How America Lost Its Industrial Edge

Reviewed by Hitoshi URABE

Article:
"How America Lost Its Industrial Edge"
(By Paula R. Kaufman) Insight
http://www.insightmag.com/news/437040.html

Comments:

This is a fairly lengthy article comprised of a brief preamble by the writer then an interview with Eamonn Fingleton, an economic commentator.

Mr Fingleton is a former editor for the Financial Times and Forbes who has worked successively nine years in London, five in New York and thirteen in Tokyo making him one of the few English-language journalists who can claim an in-depth knowledge of all three of the world’s major financial capitals. His comments have previously appeared in various magazines, and in the article introduced here, he talks about the US industry, which, contrary to popular belief, Mr Fingleton considers it to have lost competitive edge over other countries.

Mr Fingleton places value in manufacturing industry because wealth is created through production of hard goods significantly greater in magnitude than through the "New Economy" services. He states that high-tech manufacturing capabilities existed in the US a few decades ago is now totally gone, and that it has been transferred to Japan. Low-tech manufacturing has also been transferred to other countries, a large portion of which to China.

The flow of transfer was expedited by the notion that service industry would be more productive than manufacturing, which was quickly proven wrong, as, for example, information services were in reality highly labor-intensive that were recognized to be better placed not in the US but in such countries as India, Russia, and Latvia. He goes on to point out that the US economy is now supported by East Asian countries, as providers of goods consumed in the US, and also as providers of money to buy them.

The interesting part of this article, at least to us, is not about the US, nor about the strength of Japan's manufacturers. It is the development of Japan's industry which seem to be following the same path of the US counterpart, as described by the commentator.

Mr Fingleton's views should be almost amusing to many Japanese, as how the US lost the whole manufacturing industry could very well be applied to what Japan is experiencing now. The expression Mr Fingleton used in describing the US, "hollowing out of manufacturing base" is in fact the theme Japanese business critics have been discussing with exactly the same context for years.

For now, discussion is still going on in Japan as to whether the "New Economy" could save Japan as it seemed it did the US a decade ago. On the other hand, transfer of production facilities along with capital and know-how to other countries, especially to China, is accelerating. It seems in no time Japan could be left without the edge on production capabilities. Thus, Japan could find itself dwindling in the middle of two giants, China as the production center of hard goods and the US as the originator of services.