Originally Posted by waldobushman
The problem with using Apple as an example of the retreat to China, is that Apple is one company that could actually make their products in the US (absent other infrastructure issues).
Apple is a premium quality brand. And there are enough, but a significant minority of, people in the US and other places willing to purchase their products at premium prices. The wages that Apple would pay in the US would decrease their margins but would still allow them to make a very healthy profit.
This is not true for the Dell's of the world. Very low margins, low quality, and cheap, cheap, cheap.
The key issue, seems to me, is that all the components used in our new toys are made in the East, and those companies are very low margin as well. But, the East has a virtual monopoly on production. In fact, the US no longer has a manufacturing infrastructure, and it's not clear if the US could recreate one in the foreseeable future.
The last factory manufacturing metal "silverware" in the US, closed it's doors last year. And we don't have any manufacturers of clothing or material in the US.
The US is quite doomed even as a consumer/service society. The US is in a spiraling decline. It doesn't look that way on the surface because the GDP is high. But that is a fake statistic.
The cost of health care and drugs has skyrocketed, and that income/cost is reflected in the GDP growth. Bring down health care costs and the GDP will plummet.
The financial sector accounts for 40% of GDP, but they don't make anything but money. The housing bubble was just the latest symptom of a fake economy. Historically, the financial sector invested in productive enterprises, rather than creating financial instruments to invest in, and then the financial industry accounted for about 5% of GDP. Bring the fake financial sector back down to the historic 5% , and with control of health care costs, the GDP would properly reflect a real GDP of between 1/3 to 1/2 of current GDP.
The lack of manufacturing in the US is reflected primarily in the lack of investment in productive capital, not in the inability of people to perform the jobs. Money is being drained out of production because the financial sector can make at least 18% on debt, 12% to 20% on fake financial instruments. Why invest in new productive enterprises which will only give you 3%-5% return, when you can make triple that investing in money. Compare our banking system with the highly government controlled banking system in China. China's banks are required to invest in productive and infrastructure enterprises, that's why the factories are there.
The NYT article is eye-opening but fundamentally misses the critical problem the US has.