A recent Bloomberg -article By Dan Wang and Ben Reinhardt, some interesting things had to say about the production of American production. Instead of high rates, they suggested that the US encourage foreign investments in facilities that produce goods in America. I especially liked this section:
But the more Trump the country imprisoned for his impulses – whether it is trade policy, immigration or the treatment of investors – the more likely that it will not be China that is isolated from the rest of the world, but America itself.
But what if the entire starting point of the article is incorrect. Is it possible that the US does not actually lag behind production? Given all the stories about the erosion from Rustbelt, that optimistic image seems a bit far -fetched. But consider this graph in the Bloomberg piece:
It is important to remember that China has more than 4 times the American population. So in terms per head of the population, American production output is more than two and a half times larger than China’s. Indeed in terms per head of the population, the US leads every country on that list, except for Germany (that 1/4th has our population). We even lead countries such as Japan and South Korea in the production of production per capita, despite their impressive export sectors. I suspect that people underestimate American production because it is a relatively low share of GDP. But that does not reflect the fact that our production sector is doing badly – it is not – it is not that our other sectors are so productive that the total GDP per head of the population that considerably exceeds almost all other countries.
A recent article from Gary Winslett showed that the decline of the resting bell was largely caused by a reclassification from industry to other regions, especially the Sunbelt. Another article from Ben Glasner Showed that employees in production are actually more graduates than employees in other sectors of the economy. The American production does much better than hiring many people.
Ps. The strong dollar can somewhat exaggerate our production force. But remember that manufactured goods are often traded internationally, and that is why adjustments of the “PPP” type are much less important than in the service sector.