After entering the "deindustrialization" stage, what is the impact of industrial hollowing out on the structural recession of the US economy?
preface
With the continuous development of the US economy, the industrialization process has gradually entered the stage of "deindustrialization", which is manifested in the emergence of industrial hollowing.
Industrial hollowing out refers to the gradual reduction or disappearance of traditional manufacturing and the decline of industrial areas. This phenomenon has had an important impact on the structural recession of the US economy.
This paper will explore the impact of industrial hollowing out on the structural recession of the US economy and draw corresponding conclusions.
Since 1980, the United States has entered a stage of "deindustrialization". "Deindustrialization" mainly refers to the declining proportion of a country's manufacturing output to GDP and the proportion of manufacturing employment in total employment.
Western traditional economics usually regards "deindustrialization" as the endogenous process of the division of labor in the global industrial chain, and most of the US manufacturing industry reduces labor costs to improve profits through offshoring, and economic theories such as the comparative advantage model and the Heckscher-Ohlin model provide corresponding theoretical support.
In 1980, manufacturing accounted for about 21 percent of GDP in the United States, and manufacturing employment accounted for 22 percent of total employment. In 2018, the former fell to 11% and the latter to 10%.
U.S. multinationals have captured huge amounts of added value through offshoring, creating vast amounts of wealth for the United States.
However, excessive "deindustrialization" will hurt long-term economic growth in the United States, manifested in high deficits, low investment rates, low productivity, high unemployment, and insufficient growth momentum.
According to data released by the Bureau of Economic Analysis of the US Department of Commerce, in 2018, the US trade deficit was $621 billion, and the trade deficit in goods was as high as $891.3 billion, the largest trade deficit in the world.
Large-scale offshore production makes U.S. manufacturing goods heavily dependent on imports, accounting for an absolute proportion of U.S. imports in 2018, of which 14.8% are machinery, 14% are electronic equipment, and 11.7% are transportation.
A huge trade deficit not only means huge amounts of debt, but also fundamentally shakes the dollar's international currency status.
The emigration of real enterprises has led to a decrease in investment and a large number of jobs going overseas. Manufacturing employment as a share of total employment fell from 27% in 1960 to less than 9% in 2018.
As manufacturing became a sunset industry, the decline in labor demand created a relative decline in the incomes of American workers. Before 1970, wage growth for American workers was almost synchronous with productivity growth, but after 1970, the two diverged rapidly, and workers' real wage growth increased by only about 12% between 1970 and 2017, far lower than the growth rate of productivity and financial assets.
Large-scale offshoring leads to the separation of production and innovation, which in the long run weakens the overall innovation capacity and the global competitiveness of the manufacturing industry.
The serious consequence of industrial hollowing out is that the United States gradually loses its leadership and monopoly position in advanced technology, endangering the basic growth momentum of American manufacturing.
The result of the change of the industrial structure in the United States is the trade-off between the real industry and the financial industry, and the manufacturing industry accelerates the globalization layout while the financial industry in the United States continues to expand.
Since the 90s of the 20th century, under the logical arrangement of economic financialization, the United States has shifted the focus of economic activities from the production of material products and concentrated on the management, flow and appreciation of financial assets, and finance has gradually replaced the position of manufacturing in the US economy and become the core variable to promote economic growth.
The expansion of the virtual economy has led to the deformation of the US economic structure, the US economy has exceeded the needs and carrying capacity of the real economy economic over-financialization and virtual economy excessive development, the siphon effect of the financial sector continues to squeeze out the real sector capital. Further distortions in the structure of the US economy are extremely dangerous, and once the "dollar standard" is shaken, the financial industry, which lacks an industrial base, will inevitably be weak.
The United States inherited the strong propensity of Anglo-Saxon culture to propensate for consumption, and low savings and advanced consumption were common habits of the American people.
The household savings rate in the United States has been extremely low for a long time, and around 2005, there was even a strange phenomenon of zero savings. In 2018, the U.S. savings rate was just 8.8 percent, lower than Germany's 10 percent and well below Japan's 27.3 percent and China's 45.7 percent.
In 2018, total household debt in the United States accounted for 77% of GDP, much higher than Germany's 54%, Japan's 58%, and China's 52%.
The asset structure of households with high debt and low savings is extremely fragile, and saving can not only promote investment and economic development, but also serve as an important buffer tool to cope with uncertainty, and can alleviate the decline in real income caused by income, price changes or economic cycles.
U.S. government debt is also a serious problem. According to data released by the US Treasury, the US government deficit rose to $779 billion in 2018.
Although fiscal consolidation in the United States has had obvious effects after the financial crisis, and the deficit ratio has generally narrowed, as long as the deficit rate is higher than the nominal GDP growth rate, then the government debt will expand.
The United States is obsessed with subsidizing the fiscal deficit by issuing US bonds, and the "snowball effect" has caused the total debt of the United States to exceed $22 trillion, and in 2018, the total debt accounted for 108% of GDP, compared with 57% in 2000 and 72% in 2008.
The US government is constantly approaching the invisible "fiscal cliff", and the national credit and monetary credit of the United States are constantly being swallowed up by its unscrupulous fiscal expenditure.
summary
The relative decline of the US economy is an indisputable fact, and a number of key data prove that the US advantage in existing areas is shrinking, and the diminishing marginal benefit effect is gradually fermenting.
However, the judgment of "US economic decline" based on the analysis of the current situation alone is very limited, and in order to make a forward-looking and accurate prediction, it is necessary to analyze the overall system of the US economy, so as to explore the negative factors affecting medium- and long-term growth in the US system.
