Comeback: America's New Economic Boom
Summary
Morris argues that the United States was positioned for an industrial revival in the early 2010s, driven by cheap natural gas from shale, by rising Chinese wages narrowing the manufacturing cost gap, by the productivity of American manufacturing, and by the energy-intensive industries that would relocate to take advantage of the gas price.
His specific case rests on petrochemicals and heavy industry. Cheap ethane from shale gas gave American chemical producers a feedstock cost advantage over European and Asian competitors using naphtha, which he argued would draw investment in crackers, fertiliser plants and related capacity. He extends this to steel, aluminium and other energy-intensive production, and argues that total landed cost comparisons including shipping, inventory and quality would shift more assembly work back to North America.
He also argues that the American fiscal position was less alarming than the deficit debate of the period assumed, and that manufacturing employment statistics understated the sector's health because productivity growth reduced headcount while output rose.
The book is short and was written as an intervention in a specific debate. Its forecasts have partly come true: the petrochemical investment happened, gas prices stayed low, and North American reshoring accelerated later for reasons Morris did not anticipate, including tariffs and pandemic supply disruption. The broader manufacturing employment revival he expected did not occur on the scale described. The reference has not verified the specific projections and figures in the book, which are drawn from 2012 and 2013 data.
Key takeaways 7
- Cheap ethane from shale gas gave American petrochemical producers a durable feedstock cost advantage over competitors using oil-based naphtha.
- Energy-intensive industry relocates toward cheap energy, and the shale price differential was large enough to move investment decisions.
- Rising Chinese wages narrowed the manufacturing cost gap enough that total landed cost, including shipping and inventory, favoured North American production for some goods.
- Manufacturing employment statistics understate the sector's health because productivity growth reduces headcount while output rises.
- The American fiscal position in the early 2010s was less alarming than the deficit debate assumed, because growth and healthcare cost moderation changed the projections.
- Comparative advantage in manufacturing is determined by total landed cost rather than by hourly wage rates.
- Domestic energy abundance changes a country's industrial competitiveness within a few years, faster than most structural economic changes operate.
Who should read it
Investors in industrials and energy who want the reshoring and feedstock-advantage argument as it was made in 2013, checked against what followed.
About Charles R. Morris
Lawyer, banker and author on American finance and industrial history; died in 2021.
The Tycoons recounts how Carnegie, Rockefeller, Gould and Morgan assembled the industrial and financial structures of the American economy, with unusual attention to the financing and accounting they used to do it. The Sages compares the working methods of Buffett, Soros and Volcker against the crisis each of them read early.
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