Monday, December 28, 2009

Chart of the Day

Econ prof Mark Perry compares U.S. manufacturing output with the total GDP of the five next largest economies in the world:


source: Carpe Diem via Federal Reserve and Wikipedia

As Perry explains:
If the U.S. manufacturing sector were a separate country, it would be tied with Germany as the world's third largest economy. It would also be larger than the entire economies of India and Russia combined. As much as we hear about the "demise of U.S. manufacturing," and how we are a country that "doesn't produce anything anymore," and how we have "outsourced our production to China," the U.S. manufacturing sector is alive and well, and the U.S. is still the largest manufacturer in the world.
Of course, the numbers are down in 2009, yet -- despite the loss of domestic manufacturing employment caused by productivity gains -- America hasn't been "de-industrialized."

6 comments:

MaxedOutMama said...

I thought you weren't posting!

This is very true, and add to it that US capacity utilization is currently much higher than that of either Japan or Germany.

O Bloody Hell said...

Yes, but I'm certain all these manufacturing jobs are nothing but low-wage McTShirt jobs.... :oP

> I thought you weren't posting!

He did say there may be an occasional post. This would appear to meet that criteria 8-D

Carl said...

I actually set this to post before I left . . . was waiting only for prof Perry to correct the mistake he originally made in the chart.

Thai said...


Thoughts
?

And @MOM- I hope your chief is well

O Bloody Hell said...

> Thoughts?

I thought that it seemed real interesting that the author saw fit to make a ridiculously OT slam about Iraqi WMDs in the first 3-4 pages of it, suggesting an axe to grind.

I didn't read a lot after that, mainly because I'm not in the mood, though I expect it to be biased at this point as a result of the above OT BS...

However...

His overall claim that Rule of Law is important to wealth creation is probably accurate, and, I'd note, was something P.J O'Rourke pointed out (more empirically of course) ten years before in "Eat The Rich".

I consider the deficit to be important but less so than many think, since I suspect it's an artifact of massive errors in accounting due to lack of understanding of the nature o IP-as-wealth. In other words, the USA's production, with IP so dominant a portion of it, is woefully understated, both in direct valuation and in secondary valuation (i.e., piracy and the secondary productivity which results from piracy are woefully undervalued in terms of their effect on world GDP)

Carl said...

Thai:

I don't get the opening. GDP measures output -- the fact that some output is financed by borrowing doesn't deflate the value of goods and services produced. Indeed, as Hernando De Soto has shown, debt in the form of mortgages is crucial to economic growth. (De Soto's emphasis on "good governance" also goes to the "rule of law" point OBH addresses, with which I -- and P.J. O'Rourke -- agree.)

Some of the paper restates these principles in other forms. It's not latitude or IQ or religion -- except to the extent that Western Civ. promoted free men and free markets and thus prosperity (including innovation, manufacturing and relative lack of corruption).

The paper goes off the rails in its other "deflations" of US GDP. I've spent plenty of time in Hong Kong and Japan -- indeed, I'm a fan of each -- but neither is as rich or free as the U.S. (ever looked at Hong Kong's non-existent safety net? Or its lack of democracy? Regarding Japan, see "price deflation" and "aging population.") Forget Europe, for reasons addressed in part here and here.

The "trust" part stands on its head the rule of law point above: cultures without resort to impartial courts are compelled to rely on trust; enforceable contracts are superior. And the section on taxes is ludicrously one-sided. I'm also suspicious of the author's logarithmic charts (but haven't tried to reverse-engineer them). Finally, by deflating for geography and religion and many of the other factors, the author confuses cause and effect, seemingly double-counting.

Best of all, it takes 23 pages to downgrade the U.S. to number 2. Big deal: "The lady doth protest too much, methinks."