Staying Rich Without Manufacturing Will Be Hard
bloomberg.com
bloomberg.com
And given that, automation is clearly the right answer. Some manufacturing jobs is better than no manufacturing jobs, and more local manufacturing creates more local non-manufacturing jobs in sales, transportation, administration, etc.
So who works for 36 cents hour?
EDIT: https://www.quora.com/What-is-the-average-hourly-rate-for-a-...
Welp, there's one answer. I guess either this is common knowledge, or no else cared enough to check. :p
Why is it impossible to pay closer to the world market rate for labor, at the U.S. federal minium wage of $7.25/hr? I'm not saying you're wrong, these are intended as real questions :)
In theory we could try to compete with Asia on labor costs, but nobody really wants that. It's better to have middle class jobs than a larger number of subsistence-level jobs, especially when the output is the same.
This is basic free market economic theory that any economist (other than perhaps Marxians) would agree with.
On the subject of unions, I was interested to see here, https://www.bls.gov/news.release/union2.nr0.htm, that in 2016 only 10.7% of workers were union. I certainly agree that unions have traditionally been a force in keeping wages high, but I don't think they are really the best case to use as an example of US manufacturing as a whole. I'll be the first to say that I haven't really researched it, but it seems to me that quite a lot more then 11% percent of US manufacturers have moved their operations overseas.
The point still stands.
Jan 1980: $6.82/hr, adjusted for inflation is $20.16 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=6.82&year1=198...
Current wages: $20.62
My childhood home in NYC was $30k in 1980. My grandparents lived in a nicer house up the block on a sanitation workers salary. That home sold a year ago for $1.2M. The 2016 version of my parents or grandparents would be living in some distant suburb.
They don't call it the rust belt for nothing.
Edit: Average home price in Detroit: $38k
For example, New York City. NYC had 875k manufacturing jobs in the mid 60s, which plummeted 60% by 1993. The same thing happened for complimentary industries like wholesaling.
Info: https://www.bls.gov/mlr/1993/02/art4full.pdf
Those cool hipster spaces in Brooklyn, etc are there because hundreds of people were working there until the 80s.
That's not true: you failed to mention the possibility of the customer paying more to make up for some of the difference in labor cost.
> People don't want to hear that, but those are the alternatives.
Those are the only alternatives, but only if you are restricted to thinking like a free-market economist. Other ideologies allow for other possibilities.
"How the cost of a shirt adds up" http://www.cbsnews.com/news/how-the-cost-of-a-shirt-adds-up/
While I'm largely in favor of free trade, it would be somewhat foolish at this point to deny that a trade policy such as ours, so exclusively focused on returns for the Capital class, has pretty bad political consequences. We either have to develop a better education system and social safety net, or subject ourselves to dangerous populist tantrums.
Do you think that free-trade economics represents the perfection of economic thinking?
My point is: these stark choices that you and others are presenting are the artifacts of an economic dogma. That dogma shouldn't be confused with the truth and blind us to better ways of thinking. Perhaps getting the most goods for the least money-cost is not in fact the best deal? Perhaps there are other things that should be attended to, even if they're not packaged neatly in a compact ideological framework.
https://web.archive.org/web/20060106154801/http://www.newame...
http://fpif.org/kicking_away_the_ladder_the_real_history_of_...
edit:
“It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.
"Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.”
--Friedrich List
He was also charmed to hear of a find I'd stumbled across -- a bit of an economic policy edit war between the British editors, and American publishers, of Chambers Encyclopaedia. Seems there was a slight difference of opinion on matters of trade (and other issues). The publisher also produced a number of List's books in the US.
https://www.reddit.com/r/dredmorbius/comments/4xe2k1/chamber...
It's not a free market. 16% of the GDP is healthcare, which is a mix of government price controls and insurance cartels at the state level. 5% of the GDP is military spending. 8% of the GDP is the financial services sector.
Basically a third of the economy of the richest nation in the planet with 300M+ people is controlled by a group of leaders who could fit in a midsize during arena.
And this little country you may have heard of, China.
Several people have pointed out Ha-Joon Chang's scholarship on this issue, and Friederich List's The National System.
I'll point out that there was an amusing little incident in which disagreement over List and free trade policies came to light in the 1870s, in an early encyclopaedia edit revision war. Something I stumbled across on my own:
https://www.reddit.com/r/dredmorbius/comments/4xe2k1/chamber...
I was going through a bunch of Google Books results on "free trade" in the late 19th century, and the encyclopedia popped up. I'd started flipping through it at the Internet Archive, from the beginning, when I came on the Note, which I thought unusual. And so on.
It still strikes me as both funny and insightful.
Literally every one that thinks more broadly than immediate goods vs. money-price in an economic transaction.
http://www.npr.org/sections/parallels/2014/01/22/265080779/a...
Another article covering the same trend around the same time:
http://www.economist.com/news/special-report/21569570-growin...
And from the Atlantic:
https://www.theatlantic.com/magazine/archive/2012/12/the-ins...
Bottom line is that shorter supply chains, better/cheaper infrastructure, and better quality control has made bigger companies re-evaluate "overall" cost of production and the maintenance tails therein.
And, contrary to popular belief, America is not so far out of the race as to not have a chance.
Edit: One more from Forbes...
https://www.forbes.com/sites/johnmcquaid/2012/12/06/why-appl...
And a lot of the companies still manufacturing here are using automation.
GE literally has an industrial automation company: http://www.geautomation.com/
I'd say that's an example, not a trend. Companies have been looking at overall cost of production for a long time. That's how they've calculated margins and filed a 10-K for the past 50 years.
The bottom line is until overseas workers demand increased standards of living or US consumers show a willingness to pay a higher price for locally manufactured goods, this trend will continue.
My question is, what does the end-game look like for a fully automated economy? You're either an entrepreneur with a fully automated supply chain, manufacturing, marketing, sales, and finance organization producing a good that is highly demanded by other fully automated businesses, or you starve?
"Managing the human problem"
I was suprised to learn that the main reason Coal Miners are out of work is because of mining automation.
I perceive a world where people just stop buying. Yes--the wealthy will still buy their toys, but their will be a time where so much missery/homelessness; they won't be able to enjoy the luxuries of wealth. Even right now--I feel weird eating in a resturant while a guy outside is hungry.
I feel we will need to open up federal, state, and county land; and allow free camping. (They have made it literally a crime to be homeless.)
I feel a Basic Income will need to be seriously looked into.
I hope we never turn into a country that just overlooks the misery around them. Some days, I feel we have crossed that line.
I agree, I predict within the next 10 years or so we're going to start seeing some trend of people moving out into the wilderness due to downright necessity.
> Why Apple Is Bringing Manufacturing Back To The United States
I highly recommend reading some of the articles linked since they do explore some of the harder to quantify metrics (such as the maintenance tail of products manufactured in the US vs China) and how they affected GEs choice to move manufacturing.
So while I think in general your observation:
> That's how they've calculated margins and filed a 10-K for the past 50 years.
holds true, I think there is some gray area where harder to quantify and measure metrics are becoming more observable. And it's this "new" information that is potentially having substantial influence on these larger corporations decisions resulting in moving manufacturing back to the US.
I, with my light familiarity with the most basic concepts of Economics, was particularly intrigued by the assertion that GE may have exhibited more long-term thinking since it's widely accepted that businesses operate and make decisions in the short-term. This short-term thinking leading to many sub-optimal market results...but that was just the interesting thing I took away in passing.
A choice quote from the Atlantic piece sort of illustrating this:
> Harry Moser, an MIT-trained engineer, spent decades running a business that made machine tools. After retiring, he started an organization called the Reshoring Initiative in 2010, to help companies assess where to make their products. “The way we see it,” says Moser, “about 60 percent of the companies that offshored manufacturing didn’t really do the math. They looked only at the labor rate—they didn’t look at the hidden costs.”
Your question about a fully automated economy is interesting, but I don't have good references off the top of my head to point you toward...sorry :)
There's definitely more to this than meets the eye and the decisions weren't always motivated by pure economics. Sometimes managers decided to move something to China just because everyone was doing it and they were under pressure to do so. Not because it was the right thing for their business. Managers making bad or short term decisions isn't exactly a new thing, their incentives/motivation varies.
When people here eye roll union guys they should think about that. I bet the executive bonus plan accounted for 5% of COGS.
I wish we had politicians who would treat Americans as adults and tell them things they don't want to hear. We watched a whole country get swindled by a conman who promised a return to glorious 1958.
Nobody shed any tears for the horse-and-buggy industry, or the cotton-picking industry, cobbler industry, the millions of people who used to be employed in manual farming methods - why are suddenly people who used to be employed in factories this tender, can't-be-told-the-truth "protected" class of people we all must bow down to?
Yeah I get it - your father raised 4 kids in a white-picket-fence 2-car-garage house by pushing a button in factory, all while being barely literate and not being able to point out Canada on a map.
So those days are gone, forever - so what do we do going forward?
Instead, the entire country is now held hostage by the pissed-off, unable-to-accept-the-truth rust-belt blue-collar class who've been told they're the "real" America or whatever and are now dragging everyone else down with them. Wonderful.
If that's what Americans wanted, they'd vote for it; but they don't, they prefer politicians who tell them what they want to hear and so that's who they put into office. Want to lose an election, tell the truth.
Pretty much every election campaign seems to be run on "the county is in crisis and we can save it", regardless of the state of the constitution country.
Here in Australia there is a decade old thought, not back up by evidence, that the Liberal Party are better enconomic managers. Even after months of compaigning on complex issues you will have that line bought up on Election Day as to the rationale of their vote.
The US is the horse.
If it wasn't possible to expand opportunities for employment, we would have run out of jobs as a country of 5.3 million people in 1800.
As we automate, new labor emerges. Trade has taken a huge cut of the US textiles industry. But in the early 1800s, a textiles industry on the scale of what we have would have been inconceivable. Many families were making clothes from sheep to stockings, or grew a quarter acre of flax to begin the hard strenuous work of breaking it down and turning it into a scratchy fabric. They had a couple outfits and called it good.
http://www.connerprairie.org/education-research/indiana-hist...
If you told those people about a society where even a median income would let you buy a variety of shirts with different patterns and levels of comfort, then just throw them out or give them away each season if they fade a bit, they would have just stared back at you slackjawed.
As far back as the BLS has data, the employment-population ratio has stayed within a narrow band around 60%. That strongly suggests there are feedback mechanisms that create new opportunities even when underlying sectors and conditions drastically change.
The future of labor will probably surprise us just as much as the farmers in the 1800s. We'll have people do things that we can't even imagine how it would be efficient or profitable to hire out. On the order of unlikeliness of hiring someone to brush your teeth, or sing your theme song when you walk into rooms.
EDIT: Added BLS point, we have no historical evidence of labor/population ratios shifting in the way people argue is imminent. It climbed sharply in '83 and dropped like a rock in '07. Those were not due to either automation or trade. It's hard to link to BLS, but basically go here, then expand back to 1947:
There's a very common fallacy that says that people have an unlimited amount of desires. Urban people (that are most) consume basically all the time, so you won't get all those new jobs unless you greatly increase the complexity of people's desires (we are doing that) or automate consumption.
It has nothing to do with that at all. What it hinges on is that companies will pay lower wages when it's more profitable.
The thing that allows high wages against labor competition is high productivity, so that labor is a smaller proportion of total costs and companies are under less pressure to reduce wages.
I was well clothed in 1987. Most of the textiles I was wearing were manufactured in the Carolinas. My parents also were buying clothes in 1967. Their stuff was made in the Carolinas and Central/Western New York. No homespun.
Today, I'm fortunate to have a lot more money relatively speaking than my family and buy nice stuff. With the exception of a couple of suits, a few of my wife's dresses and some Irish linen, every piece of fabric in my home is milled and sewn in China, India, Bangledesh, or Columbia.
The descendants of the people who made clothes for my parents 50 years ago or my childhood self 30 years ago are mostly on social security disability, in the military, or working some garbage service job.
This simply isn't true for most workers. Why aren't those coal miners retraining as data scientists? Everyone knows coal is on the way down, right?
But that kind of personal service is something we see less of, now, not more. The middle class in the US is rich compared to lords and ladies of 200 years ago, but have no personal servants. Software developers and medical doctors and middle executives could hire batmen and butlers and maids, but mostly do not, even when the money to do so is just sitting in their bank account and they complain about how little time they have to clean and service their house, cars, etc. Why is that?
2: We don't have full-time personal servants, but a lot of people I know have a char who comes once a week; take their cars to a garage for servicing; buy prepared food; pay a window cleaner every so often; get the car cleaned whilst doing something else etc.
I'd also dispute the "richer than lords and ladies" statement, I think it selects one definition of "rich" and ignores the rest.
Yes, we have cars, electronic entertainment, indoor plumbing, free education, and access to healthcare beyond the wildest dreams of our 18th century forebears. However, I couldn't live off income from the tenants on my estate, no matter how well I manage it, or how frugally I live.
At my income, I certainly couldn't afford to employ, feed and house the 15 or so employees in a typical aristocratic household (one could argue that some of those are now white goods, which I can afford). Nor would I be able to maintain both a large house in my seat and a smaller (yet still substantial) one in Mayfair (as well as membership of White's and Brooks's). I doubt if I could afford a small country cottage, a studio flat in London, and membership of a gym.
I meant even if I knew what it would be, no one would believe me, because it would sound insane.
...because of automation.
Anyways, he basically trained his replacement(s) before they laid off a large portion of his machine shop. He trained probably 15 - 20 Chinese over the course of a few years. In the end, as expected, they laid him off. Fast forward 10 years and they had to bring a lot of the tool making back.
Turns out the Chinese either had worse quality control or poorer skill, but they simply couldn't produce at the same level. You only need a few molds for a production line, but each needs to be near perfect. The Chinese couldn't do it. And even when they did / could, the intellectual property was often stolen, so competitors would pop up and customers would get pissed.
You're correct automation is needed. However, so is high quality standards, higher education, higher moral codes / higher pay to keep people honest. The fact is, you can't really find skilled labor elsewhere easily (they want the same as the US wages). That's why the US's number one export is education, and probably why every company still fights over software engineers and really every STEM field.
Unfortunately for manufacturing, the fight is over. When they tried to bring the tool making back there were very few people still doing it. Every single one of my dad's friends (including my dad) had moved on to other jobs. The fact is, all that tribal knowledgewas passed down from master to apprentice was lost. After they laid off the masters, there was/is no one left to really continue.
Personally, I view this as a loss of critical mass and now our skills are likely no better than anywhere else, at least for tool making.
I think this is a warning for every business. Sometimes it's worth paying the price to keep talent. Companies like Google, Apple, et al, know this. Hopefully, that will keep tech and a lot of the other large US companies from losing their way.
It seems that China's workers can make Macbooks and iPhones with high precision and low tolerances according to Apple's specifications. Were the Molex molds more complicated than that?
In other words, if those specific 15-20 Chinese workers failed, maybe choosing a different set of 20 Chinese employees (or partner manufacturer) would have given the quality desired?
In outsourcing situations where you replace a highly-skilled and highly-paid worker with a low paid one in another country, you often get predictably bad results. Is it a cultural difference? Is it because of the compensation? Or just the attitudes of the companies involved on both sides and the kind of people they hire? I think like any complex issue, there's no one answer, but that last point sounds particularly convincing.
Look at SF, every company competes in that market for software engineers because that's where the talent is.
It's actually a concept explored by the book "The Talent Code", and even explains why so many people from puerto rico (by population) are so amazing at baseball. Everyone plays, everyone looks up to it, and everyone makes everyone else better.
No, they bring the "talent" (God, I hate this word and what it carries) from everywhere across the country and abroad. They is no tesseract fuelled talent generator device hidden below SF.
All I can say, is my dad recieved a hell of an offer to return (and so did his buddies). The people he trained all had PhD's from various universities around the globe and were supposedly excellent material science engineers. My dad had a high school education, but was trained/worked for decades in this particular field.
The molds that make every component in a MacBook need to be better than those assembling them. The skill to plug in a keyboard or even run a machine to make a keyboard, is not the same as designing or creating the molds of the keyboard. Apple does all of that (to my knowledge) in the U.S. The reason is likely security of their IP and that they have a critical mass of skilled people here, able to out perform elsewhere. Also, it's easy to ship designs anywhere, not so much material goods.
And plastic parts are more and more reserved for low end product, whereas high end products are all made of metal (think about a plane architecture being made of plastic instead of aluminium: this will not happen soon).
So to be honest about your dad situation: from an industrial point of view I think the people outsourcing your dad's job in China were right: they did loose the know-how on keyboards molds and they do face a problem regarding keyboard quality nowadays, but that value gained in outsourcing low end parts was invested in machining technologies with very local jobs garanteed for a long industrial time.
I'm sorry about your dad situation in that systemic change, and I'm glad he managed to move to another field, but what's at stake here is really what a was proposed in a parent comment: 'manual' labour being replaced with automation (and human tragedies involved unfortunately...).
Actually the trend is towards carbon fiber (reinforced plastic) laid out on a mold https://www.youtube.com/watch?v=wUp9Yl6-QBM
The heavy-duty first-range aeronautic suppliers are all into machining and assembling aluminium (and other metals) parts for boeing/airbus.
tl;dr Don't rush to blame the workers, they're usually just doing what they've been told to do.
The issue has nothing to do with ethnicity per se, and everything to do with management dreams of hordes of top-notch foreign talent just dying to do high quality work for pennies on the dollar, which in my experience simply doesn't exist.
The majority of the time, that's the only reason why they're relocating the work. If you have to pay foreign workers equivalent to Americans to get equivalent work, then offshoring is pointless.
Not really Google and MS provide their Indian employees working in India above average market rates which are still lower than what the average American gets.
Some other US based companies directly or indirectly pay their Indian employees average or below average Indian IT salary so the best and brightest dont go there.
You don't take anyone from anywhere drop them in front of a master tradesman for 12 weeks and have a master tradesman pop out in a few days. The output there is a guy who can probably run the machine and have a limited ability to consistently churn out stuff without understanding the process fully. That's not a reflection of pay, race or talent.
That's usually a big part of the design of the outsourcing arrangement. You train for minimum viable capability. You then just fine the suppliers and eventually you'll get what you need, even if they waste half of the work produced. I've done these with domestic and foreign contractors. It's always the same story. The difference here is that the quality required for tools is higher than end products, and the supplier cannot make money without the high skilled people.
But then ten years later the workers you trained have now formed their own company and they are the ones making the huge profits, and there's nothing you can do because your country doesn't even have any skills in the field anymore. Now spread this across tens and hundreds of industries.
Sure, we still have software development and other super high tech stuff, but China is figuring much of this out very quickly as well.
I think we'll find out soon enough which country had the better strategy.
The defining quote of this idea came from the Morris Chang, CEO of TSMC:
"You Americans measure profitability by a ratio. There’s a problem with that. No banks accept deposits denominated in ratios. The way we measure profitability is in ‘tons of money’. You use the return on assets ratio if cash is scarce. But if there is actually a lot of cash, then that is causing you to economize on something that is abundant."
Source: https://www.forbes.com/sites/stevedenning/2011/11/18/clayton...
Ratio-based investment isn't fundamentally short or long term, and the article doesn't persuasively make that argument. The entire point of selling off your assets to improve profit-to-asset ratios is to improve the performance of your assets, so that they can be put in investments which offer better profits. Whether the new investments are short-term investments or long-term investments is a matter of investor preference, not financial science.
In fact, the argument to be made is that companies which "sell off" their human capital are actually in violation of RONA principles, because the company is not ultimately made of dollars and cents but of people and products, and since the company can't really extract more value out of its highly specialized human capital (I.e. by reassigning it to more productive work), it should not reassign that capital elsewhere.
Investment bankers and programmers tend to make the same error: you are less competitive at manipulating your abstraction (whether that be money or high-level languages) if you do not understand how it abstracts away reality. Otherwise, you will constantly be dealing with leaky abstractions.
The management people give no shits about the organization as an entity. Their short term outlook is driven by the dumb KPIs that stand in front of their excessive (vs. base) incentive compensation.
In many ways the difference is that headquarters is next or on top of the factory instead of in a different state.
Sorry I have to question this .. Bosch, Mercedes, BMW? There are a few notables such as Krupps that were once upon a time family owned but increasingly these companies are owned by global conglomerates.
Yes, these companies do outsource many functions to poorer countries but their centre of gravity is very certainly in Germany.
I play harmonica, and German made Hohner's are considered to be the best. The only quality competitor is Seydel(Again a German company), or Suzuki(Japanese). I think its the overall culture and seasoning to quality and workmanship your ordinary citizens are used to.
The real deal isn't just High end manufacturing.
I know of a relative of mine who used to buy Grundig and Braun radio/taperecorders/stereos in the 80's. The design and quality still comes across way ahead of its times.
Quality shows in everything you build.
Volumes may be profitable for a while. But with lack of quality you won't be able to build BMW's and Airbus's. The kind of manufacturing that has a future.
My [relative] is [in a tech role] for [large insurer]). They recently laid off all of their in-house tech staff save for her, in favor of outsourcing, and are leaving him to train and guide the entirety of the new staff. Meanwhile, they did absolutely nothing to keep his morale/loyalty, nor to ensure he was incentivized to do this task well. So, unsurprisingly, he's counting the days to retirement and letting the clusterf*s mount.
I'm sure there was a way to handle this that wasn't ludicrously inept; the result, however, will be laid at the feet of the foreign workers that have little training and no access to the now-lost institutional knowledge.
[1]: http://mashable.com/2016/06/17/apple-china-knockoffs/#j5Nyhh...
[2]: http://www.businessinsider.com/inside-fake-chinese-apple-sto...
[3]: https://qz.com/771727/chinas-factories-in-shenzhen-can-copy-...
Probably not, and therefore the manufacturer was looking for rock-bottom prices, and thereby got what they paid for.
thought I read it somewhere that china is literally the only country in the world right now that can do that at scale and change specs as rapidly as apple wants them to.
On the surface, you have to manage extra things like shipping and imports. Under the hood, quality control and partner selection are MUCH more in-depth and difficult processes. If you're not working with someone who already has relationships built, and/or if you're not willing to be very hands-on with the process, from what I've been told you're unlikely to get high-quality, low-cost parts.
I can definitely imagine someone who is used to dealing with manufacturing in the US having a lot of issues adjusting to the way business is done in China if they didn't know what they were getting themselves into.
Isn't Apple's high-precision manufacturing highly automated to a level of expense that no one else would try? IIRC, they have acres of automated CNC mills churning out MacBook cases.
Apple's manufacturing operation is so unique that it's not generalizable.
Source: http://atomicdelights.com/blog/why-your-next-iphone-wont-be-...
Foxconn didn't start building millions of iPhones. They started with thousands of other products. Same thing happened with Dell. They financed factories for Asus to build laptops and walked away from nearly new plants in the US not long ago for mostly tax and accounting reasons.
China can, actually.
We've had molds made for the smallworks.com products in both China and locally (Austin, TX)
These molds, due to the desire to interface with LEGO products, have to produce products that are both "higly cosmetic" as well as dealing with the extreme tolerances of LEGO's system.
It's about 1/3 the price to make the molds in China. Due to shipping and import duties, it's about the same price to run production in the US as in China.
Thing is, Craftsman quality went to shit because Sears decided to compete solely on price. Apex/Danaher are plenty capable of turning out high quality tools in both their American and overseas plants (they own Armstrong, GearWrench, and Xcelite). They're also capable of producing shit tools for Sears. Turns out though that other companies (ex: Harbor Freight) can product comparable, if not superior, products for a lower cost.
You'll find random brands you've never heard of that are "made in USA" and built to military spec. I think most military tools are required to be made domestically. The quality is amazing and prices low.
So many presuppositions here that don't really support a future of a specialized American worker.
China has weak to nonexistent intellectual property LAWS, and their Antitrust law was enacted just in 2008!
Improvements in the general economy still result in a plethora of skilled workers across the entire planet, or in much greater quantity than the market needs.
Today? Yes it is possible to renege on free trade treaties and close borders to pretend the uniqueness of a highly skilled American is inherent to quality goods, but these are not absolutes and can't be extrapolated into these impending economic dilemmas.
Or even ball-bearings: http://www.popularmechanics.com/technology/a20837/german-chi...
Most of China’s industrial robots are made by Germany, the US, and Japan. The Chinese are hopeless at precision engineering.
Why are land prices still at a level that kills your economy?
https://www.reddit.com/r/dredmorbius/comments/608w97/asset_p...
That is simply incorrect. Consider the economic facts of the 20th Century. In each decade, the nation with fastest rising productivity also had the lowest unemployment. There is no obvious correlation between automation and job loss. Sometimes automation gets rid of jobs and sometimes it simply leads to more hiring in that sector, because that sector is profitable.
Which becomes problematic if the gravy train stops.
But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying. Every year the demand for servants and labourers would, in all the different classes of employments, be less than it had been the year before. Many who had been bred in the superior classes, not being able to find employment in their own business, would be glad to seek it in the lowest. The lowest class being not only overstocked with its own workmen, but with the overflowings of all the other classes, the competition for employment would be so great in it, as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. Many would not be able to find employment even upon these hard terms, but would either starve, or be driven to seek a subsistence either by begging, or by the perpetration perhaps of the greatest enormities. Want, famine, and mortality would immediately prevail in that class, and from thence extend themselves to all the superior classes, till the number of inhabitants in the country was reduced to what could easily be maintained by the revenue and stock which remained in it, and which had escaped either the tyranny or calamity which had destroyed the rest.
https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...
An example from the industry I'm familiar with - Steel: The raw materials which go into manufacturing steel; iron ore and coal are such a huge portion of the operating costs that labor expenses almost look like a rounding error next to it when you tabulate out the expenses. A lot of heavy industry is similar (Aluminum has added expense that it required large amount of electricity which is why traditionally aluminum smelters have been linked to hydro sites).
If you can improve yield (ratio of raw materials consumed to product produced) by even a small margin you can justify your salary many times over which lends support to the idea you want to be employing smarter people not necessarily less people.
Here is Australia what has rocked my industry is falling demand, largely driven by GFC which has led to a sudden decline in new commercial and residential construction etc. (It is starting to recover now but is pretty staggered). As well as increased completion from imports.
I haven't seen any data supporting this but what I keep getting told is that in some cases Chinese government heavily subsidizes their industry so they can export at what would otherwise be a loss. This is called "Dumping" and is a form of predatory pricing the idea being you flood the market with very cheap goods then raise prices when competition is driven out of business. There is evidence this is happening to the US as well here is an article I found from Jan this year (http://www.cnbc.com/2017/01/18/us-affirms-finding-of-china-s...)
If I wanted to stimulate manufacturing I'd focus on demand (i.e government funded infrastructure projects) and trade policy (Better anti-dumping legislation etc).
Huge slump right now. We need multiple large projects on the go at once to keep all four workshops busy but the work just isn't available.
This is only true if labor makes up the largest component of the cost. If the worker is only 10% of the cost of the output (versus say raw materials like steel) then being more 2X (or even 20X) more productive requires a much smaller productivity increase.
It's also worth noting that manufacturing can carry significant negative externalities in the form of pollution.
Some people believe the solution is to that problem is to pay American workers less. For example, Trump has stated he believes American wages are too high to compete with foreign imports. http://www.politico.com/story/2015/11/donald-trump-wages-215...
“When it gets down to it — talking trade balances here — once we've brain-drained all our technology into other countries, once things have evened out, they're making cars in Bolivia and microwave ovens in Tadzhikistan and selling them here — once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel — once the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity — y'know what? There's only four things we do better than anyone else: music movies microcode (software) high-speed pizza delivery” ― Neal Stephenson, Snow Crash
But pizza delivery was a euphemism, I think.
Weaponry.
To some extent, Trump was elected to fix this, but so far, no initiatives have appeared which help US manufacturing. How much protectionism the US should have is a real question. China has a considerable amount, and is trying to become an autarky, not dependent of the rest of the world. That's been quite successful in the Internet sector. China can probably do it; they're big enough.
Those are just a few citations, but just look up some of his executive actions and orders, as well as some recent legislation he's signed. Some of these addresses repeal of regulations (Using the Congressional Review Act).
The GOP border-adjustment tax is being worked on currently. While debatable in how it does or does not favor imports or exports, at the very least seems to favor establishing business in the US and eliminate tax benefits of incorporating outside the US.[3]
This, and his general desire for a slashing of the corporate rate, should incentivize corporations (manufacturing and otherwise) to move, stay, and hire in US, and move US from one of highest rate countries to one of the lowest.
[0] https://www.forbes.com/sites/christopherhelman/2017/03/28/tr...
[1] http://dailycaller.com/2017/02/02/trump-to-sign-repeal-of-ob...
[2]http://thehill.com/policy/energy-environment/319488-trump-si...
Just to narrow to one obvious piece: the difference in type of energy matters if the goal is to support local manufacturing. It's a variation of the "Buy Local" argument applied to manufacturing suppliers. Reducing the cost/regulation of oil/gas/coal doesn't support local manufacturing near as much as it continues to support/cheapen global shipping costs (because oil/gas/coal continue to transport well across borders, and continue to keep cargo ships/planes fed). On the other hand, increasing solar/wind is a much more "local" energy resource investment (it's tough enough just to store it for time-shifting, much less to transport across borders) and might be better for the stated goal.
You're really reaching there.
This would be like claiming that loosening the banking regulations was part of the Administration's plan to boost consumer spending, while ignoring the fact that it also helps those companies make billions of dollars more than they otherwise would have.
I don't disagree with the author's main points about manufacturing and the economy in general; I just don't see the dire situation in the data.
It seems logical to expect that in the future we'll have more jobs in services (e.g. tech) and less jobs in manufacturing. This is good for everybody, good for workers, because jobs in services are less dangerous, and good for economy too.
This depends on how you define dangerous. Heart disease is the number one cause of death in the United States killing ~614,000 people per year whereas accidents account for ~136,000. Sedentary behavior has been shown to increase the odds of heart related disease. Moving from more active manufacturing jobs to more sedentary service jobs could arguably be more dangerous to the longevity of a person's life.
https://www.cdc.gov/nchs/fastats/leading-causes-of-death.htm
"Physical inactivity has become a major public health concern because it is the second leading single cause of death in the United States, trailing only tobacco use (31)."
My logic is roughly this:
1. The comment I replied to was talking about harms to health by being sedentary.
2. A lot of people on HN are young professionals with desk jobs, which at first glance seems more sedentary than most service jobs.
3. I thought it would be enlightening to realize that many of those service jobs can cause one to be more sedentary than a desk job. If I had not experienced it myself, I would not have considered this.
I had interpreted the original post to be a comparison of the levels of physical danger in manufacturing vs. service industry jobs. From my perspective both programming and retail are service industry jobs since they don't involve creating physical products by hand or through the use of tools.
Furthermore when one talks about the movement of low-wage jobs from manufacturing to services, it's assumed we aren't talking about professional services (e.g. lawyers, accountants), but unskilled and low-skill service jobs such as retail, food-services, and child-care.
The example given with agreeculture is also spot on - during the industrial revolution, total farm employment plummeted, but total farm output soared, and continues to grow to this day.
Automation in the manufacturing sector would look similarly - job losses, but increased production. That's not happening. Instead we have a shift of production base out of US.
Swiss seem to be getting some of this right with their automated factories: https://www.bloomberg.com/news/articles/2017-02-17/robots-or...
I don't see any evidence for this. Here's a source which contradicts that: https://fred.stlouisfed.org/series/OUTMS
Have open borders. Market the shit out of America. This causes millions of people to immigrate into the US.
Each of these people are going to need housing. 15 million houses at 200k each = $3 trillion growth. BOOM. just like that. And that's just housing.
The 90's was characterized by open borders in the US. Immigration was completely wide open. It causes a HUGE boom in our economy, and we need to return to those halcyon days of open borders. (and, no, it wasn't the dot-coms that grew the economy - there are far too few computer programmers to do that)
I think US needs to fix it's education system first to make sure that all deserving people get a chance to go to college without incurring debt. It can easily be done considering the money the government spends on defense and other (I'd call useless) agencies like NSA, DEA, etc.
One of the first steps could be to pay college tuition for students matching certain criteria (I'm not sure what the criteria could be - maybe GPA - but I'm certain that some elibility criteria can be defined).
College is not (and should not be) required for everyone who wants a decent middle class job.
One place I visited (it varies heavily with region), the students were sorted towards Gymnasium (college prep) or Realschule (ends at 10th grade with a sight towards job, apprenticeship, or further vocational training) around 3rd grade. Good luck implementing that in the US.
Furthermore, I think that cultural shift is already happening. Computers aren't just for geeks and professionals anymore. The average user might not be thinking about how Snapchat's geofencing works when they take a selfie, but that can't be more than a few steps away.
What's the delta in lifetime earnings for high school education vs 4 year college in your country? Or how many doctorates per capita? Or some other metric for outcomes that you prefer?
I always find it interesting that in these sorts of articles, the absence of growth is the problem, as though manufacturing output (or the output of any industry really) can just keep growing and keep growing ad infinitum. Once we can make a box of tissues for every living person on the planet, the tissue industry must stop growing, because why would we make any more? Every given industry has a saturation point where output must level off, lest we drown our population in a sea of products they don't need, regardless of affordability.
This stuff was 100% obvious back in the 90s days, when the left wing people were protesting globalism, what was left of manufacturing imploded, and big agribusiness crushed Mexicos economy.
Since that time, we've been told time and time again by economists that we're all wrong, the service economy is great and life is great... just go to college for retraining.
Globalization means everybody in the world benefits, not just Americans.
Or did you want Nigerians and Sri Lankans to remain in poverty forever?
The World Bank and the IMF have always been the left's shining beacons, that bring progressive enlightenment to the downtrodden masses, the global south is not being ruthlessly exploited by multinationals, and we've always been at war with Eastasia.
I mean, that's not how I remember the politics of the 90s, but who's to say?
The only reason they don't have these things is because they're poor in the first place. Only wealthy societies can afford those things.
Free trade is the global labor and environment solution.
Or maybe you want those countries to be environmentally destructive forever?
However, you are incredibly unlikely to convince me that in decades past, those beliefs were held by 'progressives.'
"This is a legitimate question... Ricardo Hausmann believes that a country’s economic development depends crucially on where it lies in the so-called product space. If a country makes complex products that are linked to many other industries -- such as computers, cars and chemicals -- it will be rich. But if it makes simple products that don’t have much of a supply chain -- soybeans or oil -- it will stay poor. In the past, the U.S. was very successful at positioning itself at the top of the global value chain."
I would certainly call Google's search engines, Apple's iPhones and Intel's processors "complex products that are linked to many other industries". Comparing the fortunes of Apple vs Foxconn also shows that the top of the value-chain certainly lies in design/marketing, as opposed to manufacturing. The evidence the article presents is utterly baffling and unconvincing.
That is unlikely to play out in the long run. The world is unlikely to consistently enforce the cost of a one-but-no-longer complex process, when a simple/cheaper process produces essentially the same outcome. Minus rarity of material requirements.
What out of "IP" survives? Local trademarks/service marks, sure. Copyright with meaningful global enforcement... not likely. Production of small intricate things/electronics ... likely. Production of easy-to-future-produce/assemble, seems unlikely.
GM, Ford, and Chrystler have a combined market cap of ~$130 billion USD, and employ 600,000 people.
Google makes a lot of money, and pays its employees well. Unfortunately, it hardly employs anyone.
The market doesn't value job creation. The ideal company is one that doesn't have to employ anyone.
It seems the important thing about software here is that it hasn't been commodified yet. Once it has, margins will come down and it will be just like the car industry. In the meantime, whether it's widely believed to cause economic boom or malaise only depends on which side of 2011 we're believing from.
The problem is that there aren't enough of those jobs to go around, unlike the manufacturing boom of the 50s and 60s, where lots of American men (it was mostly men then) were able to afford a family of four, a house, a car (or two), nearby vacations, and a secure retirement (often a pension) from reasonably plentiful manufacturing jobs that required a minimum of training before the job started and could be done by nearly any able-bodied American male.
Many of those premises are now violated by either tech work requiring a +2 or more sigma of intelligence, often an elite college degree, and either/both of not enough of those jobs to go around and/or not enough people on the right side of the bell curve of ability to successfully hold those jobs.
Where I think the model probably breaks down is that you can't have infinite debt levels, so your consumption growth is capped by your production growth. I would think you run out of assets (e.g., Manhattan, London real estate) to sell to net-export economies, but I guess there's always financial innovation to bring you new products to sell
Business owners, and sometimes leaders, can also be winners in the sense that they make socio-economic decisions related to a given firm. They set high level policy like "culture" and stay aware of the "winner" landscape of flush firms who might be looking to buy you - and the poor performing firms who may about to shed talent.
Then there is the professional class, primarily inside lawyers and accountants. The remainder are mostly office drones, who's value is mostly emotional and social. They are the fat that demonstrates health.
We all are trying hard to make a living from pure information, but the finance guys are doing it with the most honestly. Engineering guys make things (electron states), so its messy and we can fail. And we affect the real world, with its constant scary existential threat from government, making it even more risky.
I mean, it's nice when the money is flowing wide and deep, and you really all you do is give some speeches, keep an eye on projects, make a strategic decision twice a year, and play golf with investors and other CEOs. Sign me up!
Japan is still THE undisputed powerhouse in this field (Yasakawa, Kawasaki, Fanuc, Mitsubishi, Epson...), with the EU a distant second (ABB, KUKA, Stäubli, Comau...) and China rising quickly (e.g Siasun, Foxconn).
I am no economist, but I believe that there will be a global rebalancing in the near future: manufacturing will return as the rents in low-cost regions approach the local cost of manufacturing.
Isn't that assuming current costs for care don't change? Seems a bad assumption since medicare for all would cost less than health insurance for all and be a much more efficient and thus less overhead process while simplifying the system across the board for doctors and hospitals greatly reducing the costs to them by virtually eliminating the huge hassle that is medical billing these days.
http://www.taxpolicycenter.org/statistics/federal-receipt-an...
The study is here[0], even accounting for Sanders proposed major tax increases on the wealthy and middle class he still fails to fund it by over 50 percent, and private expenditures would continue to climb. Then you have to consider the costs of "free" education and the multitude of other increased social programs. Sorry it's a fairy tale, him and people like him are lying to get your vote.
[0]http://www.urban.org/research/publication/sanders-single-pay...
In 2016, Medicare cost a total of $588 billion [1], covering over 55 million people [2]. The vast majority of those people are over the age of 65 and on average, over 50% of a person's lifetime healthcare costs will be paid after the age of 65 [3]. It would cost over $3 trillion to have Medicare for all if every person alive in the United States was over 65 years old, which is obviously wrong. The real cost would be closer to $1.5 trillion if the US just paid private insurance companies to cover everybody.
> Current tax collection collects about 1.5 trillion.
No, 2016 tax collections for just the Federal government were $3.3 trillion [1]. The combined total of federal, state, and local is estimated to be at least twice that.
> If you tax millionaires at 100% you'd see maybe another trillion.
A 15-35% tax rate on millionaires yields at least $500 billion a year in income tax revenue [4]. Increasing capital gains taxes to 100% alone would net almost $2 trillion a year.
[1] https://www.cbo.gov/sites/default/files/115th-congress-2017-...
[2] https://blog.medicare.gov/2015/07/27/medicare-and-medicaid-5...
[3] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/
[4] https://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-...
I was unclear. The 2016 budget had 1.1 trillion in discretionary spending and 2.4 trillion in mandatory spending.[1]
If you stopped paying the national debt, skipped out on our UN and NATO obligations, and ended social security as well as many other social programs then you have the number you quoted. Still in 2016 we borrowed over 500 billion as we can't afford to meet our current obligations as is.
State and local governments are cash strapped for the most part. For many existing taxes don't even cover their current expenditures. You can't simply divert all of those funds to healthcare, massive cuts to services would have to be included.
>Increasing capital gains taxes to 100% alone would net almost $2 trillion a year.
An increase of even half that would turn the United States into a third world nation overnight as huge amounts of capital flees our unreasonable tax system.
As for the rest of it the economists and policy analysts at the Urban Institute disagree with your assessment:
http://www.urban.org/research/publication/sanders-single-pay...
In 2016, Medicare cost a total of $588 billion, covering over 55 million people.
medical costs are very high in the US, and these are the patients who need the most care and the most treatments. I would expect the cost for medicare (a program that is legally disallowed from negotiating prices with their suppliers, and which covers only people aged 65 or over) to be quite high, and actually im surprised its that low.
This is accurate I think. Canada spends $230 billion per year and has 1/10th the population. $6,299 per Canadian in 2016.
BUT. You get to SUBTRACT our current healthcare spending
$3 trillion - $3.35 trillion = $750 billion saved.
That would have us closer to Canadian spend per person.
That sounds like a Trump Tweet. Are there any facts supporting the theory that the US is more of a victim than everybody else?
Is the US more of a victim than any other country? Well, insofar as US businesses manufacture more in China by volume than anyone else, yes. Although not on a case-by-case basis - a Canadian company is just as much a victim as any American one.
https://www.weforum.org/agenda/2013/05/do-patents-help-or-hi...
1. Guilds. Frowned upon, but not without their uses, benefits, and sound arguments. (Actually, part of Watts' problem was that he was thrown out of the Hammermen's Guild -- the black-smithing union, in Scotland, from which Adam Smith had Watt installed at the University of Edinburgh.)
2. A royal charter. Rather than a patent, say, the formation of a public corporation (similar to, say, the contemporaneous British East India Corporation), to which subscribers could buy shares and steam power be distributed throughout England (this was pre-Unification).
3. A royal or parliamentary award or prize. This was offered to several other of the major inventors of industrial technology (largely in the textiles trade).
4. An obligatory license. This would have allowed Watt a share of revenues on his invention, but not limited the rights of others to enter into trade.
5. A guaranteed or favourable government contract. This is essentially what Eli Whitney secured, not with his cotton gin, but with his mass-produced arms, in the United States. And from whence he gained most his financial gains.
That's just off the top of my head.
Patents are both tremendously distortionary, and not particularly good at rewarding actual inventors.
The guy tried. That a spaceship or marvelous benefactor or coincidental prize could have landed and paid him money is true, but not probable. Governments weren't in the business of mining (the application then.) They had no interest, but in any case do you really want them picking winners today? Their record is horrible in that way. You cite a military example with Eli Whitney, but I had answered that in advance. As for industry prizes only he understood that such an advance in fuel-efficiency was possible.
I really don't think you've ever tried to sell an idea of this kind.
One of those things is trash their environment. In the US, we have the federal clean air act, an EPA to enforce it, and various similar laws and enforcement bodies at the state and local level (e.g. CEQA).
A second major example of this is labor laws. Workers in the US have strong protections including the right to organize, vote, minimum wage protections, not to endure wrongful termination or sexual harassment, as well as various overtime provisions and strong protections of salary in bankruptcy. They have none of this in China. In China, due to lax enforcement of safety, major industrial accidents happen as a matter of course. I recall reading two separate times in the Economist over the last several years when workers were trapped inside of a burning building, leading to hundreds of deaths. And I keep hearing stories about workers getting woken up in the middle of the night, handed tea and biscuits, and asked to start working.
Anecdotally (I'm not as sure about this) I think many people in China work much longer hours than we do in the US. Most middle-class jobs in the US give at least a day or two off per week; I'm not sure how common this is in China.
We also have strong protections of rights in the US including freedom of speech, rights to a fair, speedy and open trial, break time to vote, and various protections relating to bona fide religious practice, including exemption from some collective bargaining agreements.
All of these things cost money -- a lot of it. So we're going to have a slightly higher cost of production, or perhaps a bit higher taxes.
The real telling thing though is the flow, not of goods or money, but of _people_. Net in-migration to the US from Asia feels much stronger than vice versa. And so I ask: perhaps our manufacturing is in decline, but, why do so many people move here from the rest of the world? Is it possible that the Chinese middle class is getting tired of lead paint in their food, random lengthy incarcerations of political prisoners, a one-party state that openly engages in religious persecution, lack of a free press, or lack of a functioning civil court system?
Now, one can certainly make the argument that some of these protections have gone too far in the US. Perhaps unions have too much power. Maybe companies like Uber/Lyft will force the discussion on making the employment regime less onerous in places like Illinois (my home state), where firing someone is almost always a lengthy court case due to a shockingly pro-labor employment law regime. Perhaps the pendulum could stand to swing back a big in the direction of economic competitiveness. Or maybe the US and China will converge.
I consider myself a pretty strong libertarian, but it really makes me think.
Completely lacking is any assessment of American economic juggernauts: high-tech (like Silicon Valley) and culture (like Hollywood). Both represent industries that are very very hard to replicate because they require immense talent ecosystems. You can't simply cut taxes and labor costs and get a Hollywood - with massive global consumption - out of nowhere.
America is very safe in these kinds of industries. Typically when other countries develop their own they either end up with extremely niche products (like India's Bollywood) or bland products with little real mass appeal (quick, think of the last Chinese movie you enjoyed that wasn't Ip Man).
Lost in Thailand. Hilarious slapstick comedy.
Oil refining and seismology in Houston
Biotechnology in Boston
The USA absolutely has a series of high tech clusters outside of California that are globally competitive.
Baidu. Tencent. Foxconn. Didi.
Think of the last Chinese movie you enjoyed that wasn't Ip Man
"The Great Wall"
You might be the only one, it lost money in the US and was panned by critics. And that was a big budget movie made to prove China can compete with Hollywood. It can't (yet).
Suspect that "I am used to things as they are" is a powerful incentive to keep business, not just citizens. (I say this as someone trying to move out of the UK because of the combination of Brexit and the Investigatory Powers Act: moving is extremely unpleasant).