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Comment by ryandamm | Hacker News Reader

Arguing that manufacturing is strategic is not the same thing as manufacturing being “all that matters in an economy.”

There’s a logical fallacy in your rebuttal.

There are other important outcomes of an economy, like better healthcare, education, housing, and well-being. But it seems like those real, tangible outcomes have become decoupled from “the line goes up” economy.

I think the original reply was itself a strawman of the point the article was trying to make. Manufacturing isn’t the only important thing about an economy but it’s an important one.

I don't think my point was straw-manning the article. The article directly conflates economic output with manufacturing output, by using manufacturing signals (like power consumption!) as a corollary for some hidden, Real Economy.

That's crackpottery. I was succinct in my criticism, but there is plenty of room for elaboration.

If the essay instead took those economic indicators and delved into why manufacturing output should matter more than other output in determining the Real Economy, then hey, we've got an essay to discuss. But just eliding that and saying "manufacturing is real because atoms are real, everything else is b.s." -- that's not really an argument, that's just laying your biases extremely bare. Which I pointed out.

That said, geohot is close to some real points, I just don't think he has the background to articulate it rigorously. And for the record, I do think the US economy is entirely too financialized.

But again, that's a different -- likely better -- essay.

How about I put it this way: Manufacturing is the bedrock of power. Everything else above it, particularly fiat currency, is built on that bedrock. While those cards can be mighty attractive, losing the bedrock for any reason would destroy everything.

Apple isn’t going to be worth $3 trillion when they can’t sell an iPhone for the next decade. Heck, General Mills won’t be selling much breakfast cereal, when the parts to the equipment can’t be imported. How much do you think a bare shelves Walmart is worth? Heck, how will American manufacturing rebuild when the CNC motors are made in China? When even a Prusa uses motors from China (LDO)? Will software sales save us with no hardware to run it on?

The value of everything on the stock market collapses in such a scenario, and the power of the US Dollar goes with it.

The endpoint of this argument is pure self-reliance, for strategic reasons. And that endpoint is North Korea.

https://en.wikipedia.org/wiki/Juche

Exactly, people forget we build things for the sake of consumption, not the other way around. You can build a thousand factories for some good but it's dead weight if there is no one to buy their outputs.

The Soviet Union had strong consumption power, but they did not know how to manufacture. The final result was obvious.

I would say that the Soviet Union had strong manufacturing power but they manufactured too many units of things that their citizens didn't want, and not enough of what they did want. By the end they could make more tanks and tractors than anyone needed but household goods were in short supply.

Yeah I think this might actually be backwards; the Soviet Union had explicit production targets, and (iirc) in like the 70s they actually had more industrial output than the US. Remember the "missile gap," when the US was concerned that the industrial might of the USSR would bury the US?

But the output was mismatched to demand; it was a classic example of "when the measurement becomes the target, it ceases to become a good measurement" -- the centrally-planned industrial targets were inefficient, so a lot of that industrial production went to waste.

And to be fair, this is what's hard about economics: you can't just count tractors, or tons of steel, or whatever, as the output of an economy. Because every marginal ton of steel matters a different amount based on demand. The genius of capitalism (yes, I said it!) is it is an extremely elegant system for optimizing an incredibly high-dimensional system with a slippery, dynamic cost function, by incentivizing a bunch of independent agents to collaborate in price setting (and therefore sending signals about production via pricing, vis a vis supply and demand).

This is also why China's economy has done better than the USSR; let's not forget that Deng Xiaoping's "limited market reforms" helped unleash the modern Chinese economy. The structural issues in the Chinese economy now stem from the lack of development of consumer demand, which does echo some of what the USSR struggled from. But China has come very far; the criticisms of its current economy that I like best are well-articulated by Michael Pettis, fwiw. But I'd encourage you to do your own reading and form your own opinions.

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