Reuters blog archive
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Those who believe that making physical things is a superior vocation will find themselves nodding through much of Vaclav Smil’s “Made in the USA”. Smil, a prolific Canadian academic, challenges the widespread view that in mature economies a shrinking factory footprint is inevitable - or even desirable. He blames short-termism and bad policy choices, not just changing economic tides, for the retreat of U.S. manufacturing. The book’s call for smarter industrial policy is appealing, but Smil comes too close to advocating protectionism.
Made in the USA uses mountains of statistics to chart the rise of U.S. industry from the aftermath of the American Civil War to its mid-20th century heyday. It pegs the rise of OPEC and related oil shocks of the 1970s and Detroit’s inept response to rising competition from Japanese automakers as key turning points in U.S. industry’s subsequent decline. He cites statistics showing the U.S. has shed about 5 million factory jobs since the 1990s.
Smil’s pro-manufacturing argument boils down to a multiplier effect: a team of engineers working to improve an automobile assembly line will spur more and better economic activity than a room full of bankers cooking up noxious mortgage derivatives. World-class manufacturing supports employment in research and development, specialised suppliers, and related services companies. Bankers and lawyers need a far smaller supporting cast, in Smil’s view.
from Global Investing:
China's slowing economy is raising concern about the potential spillovers beyond its shores, in particular the impact on other emerging markets. Because developing countries have over the past decade significantly boosted exports to China to offset slow growth in the West and Japan, these countries are unquestionably vulnerable to a Chinese slowdown. But how big will the hit be?
Goldman Sachs analysts have crunched the numbers to show which markets and regions could be hardest hit. On the face of it non-Japan Asia should be most worried -- exports to China account for almost 3 percent of GDP while in Latin America it is 2 percent and in emerging Europe, Middle East and Africa (CEEMEA) it is just 1.1 percent, their data shows.
Optimism the Indian economy will soon recover, despite no sign that it is anywhere near doing so, has increasingly led forecasters to overestimate industrial production growth.
Incessant official revisions to the data, after initial forecasts are proved wrong, also mean investors and companies don't have a clear and timely view.
2012 has been a year to forget for Brazil's struggling industry – just like the year before. But a weekly central bank survey of around 90 financial institutions says that will all change next year and industry will grow at healthy 4 percent pace.
Will it? One year ago, the same survey predicted 4.1 percent growth for 2012. Despite massive stimulus by President Dilma Rousseff's government, including record-low interest rates and billions of dollars in tax cuts that were off everyone’s radar, industrial output in Latin America's largest economy is set to fall by 2.3 percent.
from Global Investing:
The yield on 10-year U.S. Treasuries, fell to their lowest levels since early October today, breaking decisively below 1.80 percent. That compares to the dividend yield on the S&P 500 of 2.28%.
The European Central Bank kept its government bond-buy programme in hibernation for the ninth week in a row last week. The ECB may come under pressure to act as yields on Spanish 10-year government bonds rose further above 6% today.
An obscure gauge of shipping costs rose to prominence in geeky macro circles during the financial crisis because its plunge provided a telling lead on the economic crash that unfolded in 2008 and 2009. Now, the Baltic Dry Index has again taken a nosedive, falling to its lowest level in more than two decades.
This time, analysts are explaining it away as a reflection of an increased number of carriers at sea.
Phew. Industrial production rose 0.9% in July, the fastest in seven months. For the moment, that appeared to forestall fears that another U.S. recession might be imminent, even if stocks were down on worries about weak economic growth in Germany. Harm Bandholz at Unicredit saw the figures as a bright spot:
Today’s report, in combination with the recent improvements in initial jobless claims and retail sales, corroborates our view that GDP growth in the second half of the year is likely to accelerate to (a still low) 2%-2¼% from less than 1% in the first half.
Just two years after Beijing started throwing incentives at green technology manufacturers, it has now decided to starve them of financing. This stop-start approach shows that, while Beijing may have more levers at its disposal when stimulating industries, it also has a bigger risk of run-away supply growth.
On Monday, China launched the latest in a series of attempts to rein in industrial overcapacity to balance its economy and prevent investment from going to waste. Most of the sectors suffering from overcapacity are old-economy heavy industries like steel and cement. But Beijing's targets also include green industries such as polysilicon, used to make solar panels, and wind power equipment.