Mark Koyama notes that manufacturing-driven economies are being hit pretty hard by the financial crisis:
Countries which retained significant manufacturing industries like Germany and particularly Japan are currently suffering the most – even though their banks were cautiously managed unlike much of the Anglo-American financial sector. Japan’s GDP shrunk at an annualized rate of 12.7 percent last quarter which more or less wipes out the growth that took place between 2003 and 2007. Since it is very easy to defer purchasing a new mp3 player or car, while expenditures on services are harder to cut back on, the bulk of the fall in aggregate demand has manifest itself in terms of falling demand for manufactured products. Development economists in the 1960s used to advice developing countries that it was dangerous to specialize in a single cash crop like coffee despite what comparative advantage might say because it would leave the entire economy dependent on movements in global prices. Now it appears that economies that have specialized in exporting manufactured are peculiarly vulnerable in a world where globalization has meant that economic shocks are tightly correlated across countries.