One of the things I found funny about Paul Krugman’s manufacturing column but didn’t cover in my last post on the subject is that he casually cites the Boston Consulting Group report without noting its central findings: that low-cost non-union states are going to be at the forefront of the “manufacturing renaissance.” The report explicitly compares the cost structure of Mississippi to that of the Yangtze River Delta, and finds that Mississippi is looking like a better bet as wages outstrip productivity in China’s manufacturing hubs. Why is the Deep South attractive? Because compensation levels are low relative to productivity and firms have a great deal of flexibility with which they can respond to a changing economic environment. (As Michael Spence observes in his new book The Next Convergence, Germany’s success as an exporter can be traced at least in part to wage restraint over the last decade.) I touched on all of this in my Tuesday column for The Daily.
A casual perusal of the BCG report suggests that it runs directly counter to Krugman’s thesis — non-union shops (which I like), generous state and local tax incentives (which I don’t like), and other policies, good and bad, championed by right-of-center politicians played a big role in what the BCG analysts take to be America’s emerging manufacturing advantage. I assume that Krugman can marshal arguments in favor of rigid labor markets and union shops, which would have made for a more constructive engagement with the report.
As for my column, it is a riff on the LinkedIn pop and a manufacturing comeback centered on the Deep South as a much-needed complement. I touch on themes I’ve raised here at NR, which regular readers will recognize instantly.