Let's say that US manufacturing continues to comeback. How much of an impact will that have on the US economy. Manufacturing doesn't seem to generate the jobs it once did. Roger Arnold's suggested that it's unlikely to ever do so again. It may generate wealth, but for whom, and where does that wealth go? Back into the US economy? Outside the US? Would such a development foster income inequality? The re-unionizing of the economy? If manufacturing begins to again create wealth in the US to an increased degree than in the past, will that lead to a strong dollar? Lower interest rates? Perhaps an increase in the velocity of money?

Or is manufacturing sufficiently small as a part of the economy that the effect is muted at best, no matter what it might be?

Or is the effect irrelevant because once oil prices rise (albeit not to their former highs), manufacturing in the US again becomes inefficient compared to elsewhere in the world and this is just a temporary blip best ignored.

anonymous writes:

Where any wealth goes is a function of taxes.

Assume for a moment that energy is free, such that manufacturing could occur anywhere. Where then would it occur? That depends on the other costs. Labor immediately comes to mind, but quickly followed by robots who tend not to unionize. So labor might not be a determining factor. Proximity to bulky raw materials might be an issue, but with free energy the costs of shipping are minimized. What then? Taxes, friends, are the ultimate cost of production. Of course certain politicians don't believe this because they have never run a business. However there are examples. Consider those businesses in which the end product is a service. Where do they locate; why in the most tax-friendly place. And those businesses in which the variable cost of production is small, such as pharmas, have been merging to locate the head office in a favorable tax jurisdiction.


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