Email of the day
On the Larry Summers speech and BMW
"David, I enjoyed your comment on the Larry Summers speech. The BMW plant is not a car plant as such, it manufacturers carbon fibre for car manufacture back in Germany. The reason the two (German) partners went there was because of cheap energy - something that doesn't exist in the Europe. Google opened a huge server farm there three years ago for the same reason. With shale gas (a game changer you said very presciently a while ago) the US must become, with mass automation, the prime location for new manufacturing. The more automation the more competitive advantage!
"Socially the issue seems to me to be not capital formation but cash re-allocation. The ceramic manufacturer in your response must be more profitable than when it had 3000 workers. The trick is how to harvest and then distribute the cash. A big question!!"
Thanks for your interesting email. I know that the BMW plant in rural Washington is a bold move into carbon fibre, as I posted Bloomberg's article on the subject as my lead item on 15th November. And I agree that energy costs of one-fifth of what is available in Germany was the key draw.
The USA's competitive energy costs, mainly thanks to fracking but also hydro-power for the BMW plant, are a phenomenal advantage which is certain to attract more high-tech manufacturing. This is also mentioned regularly in the Friday 'Big Picture' Audios.
The social issue that you point out is an important topic. Personally, I would rather see successful corporations and wealthy individuals redistribute profits within communities, rather than the government through higher taxes. Bill Gates and Warren Buffett have set excellent examples in recent years and others are following their lead. I hope to see more of this in the UK and other countries.Back to top