USA Competitiveness

One of my favorite weekly email newsletters comes from Mike Harvey of Winfield, KS. "Flourishing" is a summary of the current financial markets along with Mike’s assessment of current factors affecting the economy. Here is Mike’s evaluation of our competitiveness compared to China.

“Contrary to what you may have heard on the nightly news, Chinese competitiveness vs. American manufacturers is eroding. Their wages and other input costs are rising. Their transportation sources and energy supplies are sporadic. Most importantly, their lack of a modern, global financial system puts them at a competitive disadvantage. Last week’s 2% revaluation of their currency will hurt Chinese exports, raise prices to U.S. importers and consumers, and do nothing for U.S. manufacturers. (It might help manufacturers in other parts of the Far East.) That’s not the end of the story, of course. The Chinese economy is being transformed from a Maoist ideal (abject poverty, humiliation, and death) to a capitalist powerhouse with democratic values. But, they still have a long way to go.“

“At the same time, American manufacturers continue to increase their productivity and cut costs. In June, the Federal Reserve’s industrial production index hit an all-time high. Never in history has our manufacturing sector produced more goods.”

I’m convinced that we will view the current Chinese competitive threat much like we once feared OPEC in the 70s, the Japanese in the 80s and Mexico in the 90s. All were perceived as major affronts on our American economy, but quickly faded from the headlines.