Thomas Friedman was able to get steady wi-fi on a bullet train running through the wealthiest outpost of a country of 1.3 billion people, 3/4 of which are rural poor living at or near the $1/day poverty level. Therefore, America needs a reboot.
Or engage his column elsewhere: are we really losing our most promising engineers to "financial engineering"? Perhaps a less famous writer could support that argument with evidence. For instance, that writer might marry Friedman's argument with the fact that people like John Meriwether managed to nearly destroy capitalism with nothing more than an MBA.
Are there nuclear physicists on Wall Street? Of course. Are most nuclear phsyisicists on Wall Street? Prove it! Are the nuclear physicists on Wall Street the ones responsible for speculating on netted-out credit default swaps? The CDS racket was no more complicated than the MBS racket Michael Lewis wrote about in "Liar's Poker", and the BSD's on the Salomon trading desks were definitely not rocket surgeons.
And to answer your question: yes we are. I will be graduating in a few months from a fairly good engineering school, and many of my fellow engineering majors are panicking - they all went down the financial engineering route instead of traditional electrical, mechanical, and civil engineering, and now they're all jobless. Before the big collapse of '08 there was definitely a large sense floating about campus that people who did "real" engineering were suckers. This is not an uncommon phenomenon.
Same thing back in high school - everyone guns for the big money. Tons of smart high school students went into business school instead of science or engineering, simply because one pays the bills, and the other not so much. My evidence is anecdotal, but this is based on observation from entire graduating classes.
Even if you want to manufacture stuff, you have to somehow organize the manufacturing. To say only manufacturing is worthwhile seems a bit shortsighted. Suppose all the finance guys would go to GM and work in their factories assembling cars, would it help much?
Consider a scenario where you have two alternatives: you could ship shit from one pile to another for 5 hours, or you could spend 5 hours brewing beer. Suppose the worker has no idea whatsoever as to which activity is more benefitial, so the finance guy decides whether 5 hours will be spent on moving shit around, or brewing beer. Suppose the value of beer is much greater than moving shit - I think at the end of the day the finance guy will have contributed to bringing the beer into existence.
I know that there is this school of economics that tries to define value by the amount of (physical) work that went into it, but it really doesn't make much sense. You don't create value simply by doing something physical - it has to be useful, too. So I think the usefulness of the end result is a much better estimator of value.
Imagine you are made president of a 3rd world country which has not yet industrialized. You are now tasked with making this country actually rich. Where would you put the government money in?
If you say you would equally create service and manufacturing industries, then your country would collapse quickly. The correct thing to do is to create goods that can be exported, or that have some use within the country itself. The other industries always develop themselves, because they are a sort of grease for the core industries.
Allocation of time and money is not done by bankers. It's done by managers and owners, the bankers just approve or disapprove loans.
I don't want to defend all bankers, but I think it could be a service like other services.
Your 3rd world example also falls short. I wouldn't create a "planned" economy, but go for demand. Actually a lot of 3rd world countries fare reasonably well with tourism, which is maybe more service than production? India also exports services - it is possible, so I think the generalization "products over services" fails. Both are necessary.
But a waitress who moves food from the kitchen to the patrons plate does not create any value, she is simply a neccessary add-on to other value creating industries. No economy can function where 100% of the people are in these type of service industries.
Value is created by scarcity, and most of the financial industry is in a similar type of service - no real value is created there. The value of other manufacturing industries is just exchanged there.
I am not sure what you are really driving at: that too many people are in the service industry? But what if there is more demand for services than for products? Like there might be enough food being grown on the fields, but what good is it to me if nobody cooks it and brings it to my table?
Service industries that function as an add-on for a manufacturing industry needs to be specifically calibrated to the volume of the industry, otherwise the excess is wastage. The other way round does not hold.
You have to understand what fundamental value in a world economy is. A waitress is no value, a programmer is a lot of value, and a guy working in the financial industry is basically the same as a waitress. He's an add-on for other industries, and the volume has to be calibrated also.
If a country produces a car out of some metal in a mine, it created real value, irrelevant of if this car was exported or not. If a country produces a waitress who can be trained in 2 days and simply moves food from one place to another, the value it created is really minimal.
I'm not saying that the service industry in the U.S is too small or too large, I don't know enough about it to say. I'm just saying that the backbone of any stable and real economy lies in constantly creating real value.
Imagine a society with 30 million waitresses and 5 farmers. Those extra waitresses are useless, and such a society cannot work. ... A waitress is no value, a programmer is a lot of value,...
Unless you have robots to plow and harvest (which is harder than it sounds) being constructed by other robots, a society with 30 million programmers and 5 farmers can't work either; neither can you have a society with 30 million iron-ore miners or 30 million autoworkers and 5 farmers.
Producing a car does NOT create value if nobody wants or needs that car. It might even create negative value, because it might be costly to have it removed and brought to the junkyard.
That a waitress doesn't need training is rather irrelevant. What has been created is a) a place for the waitress to work (building a restaurant takes time and money) and b) her work produces doctors and other things - even cars, if the car manufacturers go to dine in the waitress' restaurant.
It is true that other services/industries could not exist without food production. But that does not imply that those other industries are worthless. In some cases, food production could not exist without the other industries/services, either (sick farmers can not produce food, they need doctors and cars to work their fields).
Real value is created only in manufacturing, industry and agriculture. Service, finance and so on are add-ons to those fields.
Then you said:
I did not say that all service industries do not create value.
Actually, you did, in the comment I just quoted, less than a day earlier. What is wrong with your brain, child?
Value is created by scarcity.
Not only is that a stupid theory of value, it also fails to justify the conclusions you're trying to justify with it: waitresses (and the services they provide) are quite a bit scarcer than, say, corn.
Maybe you should test your theory of value by trying to give up something abundant for a few days. Try oxygen. Then you can tell me if oxygen has any value.
There's a 'pyramid of necessity' with "materials production" at the bottom, and at the top things like branding and marketing. In an expanding economy, such as we've had for the last 60 years, the top adds all the value (so, for example, you can just outsource the bottom). Generic bleach is often overstock from Clorox. Same product, but you're paying more for the name, image, etc. Service and finance industries fall in toward the top of the pyramid.
In a contracting economy, as we have now, the pointer on the pyramid drops relative to the size of the downturn. If it's severe, it's really only material production / commodities / etc. that matters. Who cares if it's a Nike? I need a shoe.
So it's not about "real value" meaning no value, but rather "real" vs. "nominal" value. The bottom of the pyramid has concrete value whereas the top has merely the nominal value of what people are currently willing to pay for it.
http://www.questbridge.org/cmp/partner_schools/mit/academics...
I'm sure a large number of those graduates would still work in a non-engineering field if the finance industry didn't exist, but I think that a) a substantial fraction of them would go into engineering, and b) an even more substantial fraction would at least be doing something that creates wealth.
I guess we'll see next year; I don't imagine finance will be a major destination for several years to come.
More than likely, though, he means we need a prettier President to waste larger checks. That is certainly in the pipeline.
To go back to the postwar situation, we'll need another war. And it needs to be a real war with firebombs, tank columns and opposing armies, not a stupid "suicide bomb some orphans for the cameras" event like what we have now.
Plus Hong Kong didn't always use to be a part of China, so it is a fair comparison.
While people in china might live in poverty and suffer of malnutrition, in here people are suffering form junk food. Fat and obese, compromise more 70% of the population in the states, and fresh healthy food is too expensive.
I don't disagree that America needa a new approach. I just think Friedman chose an easily sniped-at rhetorical device to make that point.
I find your point here to be disingenuous. Because NYC has more people it is not comparable to other large cities in Asia? Because NYC serves citizens through democratic multi-tiered governments that this does not exist in Asia as well? Look at major metropolises like Taipei, Tokyo, Seoul, and the awesome number of huge cities in India. All are served by democratically elected governments. If one were to take your post as gospel you'd think the entirety of Asia was one gigantic totalitarian wasteland!
I think Friedman is onto something - as a Chinese-Canadian I've seen both sides of the fence, and it absolutely terrifies me that we are facing the very real possibility of an oppressive dictatorship becoming the new world superpower, and all because we were too busy screwing selling ourselves out.
Some would say that if China is becoming a world superpower, it's because they're behaving less like an oppressive dictatorship. In world-historic timescales, China's transformation is ludicrously fast; it seems strange to demand even more radical political change as evidence of their bona fides.
Asserting that Hong Kong is a city on par with New York or London is going against years of perception to the opposite, mostly driven by the higher wages for the financial class in Western financial centers. That said, unless someone speaks mandarin these days, they are not likely to find the sorts of opportunities that previously existed in Hong Kong. One of the great things about the island is that it's always been a working city, and it is reorienting to mainland markets quickly.
Hong Kong imposes an 18% flat tax on its citizens. New York City could never get away with that, since its citizens already pay about half their incomes to the feds. Instead New York runs on a 3% tax, and I don't think the services they get from the feds make up for lost value.
If New York city got 15% more of its citizens income, hell yeah it could build a magnetic anti-gravity bullet train run off of angel farts. But it has its share to pay of pork projects in Alaska and troop presence in 170 countries.
Perhaps NY could spend that extra 15% effectively. But it would probably just be wasted.
(1) If patrons dance or sway to music in a bar without a cabaret license, the police will ticket the bar owner. As of 3 weeks ago, the cops were actively patrolling for this.
> All I could think to myself was: If we’re so smart, why are other people living so much better than us?
he seems to have forgotten about hundreds of millions of Chinese living in poverty. how disgusting.
Compared to the shrinking middle class in America as wealth flows upwards.
Don't get me wrong - I'm far from pro-Chinese, I'm just saying, let's not let the fact that there are starving people there prevent us from seeing our own faults.
Yeah, ok, they can't march into the street in protest of their government, but are they really that much worse off in the material sense?
Before you break out the numbers - keep in mind that while they make far less than Americans, their cost of living is similarly lower. I find the Chinese urban middle class lifestyle to be comparable to the American middle class lifestyle, sans a few things like a huge backyard.