I See I.P. Funky Colors

August 6, 2010 9:16 AM

Hale "Bonddad" Stewart shows that U.S. Manufacturing is NOT Dead, but says that to zombify resurrect rejuvenate it America should look into Industrial Policy. Meanwhile, in Detroit, a President is saying that the automobile industry bailout prompted an "industrial revival", a Senator is calling it "industrial policy" and an economist is saying even if it is, "it's the most successful...in American history". All of which prompts the age-old question....

Dude, Where's My Industrial Policy?

Some say it has always been there!

Some say it is in the closet (and should really come out already, for its sake and ours).

Some say it is in cigar-smoke filled backrooms, surrounded by politicians, bureaucrats, politically savvy financiers and a "small clique of clean-tech industrialists".

And some wonder who picks the winners and losers, and how?

posted by Chipmazing (53 comments total)

At some point, I want to say during the Clinton years, we became convinced as a society that we could become a post-industrial economy, which would outsource all of our industrial needs, get everybody a Master's degree, and have everyone working a good job and making a lot of money.

The sheer stupidity of that goal has become readily apparent; we are going to have to accept that the blue collar is just as important as the white.
posted by Pope Guilty at 9:25 AM on August 6, 2010 [16 favorites]

he's claiming that the collapse of manufacturing employment in the US is due to an "explosion" of productivity. What is the source of this new found productivity?

Could it be that a car "manufactured" in the US has a power train largely built in Mexico? electronics made in Taiwan? etc. etc. so that the US man-hours to "construct" a US car out of imported compenents has been drastically reduced? Basically, if we take the car industry as an example has their really been the commensurate investment in automation that explains the job losses?
posted by ennui.bz at 9:29 AM on August 6, 2010

At some point, I want to say during the Clinton years, we became convinced as a society that we could become a post-industrial economy...

I believe you can trace that change back to the moment some policy wonk coined the term "information economy".
posted by Thorzdad at 9:30 AM on August 6, 2010 [3 favorites]

So actual industrial output has increased but industrial jobs have declined due to increases in productivity?
I smell a GOP-led war on robots for the 2012 election cycle!
posted by charred husk at 9:30 AM on August 6, 2010

At some point, I want to say during the Taft years, we became convinced as a society that we could become a post-agricultural economy, which would outsource all of our agricultural needs, get everybody an Assembly Line Job, and have everyone working a good job and making a lot of money.


posted by JPD at 9:31 AM on August 6, 2010 [7 favorites]

Well, ennui, the other side of things is that increases and improvements in automation, time-motion management, and other bits of engineering means that you can do more with fewer people. Every time you increase the output of a man-hour, that's a productivity improvement. Hell, speeding the line up 10%? Productivity improvement.
posted by Pope Guilty at 9:32 AM on August 6, 2010

Could it be that a car "manufactured" in the US has a power train largely built in Mexico? electronics made in Taiwan? etc. etc. so that the US man-hours to "construct" a US car out of imported compenents has been drastically reduced?

You realize that these people aren't that dumb right? Of course that's taken into account. What really is going on is what Pope Guilty is saying - investments in Automation, and Process allowing them to decrease total labor content.
posted by JPD at 9:34 AM on August 6, 2010 [1 favorite]

Well, ennui, the other side of things is that increases and improvements in automation, time-motion management, and other bits of engineering means that you can do more with fewer people.

my point is just that he's making broad claims about the good health of manufacturing the US based on very coarse statistics. If he's claiming that Us manufacturing has become massively more productive he needs to show that this is actually the result of improved manufacturing techniques... sure there has been improvement, but enough to explain the collapse in employment? Just comparing output to man-hours results is a tautology i.e. is the definitiong of productivity.
posted by ennui.bz at 9:39 AM on August 6, 2010

we are going to have to accept that the blue collar is just as important as the white

Whoa there, sounds like you oughta be wearing a red collar, son.
posted by uncleozzy at 9:40 AM on August 6, 2010 [13 favorites]

my point is just that he's making broad claims about the good health of manufacturing the US based on very coarse statistics.

What statistics would you use? I'm a bit at a loss as to how you are debating the idea of labor productivity if you don't accept the idea of labor productivity as meaningful?

There are metrics you could use to look at productive use of capital - if the argument was that total efficiency was decling because they were inefficiently substituting capital for labor the you would see it there - but long-term returns on capital for US industry has been pretty constant (smoothed for economic cycles of course). Now what that does tell you is that the productivity investments are an issue of survival not of the capitalists reaping excess rewards by beating down the working man.
posted by JPD at 9:45 AM on August 6, 2010

[...] post-agricultural economy [...]

The only reason we got away with that particular trick (and I'd say it happened after Taft's time, which had a good quarter of the labor force still involved in agriculture) had a lot to do with most of the rest of the West's infrastructure and manufacturing base getting smashed to pieces. Had that not happened, the mechanization of agriculture might have turned out to be profoundly negative for the U.S. economy; rather than going from the farm into wartime jobs and then into export-producing postwar manufacturing, workers would simply have become redundant as farms became more productive and required fewer workers.

Obviously there's more to it than just the World Wars, but their role is fairly major in the rise of the U.S. Plus, the other obvious causes of our relatively painless industrial transition -- rapid population growth, the "demographic dividend," Westward expansion -- aren't exactly reproducible. They were essentially one-time events, and we've shot our wad.

What's happened and is happening in the U.S. today certainly isn't unprecedented -- a large percentage of the labor force suddenly discovering that their skills, and by extension themselves, are basically redundant and unnecessary -- but it's the first time that it's happened here.
posted by Kadin2048 at 9:52 AM on August 6, 2010 [3 favorites]

During one of our more recent recessions, the Carter administration commissioned a major report on Industrial Innovation Policy, which was wrapped up during the very early part of the Reagan administration. It pulled together industry, government, and academic experts on economics, trade, the environment, healthcare, antitrust, IT, IP, etc. It also included representatives of unions and public interest groups, which commented on each subreport and wrote a subreport as well.

Many of the recommendations were eventually implemented, such as the creation of a dedicated appeals court for patent cases (the Federal Circuit). Many of the arguments about, for example, IP policy that we are currently debating on the internet and in the courts were discussed at length in the report. Unfortunately, few copies of the report are left and it wasn't available at all online until I scanned one of the remaining copies. So, in the interests of learning from history, here are some self-links. (Warning, these are rather large PDFs; they are searchable with the original scan overlaid).

* Economic and Trade Policy
* Environmental, Health, and Safety Regulation
* Regulation of Industry Structure and Competition
* Information Policy
* Patent Policy
* Direct Federal Support of Research and Development
* Federal Procurement Policy
* Small Business
* Labor Subcommitee
* Public Interest Subcommittee

You can easily see that a lot of the problems then are problems now and often the same solutions present themselves. For example, some of the primary recommendations of the report on patent policy: hire more examiners and provide better research tools. What do we see in an op-ed in today's New York Times? Former Federal Circuit Chief Judge Michel calling for more money for the Patent Office to hire more examiners and upgrade its IT systems.
posted by jedicus at 10:04 AM on August 6, 2010 [8 favorites]

Productivity is a bullshit measure. It's telling that industry always touts the productivity numbers when making their case. It's simple math: fewer workers putting out the same or more product = increased productivity. Whoopee! That's why productivity has gone up while middle-income wages have stagnated.

Manufacturing as a percentage of GDP is the important number. Here are some numbers that I've been able to find. They are from various sources. I'm not going to cite them all; feel free to believe them or not.

For the 14 biggest manufacturing countries in 2008, the overall manufacturing GDP percentage was 23.7% of GDP in 1980 and dropped to 17% in 2008.

Over the last few decades Korea, and to some extent China, are the only countries that have increased the percent of GDP from manufacturing.

The countries with the largest manufacturing portions of their economies in 2008 were: China 32%, South Korea 25%, Japan and Germany at 21%. The next highest is Mexico at 18% which declined slightly over the last 15 years (with NAFTA in place). Globally, while manufacturing has grown, other areas of economic activity have been growing faster than manufacturing.

The manufacturing share of the USA economy dropped from 21% in 1980 to 18% in 1990, 16% in 2000 and 13% in 2008. Still as previous posts show the USA manufacturing output has grown substantially: over 300% since 1980, and 175% since 1990. The proportion of manufacturing output by the USA (for the top 14 manufacturers) has declined from 31% in 1980, 28% in 1990, 32% in 2000 to 24% in 2008. The proportion of USA manufacturing has declined from 33% in 1980, 29% in 1990, 36% in 2000 to 30% in 2008. While manufacturing output has grown in the USA it has done so more slowly than the economy overall.
posted by Benny Andajetz at 10:06 AM on August 6, 2010

What is the source of this new found productivity?

China.

The U.S. has an Industrial Policy - and a rather successful one at that - moving it's industry abroad to low cost no regulation countries for the enrichment Wall Street.
posted by three blind mice at 10:08 AM on August 6, 2010 [1 favorite]

moving it's industry abroad to low cost no regulation countries for the enrichment Wall Street.

If you can articulate your arguments without buzzwords, I might listen to you.

China! Wall Street! Main Street! Socialism! Bullshit.
posted by schmod at 10:13 AM on August 6, 2010

You can also get the entire report as one colossal PDF here, complete with introductory material. Once again, a self link to the site hosting the files, but I didn't have anything to do with producing the report in the first place.
posted by jedicus at 10:24 AM on August 6, 2010 [1 favorite]

In case my "productivity is a bullshit measure" comment was misconstrued, I would like to elaborate a bit. Productivity is, indeed, a useful measure - if you are measuring profitability. It is an important number to industry, but it is not entirely relevant in determining if the economy is healthy or functional in the long term.
posted by Benny Andajetz at 10:24 AM on August 6, 2010 [3 favorites]

thanks, uncleozzy. that sentence particularly disturbed me, too.
posted by msconduct at 10:25 AM on August 6, 2010

the blue collar is just as important as the white.

The last episode of Top Gear this season had somewhat of a focus on loss of manufacturing jobs in England. Worth checking out if you like seeing normally goofy, obnoxious people being wistful and sincere about what's been lost.
posted by davejay at 10:27 AM on August 6, 2010

Schmod, at some point in time, a complex topic will require its own jargon. I don't think it's particularly confusing to say that the US has moved to foreign outsourcing for its industrial needs. Are you saying that "low cost no regulation countries" is a buzzword? Or (the poorly typed) "enrichment of Wall Street"? And I'm not quite sure where socialism came in, to be honest.

Anyway, here's a starter for you: "Foreign Outsourcing in US Manufacturing". It discusses trends in US manufacturing jobs (way, way down) and draws correlations to US imports (way, way up).
posted by boo_radley at 10:31 AM on August 6, 2010 [1 favorite]

If you can articulate your arguments without buzzwords, I might listen to you.

I'll give it a go, even though it wasn't my argument.

There is a cost associated with conforming to environmental regulations, labor regulations, et al. It doesn't matter whether you support the regulations or not, or whether you believe the cost is significant or negligible -- there is a cost, and that cost is greater than what it costs to build new factories overseas and ship products back here. If it wasn't greater, companies wouldn't do it, because it wouldn't be profitable.

So, if you're running a company and trying to be profitable. You discover that if you move your manufacturing overseas and ship products back, the net cost is lower than staying local. You might personally believe that the jobs are better kept here or what have you -- and if you were running a privately-owned company you could act accordingly -- but your company is publicly owned, and so you're beholden to the stockholders to maximize profit (you can be sued if you don't.) You therefore move the manufacturing, make more money, and ultimately raise the value of the stock.

tl;dr: if you're running a publicly-owned manufacturing-dependent company, you move your manufacturing abroad to low-cost, low-regulation countries in order to make as much money for your stockholders as you can without breaking the law.
posted by davejay at 10:34 AM on August 6, 2010

thanks, uncleozzy. that sentence particularly disturbed me, too.

No problem. Just looking out for the purity our of collective bodily fluids.
posted by uncleozzy at 10:56 AM on August 6, 2010 [3 favorites]

Boy, I just deleted a looooong clip before I decided not to post it.

Long story short: There has to be a balance between service sector and manufacturing/agricultural sectors. The free markets will eventually bring some equilibrium...but it's going to be really fucking painful.
posted by Xoebe at 11:03 AM on August 6, 2010

if you're running a publicly-owned manufacturing-dependent company, you move your manufacturing abroad to low-cost, low-regulation countries in order to make as much money for your stockholders as you can without breaking the law.

I'm not at all economically-minded (the idea of money as value sends me down a philosophical rabbit-hole, frankly), but the idea of a corporation that is, essentially, immortal being beholden to the mostly short-term interests of its stockholders always gives me the willies.
posted by uncleozzy at 11:05 AM on August 6, 2010 [2 favorites]

I thought these guys at 538 were supposed to be good at data analysis?

First, they claim that manufacturing employment was steady between 1960 and 2000. Which it was, as long as you ignore population growth from 180 million to 300 million, about a 66% increase. At the end they write:

Let's examine this a bit further. From the end of the 1990 recession to the pre-2001 recession peaks productivity was up about 47%, industrial production was up about 61%, and goods employment was up about 9.3%

The population from 1990 to 2000 rose 13%, which means manufacturing jobs were lost, even more so when you continue from recession to recession.

Second, they provide no data on exports per GDP. In 1960 we were number one in exports per GDP. Today our worldwide ranking in exports per GDP is somewhere below #150. We're still in the top 5 for raw export value, but only because our economy is so enormous.

Third, it does not look at manufacturing wages versus inflation. This is the real purpose of free trade for large corporations: force American workers to compete with foreign workers who have a much lower standard of living, and pocket the difference. Productivity has doubled since 1960, and wages have declined.

Employment is the number one factor in determining the health of an economy. If workers double their productivity and their benefits and wages are reduced, you're killing all kinds of secondary opportunities for them to start their own small businesses, make home improvements, go on vacations, and so on. Concentrating the wealth not only has disastrous economic effects since money is removed from the real economy, but also because it often is used to further concentrate wealth. The market has then stopped rewarding work with money. That's the tip of the iceberg for massive social issues.

Anyway, if you look at any of the graphs, none are adjusted for workers as a ratio of the population. Just a raw "workers" figure, which is useful if you're trying to pass off a flawed opinion, I guess. The reality is that manufacturing as a portion of the US economy has declined sharply, manufacturing wages are down even though productivity is up, and there is no manufacturing base left to revitalize without serious government intervention. Curiously, they reach the same conclusion at the end, but that just leaves me as dumbfounded as to the source of their hypothesis.
posted by atypicalguy at 11:08 AM on August 6, 2010 [7 favorites]

>
The U.S. has an Industrial Policy - and a rather successful one at that - moving it's industry abroad to low cost no regulation countries for the enrichment Wall Street.

You make it sound dirty.

What always bothers me about this conversation is that it inspires a knee jerk reaction in so many people. The idea that the US must manufacture is held like religious doctrine. Funnier, because it varies from person to person. Not only must the US manufacture things, it must manufacture certain things. Guitars, pocket knives, motorcycles... whatever one's pet good is, as if one or two domestically produced (and often niche) items function as a bellwether for America's economic, even moral health, overall.
posted by 2N2222 at 11:14 AM on August 6, 2010

I'll tell ya what, 2N2222, why don't we just let things continue as they are, and let China continue manufacturing all kinds of widgets that they sell to us and we buy on credit, with China buying up our debt. Sound good? Myself, I think I shouldn't have dropped Mandarin 100.
posted by No Robots at 11:17 AM on August 6, 2010

The idea that the US must manufacture is held like religious doctrine.

It's an acknowledgement of reality. We have to create things that aren't movies, music, and microcode.
posted by Pope Guilty at 11:19 AM on August 6, 2010 [1 favorite]

The idea that the US must manufacture is held like religious doctrine.

I used to work for a high-tech company which made a product manufactured in its own plant in the US. And the product, while a very, very good one, was expensive, and we couldn't make it cheaper.

We actually passed up an opportunity to buy a competing product line from overseas, but passed on it because we couldn't figure out how to make it cheap enough in the U.S. In retrospect, we royally dropped the ball on that one.

The legacy product continued to be produced in the US and was eventually killed outright because they refused to outsource the manufacturing. And according to our CEO and CFO, the major issue wasn't components or environmental issues...it was labor. Labor to build the damn thing was just too expensive.
posted by Thistledown at 11:28 AM on August 6, 2010

Pope Guilty: “It's an acknowledgement of reality. We have to create things that aren't movies, music, and microcode.”

What, like cars and electronics? Does industry actually produce anything that humanity needs?
posted by koeselitz at 11:32 AM on August 6, 2010

It would appear that the productivity statistics would be affected by outsourcing:

From the 2004 BLS report The Effect of Outsourcing and Offshoring on BLS Productivity Measures:

If a domestic computer manufacturer switches from domestic to foreign suppliers of intermediate inputs such as computer memory chips or call center services, real manufacturing sectoral output is unchanged because the real value of the computer is unchanged. Because U.S. jobs are lost (all other things unchanged), labor productivity will rise. If the U.S. manufacturer switches most of its production to off-shore facilities, labor productivity might rise substantially.

The study does conclude that outsourcing's effects have been relatively small, resulting in a 1.5% yearly increase in productivity through 1995 and a 1% yearly increase 1995-2001 with incomplete data thereafter.

Also a caveat from the uses and limitations section of their handbook of methods indicates that changes in quality of products would also not be accounted for. For examples if the Wal-Mart business paradigm of cutting everything possible to get the cheapest stuff on the shelves has affected domestic manufacturing downward in quality, then there would be an additional hidden loss of productivity. Of course there could be the opposite effect where domestic manufacturers have to distinguish themselves by increasing quality, as they cannot compete with the cost reductions from low wages overseas.

Another thing that the 538 analysis fails to account for is the change in population over the years when looking at the actual number of manufacturing jobs. In 1987 the population was estimated by the Census Bureau to be 242,288,918. Current estimates peg the population at 309,921,836, a 28% increase.

The trade deficit analysis conducted in the article contains no statistical methodology and is totally worthless.

At any rate, accounting for the estimated inflation of productivity from outsourcing, and looking at this graph our per capita manufacturing output rose steadily but modestly for the last couple decades prior to this recession, which knocked manufacturing back to 1987 levels of per capita output.

In this same period, per capita GDP increased over twofold.

In short it would be fair to say that U.S. manufacturing has been struggling for decades relative to the rest of the economy. Strange how when you do a proper, in-depth analysis of statistics, they tend to confirm the obvious.
posted by Zalzidrax at 11:35 AM on August 6, 2010

2N2222:

Snipe away. Bitch at the "commies" all you want. Show us some numbers, though, if you want to have any credibility.

The numbers (if you're willing to read instead of snipe) are clear. The manufacturing sector of economy has declined. The quality of our economy for the middle-class and below has declined. Economies that are doing well have healthy manufacturing sectors. The economies that are doing the best have the largest manufacturing sectors.

Let's put it another way. Where are our once very strong jobs in the following manufacturing industries: shoes, textiles, tools, electronics, furniture ...? These are not buggy-whip industries; they are thriving industries making products that billions of people buy every day. Why are we not manufacturing these things anymore? Answer that honestly, and I think you will see that it does go to our economic and moral health.
posted by Benny Andajetz at 11:37 AM on August 6, 2010 [4 favorites]

What, like cars and electronics? Does industry actually produce anything that humanity needs?

God help me, I can't tell if this is sarcasm or not.
posted by Pope Guilty at 11:47 AM on August 6, 2010

Sorry, PG – I phrased that pretty badly (largely because it was far too broad.) For what it's worth, I really did mean it as a question; I'm sitting here trying to think of essential industries, and it's difficult. I mean, there's energy, I guess; but that's not as essential as we treat it. Is food produced by industry? Hmm. I really don't know.
posted by koeselitz at 11:50 AM on August 6, 2010

Manufacturing lives in countries besides the United States now.

Short of trying to build loyalty programs to "Brand America" (with whatever nightmarish labeling system will arise with it), if Americans want manufacturing to move back, either the price of manufacturing here must drop or the price of manufacturing elsewhere must rise. The latter can happen through tariffs, or rising prices from rising demand, or by attempting to force other countries to adopt the very practices which made the cost of manufacturing here rise.

Consumers want to minimize their spending and corporations want to maximize their profits. As long as those two things remain true, the US is kind of stuck.
posted by adipocere at 11:52 AM on August 6, 2010

Food production is industrial. Everything you're surrounded by as you sit in your home or cubicle or office or worksite or whatever is created by industry.

I mean, I guess you could say that all we really need to live is food and primitive shelter, but fuck that, we live in the real world and not in the primitivist fantasy world. Asking "but what do we really need, man, like, as organisms?" isn't really productive.
posted by Pope Guilty at 11:53 AM on August 6, 2010 [3 favorites]

Remember "The Future Of The Past"? When we'd all be working less hours and having more leisure time? Well, it came true, the only problem being that employees never had enough control over their own lives (even with unions or even 'employee-owned' companies) to ensure that they would get the benefit from the improved productivity. The moderately absurd "Four Hour Work Week" guy outsourcing his own work is the closest thing anybody has done to make that work. Somebody just forgot that all 'economic' systems only act for the benefit of the whoever controls the physical assets, whether it's the Owners (Capitalism), the State (Socialism), the Party (Communism), the Banks (Debt-Based Capitalism), or the CEOs and Day Traders (our Wacky Wall Street).
posted by oneswellfoop at 11:54 AM on August 6, 2010 [2 favorites]

oneswellfoop, awhile back (I can't find the link), somebody linked a bunch of predictions about what the year 2000 would look like from the beginning of the century. I remember that most of the predictions which were wrong were those that assumed that technology would be used directly to improve the lives of everyone, and not only to improve the profits of the owning class.
posted by Pope Guilty at 11:56 AM on August 6, 2010

tl;dr: if you're running a publicly-owned manufacturing-dependent company, you move your manufacturing abroad to low-cost, low-regulation countries in order to make as much money for your stockholders as you can without breaking the law survive.

This is the issue - inevitably making things in the developed world is expensive. Its not like you've seen a massive increase in returns on capital as manufacturing jobs have been outsourced. Its running to stand still in a sense. There is no solution. If you ban outsourcing then you eventually lose even more jobs, if you create trade barriers you create a different set of problems. The only "industrial policy" the US can have is managing the conversion to the post-industrial economy in the least painful way possible.

It sucks but it is unavoidable. And there will be winners and there will be losers.
posted by JPD at 12:05 PM on August 6, 2010

Consumers want to minimize their spending and corporations want to maximize their profits. As long as those two things remain true, the US is kind of stuck.

Is the first part of that true? It sounds right, I know...but how does minimized spending fit in with iPhones, brand-name shoes, 17,000 flavors of Doritos, and all the other things we buy that we could have skimped on? If we do really want to minimize our spending--enough so that it makes the higher prices for American-made goods a real factor--then why aren't we all eating citizen-chow out of a plain unmarked box?
posted by mittens at 12:06 PM on August 6, 2010 [1 favorite]

It's an acknowledgement of reality. We have to create things that aren't movies, music, and microcode.
posted by Pope Guilty at 2:19 PM on August 6

We absolutely do not. The creation of "movies, music and microcode," as you eloquently put it, is no worse than the creation of autos, hairdryers, or anything else.

In fact, those things are more important that traditional industrial manufacturing, because they are cultural artifacts as well as goods. To the extent that they are imported by other countries ensures that American culture--becomes the dominant global culture. We can import all the chinese socks we want, it doesn't make us appreciate or understand Chinese culture at all. By contrast, Chinese people watching American movies absolutely helps them to understand us, and that is a net positive--for us.

Furthermore, we are entering the earliest stages of a post-consumerism era. The widespread acknowledgement among consumers of the precarious state of the environment and the scarcity of resources, along with the consumer coming to understand their contribution to those problems in the form of excess consumption suggests that consumers no longer want (the illusion of) limitless choice. They want some small number of very good, very distinguishable choices. To embark on a re-industrialization campaign now would to the detriment of society, the environment, workers, and everyone else with a stake in society's progress.

The trend in place, and you can see it on the internet, is an information economy. But not information in the 1980's sense of statistics and data, but information in the sense of youtube videos, blogs, etc.

The facts: a median income will pay for all of an individual's (not a family's) needs. In the US, food is not expensive, and outside of major cities like NYC or LA, shelter is not overwhelmingly expensive either. The postwar industrial/consumerist economy was focused not on needs, but on the constellation of wants and subtly converting wants into needs. But that time has passed. What we want is not to be seen in our new pair of Air Jordans, but rather to have people see us on youtube, or read our blogs. That's what we want.

Finally, the US economy cannot support a renewed industrial economy like China's. Chinese workers get paid very little, US workers demand a fortune by comparison. And who will pay those huge wages for American labor, when the American consumer is strapped with debt and 20% are out of work?
posted by Pastabagel at 12:07 PM on August 6, 2010

Is the first part of that true? It sounds right, I know...but how does minimized spending fit in with iPhones, brand-name shoes, 17,000 flavors of Doritos, and all the other things we buy that we could have skimped on? If we do really want to minimize our spending--enough so that it makes the higher prices for American-made goods a real factor--then why aren't we all eating citizen-chow out of a plain unmarked box?

You are conflating two different concepts though. Look at the success of big box stores - terrible service, hugely inconvenient, cheap. They kill the competition
posted by JPD at 12:10 PM on August 6, 2010

The creation of "movies, music and microcode," as you eloquently put it, is no worse than the creation of autos, hairdryers, or anything else.

It is, in this sense: it shuts out a large group of perfectly good workers who aren't intellectually capable of these higher-level jobs. We need both.


Chinese workers get paid very little, US workers demand a fortune by comparison.

Chinese management gets paid very little, US management and shareholders demand a fortune by comparison.

That sentence makes sense, too. It's not just the workers who are more expensive.


In fact, I'd argue that most outsourced manufacturing jobs weren't sent away for competition reasons, but to increase profits. Our insane tax laws allowing corporations to avoid taxes on profits earned in other countries has definitely added to the problem.

If I were king, my free-market response to this kind of gaming would be, " I'm not gonna stop you from sending your manufacturing side to another country, but if you make a product there that you then bring back to sell here you will pay the same tariff foreign companies plus a small punitive tax. Your choice."
posted by Benny Andajetz at 12:21 PM on August 6, 2010 [1 favorite]

The manufacturing sector of economy has declined. The quality of our economy for the middle-class and below has declined. Economies that are doing well have healthy manufacturing sectors. The economies that are doing the best have the largest manufacturing sectors.
posted by Benny Andajetz at 2:37 PM on August 6

Worldwide, manufacturing employs fewer people than it did 20 years ago. The jobs didn't go overseas, the jobs disappeared. It simply does not take as many people to run a production line in any given industry as it did in the heyday of manufacturing (which was when 1960? 1950?)

By what metric is China does the best, given that it has by far the largest manufacturing sector in the world? Significant sections of the Chinese population are living in poverty. How do you define doing well?

I was listening to this new wave communist (self-proclaimed) "philosopher" the other day--Slavoj Zizek. And he was going on and on about the crisis of capitalism, etc. Never have I heard someone miss the point so completely solely by virtue of confusing their model with reality. The western world has moved beyond the socialist struggle. We don't define the classes (esp. middle class) by their relationship to labor, we define them in their relationship to the consumer society (sellers, consumers), and even now that model fails to correctly capture what is happening. But for heaven's sake, "labor"? "Middle-class" what do those even mean anymore? Is an accountant a laborer? Is a farmer a laborer on his own farm? Is he a laborer on Monsanto's farm? Is the accountant middle class?

And where is the notion of consumer debt? God, these people have completely missed the significance of Marx writing before the era of easy credit. Is the auto mechanic who lives beyond his means the same "class" as the entry level programmer who below his means them?

Seriously, I don't understand what these words mean anymore. Class, labor, etc.? If you're going to argue the point, you've got to define your terms.
posted by Pastabagel at 12:24 PM on August 6, 2010

There is one alternative: We could force countries wanting to do business with us to live up to our labor and environmental standards, not on the basis of economic protectionism, but on the basis of the same humanitarian and other grounds that justified our adopting those standards domestically.

If foreign-based companies didn't want to participate in our market they wouldn't have to. If we couldn't use our purchasing power to create enough export demand in other countries, we could use military force in service to labor rights and in the interest of protecting our own national interests by protecting shared environmental resources. We've used the military for less noble reasons, amirite?

(In case it's still not clear, that last bit was hamburger.)

Bottom line for me is if you expect the American people to just suck up the fact that they have to either lower their standard of living to developing world standards, or accept chronic unemployment without even a humane social support system in place, you're making a pretty stupid long-term bet. Passively submissive to rising corporate profits and shrinking incomes and economic opportunity as we may appear now, we won't stay that way for long. Similar periods in US history have almost always led to a groundswell of civil unrest that ultimately led to deep systemic reforms.

If manufacturing isn't the solution, then you'd better get on with the job of making the service economy a reality, or resurrect Nixon's proposal for a guaranteed annual income.
posted by saulgoodman at 12:30 PM on August 6, 2010 [3 favorites]

Chinese management gets paid very little, US management and shareholders demand a fortune by comparison.

That sentence makes sense, too. It's not just the workers who are more expensive.

You're still not getting it. The US management and the Chinese management don't have the same jobs. A chinese manager is responsible for managing the firm (or his operations) profitably. But management of industrial companies is very much an objective science.

The US manager has a different job. He has to run present operations efficiently and at the same time he must deliver growth for the shareholders that is beyond their expectations. That role is decidedly, speculative, creative, and personally driven. It is not enough in the US that Steve Jobs delivers profits today, he must outdo our expectations of profit in the future.

This is the problem in the stock-market mentality, not that people want higher profits, but that they expect profits to be higher than they expect. They expect to be surprised. That is incredibly difficult to deliver, and managers are compensated for this star role the same way star athletes are. The manager is not here to keep the company on track, he's there to create a faster track and put the company onto that one. And then repeat that feat.

You can (and probably should) criticize that, because that is a bizarre sickness of the Wall Street mindset, but understand that it is because of this that US managers are paid so asymmetrically.
posted by Pastabagel at 12:33 PM on August 6, 2010

In fact, I'd argue that most outsourced manufacturing jobs weren't sent away for competition reasons, but to increase profits.

I don't know if I can say this anymore clearly then I already have - the data does not show that outsourcing has increased profitability (with the proxy for profitability being Return on Capital) but that rather is has permitted companies to maintain profit levels per unit of capital invested.
posted by JPD at 1:51 PM on August 6, 2010

Hopefully those of you sneering at manufacturing now will remember this thread when your "knowledge-based" jobs are outsourced to India or China.
posted by rfs at 1:52 PM on August 6, 2010

Hopefully those of you sneering at manufacturing now will remember this thread when your "knowledge-based" jobs are outsourced to India or China.

realizing the inevitable nature of deindustrialization is by no means the same thing as sneering at manufacturing.
posted by JPD at 1:55 PM on August 6, 2010

That "who picks the winners and losers" link is interesting. So first our money went to the banks, and now it is being given to industry?

er, then again, firstly (in the UK) our money went to paying a fucking huge loan + interest from the USA, which was spent developing utilities and telecoms and railways, which were then sold to the rich.

@Pastabagel, do you believe there are no classes anymore? There is no working class? Because in England, that just is not true.
posted by marienbad at 2:11 PM on August 6, 2010

@Pastabagel, the "creativity" of American managers is demonstrated as well by Enron as it is by Apple. If the pressure from stockholders meant that top-performing American managers genuinely innovated products, instead of financial instruments, marketing strategies, and methods of subverting the law, I might be more sympathetic to your point.

Even Steve Jobs competes more, now, using the leverage of his market position and his brand than the quality of his products. And we all know well how bad a judge of products the lowest-common-denominator consumer is.

As far as the idea that we don't have to manufacture, I might agree with you more if the nationstate and ethnic identity weren't still a reality. The fact is, in most places other than the US, business enterprise is still highly beholden to the national consciousness. Only in America do corporate managers view themselves as somehow independent of the state that nurtures them.

This has the potential to make us vulnerable both to physical and financial violence. If we can't produce a reasonably broad number of goods on our own soil (or our allies can't) and people who are sympathetic to something like the idea of "America" don't retain the knowhow, then that makes us vulnerable, I would think.
posted by macross city flaneur at 2:41 PM on August 6, 2010

In general, I should also add, @Pastabagel, American innovation does not come from large established corporate entities.

It comes from small players who often work for very little money, sometimes in the expectation of a big future payoff.

But just as often not. I personally hate the way that people today so cavalierly associate innovation with the profit motive. The fact is, we are still living off of the massive government investment in fundamental research that took place after WWII. Most of those scientists and engineers who benefitted made very little money for their efforts.

The fact is, innovation comes from people who love thinking and creating. Love without money can make the process of invention a lot more difficult in particular industries, and it can make bringing something to market impossible. But money without love, drive, and interest never produced anything.
posted by macross city flaneur at 2:47 PM on August 6, 2010 [1 favorite]

The US manager has a different job. He has to run present operations efficiently and at the same time he must deliver growth for the shareholders that is beyond their expectations.

This is not how it works. The expectation is that a publicly held company will deliver beyond the expectations of analysts, not shareholders. This is a significant difference. For the most part, if you deliver what's expected to shareholders, you'll be fine, but institutional investors look at analysts far too much of the time for their guidance and do have an effect on price, and hedge funds try to anticipate these moves and act accordingly. However, the whole game of beat-or-meet is coming under question with the failure of analysts to do their jobs and correctly anticipate problems, particularly leading up to the 2008 crash.
posted by krinklyfig at 4:06 PM on August 6, 2010 [1 favorite]