Jan 3Liked by Connor O'Brien

"Why did American manufacturing hubs perform so poorly? One likely reason is that the college degree gap between manufacturing hubs and non-hubs was greatest in the United States than in other industrialized peers."

Why would this be, though? This seems like a central question. Perhaps the US, because it is larger than most counties, has a more unequal dispersion? But I wonder if the role the US dollar plays in international trade matters. Unlike German or Japanese currency, demand for USD has been very high and so many countries have built export-driven economies that sell goods to the US in exchange for dollars. Perhaps, the demand for dollars undermined US manufacturing more than it otherwise would have been?

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Frankly I'm not sure why this difference existed in the first place. Have to think about that a bit more.

The USD explanation for how severe the shock was here is compelling to me, though I'm hardly a macro guy. The Euro is too weak for Germany but too strong for Southern Europe. The classic critique that Europe is not an Optimal Currency Area. And maybe because of Germany's cooperative labor model, it was able to do further internal devaluations that suppressed wages in a way that couldn't be done here. On the other hand, German manufacturing also has far greater state-provided extension services, which try to help smaller firms integrate frontier technologies and remain competitive. Hard to sort out these competing theories.

Still, why was the rate of recovery lower in the US than the UK? Very similar economies in some ways. The pound isn't the world's reserve currency, but it's still one of the most important.

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