owned by the poor of the world. What do Americans even manufacture anymore? Televisions? Zenith and Curtis Mathis closed their doors long ago. Vacuum Cleaners? The last of those factories have found their way to Juarez. I suppose the only thing I ever saw was the great American automobile, and even those are usually the 20 year old versions of themselves.
What happened to the great American manufacturing sector, this dynamic engine that produced goods for the whole world? In exports, not only are we behind China, we're behind Germany. 90 million person comparatively Socialist Germany. How? Why?
With Germans, the economic free trade zone of the EU is the easy answer. Protectionism without, free trade within, and Germany exports tariff free to its EU sister nations. The rest of the world? The world is flat. The plain fact is, American products just cost too much. Stateside, American cars have the protection of tariffs which bring imported vehicles up to the comparable price of American made cars. Toyota's small cars are roughly $1500 cheaper to make than comparable American ones. Outside of America, American cars are just more expensive. Not because of efficiency. America is at least as cheap and efficient in its manufacturing process as anyone. Corporate taxation? It would seem not, Japanese, Korean, and German automakers seem to be able to make cars just fine on American soil, and export them to other countries.
The difference-maker, at least in the car industry, would appear to be the American cost of labor, and more specifically, unions, which the Big 3 have, and foreign owned manufacturers by and large, do not. Perhaps the best thing to be done was to have let Chrysler and GM fail, tear up those union contracts, and sell the parts to the highest bidder, free of the accumulated debt.
What I do know is that Juarez is a dynamic manufacturing center, with output greater than Detroit and Atlanta combined. They make the cars, TVs, microwave ovens, and vacuum cleaners that we often do not. They are free of the safety regulations of OSHA, have lower corporate income taxes, and naturally benefit from the lower labor costs of the Mexican worker. The same can be said of Shenzhen. Or Chiang Mai. Or Jakarta. Or Mumbai.
We can't close our markets or raise or tariff walls any longer. The great growth stories of the past few years are China, Korea, Thailand, and India. These nations no longer rely on their export economies, with less than 10% of China's economy comprised of its export sector, but fuel their growth mostly from within. America will get left in the dust if it cannot sell products to the growing middle classes of India and China. The World is Flat.
Perhaps we can set up economic free trade zones along our border, free of the usual taxation and regulations. Dubai and Mexico amongst others utilize these zones to great effect. The alternative I see is that the shell of the American manufacturing economy continues to hollow itself out. 85% of college graduates intend to return to live with their parents this summer. This is frightening.
I was recently in Rome, and met a university educated electrical engineer who was working as an electrician? Why? Because Italy's engineers virtually exist in the dark ages. There are no longer design jobs to be had, because Italian economic infrastructure no longer supports it. With high unemployment, his former career in France no longer exists. This is the future we face.
If there's alternatives to playing by China's and Mexico's rules, I'd love to hear it. Certainly smarter men than me have tried, and have thus far been found wanting.