Friday, April 9, 2010

Excellent article at Seeking Alpha

Sorry I haven't been keeping up with my blog lately; I've been preoccupied.  Anyway, I just read a great article at the blog Seeking Alpha titled Why the Credit Bubble Cannot be Reinflated.  Here is a profound quote that I'd like to share with everyone:

It's not the loss of factory jobs per se which has hollowed out the nation's manufacturing base--it's the loss of entire ecologies of production.
Most factories in advanced economies are filled with robots, not thousands of humans; that's the only way it makes financial sense in a global economy. But some company manufactures the robots, and someone has to maintain them and program them, and other firms supply parts, software, machine tools, etc. The end-product factory is merely the most visible part of a complex web of suppliers, toolmakers, and expertise.
So when production capacity leaves the country, it's not like certain trees got logged--it's like an entire ecology has been clearcut, leaving barren hardpan behind. It becomes very difficult to recreate that complex ecology and expertise.
This is consistent with one of the themes of this blog--that almost everything in our economy is interconnected.  In this case, the loss of low-level manufacturing jobs, the ones that our politicians and intellectuals thought we could do without--also results in a loss of other high-level jobs that are dependent on doing the low-level jobs.  Of course, that also results in a loss of jobs in other fields, such as lawyering (less economic activity means less work for lawyers).  Additionally, the loss of manufacturing jobs drives people into the colleges to retrain for (fewer) high-level jobs, and some of the people who lost those high-level manufacturing-related jobs will return to seek advanced degrees or to retrain for other fields, resulting in an oversupply of degree holders in various fields.

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