Friday, July 27, 2012

Future Development

I want to add a couple of things to my post yesterday about Malaysia, and how recently its independence has come, and to the country's economic growth lauded by LDWorldwide today. The first is a cool video from Farnam Street showing the waning influence of the big colonial powers over the period 1800-2011.

The other is from Tyler Cowen, citing  a paper by the Harvard economist Dani Rodrik:
Almost all of the growth miracles of the last 60 years were based on rapid industrialization. Today, technological changes and global competition are fostering rapid de-industrialization (in terms of employment shares) almost everywhere. This makes me wonder whether the kind of rapid growth experienced by countries like South Korea, Taiwan, and China will ever become possible elsewhere.
This fits with Race Against the Machine, a book I read last year about how automation is eliminating all kind of jobs, making things cheaper for consumers and industries more profitable, but at the same time, without providing jobs for humans. People are frequently incredulous when they hear that manufacturing output in the US has been steadily increasing over the last 40 years. Check out this chart:

A one sentence history of industrial trade and globalization would involve manufacturing jobs migrating to lower cost centers, beginning with Manchester's textile mills moving to New England and then North Carolina, and then overseas, continuing with the "made in japan" period of the 1950s and 60s and bringing us to today's China. Now, trends suggest distribution costs may be the key driver, and the products will return to where the consumers are, but without the jobs.

Still, I have to believe that it's a net gain for the U.S. economy if my jeans are made most economically in North Carolina, (or if I can print them at home), but one wonders where developing countries will be able to find a comparative advantage in the future.

I might actually follow the election, if either candidate were talking about this issue, rather than claiming that he is going to create more manufacturing jobs by either taxing the rich, or cutting their taxes. The future looks wondrous, but also seismic, and I'm not sure we are doing much to prepare for it. But then again, maybe that's the best approach, and our society just needs to adapt, as these things happen. Predictions are hard, especially about the future.

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