Alan Reynolds: An old Japanese rerun
The time when you first become aware of the world helps set your expectations. People who grew up in the depression tended to be frugal savers, even during the post WW II boom years. People who first started investing during the 90's boom think that 10% returns on the Dow are sluggish. I became aware of the economy during the stag-flation of the 70's, so I find low interest rates and low inflation a happy but curious state of affairs.
All through the 70's and 80's the Japanese and Germans were going to eat our economic lunch (especially the Japanese). Then the 90's hit and Japan withered and Germany stagnated. Alan Reynolds gives some figures:
Manufacturing jobs declined in all three countries, and most others, but industrial job losses were much greater in Japan and Germany. From 1990 to 1995, manufacturing jobs fell by 1.6 percent a year in Japan and by 4.2 percent a year in Germany, but only 0.6 percent in the United States. From 1995 to 2000, manufacturing jobs fell by 1.9 percent a year in Japan, by 0.8 percent in Germany but only 0.1 percent in the United States.
Now we hear China and India will eat our lunch (especially China). Not to be putting my head in the sand, but I've heard it before.
China still has a small trade surplus, but the notion that China has been stealing our manufacturing jobs faces a bigger problem. According to the Asian Development Bank (adb.org), China's industrial employment fell from 109.9 million in 1995 to 83.1 million in 2002 -- a drop of 24 percent. Anyone who wonders where U.S. manufacturing jobs have gone need not bother looking for those jobs in China, Japan, Hong Kong or South Korea. All those countries suffered much larger percentage declines in manufacturing jobs than the United States has. Politically inconvenient, perhaps, but true.
China may be an economic powerhouse in the next couple of decades. I hope so, improving global productivity rises all boats. But I expect that China, like most booming economies before it, will run headlong into a mis-application of resources or a resource constraint, that will bring the entire economy to a shuddering halt. If they are lucky, China will be able to weather this downturn and get back on a reasonable growth path again. If not, there could be considerable political unrest in China.
Posted by georgegmacdonald at July 17, 2004 10:45 PM