"We can't rely on a consumption-based economy. We have to encourage a production-driven one"

Forums: Usa, Economy
Email this Topic • Print this Page

Renovate the Old Economy, Don't Rebuild It
We can't rely on a consumption-based economy. We have to encourage a production-driven one, argues Tom Davenport

Quote:

It's no accident that China and Japan, for example, have been both producer-driven economies and nations of savers. We have to slowly shift back to being a producer-driven economy. It will be difficult and painful, but we have to spend less and produce more goods and services that other economies around the world want to buy. We also need to replace these other economies as investors in our own economy.

This probably means that the U.S. government needs to identify some key industries that it will nurture as the potential big exporters of the future. There used to be many objections to this sort of "industrial policy," but perhaps now that much of our financial system has been nationalized, such interventions will seem relatively mild. We're already investing in the automobile industry, for example, although I'm not sure that's our best bet for future exports. Tom Friedman is probably correct in saying (in Hot, Flat, and Crowded) that environmental technologies would be one of the best possible industrial policy investments for the U.S.

Topic Stats
Top Replies
Link to this Topic

Type: Discussion • Score: 10 • Views: 1,329 • Replies: 17

No top replies

@Robert Gentel,

Well, duh (from my pov -memories of arguments past).

0 Replies

@Robert Gentel,

The two have to be in balance. A large part of what caused the depression in 1930 as I understand it was a growing imbalance between productive capacity and markets.

0 Replies

a national economic policy is anathema to those who believe in the invisible hand of the free market, regardless of the reality of the fact of government subsidies for agriculture, or transportation.

however, since international trade is important and our trading partners do it we can either follow the methods or die.

sometimes, reality forces people to modify their ideology, and having a national economic policy to protect workers and profits is one of those times.

1 Reply

@kuvasz,

A nation of MacDonald's and Burger King's workers cannot survive.

0 Replies

The problem with production drives is the sheer efficiency of them. The Luddites did have a point. They believed in everybody working inefficiently.

Take one sheep. Shear it, cure the wool, card it, spin it into strands and crochet yourself a doilie with two sanded twigs. Simple.

As long as you don't mind a drab grey colour to match your socks, blankets and sleeping cap.

1 Reply

@spendius,

Oh--I forgot to mention that you have to make bargain hunting, the motive force of productive efficiency (except the Public Service I mean) illegal like it used to be and especially inducing people to engage in it.

You can always wave a magic wand in the form of a pen over it and keep your fingers crossed.

Do you guys really think yourselves knowledegable regarding these matters?

Sheesh!!!

0 Replies

@Robert Gentel,

as my old boss used to say :

"we can always make the economy grow by taking in each others wash - it won't make us any richer - but it'll look like we are well off being able to have someone else do our wash ! " .

have been thinking of rudy often lately !
he taught me many a good lesson over 25 plus years working with him .
hbg

0 Replies

I think the efficiency of the "just in time" supply pipeline is part of our economy's problem. Companies have decided to save warehousing money by only ordering/producing what is currently needed rather than stockpiling materials/product to carry them through the bumps in the economic road.

It makes the entire system highly susceptible to hiccups.

3 Replies

@Butrflynet,

everywhere you look the economy has been destabilized, the stretching for growth in order to prop up a failing free market economy puts the health of the society at risk. Now that we are in collapse we are sending $100 billion a day in taxpayer IOU's into the vaults of banks and shadow banks, because we don't know what else to do, the same reason that we ignored risk at got into this mess.

The new order will be built on "susainable systems" and promoting healthy society.

0 Replies

@Butrflynet,

Butrflynet wrote:

I think the efficiency of the "just in time" supply pipeline is part of our economy's problem.

That is an interesting concept, B'net. In my retail stores, we are buying less and less from the manufacturers/importers and more and more from distributors. It costs us a little bit more, but not a lot more. And we have cut our inventory and warehouse costs by a lot. The savings, in my mind, offset the extra cost of goods.
An amusing analogy-which may or may not be relevant to the "just in time" theory-is the amount of gas we keep in our cars. I drive 12 miles a day. But when I go to the gas station, I fill up the tank. Good for two weeks or so. I could get gas once a week and only have enough for one week.
If everyone did that, there would be a sudden drop in demand for gas. But it would be a one-time drop. Do you agree, or am I talking total nonsense, which I am wont to do?

1 Reply

@realjohnboy,

it is about more then efficiency, it is the off loading of risk. Just as banks were allowed to offload risk and thus reduce the amount of reserve funds required by regulation by employing credit default swaps, retailers can off load the risk of product not selling or not selling at a profit by ordering very little bits of inventory often.

1 Reply

@hawkeye10,

No argument there, hawkeye. Many of the big retailers pulled the trigger on holiday buying in late-spring or early summer. Oops. They probably over-bought badly, given what has happened recently. There is going to be a lot of pain amongst them.

1 Reply

@realjohnboy,

the pain will be spread to china, as large retailers go bankrupt and don't pay their bills. It has in another way as well: Chinese manufacturers typically produce and then send product to the port area to wait for an order from Walmart or whomever. In the last two months the orders have not come in, all that crap is sitting at Chinese ports. Manufactures need to pay workers now, but it will be a long time before the product is actually sold, at who know what price it will eventually get.

FYI, 18 of the 26 largest American steel mills are in the process of shutting down, that is how bad the manufacturing and construction outlooks are. This recession is going to be a son-of-a-bitch

0 Replies

@Butrflynet,

butrfly wrote :

Quote:

I think the efficiency of the "just in time" supply pipeline is part of our economy's problem. Companies have decided to save warehousing money by only ordering/producing what is currently needed rather than stockpiling materials/product to carry them through the bumps in the economic road.

however if you look at the house-building and automobile industry you'll see that their warehouses are bulging with supplies and unsold goods . so "stocking up" is not always a good idea .

personally , we'll stock up when the price is right , but when prices take a jump we'll try to make things last just a little longer .
have to adjust to "economic circumstances" !!!
hbg

0 Replies

Another problem is that the government discourages savings by taxing a person's bank savings account for as little as $1,000.

0 Replies

Isn't consumption and production balanced? If I'm going to consume, then someone has to produce. If I produce, then someone has to consume, or I'm just wasting my time.

1 Reply

@DrewDad,

That's right DD. You are. According to the materialists anyway. It's all pointless they say.

0 Replies

"We can't rely on a consumption-based economy. We have to encourage a production-driven one"

Related Topics

Quick Links

My Account

able2know