The CV is that N.A. manufacturing, long ailing, was dealt a death blow by the recession. It ain't coming back, outsourced for good to lower-wage precincts.
Paul Krugman thinks the obits are premature:
"The recovered [U.S.] economy will surely involve more manufacturing - in fact, before the world economy collapsed we were seeing a boom in manufactured exports, with shortages of machinists and other skilled workers. It will probably include a lot of green employment in the broad sense - not just people building and running wind farms, but people busily improving insulation and installing white roofs...
"Actually, there are a lot of advantages to producing in advanced countries, even at much higher wages - that's why they're advanced countries. U.S. manufacturing was having a clear revival in 2007, before the crisis hit. So if we get a recovery going, outsourcing will seem a lot less important as an issue..."
In the U.S., as in Canada, a traditionally strong currency, not outsourcing or tax policy, is the chief culprit in the manufacturing downturn:
"The [U.S.] dollar's role in the world actually looks stronger now than it did before the crisis. Why? Because our only serious rival, the euro, looks weaker. The euro zone has been fragmented in this crisis, especially the bond market, with debt of weaker European countries seriously discounted. This pushes the euro's ability to rival the dollar back, at least for awhile."
As long as Beijing's appetite for greenbacks remains unsated, and the greenback is the reserve currency of emerging economies and the global black market, the U.S. dollar will retain its strength and U.S. manufacturers will be disadvantaged:
"We've got weak manufacturing because we attract so many capital inflows, which keep the dollar at a high level in normal times. And that era may now be over."
That era may near an end, of course, due to staggering U.S. deficits as far as the eye can see. Unless Obama can eventually restore America to fiscal surplus, as Clinton did. At this point, the prospects for that outcome would have to be described as bleak. But I wouldn't rule it out.
The point here is that a sustained weakening of the greenback - if, say, Europe and Asia recovered much faster than the U.S. - would be a boost to U.S. manufacturing.
And to that of Canada. Hence Mark Carney's preoccupation not with jobless claims and anemic GDP growth but with the rise of the loonie. The quandary is that the loonie's strength derives largely from the greenback's current doldrums. America will benefit from a sustained lower-valued currency, but that would likely keep the loonie aloft, a drag on our manufacturing sector.
Maybe we each need to default on an itty bitty series of government bonds, just to knock our currencies down 10% or so for a couple of years. Oops, I see my sponsor for membership in the Canadian Economists Association has just stormed out of the room...
David Crane (Toronto Star): Canada can't thrive without a healthy manufacturing sector.