It’s nearly 30 years since Ronald Reagan launched his re-election campaign by declaring: “It’s morning again in America”.
Coming so soon after the humiliations of Vietnam and the Iranian hostage crisis, the spiralling inflation of the previous decade and a devastating recession, perhaps only the Great Communicator himself could have got away with it.
In the wake of the 2008 financial crisis and its aftermath, that kind of optimism might seem as out of place as it did to some in 1984 but, whisper it quietly, a similarly positive tone is being struck by a new generation of US enthusiasts.
Talk of a manufacturing renaissance is gaining ground and the prevailing narrative of the past decade or so an unstoppable shift of economic power from the developed to the emerging world is starting to be questioned.
The anecdotal evidence is compelling.
Wal-Mart announced last week that it would be purchasing an additional $50bn (£32bn) worth of American-made goods over the next decade. Apple (NasdaqGS: AAPL - news) is bringing home some of its production. Alcoa’s boss Klaus Kleinfeld described a focus on wages as a basis for choosing production locations as “so old school”. And General Electric has begun to reverse decades of decline at its iconic Appliance Park in Kentucky, opening brand new assembly lines for high-end water heaters and fridges at the sprawling Louisville site.
To be clear, it is early days, and Appliance Park still employs little more than a tenth of its peak 1973 workforce of 23,000. But chief executive Jeffrey Immelt, who ironically tried to sell GE’s entire appliance business as recently as 2008, is spending $800m to revive its massive facility. And why? “I don’t do it because I run a charity” he said recently, “I think we can do it here and make more money.”
There are several reasons why the jobs are coming home “re-shoring” to use the clunky jargon.
The first, again somewhat ironically, is the same reason they left in the first place cost. Twenty years ago, chasing low wages in China was a no-brainer with factory workers available for a fraction of their counterparts in America. Today, although the gap is still wide, it is narrowing fast as earnings in China grow at 14pc a year, according to Citi. Over the past 14 years, by contrast, US manufacturing wages have grown at 3pc a year, just about keeping up with inflation.
Rising costs elsewhere in the value chain have also raised questions about how much of China’s cost advantage is now more apparent than real. The increasing cost of oil makes shipping goods around the world less attractive. And that’s before the benefit of speed to market in a world of ever quicker product cycles is factored in.
Then there is the question of quality. China’s labour market is now so stretched that the pool of high-quality workers is arguably on its way to being exhausted.
It only takes a small increase in dud products, put together by second-rate workers, to wipe out the cost benefits off-shoring was meant to generate.
Re-shoring is not the only reason to be positive on the outlook for America. As I’ve mentioned once or twice here before, the revolution in shale oil and gas has the potential to transform the US economy.
Unconventional hydrocarbons give the US a massive cost advantage over European and Asian competitors in areas such as refining and downstream manufacturing businesses such as chemicals.
Feedstocks are cheaper by a factor of three or four in the US, which is a cost advantage on a par with China’s labour costs. And the knock-on creation of ancillary jobs in equipment manufacture, IT and other services means there is a significant multiplier effect throughout the rest of the US economy as well.
From an investor’s point of view, re-shoring and shale are a salutary reminder that trends that look unshakeable might be less solid than we think.
The shift of manufacturing to low-cost countries looked so obvious a few years back that businesses overlooked the fact that if you get someone else to do the dirty manufacturing work you slowly but surely lose the knowledge and skills that enable you to do the bits you thought you’d be able to keep the design and the marketing and all the other “high-value” parts of the process.
America is realising belatedly, but probably not too late, that the benefits of off-shoring may have been overstated.
As Britain slips towards a triple-dip recession, we can only look enviously at a country where yet again a new day may be dawning.
Tom Stevenson is an investment director at Fidelity Worldwide Investment