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Revenge of the Rust Belt

So now that US Industries have woken up – and finally started realizing that producing many products is cheaper in America…

Where are the new factories going?

Turns out, a majority of them are moving right back where they came from…

The Rust Belt.

During the 80’s and 90’s a lot of American business followed the cattle herd mentality in migrating manufacturing to China – or the next “best” onshore location – the American South. Now I don’t know if it was because at the time, Wall Street was sucking up all the smart MBAs with promises of making millions – or a failure in groupthink…

But a whole bunch of somebodies forgot to put the ancillary costs of offshoring into the equation. From lead laced toys damaging babies, to diaphanous intellectual property protections, to drywall which killed people because of the use of cheaper – poisonous chemicals… The real cost of manufacturing in China is much higher than the wage level would indicate. Thank goodness some folks finally got a clue.

The issue in the South is productivity. American productivity far surpasses that of any other country – and is significantly higher than Chinas. So while the payroll part of manufacturing in China is cheaper – the cost per completed piece is actually higher. Same issue in the South. When you start looking at where your educated workforce is…

It isn’t by and large …There. Meaning productivity is again higher in those old tried and true rust belt states. Further is the cost of conservatives. That is – as long as southern conservatives are dedicated to fighting the Civil War – the number of discrimination lawsuits, and level of employee friction is going to be through the roof, hampering full productivity. Lastly – as recent laws introduced and passed by conservative red state legislatures – such as the anti-immigrant legislation in Georgia where the state’s agricultural workforce was decimated…

You don’t know what stupid, business killing thing they are going to come up with next. Like declaring war on your largest foreign customer.

It’s early – but the “Rust Belt” right about now is looking pretty damn good.

The Revenge of the Rust Belt: How the Midwest Got Its Groove Back

We’re not used to thinking of the old industrial Midwest as a beacon of good news. Just the opposite. It’s Exhibit A in the story of America’s economic decline — a land of hollowed-out factory towns and shrinking cities. There’s an entire genre of photography dedicated to Detroit’s decaying cityscape alone.

Yet, it may be time to rethink that view. Because there are signs that the heart of the rust belt may be finally shaking off its rust.

For the past thirty years or so, there have been two great running narratives about American manufacturing, both of which have been disastrous for the Midwest’s economy. The first has been about the disappearing factory worker — how by shipping some jobs abroad and replacing others with machines, companies have figured out ways to produce more goods with millions of fewer employees on their assembly lines. The second narrative has been about migration — the decision by companies to move production away from once-booming industrial centers of the north, to southern states with weaker unions and lower wages.

Both of those trends, it appears, may have drawn to an end.  Read the rest of this entry »

 
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Posted by on May 27, 2012 in News

 

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Rising Like a Phoenix? US Economy…

World power swings back to AmericaThis may well just continue to work and turn the US economy around…

As long as conservatives don’t get elected to screw it up.

The fact is, it has now become cheaper to manufacture many products in the US than in China. Those companies who haven’t made plans to “inshore” yet may well be holding losing cards. This could have a net impact on the US economy of over 3 million new jobs in 3 years. Foreign based companies have figured it out, with both Asian and European companies flocking to build plants in America. You add that to the two major “bleeding edge” chip foundries being built right here in America – and there are some fundamental economic changes afoot.

No small contributor to this shift is that energy independence thing. The US isn’t very far from being able to be self-sufficient. There are humongous reserves of Natural Gas in the Midwest, and oil reserves beggaring those in the Middle East in the Gulf of Mexico. This should mean stabilized energy costs, no longer at the whim of some crackpot oil-can Dictator.

China’s counterfeiting and Intellectual theft issues are huge for tech industries, it is also impacting firm’s brand names. I for one, have never been convinced it was ultimately profitable to move any high tech or leading edge product production to China because of the theft issue. It really doesn’t matter if you can make a big screen TV 15 cents cheaper – if the manufacturer is making knockoffs, using your logo, and selling them $100.00 cheaper. I think it’s time to cut the George Bush (pick one) support system for China. They have a huge internal market, and there is no reason their economy should not be strong once the necessary changes are made in how their government works, and business is conducted are made.

World power swings back to America

The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.

Assumptions that the Great Republic must inevitably spiral into economic and strategic decline – so like the chatter of the late 1980s, when Japan was in vogue – will seem wildly off the mark by then.

Telegraph readers already know about the “shale gas revolution” that has turned America into the world’s number one producer of natural gas, ahead of Russia.

Less known is that the technology of hydraulic fracturing – breaking rocks with jets of water – will also bring a quantum leap in shale oil supply, mostly from the Bakken fields in North Dakota, Eagle Ford in Texas, and other reserves across the Mid-West.

“The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d),” said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.

Total US shale output is “set to expand dramatically” as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009.

The US already meets 72pc of its own oil needs, up from around 50pc a decade ago. Read the rest of this entry »

 

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