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See the new light! America is the leader in Health/medical development not in Durable Goods manufacturing.

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When Americans balk that we have lost our economic leadership and we’re no longer a manufacturing nation, they miss the fact of America’s in depth research and development in health care.  Conservative protectionists believe America has lost its lead worldwide in the manufacture of durable goods.  Reality is we are leaders in Commercial and Military Aviation but for EADS in Europe with the Airbus as the other worldwide competitor.  If one wants to consider military and aviation as the only durable goods then clearly America is still the leader. However, as large as the expenditures are for military and commercial aviation and considering how we calculate; C + G + I + X-M, clearly our GDP expenditure on consumption still remains the largest part (estimates vary but most economists agree it equals, nears or exceeds 70%), most of our consumption is in softer consumer goods manufactured overseas through outsourcing.

However, given the onset of the 21st century communication technologies, emerging and innovative research & development in life sciences (pharmaceuticals, diagnostics and medical devices) America has harnessed global communication to lower market barriers for university entrepreneurs which has in turn stimulated and increased private sector investment bringing huge new developments in healthcare. The classic (older) American mind set (ignorance) that perceives we’ve lost our lead worldwide in manufacturing may only be correct if we are measuring productivity on durable goods which are now produced in mass scale primarily in developing countries with low labour costs for competitive market price reasons.  In fact our (the US) real multiplier effect worldwide is our innovative technology output in leading the world in cell genomics and medical devices.  When Swine Flu hit the world, which nation was the first to develop a test for swine flu, the US!  What nation pioneered HIV anti-retroviral drugs? The US is actually still a world leader manufacturer as we have redefined our most competitive productive resources as compared to promoting low skill manufacturing and particularly in life sciences.

US private equity allocates more than ½ trillion dollars towards life sciences, biotechnology and healthcare. The US invests more in cell genomics than any other nation and it has proffered through its universities.  Per capita, the US has more universities to draw life science research from where the private equity market has found a new low cost threshold to continue to develop assets to keep America as a leading life manufacturer worldwide in the high tech life sciences, biotech and healthcare arena. While some see outsourcing to the third world as losing our position as the largest manufacturing nation, that is to our benefit as we grow in manufacturing new technologies, structurally replacing those 20th century durable goods manufacturing jobs. This shifting paradigm is actually building our “comparative advantage” in growth, affording us greater surplus leading to higher productive output. Indeed, our 21st century aggregate output is greater by concentrating on manufacturing in high tech health care arena verses being a leader in manufacturing cars, refrigerators, ovens or air conditioners.

By Ken Peters PhD
Principal, Analytic MedTek Consutlants
Professor of Economics, CUNY, Baruch College

 

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