There are whole sectors where automation has not staved off collapse of US manufacturing, e.g. clothing, consumer electronics such as CD and DVD drives, magnetic disk drives, etc.
Also, when the service economy collapses because of the comparative advantages of the off-shore operations, what comes next in the United States?
And, thanks to modern transportation and communication, a significant portion of the goods we consume are made in countries that can produce these goods more cheaply than we can do so at home.
Even now the export of services is not sufficient to counterbalance the import of manufactured goods. We are living off of our capital -- essentially selling the assets of the United States in order to pay for current consumption. When the service industry trade balance goes negative as well, the descent into bankruptcy will accelerate.
This is a bad thing only if you see the world economy as a zero-sum game. The Indian call center operator who spoke with me today has more money than when he was an unemployed student in Delhi. He is helping build the Indian economy.
I agree that it is not a zero-sum game. In fact, the period 1873-1896 was a period of considerable progress in other countries than Great Britain. There was great, if uneven, progress in the United States. Germany, unified in 1870, gained rapidly on Great Britain in every sphere. Serfs were freed in Russia, and bonds were floated for railways there.
However, Great Britain's preeminence among the Great Powers declined.
He will be a consumer of American goods and services, even if all that he does is move into an apartment with a few electric appliances because his demand of electrical power will create the need for a new power plant built by Bechtel and using GE turbines financed by a JP Morgan Chase loan.
Could be, although why would the plant not be built by an Indian company using Japanese or European equipment and financing. The idea that only US companies are smart enough to produce the highest-tech manufactures is just as wrong as the idea that only US employees are smart enough to provide the most sophisticated services. The JP Morgan Chase loan officer is most likely to be from London or Singapore, lending money based on deposits by non-US persons.
And, by the way, the British did not become more imperialistic at the close of the 19th century. That was the Germans.
The '80s and '90s were the period when Africa was colonized, and Great Britain acquired the choicest real estate -- Egypt, Sudan, Kenya, Rhodesia, South Africa, and Nigeria, as well as more minor parcels. Great Britain's colonial acquisitions during this period were greater than previously in the years between the Napoleonic Wars and 1870. So Great Britain did indeed become more imperialistic than before, and she was far more successful than was Germany or France.
Richard W.
In a sense, is that already happening? The percentage of immigrants doing these service jobs must be quite high. Would that qualify as "going negative" since a portion of those salaries are going overseas and that "cheap" labor is being subsidized by government handouts?
On another note, I read A COUNTRY MADE BY WAR by Geoffrey Perret back in 1990. The hypothesis is that every war the US had been involved in has led to expansion and economic growth. Could the "IIC" (my own abbreviation, ask by private mail if your want to know what I'm saying) think that a war is just what the economy needs? If so, that would seem to be totally silly thinking as so many countries and small groups have the capability to annihilate things.
And, yes, if you look at the tags on your shirt and pants, your DVD and CD player, and most probably your TV set, it’s likely they have been made overseas. It’s one of the reasons that you can buy a shirt for $5, a CD player for under $100 and $200 will get you a really nice TV set.
But your much vaunted “collapse of US manufacturing” is probably news to GM and Ford, as well as the Japanese auto plants springing up like mushrooms after a rain in places like Tennessee.
And regarding the collapse of the service market: the Chinese still haven’t figured out how to serve me a meal made in Taiwan and delivered by a Korean direct from the Far East.
And that power plant in India I was referring to is not a hypothetical example. Yes, I suppose it could be built without American participation, but with the dominant US market share in power generation equipment and financing, it’s likely to involve us.
The decline of the British Empire was not the result of a “Great Depression” at the end of the 19th century. It is the almost inevitable result of the growth of other world powers, most prominently the US, with its larger population, land mass and natural resources. It was also the result of World War I, which cost old Europe not only a generation of young men but also its treasure. And, as the aftermath of WW I, the British, who were on the winning side, suffered a crisis of confidence. And without self-confidence, you cannot hold an empire. It is this lack of confidence among a minor, but growing segment of the American public, that is debilitating to the future of the country.
Finally, you are simply wrong about the British becoming “more imperialistic” (your exact words) in the late 19th century. The jewels in Britain’s imperial crown were India and North America, which it won well before that time. They lost – of course – the US (sometime in the 18th century if memory serves me) but continued their hold on Canada and India. Their African colonies were a sideshow. However, Africa was not a sideshow to Germany, which had only recently become a unified nation. The last Kaiser demanded his nation’s place in the sun, especially because of his relationship to the British royal family and the fact that it was a European great power. It’s one of the things that led to World War I.
Finally, with regard to Bill Gross. He is a fine fixed income manager, one of the best. Given the fact that we have had a bull market in bonds since about 1980, all bond managers have good track records, especially if compared to equity managers during the last 3 years. (Someone once said that you should never confuse brains and a bull market. How true.) However, like a Hollywood star, Bill has allowed his success go to his head. He will now share his opinions of the stock market, politics and the rise and fall of empires with anyone who will listen. I will let Bill manage some of my fixed income money, but I will take his pronouncements on areas in which he has not demonstrated his expertise with a large grain of salt.
Question: if interest rates, which are at 50 year lows, start to rise, how will Bill make money in bonds?
Love and peace.