Prestowitz:
S+B: Starting with his role as an advisor to the secretary of commerce in the Reagan administration in the 1980s, and progressing to his current position as founder and president of the Economic Strategy Institute in Washington, D.C., Clyde Prestowitz has been a consistent voice on the importance of manufacturing in economic competitiveness....
PRESTOWITZ: ...There are two kinds of global companies. In the United States, the purpose of the corporation is primarily to provide optimal returns to shareholders. This leads to a focus on optimizing short-term results. In continental Europe and most of Asia, the state charters the corporation and gives it a lot of specific benefits; in exchange, the corporation provides benefits to society. This leads naturally to embracing a coherent industrial policy....
S+B: What do you mean by a coherent industrial policy?
PRESTOWITZ: There’s a lot of misunderstanding about this. It’s associated with pre–World War II Britain and France, whose governments supported particular companies as national champions. People assume it means having governments pick winners and losers.
Look instead at countries like Singapore, Sweden, Taiwan, Germany, Korea, Switzerland, Finland, and China. They’re all very different; some are democratic, others are authoritarian. The Finns and Swedes have strong labor unions, whereas unions in Taiwan and Singapore are weak. But all these countries are economically successful for the same reasons. First, their governments focus on being competitive by promoting selected high-value-added industries, with a long planning horizon. Second, they have a high level of coordination among the government, labor unions, and business management, in investment decisions, wages, and inflation rates. They don’t pick winning companies; instead, they build a consensus on what each of them has to do to contribute [to building a vibrant industry]. Compared to other countries that have taken a more laissez-faire approach, their performance is far superior.
Friday, August 19, 2011
Monday, July 25, 2011
Summers memo - Wikipedia, the free encyclopedia
Read the whole thing. It is remarkable ethics.
Wikipedia, the free encyclopedia: "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that."
Tuesday, July 5, 2011
Manufacturing Is Key to Growth
Economist Debates:
Take the case of the Netherlands. Unbeknown to most people, it is world's third largest agricultural exporter, despite having little land (it has the world's fifth highest population density). This has been possible because the Dutch have 'industrialised' agriculture by, for example, deploying hydroponic agriculture (growing plants in water) that uses computer-controlled feeding of high-quality chemicals—something that would not have been possible if the Netherlands did not have some of the world's most advanced chemical and electronics industries. In contrast, despite being the world's second most high-tech exporter (measured by the share of high-tech products in manufactured exports), the Philippines has only $2,000 per person income because it makes those products with other people's technologies.
Saturday, June 18, 2011
Ricardo Revisited?
NewAmerica.net, Baumol and Gomory:
In a world in which productivities are often not fixed by nature but are often acquired we have shown the following possibilities:There is a grain of truth here, but It isn't time to write of the Ricardian model. In the Heckscher-Ohlin model, the 'dominant' country benefits from trading with 'dominated' countries because the capitalists get the benefits of cheap labor. As productivity grows in 'dominated' countries, our capitalists have less advantage over them which would simply reduce trade if everything else were homogenous (which it is not), so there is no real problem in the Ricardian and Hechscher-Ohlin models. The real potential problem is outside of those models. The problem would be if the US specializes in industries which do not grow in productivity and/or demand in the future and the formerly 'dominated' countries do specialize in these industries. China in particular is specializing in manufacturing which has traditionally been the sector with the very highest productivity growth, so that is a good sector to specialize in for developing future productivity and wealth and the US may lose out by losing relative manufacturing capacity to other countries. The oil industry has been seeing declines in productivity for decades, but demand is price inelastic and is income elastic and demand grows as global incomes grow and so that sector has a bright future despite its declines in productivity. The US used up most of our cheap oil a long time ago, and we have been a net importer for 40 years, so this is unlikely to be a bright spot for the US.
That the economic development of a trading partner can be harmful to the home country. Although the effect of that development starts good, it ends badly.
That there is a dominant and dominated relation possible between two countries, a relation that is good for the dominant one and bad for the dominated one.
That a country can attain a dominant position only by having an undeveloped trading partner. This can occur naturally if the trading partner is simply there in an underdeveloped state, or the underdevelopment can be brought about by mercantilist actions that destroy industries.
There is inherent conflict not only between a nation in a dominant position but between that dominant partner and the interests of a two-county world.
While a country cannot gain a dominant position by building up its industries, it can avoid a dominated position and assure a good outcome by developing a particular subset of its own industries and not allowing them to be destroyed.
It is possible that the United States and China were in the dominant and dominated position some time ago. We should recognize that China’s evolution away from that state can be harmful to the United States. Furthermore we can observe that China’s gain has been accompanied by the disappearance or at least decline of a number of our industries. We need to be cautious because, as these standard models show, there is a distinct possibility that this situation can even lead to significant loss through deindustrialization in an initially prosperous economy.
Not all productivity gains are the same. Here's why.
McKinsey: What Matters:
In 2000, imports of computer and electronics products from China and Mexico accounted for about 10 percent of the net supply to the US market (domestic shipments plus imports minus exports). By 2010, that percentage had risen to 37 percent. Meanwhile, the share of net supply coming from G7 countries, including the United States, fell from 69 percent to 43 percent (domestic shipments less exports, plus imports from other G7 countries).
These shifts in sourcing from high-cost to low-cost suppliers can show up as productivity growth in the United States. Let’s look at one example. Suppose a US automaker imports one million parts from a Japan-based supplier at $10 per part, for a total import bill of $10 million. Consider two scenarios:
Scenario 1: The US automaker improves its production process in its domestic factories, so it only needs half as many components. The import bill goes down to $5 million.
Scenario 2: The US automaker switches to a China-based supplier that only charges $5 per part. The import bill goes down to $5 million.
Surprisingly, these two scenarios are indistinguishable in the US economic statistics. In both scenarios, the import bill goes down to $5 million. The value-added of the US auto company goes up (sales minus the cost of materials), as does its profitability (sales minus cost of labor and materials) and measured productivity (value-added per worker).3
However, the two scenarios have very different implications for incomes and jobs. In the first scenario, the productivity gains come from an improvement in the domestic production process, which increases the value-added by each worker in its domestic factories. All else being equal, economic theory suggests this should result in an increase in the real wages of US auto workers and/or an incentive to boost the US employment of auto factories.
In the second scenario, the gains come from an improved ability of the company’s managers to identify new sourcing opportunities... All else being equal, economic theory suggests in this scenario, real wages and/or employment should rise for managers who are capable of identifying additional global opportunities to cut costs.
Friday, June 3, 2011
Eight of the Ten Largest Private Companies Produce Oil and Gas
And nine of the top ten largest private companies are dependent upon gasoline if you include Toyota. I'm not including Japan Post as the tenth biggest because it is a state-owned enterprise and it is weird because it only has 3251 employees which is the smallest number of any company on the complete list of almost 200 companies. The complete list is also interesting because it reveals industries where there are serious economies of scale and absent industries like plumbing, law, or pediatrics where they do not exist.
Wikipedia: List of companies by revenue
Wikipedia: List of companies by revenue
Sunday, May 1, 2011
Record Food Prices
Why is grain consumption going up? More people and particularly, richer people eat less efficiently. The Chinese are eating lots more meat and beer:
Subscribe to:
Posts (Atom)