EWI founder and president
Robert Prechter has long said that the move away from manufacturing would undercut the U.S. economy. Now, the CEO of Dow Chemical, Andrew Liveris, is urging a return to manufacturing for the U.S. economy with a new book,
Make It in America. A recent article in The Economist explains the Dow chief's position:
"Mr. Liveris is not arguing for protectionism. ... But he does want the government to develop a strategy to help American firms compete with foreign rivals. Other countries are acting like companies, he worries. China and its imitators are following deliberate strategies to create manufacturing jobs. America should behave like a company, too, he argues." (The Economist, "Making It in America" 7/7/11)
Editor Mark Galasiewski explains the Chinese attitude toward manufacturing in the July 2011 issue of EWI's The Asian-Pacific Financial Forecast.
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Excerpted from The Asian-Pacific Financial Forecast, July 1, 2011, issue
Quote of the Month
Here’s what Fang Xinghai, Director General of Shanghai’s Financial Services Office, said about the decision to give preference to manufacturers when choosing which companies to list on the Shanghai Stock Exchange’s new board for foreign issuers:
"Manufacturing is the basic and most important for the economy. The other industries like finance are all serving this main body."
—Bloomberg, June 3, 2011
The Chinese get it. And long before China became the world’s factory, Bob Prechter said it in At the Crest of the Tidal Wave (1995):
Ultimately, manufacturing supports all wealth. The fact that [U.S.] manufacturing has been hit so hard and government has swollen so much reveals deep structural damage. Although none of these observations are perceived as current events or acknowledged as legitimate fundamentals, they are certainly poised to be important in shaping the next phase of current events.
Since then, economic realities have borne out Prechter’s prediction and underlined the importance of manufacturing as the key to global power. China now stockpiles cash while America sells it IOUs.
The U.S. investor Warren Buffett has famously said of bear markets, “When the tide goes out, you can see who has been swimming naked.” The financial crisis since 2007 has clearly exposed America’s weaknesses while revealing China’s strengths. The complacency that decades of wealth created in America contrasts with the discipline that decades of poverty instilled in Chinese society. Whatever the outcome of the corrective period since 2007, that gap between the two societies is not going to narrow anytime soon. That is why Bob Prechter predicted in an interview with Tony Robbins in 2002 that China would eventually become “the world power.” (The Elliott Wave Theorist, June 2003) Your editor agrees 100%. China is bound to experience bumps in the road along its way to greatness, and we will continue to do our best to alert you to both the pitfalls and the opportunities as they appear.
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Mark Galasiewski (gala-SHEV-ski) Since 2008 Mark has edited EWI’s Asian-Pacific Financial Forecast. For six years during the 1990s, he lived in Japan, where he observed that country’s extended bear market firsthand, and he has traveled to many of the countries whose markets he analyzes. A graduate of Middlebury College in Vermont in East Asian Studies, he is fluent in Japanese and conversant in Mandarin Chinese.