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Comment by roenxi | Hacker News Reader

Probably. The original industrial revolutions were happening in nations that quickly became wealthy, and the US was doing pretty well with high wages vs. Asia for most of its industrial period. Higher wages in theory should be linked to higher productivity and output per worker in the US due to deep skillsets - otherwise where do the high wages come from? But something might have broken that link.

The issue looks from afar like a double-whammy of (1) pushing capital investment offshore to China resulting in most of the productive capital formation happening in Asia and (2) banning a lot of industrial activity in the US for environmental reasons. A lot of what the Chinese did to get ahead was literally illegal in most Western countries - some of it was labour laws mind. Even today there I question whether something like Shenzhen would be legal in the US. If Shenzhen was magically transplanted to the US, what would happen when the lawyers move in?

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> Higher wages in theory should be linked in higher productivity and output per worker in the US due to deep skillsets

I don't think this always have to be true, e.g. I'm polish and used work in uk and by crossing border to uk overnight I increased my salary 2-3x but that doesn't mean my productivity increased 2x.

You want to google concept called "Dutch Disease", an economic phenomenon where a resource boom (like oil) causes currency appreciation and decline in other sectors. Norway and the Netherlands faced this issue.

Lyn Alden’s Broken Money argues that modern financial systems fail to protect savings. For high-income countries like the U.S., the issues include:

- Currency devaluation: Persistent inflation undermines wage growth.

- Debt reliance: Governments and households depend on borrowing, creating fragility

- Technological gaps: Financial infrastructure lags behind energy/tech advancements, exacerbating inequality.

You've not fully comprehended the nature of productivity. If a doctor saves the life of a lazy labourer then they've created a certain amount of economic value. If they save the life of a very hard working labourer they created more economic value with the same actions [0]. Your productivity isn't just you, it is the entire system your work take place in and what capital it interacts with. Otherwise engineers would be worthless, we barely do more than mumble and wiggle our fingers.

It is entirely possible that moving from Poland to the UK doubled the amount of wealth you were generating. Dutch disease is an expression of that - if all your customers are wealthy then the economy signals that you are more productive than if all your customers are poor. Because you are.

Although I'm all aboard with Lyn Alden’s complaints. The US keeps disabling economic feedback mechanisms rather than reform failures and it is starting to catch up with them since the Chinese just work harder than they do.

EDIT And I think you might want to talk about the Baumol effect, not Dutch disease. Dutch Disease is typically invoked for countries that find high mineral wealth and then experience problems but Baumol effect is more relevant to productivity increases.

[0] We make no moral judgement, but economics is a harsh accountant.

> You want to google concept called "Dutch Disease", an economic phenomenon where a resource boom (like oil) causes currency appreciation and decline in other sectors. Norway and the Netherlands faced this issue.

Isn't this just the downside of comparative advantage?

Like you have the classic example of island 1 can make 5 apples or 15 oranges and island 2 can make 15 apples or 5 oranges so island 1 makes 15 oranges and island 2 makes 15 apples. What happens to the apple industry of island 1? It gets destroyed as they only focus on making oranges.

The only way you avoid dutch disease (Natural Resource Curse nowendays) is to intentionally have an inefficient economy.

I think that that’s the crux of the issue—efficiency is very often in tension with resilience. In an economic system that optimizes for efficiency above all, you end up with fragility. Not only do you have fragility, but because the system is complex, the fragility shows up in unpredictable places.

Red Queen races are also terribly inefficient and that's a big part of our economy today. Unfortunately Red Queen races are net positive on GDP.

>intentionally have an inefficient economy

Yes, but the economy should serve the people. The people do not serve the economy. Or at least that's the way it should work. Wall Street tends to disagree with this sentiment.

The original industrial revolutions were explosions of productivity. We aren't going to get that again by onshoring jobs from low cost regions unless we again seriously explode productivity again, and even fully automated factories are unlikely to see the same gain as going from all goods being handmade to having factories.

I'm highly dubious the post WW2 economic boom is much more than the after glow of the US being the only industrial nation on the face of the Earth that didn't get bombed [0] to smithereens. China couldn't pose an economic rivalry at the time because it wasn't significantly industrial and had had years of civil war before the Japanese threat came in, Europe was a burnt husk, and Japan had weak industry even before it was bombed and cowed.

And yes China did what most industrializing nations do, sacrifice their environment and burn natural resources at prodigious rates to super charge and grow their economy. It's a horrible place to be long term and even China is starting to implement some environmental protections because that kind of pollution is terrible long term. They're even seeing their neighbors do the same thing that drove so much of US production to China, cheaper labor and fewer government hurdles, it's a cycle many countries have followed.

[0] In any meaningful capacity, have to say it or the pedants will mention Pearl Harbor or the tiny number of attacks from things like balloon bombs etc.

It's probably possible but certain low level things have been all but wholly outsourced for a generation or two. The know-how isn't there to do a lot of stuff at various places on the scale and cost axis.

I'm not what a realistic path to come back from that looks like.

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