Monday, February 13, 2006

Blog of the Week: The Stalwart

Do we need Exports?

There he goes again. Stephen Roach of Morgan Stanley is talking about the trade deficit, global rebalancing, and how the U.S. can't recover because we don't have anything to export. You'd think we were already in a recession:

The export solution also suffers from an even more glaring deficiency -- the hollowing of Smokestack America. With manufacturing capacity and jobs moving steadily offshore over the past 20-plus years, the US simply lacks the wherewithal to spark an export-led turnaround in foreign trade. In all too many cases, the loss of US manufacturing prowess has been a permanent, or structural, erosion. The list of “lost industries” -- from steel and autos to textiles and even computers -- speaks of a competitive dynamic that makes it all but impossible for the US to recapture its once leading market share as an industrial powerhouse. As I noted recently, that leaves the US on the outside looking in when one of its formerly large trading partners like Japan springs back to life.

I hate to sound all "new economy", but I don't understand why we need smokestack industries. That's not to say we shouldn't have them, or that an optimally diverse economy wouldn't have them. In fact, it's just the opposite, I suspect that manufacturing will always be an important part of our output. But what's unique about smokestack industries as opposed to software, financial services, or search engines. Surely, there are economies that have thrived without much physical output.

Is it logical that...



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