We said in previous posts that “Made in America” is becoming a myth. While we could focus on a great number of factors like our standard of living, wage growth, the rising cost of health care, the one scary long term prospect is our national defense. No, we’re not talking war–although that is an extreme example of defense. We’re talking economic defense. As the world industrial society evolves it is obvious that every country depends on the natural resources of every other country. Whether we talk about where we get our morning coffee from or lithium for batteries or any other key component of life in the US, we need to accept the fact that no country can establish and maintain its normal routine without being able to trade with its foreign neighbors. But–that said–it is critical that acquiring those natural resources should be the starting point for our manufacturing industry. During the last century we were much more competitive because we made products that were not made elsewhere or were far superior to those made in other countries. But today is different. America is a huge importer of foreign manufactured products. And therein lies the problem. It has been proven that every dollar spent on manufacturing in America generates $2.79 in related industries which also make products. We lose that when we buy from foreign makers. One manufacturing job creates 7 to 12 related jobs. We lose that employment too. Drive down your street and count the number of foreign cars. In the 1960’s foreign cars were scarce and their quality was poor. Today just the opposite is true. They dominate the market and their quality is legendary. So where does this leave us? We don’t pretend to have a solution but neither does anyone else. When someone says “It’s easy to win a trade war with China” — don’t believe them. The cruel truth is that as long as oppressive regimes rule China, Thailand, Pakistan, and other similar countries where the standard of living is far below ours we will continue to rely on those countries for manufactured goods. And trade tariffs are not the answer because raising the costs of imports is an inflationary move and will only cause other countries to tariff our products or possibly boycott then completely. Now, consider what a war could mean…in the 1940’s America had a robust and growing manufacturing sector that was immediately transitioned into a war-producing assembly line. We simply don’t have that “in-the-trenches” structure now. The world is delicately balanced and all nations should focus on keeping it as is.
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