Monday, February 27, 2006

Manufacturing's economic significance

Free trade benefits both trading nations. It’s the trade deficit that harms USA’s economic and social welfare, (Refer to the post of “David Ricardo’s Comparative Advantage”). Even with adjustment for the dollar’s inflation over a half century, our annual deficits and their harm increases. The world's and the USA's production and consumption of goods continues to increase. The proportion of USA goods consumed both within the USA and the entire globe continues to decrease. There is no national benefit from a trade deficit.

A completely automated factory employing no production labor, requires the support of materials and other services. Accountants, maintenance, janitors, transportation of materials and components, are all required before the finished products reach the factorie’s shipping platform. Those supporting goods and services are generally of domestic origin. To the extent domestic goods and services are utilized, all domestic production contribute to our GDP and median wage.

The production of foreign goods contibute little or nothing to the USA’s economy. Domestic and imported goods do not economically differ after arriving at a USA port of entry or a USA producer’s shipping platform.

Manufacturing is of greater importance because the goods and services supporting factories are generally great as or greater than what's required for most other industries. Manufacturing has a great (multiplier) effect on our GDP. Individual businesses are more or less unique, but a domestic factory's contribution to GDP is generally much greater than that due to a service site such as an administrative office or a retail outlet. Excluding the value of unrefined petrolium, manufactured products account for almost our entire global trade deficit.

I believe there’s a symbiotic relationship between manufacturing and technological knowledge. USA’s deindustrialization has begun to cost us our technological edge. Our colleges and universities are not producing the creators of the globe’s technical future. Due to USA's deindustrialization, we invest less and others more for research and development. Those who sow less, harvest less. As we manipulate materials, and create products, we learn more of the materials, tools and the products. If we do not manufacture today, will we be able to resume manufacturing in the future?

Many are concerned about our military’s dependence upon foreign manufacturers. There’s of course some concern regarding security of information and prevention of sabotage. If national governments of our suppliers disagree with our policies, will it affect the production and delivery of our strategic needs?


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