I'll go off tangeant here, but hey, off base is my middle name (got a weird mother ;-)
America was doing well post war
because the rest of the world had been ripped to shred
by 2 world wars. Germany was the first world power at the turn of the century
(they had just overtook the UK), the US overtook everyone post WWI.
Protectionisms almost ripped the whole world wide economies in the 30's and
the US didn't recover until WWII. Then, with the rest of the world down,
US firms had record profit margins for the next 20 years, which enable
everybody to hop on the gravy train. The interior US market was booming
with huge population boom linked to a sudden prosperity due in part
to Keynesian like massive capital outlays during the war
with laws in place to control inflation (which normally would have happened in such cases),
after more than a decade of doldrum.
Unions where able to gain so much because company's could give it to them.
The interior US market was protected and prices where higher than
there should be which kept margins high (which as I mentioned is
one of the big reason for the old boys club existing, they could afford it
many folds). There was some trade deregulation
because people knew that total protectionism caused too many problems
in the 30's, but tarrifs were generally high which mean even places with lower cost
of production could not compete with US production. Though in the early post
war era, there was basically no one left to commerce with (which explains
why the Marshall plan was launched (there was quasi starving in the immediate post war
in continental europe).
By the late 60's though, this system was starting to unravel, lack of competitivity
was undermining US productivity and the old european powers and Japan had
regained their footing and exported a lot again (they had much higher productivity gains).
The protected US market also fostered inflationary pressures and the US dollar
was under attack, by the late 70's (the height of unions by the way). The US economy
was at its worse with high inflation, low productivity and a credit crunch which curtailed
investment in industrial machineries (which ironically enough were mostly used in union
based manufacturing), setting up the subsequent decay.
Of course, there's the whole backdrop of social unrest, which was partly linked to soaring
poverty rates, especially in inner cities. Blacks who had found employment in the post war boom
now where the first to feel the crunch of the manufacturing industry's quick demise. Since there
was still much discrimination in education and white colar work, most had no immediate backup.
The US hit its worse economic patch since 1933 in 1982, with a very severe recession,
which most of all hit the manufacturing sector very very hard. Many industry
in those sectors never recovered from that (though they may have died later if that
wasn't the case.
Following this, the US policy makers,
saw its advantage of going from manufacturing economy to a knowledge economy, the
switch occured in the 80's and is probably one of the reason for trade deregulations
all through the 80's to now.
The argument,
protecting the manufacturing industry through protectionism
would hurt US consumers more and more as they became less and less competitive
on cost. Investing to keep them marginally competitive would still end up costing
tons of layoffs (since they would need to be X times more productive) and
this money would be better spent on investments in
more knowledge based upcoming industries. That's the decision
**Stockholders** do, they are the ones who decides
which industry they want to invest in and that decides what company has the
money to pursue its capital expansions. Most stockholders are not fat
cats, but are us, money managers manage our money and we want
the best return on it, which means investing in industries with
the best future prospect (that's why tech was all the rage in the 90's).
Same thing with government, they pursue trade regulations because they think
its better for US citizens to buy cheaper goods abroad and with the rest of
their money gained through some other employment than fading industries
they can buy or invest in something else. Since most money is spent on
services, most of this money is actually spent inside the US, not
on foreign goods (so, its produces US jobs). So, opening trade
increases job locally. Some question that these service jobs
are less paid than the union jobs they replaced. But, that's
a false comparaison, those well paid manufactuing
jobs were unsustainable in the long term.
The manufacturing sector that remained in the US
was the highest value added one (like airplanes and cars). Manufacturing
where humans played a big part, was shipped out). Long term, there may
be robots that can do those lower value added manufacturing and
ironically, this manufacturing could come back to the US because we'd
have the money to buy those robots.
One of the principle of strategy in business is you should concentrate on what your good
at (that's why you don't see very diversified companies). The same goes with countries,
if the US is not so good in manufacturing, they should concentrate on the knowledge
industry where they have been good. The 90's, despite the tech bust (which
is mainly linked to Greenspan, same thing with housing bubble), didn't really dent
the US's prosperity, which is reached by 2000, the best ever in real term
and in social term (like poverty).
Bush, the numbscull has reversed some of this and put the US on some very bad path
economically, but hey I didn't vote for him and there's still much good that can be
done if someone holds the rein and takes the good decisions.
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OK, now flog me for being so off base.