A mistake about manufacturing costing Americans millions of jobs
qz.com
qz.com
> The problem is, the processor released in 2017 is superior to that sold in 2016 in many tangible ways. But how do you account for the fact that a 2017 processor provides users with more value? In general, statisticians assume the difference in value between the two models is just the difference in their prices. If, say, the 2017 processor costs twice as much as the 2016 one does, then selling one 2017 processor counts as selling two of the 2016 versions in the statisticians’ books.
This makes it sound like the problem is prices rising from year-to-year. The real issue is that the comparison is made with the price of the 2016 processor in 2017. See "methods of quality adjustment" in https://www.bls.gov/ppi/qualityadjustment.pdf
So basically - let's say in 2016 a new CPU costs $200. Then in 2017 Intel releases a new model, prices it also at $200, and sells the old model at $100. The quality adjustment algorithm will see that right now, the new one is selling for twice as much as the old one, and assume that there's been a 2x jump in value per item.
[EDIT: One way of thinking about this is: the method treats clearance prices for last year's model as deflation in this particular market, and adjusts for it.]
Subjectively, we know that the reason 2017 processors cost 2x as much as a 2016 processor, is because of improvements in process technology and architectural design. There might be incremental improvements in the manufacturing process, but not enough to say that "manufacturing capabilities have doubled compared to last year".
The obvious solution here would be to compare the price of a 2017 processor in 2017, to the price of a 2016 processor in 2016. But that would give hopelessly cynical answers in other circumstances.
For instance, consider a factory for paperclips that produced 10M units in 2016, and due to various improvements, 20M units in 2017. The paperclips in both years are mostly identical to one another. But for various market reasons, the price of each paperclip has fallen by 50%. Possibly due to the enlarged supply from factories all over the country doubling their production.
In such a situation, if you rated the factory's output using the alternative metric suggested above, you would think that the factory hasn't made any improvements at all in the last year. When in reality, it has doubled its production capabilities and efficiency.
There just doesn't seem to be a purely quantitative to compare the manufacturing capabilities of factories that produce qualitatively different products year over year. This seems to make moot any single metric that rates aggregative manufacturing capabilities across multiple years.
Example:
Right now Amazon is listing the overclockable Skylake Core i7 6700K 4 GHz 4 core at $392.76
https://www.amazon.com/Intel-Unlocked-Skylake-Processor-BX80...
Also right now, the newer, overclockable Core i7 4.7 GHz 6 core 8700K is offered at $347.06.
https://www.amazon.com/Intel-i7-8700K-Processor-Unlocked-BX8...
The newer chip has two additional cores and a higher peak frequency, but it's about $50 cheaper.
Would an economist conclude that this means industry output went down in this particular case?
How do economists work this sort of market-pricing reality into their estimates of computer industry value?
The late 1970s is when productivity and wages began to diverge. Much ink has been spilled about this, as it corresponded with the emergence of neoliberal economics by Reagan and Thatcher.
Maybe wages and productivity began to diverge not because labor was capturing less value due to political developments, but because we have been overestimating the productivity of industry in aggregate due to the rapid productivity growth in one sector, computers, skewing the aggregate.
It seems like a statistical misattribution of this scale could be applied to many other phenomena.
There was a time the US had an interest in the getting the rest of the work to "Globalize" to stem the Soviet tide. We won, it's over, but the American worker is still getting shafted by the industrialists who loved cheap outsourced labor. Clinton, Bush and Obama either were completely complicit in this or lacked the wherewithal to fight it.
Maybe Kanye along with others can get Americans reluctant to side with current American policies to see the advantages to bringing things back state side --or at least stemming the hemorrhage.
It's not like China or Mexico or anyone else thinks "Oh, those poor Americans who get laid off, who will think of them". Nope, everyone is out for themselves --despite what Globalists say.
You might have a million more manufacturing jobs, but hundreds of millions of people are paying through the nose for it. Meanwhile you may not actually make any significant difference to overall employment. Most of those million people now in manufacturing will have moved from jobs in other sectors, increasing costs in those sectors too. Meanwhile none of this does anything for America’s exports, because foreigners can still buy the same goods from your cheaper foreign competitors. In fact it can hurt exports if the goods you’re manufacturing are inputs to existing American exporters. Take steel, if American car exporters now have to buy more expensive locally made steel, the price of their cars goes up hurting car exports as well as shafting American car buyers.
Never the less, Japan and S Korea prove the claim is not true -they are protectionist but they are not paying much higher prices and their societies benefit form that. Also, I think we're coming to the conclusion that disposable consumerism is not good --maybe expensive but good with low "velocity" is better.
> Japan and S Korea ... are protectionist
They are not except in the absolutist sense.[0] And the U.S. protects its politically powerful industries too. In fact, the last round of the WTO was held up primarily, IIRC, by the US (and possibly Europe) refusing to lower domestic agriculture protections.
Finally, you are better off if you lower tariffs even if the other side does not. Whatever 'fair' means, tariffs cause goods to be more expensive for your consumers and divert economic resources from their most productive uses to unproductive domestic companies that hide behind tariffs. It breeds corruption (as the government picks winners rather than the market) and unproductive business, instead of meritocracy of competitive businesses.
[0] For example, another absolute statement is 'everyone is a liar' - obviously true in an absolute sense but meaningless. Some are far more trustworthy than others; most people are not called "liars".
Tell me how many foreign auto manufacturers are allowed to build in JP and SK. What's their output?
Which is you admitting the OP is correct btw. They are protecting a few politically important industries just like the US does.
Or do you genuinely think all those IP protectionist bs the US shoves in treaties is different?
The greatest feature of globalization is that it distances consumers from the source of the goods they consume. This might be "good" for the consumers in the short term, but it's absolutely not good for their s/economy/quality of life/ in the long run.
What's the effect of instant gratification global capitalism? The American economy now has to compete with the foreign economy. If workers in the foreign country experience a lower quality of life in order to sustain American consumers, then the American worker gets shafted because they have to lower their quality of life to compete. If they won't or can't (because we consider those conditions too inhumane for our own workers) then they have to find new work.
Globalism is the great equalizer.
EDIT: I'm not necessarily saying this is bad for the world (except that human rights and quality of life regress to the mean), and one can also argue that the freed up resources might be put to more.. sophisticated.. uses. I don't know...
I'm responding to the parent: the only way globalizing an economy is good for a strong country (one sitting above the mean) is if you define good in a strictly economic sense like "lowest prices for the consumer" (which is the premise of the parent's argument). It's easy for an economist to do that in isolation because that's the name of the game. A government, however, is not tasked with driving down prices for consumers (that's a market's job) but rather is responsible for roughly maintaining quality of life for its citizens and with protecting its workers, among many other things. Allowing the economy to run unchecked at a global scale essentially equates to selling out the workers. It's not just about who's consumers get the lowest price at the end of the day.
We're telling grown adults what they can't do, supposedly for their own good.
That quote from C. S. Lewis applies:
“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”
Look I generally agree with your C.S. Lewis quote, seriously.
But if it's tyrannical to maintain a baseline for workers, then we should abolish minimum wage and all worker protection laws and just let the adults go at it (I'm sure they'll eventually tap in cheap children too). Point being we've already agreed that workers need protection so you're arguing against the status quo (and calling it a tyranny nonetheless).
> we should abolish minimum wage
Certainly.
> we've already agreed that workers need protection
Actually, not all of us have agreed that.
> you're arguing against the status quo (and calling it a tyranny nonetheless)
Just because something is the way things are doesn't make it not a tyranny.
You're arguing against things that workers put in place themselves a century or more ago. 8 Hour workdays. Weekends. No child labour. Minimum wage. Workers have already fought these battles, are you suggesting we should go back to square one and do it over again for the hell of it?
This is not based on any serious understanding of economics. Just reading around this HN discussion should explain why free trade does far more. But really, if you truly care about the economic welfare of people rather than the politics of nationalism, just find some basic economics online about free trade; it's not very complex.
It just lays out what some Wikipedia users wrote; there's no reason to think it represents the economic facts or the whole picture, especially on a controversial topic.
Look up some real economics instead of Wikipedia. Look at Britannica at least, which probably is written by an actual economist.
A worker in Rural china with no manufacturing job is an an utterly shitty position. All those league tables of education are about the cities. My wife is Chinese, I've been to the Chinese countryside. The conditions are utterly appalling. The jobs these people can get in the factories can transform the lives of their whole families.
Of course workers should have minimum safety protections, etc, but you just can't compare the situations of these two people - unless you can guarantee that Chinese worker the same opportunities and advantages as the US worker outside that employment. Only then are the situations comparable.
-Very low labor costs from 1+ billion potential employees.
-Very, very high growth potentials from a potential of 1+ billion new consumers as the industrial level matures.
They saw that while the US had the position as the defacto world leader, it was also dwarfed in population size by China’s emerging market. So the prospect was to either try to somehow maintain the US position on the world stage through somehow sanctioning these 1+ billion people and their government (and that would of course fail). Or, they could “peddle with the current” by positioning the US strategically with the emerging behemoth.
And largely they did. China and the US have this relationship where China produces many goods and the US fills in various details - like providing the defacto world currency and political leadership.
What do you suppose will happen to the US if it tries to sanction China now? Do you figure the world would follow the US? Any negative trade action towards China will permanently dethrone the US.
There is no “globalist” interest in the long term US policy. There is the US best interest instilled within the reigning politial forces of the world. Of course they’re going to word that to sound globalist, and of course it is not. Or else the US wouldn’t have so many nations gunning for it. Globalism would look like a UN ideal currency (look it up) and UN political governance where the US had 300 million/7 billion (ish) voting power. That is not what the world has now.
I'm pretty sure it was Bill Clinton grinning[1] when they were allowed into the WTO. He totally shafted the blue collar unions who dutifully continued to vote democrat (they could have defected to I or G, or even R --but not even a protest.
[1]http://apps.cndls.georgetown.edu/projects/uschina/items/show...
No! No, no, no! Thousands times no! American workers are being shafted by consumers who love cheap products. Smartphones will be built again in USA when USA workers will accept to be payed as much as their Chinese colleagues. Either that, or be forced to pay more for everything so that USA brothers will be able to produce other stuff as well. I really don't understand how people could vote for a clown promising to 《make USA great again》: USA are still great, there's not a better past to long for, and that is also due to cheap stuff being provided from abroad. Globalisation is not something you can choose: it is the reality, and it will remain at least until we will have cheap oil to ship things around the globe. You can choose to embrace globalisation or to stomp your feet, but the world will move on anyway. Do you want manufacturing jobs back in the West? Fight for better work conditions in the East!
While most consumers would likely prefer that revenues from the products they purchase be distributed equitably, they generally appear unwilling to pay a consistent, significant premium for social conscience. Corporate PR and advertisement seems to satisfy any demands consumers have for companies to serve the public good.
smartphone manufacture requires a significant, specific, miniaturized, electronic-industrial ecosystem AND a large number of trained industrial, electronic and other engineers, not just cheap labor. (Africa has cheap labor but where are its smartphone manufacturers?)
China has a city like Shenzen with thousands of electronics makers. China has lots and lots of engineers of various kinds. China has pro-industrial development governmental policies, labor rules and environmental rules.
We cannot simply look to labor pay rates. It's a much larger system.
The divergence could be attributed to the devaluation that has been happening since.
See 'Figure A': https://www.epi.org/publication/understanding-the-historic-d...
Women began entering the workforce en masse. You had a huge increase in labor supply, while consumer demand didn't increase the same amount. Wages had to give.
We do see a loss of volunteer time by women who previously might not have worked. https://www.theatlantic.com/politics/archive/2016/09/what-wo...
The article speculates a lot on why and how the reverse implication might be true, but all of the problems with explaining that implication simply don't exist if you flip it.
But another point is healthcare expenditure increases have outpaced inflation dramatically in that period (women today make up ~80% of healthcare workers).
And a final point is in the same period that women's labor force participation rate went up, men's went down a massive amount, so you wouldn't expect the full effect of increased female supply:
Also, does anyone know anything about Houseman, the (principle?) researcher?
IME, there are many small organizations that produce reports to grind some small axe. It doesn't mean Upjohn is one of them, but it's important to know who you are listening to.
EDIT: It looks like a local research organization located in Kalamazoo, Michigan. They say they date back to the Great Depression. The Board of Trustees often gives a good introductory picture of an organization; in this case, I see a mix of academic and business leaders local to Kalamazoo:
https://www.upjohn.org/about-us/board-of-trustees
Also, you can find Houseman's and other researcher's official bios here. They look like real economists, fwiw:
https://www.upjohn.org/about-us/research-staff
(Ironically, many in this discussion are citing research by economists to claim that economists are unreliable.)
Susan Houseman has a very distinguished CV[3], and you can read her full paper and presentation here.[4][5]
Here is a video of her speaking on the topic.[6]
[1]https://en.wikipedia.org/wiki/W._E._Upjohn_Institute_for_Emp...
[2]http://www.upjohn.org/sites/default/files/pdf/Upjohn-Institu...
[3]https://www.upjohn.org/sites/default/files/housemancurrentcv...
[4]http://research.upjohn.org/cgi/viewcontent.cgi?article=1268&...
[5]http://research.upjohn.org/cgi/viewcontent.cgi?article=1054&...
[6]https://www.c-span.org/video/?439645-1/manufacturing-jobs
If you follow the example on the link provided, they show how upgrading an old tv that cost $250 to a new one that cost $1250 actually was had a negative inflation effect due to the extra features that the new TV had.
From one perspective I can understand their point, but when the "new normal" of tv ownership basically demanded those features, so they weren't really extra benefits for the end user in the long run (and then became standard features where the prices did plummet back to the original $250, one again reading down the inflation figures).
Look if like to think that economist are smarter than that, but given the original article...
[1] https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
Even if you accept the core logic, they went about it in an absurdly naive way: a 50% faster chip does not make the iPad 50% better; very little of that went to relieve a true bottleneck and so doesn't translate into observably higher usefulness. Now, if iPads were so much better that they actually freed up owners from significant household tasks that actually translated into e.g. greater free time or ease of earning, that would make sense. But the chip simply being faster isn't good enough.
Incidentally, do they ever readjust inflation upward when products get worse? Like, when packaging is flimsier or paper cups harder to grip? Somehow I doubt it.
[1] https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...
Everybody and their dog for quite some time "knew" that inflation is bad, because you get less for the same money when prices rise.
But, around the world, it's usually some government entity publishing inflation numbers... So it isn't a big surprise that the governments came up with ways to keep the inflation numbers as low as possible, at least on paper if they failed to keep the number low in the real world. One of the many ways to artificially "shrink" inflation numbers is Hedonic Quality Adjustment.
A government does that to avoid disgruntled citizens asking questions about why the inflation is so high, but you also does that to avoid disgruntled companies asking questions about why the inflation is so high and thus why their workforce keeps demanding wage raises to offset that high inflation. And then there are those rating agencies judging the risk of state bonds and consols also in part on the inflation numbers.
Another potential way to massage inflation numbers is the "inflation basket"[1]: E.g. the UK between the 2017 and 2018 basket the gov't slightly decreased the weight of all goods in that basket (such as "Food" and "Health") except for "Alcohol & tobacco" (steady at 3.3% weight) and "Housing & household services" (27.6% to 30.0% weight). Now I'm perfectly sure there is a real fine explanation why this happened other than to optimize for low inflation numbers on paper, just like I'm perfectly sure there is a real fine explanation why Hedonic Quality Adjustment just makes sense and it's absolutely necessary to use it in your calculations!! Other countries do the same or similar things.
Governments got really good at mucking with numbers. E.g. in Germany they started massaging unemployment numbers by essentially redefining what "unemployment" means[2]: It used to refer to people seeking jobs but now it's those job seekers minus all those people who are enrolled in government "employment" programs (where e.g. they teach you how to write a good CV), working in shit jobs that don't pay a living wage (incl "1€ Jobs") and therefore still rely on the welfare state, etc. The most drastic "adjustment" they came up with in regards to unemployment numbers in Germany is that they simply do not count anymore unemployed job seekers older than 58 years as "unemployed" (retirement age by law is between 65 and 67 years old, depending on when you were born). Other countries do the same or similar things.
[1] https://www.ons.gov.uk/economy/inflationandpriceindices/arti... and https://www.ons.gov.uk/economy/inflationandpriceindices/arti...
[2] https://www.tagesschau.de/wirtschaft/hg-arbeitslosenzahlen-1...
Rumsfeld et al started this bigtime in the 80s, selling and giving tech and IP to several asian countries for diplomatic favors. We were not consulted as to why at the time, just forced to make ourselves highly available for several Chinese government partners that were very interested in some of our advances, particularly in networking and manufacturing.
This song and dance apparently accelerated in the G W years, but by then all half our company had shut down and I had abandoned tech for the second time.
> In effect, US policymakers put diplomacy before industrial development at home, offering the massive American consumer market as a carrot to encourage other countries to open up their economies to multinational investment. Then, thanks to the popular narrative that automation was responsible for job losses in manufacturing, American leaders tended to dismiss the threat of foreign competition to a thriving manufacturing industry and minimize its importance to the overall health of the US economy.
It started with Nixon's 1972 visit to China. Engineered by Kissinger.
However, it's arguable that it helped prevent WWIII, so hey.
It could have been the best option at the time, especially with nuclear weapons in the mix.
However it's also very convenient that those deciding to pay the tribute or bribe (government bigwigs) did not have to pay out of their own pockets. In fact they were able to skim a portion off for themselves.
But yes, it also looks like tribute.
Edit: > In fact they were able to skim a portion off for themselves.
Walmart was represented at those talks :)
I've heard that Mao offered 200 million young Chinese women, but Nixon passed, I guess.
Nationalism also ignores two fundamental moral issues: First, it is an unequivocal moral good for people rise out of extreme poverty, as has happened in China (and elsewhere). Second, there is no moral difference between the welfare of a human being in China and one in the U.S. or any other country; there is no reason the American deserves to be more wealthy. Everyone should have opportunity and a fair shot to earn what they can; if you don't make more, should you get special welfare because of your nationality?
With the knowledge that the original analysis is wrong, I wonder if we'll see actual policy changes more broadly than Trump's campaign rhetoric?
No, the rest of the world has been pushing it too, with exceptional results, and still follows that path with the U.S. being the odd country out.
If this one study is correct, it only reflects on one aspect of a much larger issue. Trade has brought immense benefits to the world, lifting billions out of abject poverty; whatever it's drawbacks and imperfections, it's very hard to say it's anything but the greatest economic success in human history. Globalism is built on the foundation of universal human rights, probably the most important factor in the overall welfare of humans. If the people who happen to be on the other side of an arbitrary, invisible line don't have rights, then neither do you.
I'm not sure what else you are referring to. Who said it's ok to enslave people? Or that the economic rights were the only ones that mattered?
> am I supposed to look the other way?
Absolutely not; it's wrong to look the other way. I shouldn't either.
I agree that's a very important question.
First I think we need to stop talking in absolutes. I'm not saying globalization is "universally" good; I'm saying there are great benefits; there are also real problems, including the one you point out. Nothing in the world is perfect; if we only move forward on things when they are perfect, we live in caves - which are pretty imperfect themselves. The question is not perfection but how can we do better?
Post-WWII globalization has created the greatest benefit to common people in the history of humanity. After thousands of years, hundreds of millions of people in China have been lifted from desperate poverty to 'middle-class'[0] prosperity. The same has been repeated in India, Brazil, South Korea, and many other places in the world. People in the West also are immensely wealthier, live longer (and have more freedom). Also, specific to the question you raised, human rights have spread at a rate also unprecedented in the history of humanity; look at the explosion of democracies and of liberty. While there are problems, the benefits are overwhelming IMHO.
There also is a moral component: People generally believe in freedom, and economic freedom, to trade with whom you like without government stopping you, is an important one.
But I do take the problems seriously:
* Impact on individuals: This is the fundamental problem, IMHO: Capital can move much faster than individuals; a factory can move to another country much faster than the workers can find new, equivalent jobs - for most, moving to another country is practically impossible - especially if half the town is now unemployed. Therefore, trade provides a net benefit, but the impact on individuals is disparate to a great degree. We need to protect those individuals, by giving them time to adjust (require a warning or continuing salary for X time, perhaps based on the impact on the local job market), by compensating them for the change (taxing the benefits of moving capital and giving some back to the people making the biggest sacrifice), and by means of the latter taxes, also raise the cost of such changes to the point where it's economically viable not just for the company and future employees, but for those left behind.
* Human rights: To not trade - to lock billions into extreme poverty (often defined as less than $1/day), starving, with no education, medical care, etc. - seems the opposite of concern for human rights. Money is essential to "life ... and the pursuit of happiness". As for liberty, there's long been the theory, often born out, that when a middle class grows in a country, they demand political rights. That's been true in many countries, including parts of China (Taiwan and Hong Kong), S. Korea, Brazil, Chile, etc. But to rely on it just happening is insufficient; we need to do more, including writing human rights into our agreements, leading on the issue (which the current US administration has abandoned), and pressuring others into expanding them.
* Labor practices: I think these need to be written into trade agreements, though I don't know what's already been done - I think it's widely assumed to be nothing, but I've never read anything by someone who actually knows what's in the agreements. However, it's a false assumption that labor costs are the prime cause of manufacturing moving, based on at least some economists I've read. Manufacturing was big in mid-20th century West and has been declining since; Americans now have much better paying, safer, more comfortable jobs than working in factories. That's a good thing; we need to do much better, but not by going backwards. Manufacturing is often done in China because that's where the expertise and other resources are concentrated (from infrastructure to bankers to talent to suppliers etc.), the same reason SV is home to the IT industry.
[0] I won't bother to define it here; I hope you get my point.
Similar to you, I'd be curious what people are doing to underwrite human rights via trade deals so we globally don't regress to the mean, but that's a topic for another time. If underwriting human rights became expensive or a requirement in certain states in theory it impacts the free market...
One thing you say that I don't quite agree with:
> very possibly the reason Trump is sitting in office
Think of all the ways the theory doesn't apply: Most voters making less than $50K chose Clinton[0]; minority voters, who also lost jobs and who have higher unemployment than white voters, overwhelming chose Clinton; Trump's and the GOP's policies overwhelmingly favor the wealthy and big business, including cutting health care and other government services to the working class, and shifting relatively more of the tax burden onto them.
To the extent working class white voters supported Trump, they did so against economic self-interest. But that's long been true of many such voters; remember the book 'What's the matter with Kansas?' (or whatever it was called - a f*ng obnoxious, ignorant, arrogant title that reveals the problem with Dems: 'customers aren't buying our product, what's the matter with them?'). The question is, why?
[0] Based on a HN comment that cited some stats; I didn't check them myself, so take with salt. But I remember reading similar research after the election.
If a communist dictator takes over a country (on the other side of an arbitrary line) and reduces rights, my rights are also reduced? Could you possibly explain the mechanism of how this works, and maybe even provide some examples?
Americans have gone through decades of ups and downs without turning to hateful nationalism and while supporting free trade, as well as 'humanism' (in terms of democracy, liberty, and opportunity) for all. The nationalists want to appear inevitable, but they are not.
If there's no humanism for others then there's none for you either; if human rights aren't universal, then you don't have any either. Being unemployed and relatively powerless, people might appreciate a little more humanism.
EDIT: And according to this thread, the low-income voters voted for Clinton anyway:
https://news.ycombinator.com/item?id=17004385
> This is all well and good in global altruistic humanist sense
In the local economic sense, in fact. If trade is harmed, then your chance of getting another job is reduced and the cost of things that you need will go up. Most of what you buy is produced outside the U.S.
> if I just lost my job in Indiana because the company shuttered our plant and outsourced manufacturing to China, I'm voting for Trump
That takes at face value Trump's claim to represent such groups' interests. If you are a minority, you probably aren't voting for Trump; if you are a woman, it's also unlikely you see him as protecting your interests, Also, Trump will take away you and your family's health insurance; his spending policies will remove other government benefits and investments you receive (including higher education for your kids); his economic and trade policies may harm economic output, reducing your chance to get another job; his inflationary policies may eat away your savings; his pro-Wall Street policies may make you a victim of the financial system ... much of his appeal is not to the economic interests of factory workers, but to ethnic nationalism, and other issues.
My point is not to debate about Trump's policies, but to say: Let's not take politicians' claims at face value and just repeat them.
First of all, the nationalist assumption that humans are sociopaths and care only about themselves is wrong; they try to promote anger constantly, but that's not the normal state of affairs. Healthy people care about others.
Second, what I'm talking about will benefit their small town and them personally. As I pointed out in detail, reductions in trade harm them directly. Economic problems harm them directly. Working class people in the U.S. wouldn't be in so much jeopardy if they had health care, better education, better unemployment insurance and welfare benefits. All this directly affects them.
> we've got to find a way to frame the conversation in terms that will engage the other half of the country who do feel this way. Who knows, we might even find out that they have some good points.
That assumes "we" don't. The issues are political and ideological, not economic. The GOP has rallied anger, racism, and populism to such a degree that Trump won the Presidency and a known child molester almost won in Alabama. The issue isn't policy; the angry people have no interest in economics, but in ideology and political warfare, to the point of destroying non-ideological national institutions (e.g., the judiciary, the FBI, the IRS, the State Department, etc.). The Democrats are cowards and avoiding political fight, pretending it's policy while their enemies fight scorched earth war. Predictably, they are losing ground rapidly.
The only places economic arguments matter are ones like HN, where some still value reason and knowledge.
Could you possibly direct us to what definition you are using for Nationalism? Judging by your words, it doesn't remotely resemble anything I've ever read.
This argument assumes the nationalist position, rather than addressing its (immense) flaws (a proven track record of promoting hatred, of leading to war and disaster, and of being wrong - peaceful international cooperation in the West has predominated for generations, with the result being the most successful boom of political and economic welfare in the history of humanity).
A belief in the idea of liberty, rather than ethnicity, is the foundation of the United States. 'All men are created equal' was why the U.S. was formed; not 'All Americans' or 'All white people'. Human rights must be universal; if the other guy doesn't have them then neither do you. Universal human rights has been a foundation of U.S. foreign policy for generations, with great effect: The world is now filled with democratic, free countries, like never before. People in the U.S. have always cared about the freedom of others. The nationalist position of the current administration is an extreme exception, not the rule.
It's also is in the U.S.'s self-interest: Free democracies are peaceful, and they are prosperous, which makes them good trading partners. All the wealthiest countries in the world are democracies. Also, democracies rarely if ever start international wars (the U.S. having become the prominent exception during this century).
> Think China cares about US citizens beyond what it can give China?
I don't know who "China" is. Do people in China care about the welfare of people besides themselves? Of course. Most human beings are not sociopaths, despite the nationalist assumption that they are - really the desire, because it promotes more nationalism.. Does Xi Jinping? As the dictatorial, oppressive ruler of over a billion people, he seems mostly interested in his own power and not their welfare, or anyone else's.
Given that it's my country: yes.
Why else spend so much money on bombs?
Lol. If even a tiny percentage humans followed this morality globalism wouldn't be necessary in the first place.
No, these are universal human rights. Dictators who deny their people self-determination have long claimed 'we're different', but wherever people have a choice, they've chosen these rights.
It's true across cultures: The only places in China where people can decide their own rules have chosen these rights, Taiwan and Hong Kong (and don't forget mainland Chinese the last time they had a chance at it, in Tienanmen Square). Japan, South Korea, almost every country in N. and S. America, Europe and the U.S., and on and on.
It's a bit of a catch-22 for the dictators: If people are so happy with your rules, why not take a vote?
A group of people, mostly men, got together and wrote some things down and declared that they are "universal" "rights".
> It's true across cultures
Except where it's not.
> The only places in China where people can decide their own rules have chosen these rights
Are you implying Chinese citizens share the same rights as everyone else?
> If people are so happy with your rules, why not take a vote?
This sounds like you're under the impression the outcome will be unanimous support. After all, these laws are universal, right?
To me this looks like another simple case of an advocate of some cause once again simply declaring themselves Correct, "the time for discussion is over". It's a fashionable and quite effective persuasion technique so you can hardly blame people.
On another note, I'd love for you to provide your definition of the word "nationalism". If you're so confident it is correct (I presume) then why not just explicitly state it? ;)
> A group of people, mostly men, got together and wrote some things down and declared that they are "universal" "rights".
That's false, as I pointed out; they've been endorsed and embraced worldwide for centuries. Generally speaking, almost any group given a choice has endorsed them, men and women.
Also, the supporters of oppression like to frame it as a matter of opinion, and then invoke some extreme relativism: Your opinion is X, mine is Y, therefore there's no real basis for X. We could say it about anything: You think murder is wrong, I think it's ok, therefore it's just a matter of opinion. It's not a meaningful argument and doesn't address the real and very strong basis for universal human rights.
Another consideration: Should you and others be allowed to debate this issue with me? Why?
...
The rest of the parent comment attributes things to me that I haven't said, so I'll pass commenting on it.
What does "they've" refer to?
> Also, the supporters of oppression like to frame it as a matter of opinion
Am I one of these "supporters of oppression"? What oppression are we talking about here? This feels like one of those situations where two people wearing a blindfold are describing an elephant to each other, I have no idea what you're talking about. Maybe you feel the same about me? But I certainly don't think I'm trying to oppress anyone.
> and then invoke some extreme relativism: Your opinion is X, mine is Y, therefore there's no real basis for X.
Have I done that? Where?
> We could say it about anything: You think murder is wrong, I think it's ok, therefore it's just a matter of opinion.
I've seen this technique before, I wonder what the name is for it. I'd offer a comparable retort, but I don't enjoy protection due to my politics.
> Another consideration: Should you and others be allowed to debate this issue with me? Why?
In the real world, that is a matter of opinion, but let's try not to change the subject shall we?
> The rest of the parent comment attributes things to me that I haven't said, so I'll pass commenting on it.
The irony.
This commerce.gov report [0] taught me a few pieces of the puzzle. I especially like the graphics on pages 5 and 7, showing major semiconductor manufacturing and lots of output from Cali, Oregon, and Texas.
This wiki page [1] shows lists semiconductor fab plants. The ones I recognize (as my own proxy for size) are Intel, TI, Broadcom, Seagate, former Fairchild, and NXP/Freescale.
[0]: https://www.commerce.gov/sites/commerce.gov/files/migrated/r... [1]: https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat...
For factory productivity numbers, I assume that labor is not subtracted from value. If one person at $50/hr builds $51/hr of widgets completely from scratch, their productivity is $51/hr, not $1/hr.
Now imagine some major policy mistakes that make all other economic activity fail. Average productivity would rise madly! And everybody would ask themselves, how can we have so much unemployment, when we have this totally awesome productivity? You can almost hear the knives getting whetted against foreign and domestic scapegoats, because clearly, with that awesome productivity inherent to "us" (people love thinking that!) , only foul play can be the explanation.
I spent most of this century in the UK, and the narrative there was always that these jobs have gone away, they are not coming back, that’s why things say ‘Made in China’ on them. This seemed to be the conclusion of other EU countries too. Germany was very deliberate in its approach to manufacturing for export.
I find it very hard to believe that the US alone could come to a radically different conclusion than the rest of the world about the largest economic trend of recent times, because no-one had examined numbers.
The surprising thing is that as a politician you can say what you like, and journalists have neither the ability or interest to examine it before spreading. This seems to be what happened with the automation narrative.
It seems that the author is making this entire scenario unnecessarily political and polarizing. "Rogue Economist finds blinding obvious flaw by incompetent elites"; which, given that this is Houseman (one of the economic elites), it's very much kinda not?
As a side note, I love this phrasing. I mean, it's only 17 or 18 years depending on how accurate you are with when a century starts, but it just sounds so long.
I'm going to start saying that I've lived in the Bay Area since before the turn of the century, because it sounds cool.
As I remember things, since the 1990s or even 80s, sending manufacturing jobs overseas was the program, with the main justification then being "there will be better jobs in their place". But just in 2016 you had instead "really, it was automation". Now, you complete the cycle with "sure it was China but we were sure it was automation, big woops..."
> President Clinton claims that the recently signed trade agreement with China “creates a win-win result for both countries” (Clinton 2000, 9). He argues that exports to China “now support hundreds of thousands of American jobs,” and that “these figures can grow substantially with the new access to the Chinese market the WTO agreement creates” (Clinton 2000, 10).
But it then prophetically goes on to argue:
> China’s entry into the WTO, under PNTR with the U.S., will lock this relationship into place, setting the stage for rapidly rising trade deficits in the future that would severely depress employment in manufacturing, the sector most directly affected by trade. China’s accession to the WTO would also increase income inequality in the U.S.
Perhaps because it was a predicted outcome of future events. As discussed in the article and here, it turns out he was more or less correct, does it not?
Maybe I just overlooked it, but I didn't see any mention of the big recession that happened on the 2007 end of that interval. A lot of industries that were hit hard in that took a very long time to recover (some still have not).
Because of that, articles that do comparisons from 2007 or thereabouts probably should include a short note explaining when whatever they are looking at recovered from that recession.
Similar economic metrics that have undergone fairly large changes for both practical and political reasons are the unemployment rate and the cost of living.
In all of these cases if you can get the core data and the methodology (as Dr. Houseman did) and it is yet another reason to make all of the data available rather than just to governors on the Federal Reserve board.
Then again, I guess it's better to have a job but be unable to afford the the latest and greatest toys, than it is to just not have a job at all.
Yes. That's the fundamental reason those jobs went overseas in the first place: it was too expensive to keep them in the US.
> it still seems like US workers will not accept wages that will keep prices as low as they are now
I think that's correct.
> I guess it's better to have a job but be unable to afford the the latest and greatest toys, than it is to just not have a job at all.
The problem is not that the worker won't be able to afford the latest and greatest toys; it's that nobody else will be buying what the worker is producing, because it will cost too much. Which means bringing back those kinds of jobs is simply not a realistic proposal at this point.
The problem is that we (the public and various business owners) are still living under the assumption that it's the year 2000, when you could land from China for $3 and sell something for $30. This isn't true in the "New China," where wages are catching up to the US. That $20 item you are buying on eBay has a COL of $15.
There are three major issues:
1- China has a TON of engineers. This isn't so true in the US. This means that China can get from spec to market in short order. In the US, spec to market is much slower.
2- Supply chain. In China, the manufacturer, design team, broker, sales, printer, and so on are all in one building.
The US supply chain is incredibly convoluted, featuring 5 layers of people who's sole job is to prevent the buyer from contacting the factory directly.
3- China still has an unfair advantage. When you buy a product, a large chunk of that cost is shipping ("free shipping" is up to $7 that you don't see).
This is doubly bad for the supplier, as they have to work out the shipping price for China -> US and US -> customer.
Ever heard of e-packets? It's actually cheaper to use USPS ship from China -> customer than it is to ship a package US -> customer, even if the customer lives across the street.
In short, China has some inherent advantages, but the US also does many things that give China an unfair advantage. Last but not least, the US supply chain is a complex web of back-patting that does little more than destroy itself.
There are plenty of options for cheap US manufacturing, it's just that there is no scale for that, and there are many other small issues. The US has to do much more work than open up a new factory down the street. If we are talking about raw per piece production, the US often does it cheaper than China. It's all the other things that raise the price.
It's rapidly becoming a myth that Chinese products are cheaper because they don't pay their workers or because they manipulate their currency (both of which they've done in the past, but as with most market forces, they can't sustain forever). Rather, the Chinese are innovating heavily on how they make products, and doing everything possible to squeeze out waste in the process. They're simply making things more efficiently than we do in the U.S.
All of this is fixable, but requires that all the layers of management between U.S. factory workers & customers needs to stop doing what they're doing and in many cases eliminate their own jobs. And that is unlikely to happen, because they are the decision-makers on layoffs and it's a lot more profitable to lay off the factory worker who actually produces the product than themselves. IMHO the U.S. desperately needs a lot of bankruptcies, a few enterprising individuals with knowledge of full manufacturing processes to start new firms, and a financial system that directs money to people who actually have domain expertise rather than folks they went to college with, but good luck on that.
Can you expand on this? Who/what would prevent me from directly working with factories?
Let's say you want to create a unique mug for your company. In general, you can do this pretty easy by calling a promotional products distributor (you can't contact the supplier directly), but you are bull-headed and want to do it yourself.
You decide you want to buy something USA-made. Well, you contact the factory and you get yelled at for not calling their broker. (I contacted an unnamed factory in Texas and they were demanding all names and numbers, implying heads are rolling).
You call the broker. You contact the broker and she tells you that you can't really order from her, and you have the option of contacting a printer in Chicago.
You contact the printer in Chicago and now they are upset because you aren't ever supposed to call that factory, never mind you have a retailer license.
Okay, well... you call their broker, and well, yeah, they can do that, but you have to use their preferred artist located in NYC.
Got everything wrapped up now? Nah... you have to find someone to do the mold, and no, the factory doesn't deal with that. You contact someone in Colorado and you get quoted $15,000 for an injection mold.
So you go back to the broker who is... well, you don't really know who to contact, but it turns out that the Chicago printer isn't tooled to do anything but the shapes they are getting from Texas (you don't learn of this for 2 weeks because that broker is too tied up with other things). You call up Texas broker and she says "yeah, we do custom molds, but you still have to use our preferred network."
You ask if they can do orange and they say no, they only do red, black, and blue. Sorry.
You say to hell with it, call China who can do all of this in one phone call. You figure the cost is about the same (though the mold is only $5,000) and can get an sample in 2 weeks. They also offer to send you 15 different colors because they can.
I guess that doesn't explain why this happens. The reason is that there are a lot of "policing societies" that factories, suppliers, brokers, and distributors pay good money in order to keep the supply chain in check. There is no dirtier word than "double dipping," which means you are acting as supplier and distributor. Once you do that, you end up losing your society membership and you are basically toast.
There is a bit of inflection point these days. Suppliers / manufacturers are starting to sell direct. The distributors don't really like that the supplier / distributor relationship is breaking down, but it is slowly happening in some segments.
In sum, there really isn't a such thing as a "middle man." There is a whole party of people involved in everything that you buy. It's just a matter of how deep the rabbit hole goes. China smartly chose to streamline the process.
The situation I'm talking about is definitely reflective of reality though.
People and companies pay to be a member of these clubs. Basically, it's saying that no one is going to step on each other's toes. Not being a member would make things hard for you to do business.
This obviously isn't universal to all industries. As far as I know there are no written legal codes, so it's basically an example of self-policing a la libertarianism, where you pay to play and follow the rules.
... So if you click the link below the graph for the source data, the data that was graphed was the number of robots per ten thousand workers in the manufacturing industry in 2016.
The report also indicated that the US had the second highest number of robots per 10000 workers in the automotive industry in 2016 after South Korea. Given that the article's main point was that the computer industry distorts the overall growth numbers for US manufacturing, it may be worth pointing out that different industries within the overall manufacturing industry may find different levels of automation appropriate at our current level of technology. Without a clearer picture of the relative representation of different manufacturing industries in each of these countries and what's considered state-of-the-art in terms of automation for each, I don't think the data for this graph can be used to unambiguously support the author's conclusion.
Link to the source report: https://ifr.org/downloads/press/Executive_Summary_WR_2017_In...
We start at 100% of the starting value, by definition. We then go from there.
So if there were 256 robots, and that increased to 384 robots, the graph would start at 100 and end at 150.
We need more information to tell if that is odd. Yes, robots, like humans, have to work somewhere--but robots, unlike humans, don't care where that somewhere is.
Plants using mostly human labor face more size constraints, I'd expect, than do plants using mostly robot labor. Adding more humans to a plant means you need more housing in the nearby communities, more traffic capacity, bigger schools, and so on. There are limits on how fast communities can add those things, so you can end up having to have several plants in different communities.
With a mostly robotic plant, your growth constraints are land, energy infrastructure, and transportation infrastructure to bring in raw materials and ship your output.
I'd expect, then, that a company using mostly robot plants would move to have a smaller number of larger plants for a given level of output than would a company using mostly human plants.
The brain dead obviousness of these shocking new revelations have been apparent to most people for decades — I wrote a paper about it in high school in 1992. I live upstate NY, once an economic powerhouse, now an empty shell. Every sector is dead, from farming to traditional industry.
It was pretty obvious 25 years ago what was happening, and pretty obvious now. Work went to Mexico. That includes the machinery and tooling. Ten years later, it went to China. Automation is a thing, but the jobs left years ago and the upside of automation like mechanical engineering and tools are all being realized in China.
Too bad there's no HN gold. :)
While its possible there is something to it, even if there is it irritates me to see so many people harp on Cambridge Analytica and Russia and such for why Trump won. Trump won because he was the only one who really ran on the collapse of the interior as an issue. I am not convinced Russian trolls or CA had much to do with it. At the very least I think without the rust belt he would have lost badly.
I feel that while this is why Trump won, Bernie ran on a similar platform. However, Bernie didn't end up becoming the nominee, and we all know what happened next.
Clinton had the distinct "cultural" advantage IMO, although evangelical voters united fairly monolithically behind Trump; the marketers of culture lined up pretty solidly behind Clinton. It's also important to remember that the culture of white dudism only represents about 1/3 of the country, although it represents a bit higher percentage of voters, and there were a lot of young defectors this cycle.
https://ropercenter.cornell.edu/polls/us-elections/how-group...
... what do you think your link says?
It's not actually obvious whether personal observations are representative of what's going on in other parts of the country that you've never visited. Even if you're well-travelled, you can't see everything. Reporters can't see everything either, and newspapers give us a very biased view of the world.
That's why we rely on statistics, and they're notoriously difficult to get right.
In the end, I'm like: "Studies? You can prove anything with studies." Each study is part of a conversation among economists, and I doubt this will be the last word.
Studies and economists can be bought.
We live in a world of uncertainty, but it's not at all true that everything is equally uncertain. An MD is more reliable than a guy in a bar when talking about medicine. An economist is also more reliable, as are certain economists and economic institutions, as are the consensus of economists.
Same might be true for many economists. We like to think we've got the right experts, but it turns out we really don't know if the so-called experts have the most useful perspective on matters.
I think I just particularly mistrust economists.
It's partially that if these new studies are correct it's just amazing how so many economists could be so wrong about something that seems so obvious. I can't even fathom it without imagining they were paid off.
Funny thing is I know people who will bring up talking points of economists in real life while ignoring the "reality on the ground", and I know they aren't paid for. They won't even consider that the economists might be wrong. Maybe there's just been a lot of groupthink in economics.
My experience is that with very rare exceptions, if I think experts who study an issue are all so obviously wrong, then I'm the one who misunderstands something (about the facts, the experts, or who knows what). The 'everyone's an idiot and missing the obvious' theory rarely holds up.
The study is interesting. Let's not get carried away with the interpretations of a bunch of HN users, of one news report, about one economic study, by a small research institute in Kalamazoo MI.
In this case I'm not saying "everyone is an idiot and missing the obvious", I'm saying "politicians and economists are idiots and are missing the obvious", because this is a case where the average non-academic person would intuitively believe outsourcing would be bad for American industry in the long run.
I'm not saying that more research shouldn't be done into this, but if it's correct than the incorrect conclusions of economists helped to decimate the American manufacturing industry. If this is the case then how did things go so wrong, and how do we avoid something like this in the future?
You've just stumbled upon the secret to how corporatists have taken over the west. It seems to me, most any Westerner with a university degree will believe any story they're told, provided the story fits a general narrative, and the person telling the story has a degree or it is printed by one of several accepted "authoritative" sources. Whether it matches what they see when they leave their desk and walk around in the real world seems to make utterly no difference.
We should distinguish between our suspicions (hey, this looks weird) and investigation. Gut instinct and anecdotal reports are a good source of suspicion, but suspicion without investigation mostly just generates lots of online blather.
So, it's great that some economists were not only suspicious, but did something about it. Too bad it didn't happen sooner!
But maybe there are more mistakes?
Fact is, the social sciences have completely opposite theories with completely opposite causal mechanisms or even opposite ideas about outcomes and conceptualisation. These studies can't even agree on the dependent variable, let alone the independent variable. And they're all championed by top ivy league scholars.
Take the article's theme for example, globalisation and job security. In public administration there's two hypotheses about the way the welfare state responds to job insecurity from globalisation. One is the efficiency hypothesis which expects the welfare state to retrench and become smaller, assuming increased competition forces a sort of race to the bottom effect in order for a state to stay competitive. The other, the compensation hypothesis, expects the welfare state to expand in order to compensate the losers of globalisation (e.g. factory workers in the US). A whole range of studies exist that show evidence for both hypotheses. They keep getting better, moving from correlation to causation, from aggregates to specifics, towards clearer conceptualisation and a semblance of a consensus. But for decades, this is a field where articles were getting published which could easily be written about in newspapers in an incendiary manner like OP's article about how 'we used to get it all wrong', and linking it to some recent populist movement, explaining how it all wasn't so crazy after all.
It's silly. Studies are valuable, but anyone who spent any time in academia, even as a student, should notice studies never translate well to journalism. It's particularly apparent reading about a field he/she is familiar with. The number of times I cared to look into the research underlying news articles and came out thinking 'this article is nonsense' is tiring.
And it's no surprise, I'm guilty of the same behavior of journalists. Either it's ignorance because I'm not a specialist in my field, or I just don't care. I've written a bunch of school assignments taking positions that were blatantly false, ignoring a whole range of literature that didn't agree while making it appear as if I was being nuanced, just to get the essay out of the way. Journalists are likely not much different.
Only if the party allows that to happen. They've got strong incentives to keep people employed.
China's best bet is to have a very strong local economy before this happens and not really heavily on the west -- but they are already on the fast track to do that.
It was mainly a useful scapegoat. The reality was that highly automated factories were more visible (because they were the ones that didn't close and move abroad) and there was no shortage of anecdotes about jobs eliminated.
If you're trying to protect profitable trade deals and austerian government budgets, a scapegoat is necessary.
The most automated profession in the US has suffered no macro level disemployment effects: https://qz.com/962427/what-its-like-to-be-a-modern-engraver-...
Or are you explicitly dismissing jobs that are never created?
The whole "oh but this time it's different because AI" argument is a load of bullshit. The disemployment effect is actually about 10x milder than it was when we came in off the fields and new kinds of job are created all the time.
That said: http://foreignpolicy.com/2018/03/21/nobody-knows-anything-ab...
Note: I personally think there is amazing innovation around production happening elsewhere in the world, besides low wages. That's something I would like to see happening more in the USA. But I doubt it is as significant as cheap labor in moving manufacturing abroad.
I always thought the widely accepted narrative was that automation might bring some bulk manufacturing back to richer countries when it starts to compete with the cost of a skilled worker in a lower wage economy, after a decades long policy of outsourcing manufacturing chains, not that richer countries somehow automated away all the jobs at home.
- A venture fund, similar to In-Q-Tel, focused on investing in cutting edge manufacturing tech startups. It'll make sense to focus on defense applications initially, but many of those techniques do get carried over into private enterprise.
- Increased grants for fundamental research, and tax write offs for corporates who expand R&D facilities adjacent to production facilities in the country.
- Inevitably any company doing manufacturing today will experience labor shortages, most experienced staff are now retired. A federal program to re-train displaced workers to become technicians servicing the robots doing the assembly, monitoring quality, and doing basic troubleshooting work onsite.
- Tax writeoffs for companies who provide training for front-line employees to move into design and engineering roles.
EDIT: Old time manufacturing jobs are gone and not coming back, however they are loads of opportunities in other areas of manufacturing that will generate much more value per employee and hence will pay better. Giving companies incentives to create these jobs, and providing a pathway for individuals with minimal training to attain the skills necessary to do them will solve the problem over time. Of course, it's all in the details.
NNT was right, again.
And the one reads articles that open with "Looking back, there were two kinds of people who lived in America in 2016: people who believed Donald Trump, and people who believed data."
As if:
a) Non-trump supporters read data
b) Jobs disappearing due to automation could enable China to achieve its amazing transformation
I can appreciate how leftists can laugh at stereotypical Trump supporters, they can be rather dumb after all, but can't wrap my head around how "Liberals" take themselves seriously, at least those who buy into the mainstream corporatist neo-liberal flavor of it.
> Between 2000 and 2010, manufacturing employment plummeted by more than a third. Nearly 6 million American factory workers lost their jobs. The drop was unprecedented—worse than any decade in US manufacturing history. Even during the Great Depression, factory jobs shrunk by only 31%, according to a Information Technology & Innovation Foundation report. Though the sector recovered slightly since then, America’s manufacturing workforce is still more than 26% smaller than it was in 2000.
Precisely as Ross Perot told us would happen.
https://en.wikipedia.org/wiki/Ross_Perot
Based on his performance in the popular vote in 1992, Perot was entitled to receive federal election funding for 1996. Perot remained in the public eye after the election and championed opposition to the North American Free Trade Agreement (NAFTA), urging voters to listen for the "giant sucking sound" of American jobs heading south to Mexico should NAFTA be ratified.
To those of you who may have the urge to claim Perot wasn't entirely right, China didn't join the WTO until 2001.
That's not how economies and economics work. It's not zero-sum at all. In fact, the more your neighbor works, the more work you have to do, because now you have someone to buy your goods and now things you need to be more productive are more available.
In fact, global economic production increased around 700% in the 20th century[0]; in the U.S. since 1950 it's grown around 3,000% 1950-2010[1]. By the zero sum theory, GDP would not have grown at all and we'd all be doing the same jobs we did in 1900 or 1950, just in different places (which means not a lot of software development jobs!).
Another benefit is that as worse-paying jobs move to poorer countries, the wealthier countries get better-paying, higher-skilled jobs.
China has become one of the largest markets for U.S. goods, and IIRC is the world's largest market for things like smartphones. American companies make a lot of money selling goods to Chinese people, who without the manufacturing would not be able to afford them, and U.S. unemployment is below 5%.
The U.S. has problems with income and wealth distribution, but other advanced economies, which have seen similar transitions from industry, don't have nearly the same difficulty. As I understand it, it's a product of U.S. law, tax codes, and government investment, which strongly favors the wealthy. For example, almost alone among advanced economies, the U.S. does not provide health care to all its citizens. That's not because China has more manufacturing jobs!
[0] https://en.wikipedia.org/wiki/File:World_GDP_per_capita_20th...
[1] https://www.usgovernmentspending.com/usgs_line.php?title=US%...
The "worse-paying jobs move to poorer countries, the wealthier countries get better-paying, higher-skilled jobs" is true, but you could also phrase it differently: you now have to be this tall/smart/educated to get a job in the west because you're suddenly competing with people in china or mexico who will do it for 1/10 the wage. One could say that this is how it should work, because they need jobs more urgently than we do, and its a valid point. But tell that to an unemployed steel worker in the Rust Belt. This is how you got Trump.
(In some places I'm going to copy and paste parts of other comments of mine, so I can get off of HN and back to work!)
...
> you now have to be this tall/smart/educated
You always needed some ability; it's just that the abilities needed have changed. You used to need to be physically durable, strong, handy, and usually male. The nerdy, clumsy kid with the glasses, not to mention women, had no future in the coal mine or steel mill. It's not a lot different than a developer growing older, not learning the new technologies, and finding their skills are obsolete.
I generally believe almost anyone is smart enough, if given education and opportunity, to do knowledge work. Many people just don't get the education and opportunity.
...
> tell that to an unemployed steel worker in the Rust Belt
This points to the fundamental problem, IMHO: Capital can move much faster than individuals; a factory can move to another country much faster than the workers can find new, equivalent jobs - for most, moving to another country is practically impossible - especially if half the town is now unemployed. Therefore, trade provides a net benefit, but the impact on individuals is disparate to a great degree. We need to protect those individuals, by giving them time to adjust (require a warning or continuing salary for X time, perhaps based on the impact on the local job market), by compensating them for the change (taxing the benefits of moving capital and giving some back to the people making the biggest sacrifice), and by means of the latter taxes, also raise the cost of such changes to the point where it's economically viable not just for the company and future employees, but for those left behind.
> This is how you got Trump.
I don't agree: Think of all the ways the theory doesn't apply: Most voters making less than $50K chose Clinton[0]; minority voters, who also lost jobs and who have higher unemployment than white voters, overwhelming chose Clinton; Trump's and the GOP's policies overwhelmingly favor the wealthy and big business, including cutting health care and other government services to the working class, and shifting relatively more of the tax burden onto them.
To the extent working class white voters supported Trump, they did so against economic self-interest. But that's long been true of many such voters; remember the book 'What's the matter with Kansas?' (or whatever it was called - a f*ng obnoxious, ignorant, arrogant title that reveals the problem with Dems: 'customers aren't buying our product, what's the matter with them?'). The question is, why?
[0] Based on a HN comment that cited some stats; I didn't check them myself, so take with salt. But I remember reading similar research after the election.
sure it's clear that the overall pie expands with additional trade. economists have been selling globalization to the US voter with that idea for a long time. i don't even think the comment you're replying to was disputing that.
but, more interestingly, such pie expansion does not guarantee that every group's slice of pie grows too. it hasn't really worked that way in the US. Joe Stiglitz, in 2011:
Most Americans are worse off than they were ten years ago, a dozen years ago, so it's actually trickle up economics. All the gains in our economic growth have gone to those at the top .... we've been getting more unequal while other countries have been becoming less unequal
https://www.wnyc.org/story/121224-stiglitz-american-inequali...
> economists have been selling globalization to the US voter with that idea for a long time
And politicians have too. The argument long has been, as I understand it: There's a big aggregate benefit and the rising tide will lift all boats. Obviously that hasn't worked out, which shouldn't be surprising, raising a few issues:
1. People need opportunity to participate in the globalized economy. Opportunity and social mobility have decreased in the U.S. for decades, IIUC. Just consider access to quality K-12 and higher education, the latter probably being important for getting into the globalization game, much less the necessities for survival such as health care.
2. If people are to vote and work for the country's and world's aggregate benefit, rather than their particular benefit, then the 'aggregate' needs to support them in return through social benefits such as unemployment insurance and guarantees of basic needs such as healthcare, shelter, food, and education, and through opportunity (see #1). As it is, the beneficiaries are arguing for aggregate benefit, and then putting the benefits in their particular pockets and walking away with it.
3. My hypothesis for the cause is that working people simply didn't have a seat at the table when these deals were negotiated. Big business insisted that the particulars of their needs were explicitly addressed in great detail; consider the global intellectual property regime, for example. Working people were told that it would just work out somehow, 'a rising tide lifts all boats'. Strange that wasn't the response to Wall Street's and Hollywood's demands. Assuming things would just magically sort themselves out for everyone else was lazy and careless governance.
[0] Semi equipment, earth moving equipment, networking equipment, aircraft,... a lot of big, expensive stuff made in the US gets exported, wouldn't want to leave that out of the picture.
This is a very interesting story that deserves a much wider hearing.
I understand the distinction they're trying to draw but I don't know if it's actually all that usefully distinct.
As you go about your daily life in the US a significant amount of the manufactured things you purchase are made overseas. Most electronics, made in Asia. Cars, if assembled in the US, have a significant amount of foreign content. Clothes, more often than not overseas. Dishes & kitchen items, mostly China. Major appliances, unless you are buying a GE (now owned by Haire Chinese company) or Whirlpool, made in Mexico, Asia or Europe. Furniture, many choices, especially the ones you assemble, overseas. Lamps, fans, light bulbs, switches, HVAC system etc....mostly China, Mexico etc.. Bed linens, towels, mostly overseas. Your luggage, Asia, Mexico or Europe. If you fly on a US airline on a Boeing plane, it's major overhauls and inspections are being done in Mexico, China etc..
If automation were the culprit, given the transportation costs, these would be manufactured in the US by robots.
> But they still don’t seem to grasp what’s been lost, or why. It’s easy to dismiss the disappearance of factory jobs as a past misstep—with a “we’re not getting those jobs back” and a sigh. Then again, you can’t know that for sure if you never try.
If there is one thing that Obama did that was vital to the US it was saving of the automotive industry in 2008. He did this in spite of the "learned" economic experts saying otherwise.
Too bad, he didn't ignore them with the banks and jail the bankers.
If you want to jail bankers in the future, supporting institutions like Consumer Financial Protection Bureau and electing politicians that want to pass more strict laws is the only way to accomplish what you want.
In this diametric political climate we have one party that is gutting the CFPB by installing leaders that are pro-finance/banking industry and rolling back protections under the guise of "not being fair."
They were never investigated. Looking back to earlier banking meltdowns, plenty of crimes were discovered. See for just such an example: https://en.wikipedia.org/wiki/Savings_and_loan_crisis
It is a perfectly reasonable to suspect that similar crimes were also committed.
You could also look at the court cases at : http://4closurefraud.org/ Many of the foreclosure cases involve banks not being able to demonstrate that they actually had standing to foreclose on houses. For example: http://4closurefraud.org/2018/02/09/fl-3rd-dca-reverses-ruli...
What an ass-backwards approach. No wonder the data has been wrong and the findings have been wrong. You have access to raw data, and you instead chooose to go to final results that already include some measure of error and approximate the solution in reverse rather than simply summing up non-tech industry growth? Really?
Why can't both be considered? Trump wasn't wrong when he pointed out trade agreements were shifting labor abroad.
> The Economic Policy Institute think tank estimated that as of 2010, the trade imbalance with Mexico had cost the U.S. about 683,000 net jobs — about 60% of those in manufacturing.
(http://www.latimes.com/business/la-fi-mexico-jobs-20161212-s...)
This is scientism.
The question around the effects of economic globalisation, trade relations, the size of china's manufacturing industries, automation and other advances in manufacturing methods... it's not a decided issue. You can't just put quote an economist on "The Long-Term Jobs Killer is Not China. It’s Automation." and present this as a "case closed, science has spoken" decree.
Paper wealth is where it's at. Check out the 'growth' in banking:
https://pbs.twimg.com/media/DceTLZ9UQAAr335.jpg:large
"The divergence first emerged in the late 1970s". Hmm.
> Looking back, there were two kinds of people who lived in America in 2016: people who believed Donald Trump, and people who believed data.
...only to show that, against the odds, people who believed "data" ended up being incorrect about some of the most crucial conclusions drawn by the use of that data.
However, I have this itching feeling that I always have whenever I read an analysis on this topic, and it's this:
Americans don't want those jobs back. We really don't.
I think Dave Chappelle said it very well: https://www.youtube.com/watch?v=inlDT62oGy8
And that leads to an even bigger realization: people (and the body politic) don't want jobs at all. Jobs aren't useful. People generally only want the resources and independence that come with a job.
We've been sold the idea that the connection between "a job" (ie, something that someone does for hours a day, 5 days a week, in the tack of a career) and resource (like food and shelter, ie, the Money) is a natural, wholesome consequence of a free market.
But then, why don't animals have jobs? Why don't very wealthy people have jobs? Why don't very poor people have jobs? Why don't indigenous people have jobs? Why don't well-adjusted hippies (think Rainbow Gathering) have jobs?
I think that we can find a truly free market, with the price signals and freedom from state intervention that free market fans always cheer, but whose central models are the Job and the Money. If the internet means anything truly useful to our species, I think it's best viewed as our chance to finally shed the Job and the Money.
> I think Dave Chappelle said it very well: https://www.youtube.com/watch?v=inlDT62oGy8
> "I want to wear Nikes, I don't want to make them"
I don't mean to sound like a dick, but it's very easy for a multimillionaire speaking to a upper middle class audience or for an upper middle class software developer on hackernews to agree with this sentiment. I think if you asked 100 unemployed Americans living in poverty, you might hear a different answer.
I'm not saying that there aren't classes issues in play here. I'm saying that I wish poor people didn't have to wish to make shoes.
Surely if we can automated all the matter around us to do our will, we can also shape instill in our economies the basic tendencies toward compassion and freedom.
Automation makes people more productive, given the same inputs, but requires knowledge to operate.
It will be hundreds or thousands of years before automation is advanced enough to resemble a magic wand in the way you are describing, where no person is involved at any step of making shoes.
Even then, there will be two kinds of people: those who are given magic wands and learn/are taught how to use them and keep them working, and those who need help obtaining and using magic wands. I don't think I have to tell you that there will still be a power dynamic.
But is there no gradient to be observed during that time? Aren't we already deep enough into automation to have this discussion?
Did we have to ship those jobs to China? In a more just world, might the Chinese laborers be spared exposure to benzene sooner than a thousand years?
> Even then, there will be two kinds of people: those who are given magic wands and learn/are taught how to use them and keep them working, and those who need help obtaining and using magic wands.
There are two kinds of people in this world: people who try to convince everyone to think of things as simple dichotomies with no middle ground, and those who do not.
the trouble with socialism is eventually you run out of other people's money; modern socialism tries to get around this problem by positing that there will eventually be infinite resources thanks to automation, so we should just start acting like that's already the case.
Sure, people grumble about it. They say they hate their job. They like to take vacation.
Without the job though, people have less self-esteem. People have a natural urge to be of value, to contribute, and to earn their keep. Welfare doesn't satisfy that need.
> And that leads to an even bigger realization: people (and the body politic) don't want jobs at all. Jobs aren't useful. People generally only want the resources and independence that come with a job.
I have to strongly disagree with this point. It's used a lot, particularly on HN, and I do wonder if any of the people making it have ever worked in a real manufacturing job in order to have developed this opinion through real-world experience, or it's just part of the current narrative they feel they have to parrot, and is merely uninformed.
Working in a manufacturing job, doing something real, making an actual physical product, being part of a large team and something greater than yourself can be very rewarding and provide a lot of satisfaction and a great sense of pride and purpose. Leaving the plant at the end of a shift, seeing convoys of lorries leaving the gates with what you made on board can give you a quiet sense of accomplishment and pride: your personal efforts went into that, and without them they wouldn't be going, and you head home tired but happy. You were useful and contributed work of real value to a greater whole. As a current software developer, I get little of the same reward and satisfaction, despite working hard and being paid several times the salary.
America (and the rest of the West) do need those jobs back. Manufacturing is the basis of our economies and civilisation. The wealth and prosperity it created is the reason for the quality of life we enjoy today, but this will rapidly decline once the source of it has been destroyed. Hollowing it out might have been for the benefit of some bankers and investors in the short term, but it's a long term disaster in the making which was obvious a couple of decades back at least. Without this industry we are little more than consumers subject to the will of others. We can only coast on the success of previous generations for so long; the accumulated wealth of those years will be quickly spent and sent overseas. The ability to manufacture is power, and we have given away that power and as a result impoverished millions of our own citizens and left ourselves vulnerable, and all for what exactly?
1. the US domestic economy would be based on services that would pay just as well as the old manufacturing industry had in the 50's and 60's
2. the US would be the global leader in the "financial industry"
3. the US would be an "ownership society." US investors would reap hefty profits and substantial income from the parts of the world that were industrializing and developing.
but that plan, that vision, has worked rather poorly for the vast majority of US residents.
The critical point is how they account for better products year over year. A faster chip in 2017 is counted as 2 2016 chips because it’s that much better.
A can of soda in 2017 is equal to a can of soda in 2016.
So when you remove this one weird industry that is experiencing tremendous growth in power, it turns out our manufacturing has been well and truly gutted.
If you look at manufacturing “value” including computers it doesn’t look so bad.
If you look at manufacturing units not including computers...you understand Trump 2016 a little better.
If those are counterproductive methods to boosting manufacturing, what would productive methods look like?
Once you remove all of that the data looks radically different.
Oh, and in case it wasn’t obvious, that sentiment is partly responsible for the election of Trump.
https://www.theregister.co.uk/2016/03/23/andy_groves_warning...
How about Standard Oil artificially lowering regional prices to put all competition out of business, only to raise the prices once dominance is attained?
The question is really did China achieve that competitive advantage in unfair and unscrupulous ways? Should other countries be free to regain competitive advantage by finding even more unfair and unscrupulous methods? What does the world look like after walking down that path for another 50 years?
Lowering prices to increase market share is perfectly fine, especiallly when you have decreasing costs of production.
> only to raise the prices once dominance is attained?
No evidence of any policy of them doing that, or of it happening on any long-term scale.
But ... will this aggression stand?
Most of them are just trying to stay solvent until they can sell.
(I'd sort of guess it matches up with the broader US milk market and produces more milk than it did in 1992, with the average producer being larger)
I worked on a farm as a teenager that was fairly large, and was in continuous operation since the Dutch colonial times. It was literally a going concern older than the state. It went out of business in 2005, unable to handle the burdens of rock bottom commodity prices, fuel costs, taxes and regulatory costs.
Of course it's really poorly written political propaganda. Ugh, a minute lost.
At its current level of globalization, the US is at a point where it stands to benefit significantly in aggregate from further globalization [0]. The problem is that the benefits of globalization disproportionately accrue to the wealthy, both in aggregate and at the US's current level of globalization [1].
IMO, the best approach is to "grow the pie" by promoting globalization and free trade and then implement distributional policies domestically to ensure that no one gets screwed over. Most advocates of globalization would likely say the same. The issue is that in practice, that increase in globalization has occurred, but domestic policy has been regressive rather than progressive in terms of its impact on wealth inequality.
[0] https://www.imf.org/en/Publications/WP/Issues/2018/03/13/The..., page 23 of linked PDF
[1] Same source, page 26
The larger problem seems to be that our political institutions are captive to a hyper-polarized two party institution that lacks the degrees of freedom to provide legitimate representation to society's myriad facets and interests. Any dualistic system is naturally going to orient itself in opposition to its other half, to the marginalization of all other considerations. The key to effective electoral reform is finding ways to fundamentally change the processes from which structural bipartisanship emerges from. Practically speaking this means increasing political diversity through non-partisan primaries, ranked choice voting, proportional representation, and purging the entrenchment of the two national parties from election commissions and similar bodies.
Transforming the political court from a 2-sided chess match to a multiplayer game is a necessary condition for realizing the true expressive power of a democratic society over concentrated interests. Such conditions have been the key to the establishment and normalization of wealth equalizing institutions in many of the European democracies, for example.
Why does it "need to occur"?
For example eating local produce is better for the environment than eating stuff that has been transported for 1000s of miles, with the respective carbon footprint. And that's just an example from an environmental perspective.
While this isn't the point I was attempting to make in the sentence that you quoted, I also tend to think that increased globalization should occur, at least at the margin. But to your point, there may be specific sectors in which globalization is harmful in net, and externalities do need to be considered.
We could grow just about anything indoors year-round, but it's much better for both the environment and my wallet to grow crops in places where we don't need to enclose, light and heat them.
Depends on the country -- and region of the country. There are countries that sport different climates and micro-climates. And there is stuff that thrives during the winter as well. And if it's really needed, we've had greenhouses for ages.
But that's part of the proposition: don't eat out of season stuff, even if it means changing the diet in an annual cycle (which, e.g. tons of Italians has no problem doing -- even if it means no, of much fewer tomatoes in winter).
It's also likely that America could not have maintained its standard of living by walling itself off from this new technical development. The rest of the world would have continued to trade without America.
The economics profession has generally become one paid for its conclusions, not for its research. There are very few people working in mainstream, evidence-based economics anymore, and I don't think they're exceptions, they're just working for people whose personal interests happen to coincide with evidence-based theory. If the theory and the backers diverge, the economists will hopefully find new backers, because the backers will definitely find new economists who deliver the answers they want.
> actual science and engineering has made immense progress
I don't believe so. It's pretty much the same as economics. Most studies are wrong, and the review/reward system in science is all screwed up. We've generally been coasting on the invention of the transistor for a long time, and benefiting from their getting smaller and smaller. Once we've hit the hard limit with that, we can ride parallelism to squeeze a large amount of additional performance - hopefully enough to make a few more algorithms that have been around for 70 years have some pragmatic usefulness, but I think we're close to the end of what transistors are going to give us.
The best thing we can do for science is to get rid of the perverse incentives that cause bad science, eradicate accepted bad science, and mine the good science that will come to light after that uncovering. That might get us another good 100 years without a major discovery.