Well, this makes sense doesn’t it?

Once in awhile I put things into the Patriot Post, but in this case I’ll take something out:

They say every cloud has a silver lining, and perhaps that is even true of the hubbub over fuel costs. Each day, as we are bombarded with news stories of skyrocketing gas prices and political battles over the potential solutions, an interesting and profitable side effect is that manufacturing and jobs are coming back to the U.S.

This phenomenon, dubbed “reverse globalization” by economists, is a result of shipping costs that are climbing apace with that of oil. Shipping goods from overseas has become so costly that it outweighs the benefit of cheap labor from other countries such as China or Mexico. This has led many American businesses to manufacture their goods in, of all places, America. “It’s not just about labor costs anymore,” said economist Jeff Rubin. “Distance costs money, and when you have to shift iron ore from Brazil to China and then back to Pittsburgh, Pittsburgh is looking pretty good at 40 bucks an hour.”

Of course, the return of homegrown manufacturing brings with it the return of homegrown jobs as well. When hair-care company Farouk Systems transfers all of its production from China to Houston this summer, 1,000 jobs will open up to American workers. Economists predict that the U.S. steel industry will be given a boost as well.

So while we are all tired of seeing rising prices at the pump, thanks to reverse globalization, we may also be seeing a lot more of something else as well: Made in America.

I wondered where the tipping point would be as far as shipping costs were concerned – apparently it’s about $130 a barrel oil. Obviously larger-ticket items like computers and other electronics will still be made overseas because the increased shipping costs can still be factored into the price comfortably. However, it’s worth noting that China itself is a growing market so some of the demand slack from the United States can be recouped locally, while we pick up the manufacturing pace for our own needs. In that case it’s a win for both countries. And given the issues we’ve had with a number of Chinese-made products over the last couple years, perhaps it’s better that they expose themselves to harmful substances than export them across the Pacific.

Even though manufacturing jobs are slowly returning to America, it still doesn’t alleviate the need for us to get our own resources – for the near-term future we’re probably still looking at triple-digit prices for a barrel of oil so the less we have to import the better it is for our trade balance. Between these additional manufacturing jobs from “reverse globalization” and oil companies creating jobs for new efforts at exploration and recovery, we could turn around the economic doldrums we’re under.

Author: Michael

It's me from my laptop computer.

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