Wednesday, August 6, 2008

Reverse deindustrialization

Will higher oil prices spell the end of globalization and deindustrialization, two intertwined forces that have had a catastrophic impact on Flint?

The blog Alterdestiny explores the possibility:
"Let's think about how expensive oil changes the globalization equation. First of all, it may mean that the trend of deindustrialization in the United States reverses itself. Perhaps this seems far-fetched in the face of GM's latest plant closings. But once it becomes economical again to manufacture items at home, we are likely to see factories again spring up. How does this then affect the developing world? Does it continue to develop? If manufacturing jobs aren't going to Cambodia or Honduras anymore, do those nations fall further into poverty? Or do they change their production for the local market, building localized economies that succeed because money was made through an earlier globalized economy? On the local front, do unions make a big comeback because both labor and capital will be less spatially flexible? Will US unions also be able to make big inroads in Mexico, since the border will be the one place where transnational manufacturing will still make sense?"


  1. ... saw something regarding this phenomena on the news a few weeks back. A NC furniture manufacturer was featured as a recompany that was benefittin from high fuel costs. Seems the "Chinese" style furniture that was previously made in, well, China is now cheaper to produce for the North American market right here in the good ol U.S.of A.

    While you may see some U.S. industries that benefit from high oil prices the biggest cost for most is wages. Labor intensive industries still have dirt poor frontiers to further exploit in South Asia, China (900 million living at or near poverty levels) and Sub-Saharan Africa. Who knows, maybe we'll eventually become the underpaid and exploited tools for wealthy Asians and Africans.

    Even with high fuel prices you'll probably see industry continue to boom in Mexico and Central America. Low wages usually come to the fore in these situations.

  2. I would add an often overlooked element to the globalization trend. The focus is mostly on jobs and wages going offshore. But we have also 'offshored' a ton of industrial realted pollution. This is frequently documented these days on how Enviomentally screwed up things are in China and the industrial sectors of other low cost labor markets.

    Smurfs is right to point out that expensive oil will primarily affect goods where transportion cost is a high percentage of the delivered price, driving them to much nearer shores. But before that production comes all the way to America, they will likely face a host of Environmental, Regulatory, Labor, and other constraints that will dampen any significant upside for US Industry.

    I find the Union comments in the blog interesting, I am racking my brain to think of one industry in the US where unions are broadly enhancing the competiveness of their employers. The most heavily unionized companies in the US are typically transport (air, rail,trucking) and automotive, and all find themselves squeezed big time in this current crisis. Certainly not due solely to unionization, but I feel that most union agreements negatively affect the nimbleness and agility of a company to adapt to change. Thus i don't see organized Labor getting a big win out a return to the old days. I think the firms to capitalize on this marketplace disruption will need to be swift, lean, and innovative. Not what i have seen to be the hallmarks of heavily unionized businesses.


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