A Manufacturing Economy

Some of you may have seen Brother Hezekiah leave comments from time to time on this site. I pretty much disagree with most of what he says, but a while back he recommended this book to me, and after stumbling inadvertantly across this review of it, I may actually give the book a chance. The part of the argument that interests me is this

Those jobs in advertising, accounting, consulting, banking, law and the like — fields in which America leads the world — may be highly paid, but they have very limited export potential. American advertising agencies and accounting firms may have branches all over the world, but the need to handle local languages and other peculiarities guarantees that they mostly employ foreigners, most of the value-added takes place overseas, and only a relatively small trickle of profits and jobs come back to America.

This lack of export potential is key because in the long run, if we want to sustain the ability to pay for the cheap imports we are addicted to, we have to either export something in return or gradually sell off this country's assets. Foreigners are not going to give us something for nothing forever. At best, the dollar will continue to sag, making those imports more expensive, which reduces our standard of living.

I have taken some graduate level economics, and read many books on globalization since I graduated, but I have a very difficult time understanding the full implications of America's current account deficit. Ever since I can remember, we have imported more than we have exported, and it hasn't seemed to hurt us yet. Here is the criticism of the argument I used with Brother Hezekiah

A faulty analogy is sometimes drawn to the Industrial Revolution, which made agriculture a relatively small employer and percentage of GNP. But the Industrial Revolution did not cause agricultural production to decline in absolute terms. In fact, it boomed: America grows much more and better food today than we did in 1890 when a third of the nation farmed. We remain an agricultural powerhouse and have not farmed out the production of our food to foreigners.

. I find this very interesting and, if true, I think it means the "asian tigers" are the economies of the future. I don't know though, America is the land of innovation. I think we will figure something out.