By: Daniel Nardini
According to a study, “Made in America” put out by the Boston Consulting Group, the United States is as productive as ever and is producing 2.5 times more than it did in 1972. By the year 2015, many corporate businesses will decide whether they want to build their plants in the USA or in China. The Boston Consulting Group believes that the majority will return to the United States and this will help grow the American economy again. Considering the rise of China, this sounds like good news.
But I must throw a wrench into the works. Yes, the United States is becoming more productive than it was five years ago. Yes, U.S. businesses that have survived the Great Recession and the competition from China are making better quality products than they did a mere five years ago. Yes, some companies have returned to the United States because the U.S. dollar is weaker and therefore cheaper compared to the Chinese yuan which had greatly appreciated due to inflation and the rise of Chinese wages by 15 percent to 20 percent. This does not however define a full recovery nor enough of a silver lining at the end of the tunnel.
There are three things to consider. First, most consumer goods are still made in China. Even with a rise of 15 percent to 20 percent in wages, Chinese labor costs are still way lower compared to labor costs in America. Also, even with the costs of fuel for transporting those same goods to the United States versus having them made in America and sent much faster to market is actually even. The profit margin still favors China. That might change in the next four years, but that is still a big question mark. The report cites a lot of industrial goods being made in this country. That is true, most large-scale (also called capital) goods like airplanes, cars, buses, trains and farming equipment are made in the USA. But the bulk of what Americans buy are consumer goods such as clothes, shoes, bicycles, tools, toys, etc. They are made in Third World countries, and most of that from China.
To complicate things huge companies like Walmart and Target are buying billions of dollars worth of merchandise from China. This trend has continued for almost 20 years, and I see no dent in that. You cannot even find ten percent of anything made in the USA in Walmart. Maybe five percent at best. Yes, American manufacturing is now more efficient with less workers than before, but a high unemployment rate does not help an economy grow if too many people are out of work. The report may be one for guarded optimism, but we will have to see what happens in four more years.
Made in the USA…..Well
By: Daniel Nardini
According to a study, “Made in America” put out by the Boston Consulting Group, the United States is as productive as ever and is producing 2.5 times more than it did in 1972. By the year 2015, many corporate businesses will decide whether they want to build their plants in the USA or in China. The Boston Consulting Group believes that the majority will return to the United States and this will help grow the American economy again. Considering the rise of China, this sounds like good news.
But I must throw a wrench into the works. Yes, the United States is becoming more productive than it was five years ago. Yes, U.S. businesses that have survived the Great Recession and the competition from China are making better quality products than they did a mere five years ago. Yes, some companies have returned to the United States because the U.S. dollar is weaker and therefore cheaper compared to the Chinese yuan which had greatly appreciated due to inflation and the rise of Chinese wages by 15 percent to 20 percent. This does not however define a full recovery nor enough of a silver lining at the end of the tunnel.
There are three things to consider. First, most consumer goods are still made in China. Even with a rise of 15 percent to 20 percent in wages, Chinese labor costs are still way lower compared to labor costs in America. Also, even with the costs of fuel for transporting those same goods to the United States versus having them made in America and sent much faster to market is actually even. The profit margin still favors China. That might change in the next four years, but that is still a big question mark. The report cites a lot of industrial goods being made in this country. That is true, most large-scale (also called capital) goods like airplanes, cars, buses, trains and farming equipment are made in the USA. But the bulk of what Americans buy are consumer goods such as clothes, shoes, bicycles, tools, toys, etc. They are made in Third World countries, and most of that from China.
To complicate things huge companies like Walmart and Target are buying billions of dollars worth of merchandise from China. This trend has continued for almost 20 years, and I see no dent in that. You cannot even find ten percent of anything made in the USA in Walmart. Maybe five percent at best. Yes, American manufacturing is now more efficient with less workers than before, but a high unemployment rate does not help an economy grow if too many people are out of work. The report may be one for guarded optimism, but we will have to see what happens in four more years.