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US Manufacturing Is Not Dead

fivethirtyeight.com

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Re: US Manufacturing Is Not Dead

#21

Post by Locke1689 »

richcollins wrote: post #5

Secondly, there have been calls for a US industrial policy -- that is, for Washington to essentially "pick winners and losers" by promoting some industries that they feel have a high probability of success. Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy. The market is pretty good at picking winners. Washington likes to take money away from the w…

Eh. Neither of you cited any empirical evidence for your claims. Jury's still out.

Re: US Manufacturing Is Not Dead

#22

Post by bokonist »

MikeCapone wrote: post #10
mch929 wrote: post #3

Worthless without context. What I'd really like to see is the change in US manufacturing as a percent of world manufacturing over time, and the trajectory of US manufacturing in comparison to the level of manufacturing in China.

Krugman: "He was driven mad by Lester Thurow and Robert Reich in particular, both of whom had written books touting a theory that he believed to be nonsense: that America was competing in a global marketplace with other countries in much the same way that corporations competed with one another. In fact, Krugman argued, in a series of contemptuous articles in Foreign Affairs and elsewhere, countries were not at all li…

Krugman is wrong. In many circumstances, countries are competing with each other. For instance, imagine Kuwait produces oil, and Japan produces automobiles. Kuwait trades oil to country America for automobiles. Now imagine Japan enters the market and makes automobiles that are much better and cheaper than America's. Kuwait will now start buying automobiles from Kuwait instead of America. America will find the price of oil skyrocketing and it's standard of living collapsing, unless it can produce automobiles that match the quality and price of Japan's automobiles.

Re: US Manufacturing Is Not Dead

#23

Post by Darmani »

bokonist wrote: post #22
MikeCapone wrote: post #10

Earlier quoted context omitted.

Krugman: "He was driven mad by Lester Thurow and Robert Reich in particular, both of whom had written books touting a theory that he believed to be nonsense: that America was competing in a global marketplace with other countries in much the same way that corporations competed with one another. In fact, Krugman argued, in a series of contemptuous articles in Foreign Affairs and elsewhere, countries were not at all li…

Krugman is wrong. In many circumstances, countries are competing with each other. For instance, imagine Kuwait produces oil, and Japan produces automobiles. Kuwait trades oil to country America for automobiles. Now imagine Japan enters the market and makes automobiles that are much better and cheaper than America's. Kuwait will now start buying automobiles from Kuwait instead of America. America will find the price o…

No, America just winds up also buying much better and cheaper automobiles.

Re: US Manufacturing Is Not Dead

#24

Post by jbert »

nradov wrote: post #11
jerf wrote: post #4

Secondary conclusion: As long as manufacturing productivity continues to improve, increasing our manufacturing may lead to American prosperity, but it won't save the economy, in that it won't produce jobs. Long-term, I've actually not been concerned about American manufacturing for a while now. Why is overseas manufacturing cheap? Primarily, cheap labor. When does that cease to be an advantage? When labor is no longe…

Besides cheap labor, the secondary reason for overseas manufacturing is lack of (enforced) environmental laws. That advantage could last quite a while.

And could be (partially) negated by requiring western suppliers to demonstrate some kind of parity in their supply chain.

Re: US Manufacturing Is Not Dead

#25

Post by bokonist »

The methodology used by the Industrial Production Index is extremely problematic. Any index that uses Fisher price indexes introduces huge amounts of subjectivity. For instance, the decision to use an "overlap method" rather than a "direct comparison method" is subjective ( http://en.wikipedia.org/wiki/Fisher_index ). Choosing one method rather than the other can dramatically alter the resulting index. The result is that the index ends up replicating the assumptions and opinions of the index creators.

Re: US Manufacturing Is Not Dead

#26

Post by richcollins »

teeja wrote: post #12
richcollins wrote: post #5

Secondly, there have been calls for a US industrial policy -- that is, for Washington to essentially "pick winners and losers" by promoting some industries that they feel have a high probability of success. Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy. The market is pretty good at picking winners. Washington likes to take money away from the w…

Winners like Goldman and Enron? The government can help by protecting productive concerns from the thieves and pirates. Those "winners" can go to hell.

Unfortunately, the government has just as strong a history of protecting the thieves and pirates from competition as it does protecting others from them. Goldman and Enron are possible because of government intervention in their favor.

Re: US Manufacturing Is Not Dead

#27

Post by bokonist »

Darmani wrote: post #23
bokonist wrote: post #22

Earlier quoted context omitted.

Krugman is wrong. In many circumstances, countries are competing with each other. For instance, imagine Kuwait produces oil, and Japan produces automobiles. Kuwait trades oil to country America for automobiles. Now imagine Japan enters the market and makes automobiles that are much better and cheaper than America's. Kuwait will now start buying automobiles from Kuwait instead of America. America will find the price o…

No, America just winds up also buying much better and cheaper automobiles.

No, because in my example America has no source of foreign exchange it cannot buy autos from Japan, it has nothing to offer Japan in return (it's a simplified example, but it shows an underlying dynamic that can and does exist).

EDIT: to clarify, there are also examples where increased foreign industry will benefit America. For instance, if Kuwait doubles its productivity, oil imports to the U.S. will be much cheaper. But my point still stands that this is not also the case. Increased productivity from other countries can be positive or negative to America, depending on the specific situation.

Re: US Manufacturing Is Not Dead

#28

Post by yummyfajitas »

ugh wrote: post #15
jerf wrote: post #4

Secondary conclusion: As long as manufacturing productivity continues to improve, increasing our manufacturing may lead to American prosperity, but it won't save the economy, in that it won't produce jobs. Long-term, I've actually not been concerned about American manufacturing for a while now. Why is overseas manufacturing cheap? Primarily, cheap labor. When does that cease to be an advantage? When labor is no longe…

We get richer as labour gets more automated and cheaper. So it’s not a bad thing. It shouldn’t be. The big problem is that we don’t have work for bigger and bigger parts of the population. They are poor not because society as a whole got poorer, they are poor because they don’t have anything the labour market wants because it can be had cheaper now. I think it’s about time we recognize that. We have to make it possib…

We have to make it possible for everyone to live ok lives, even without having a job. We are rich enough. We didn’t get any poorer as a whole. We should be able to afford that.

It already is possible. The poor in the USA right now have a standard of living greater than the middle class of 1970, but tend to work less than 800 hours/family/year.

http://www.heritage.org/research/welfare/bg1713.cfm

Re: US Manufacturing Is Not Dead

#29

Post by anamax »

richcollins wrote: post #5

Secondly, there have been calls for a US industrial policy -- that is, for Washington to essentially "pick winners and losers" by promoting some industries that they feel have a high probability of success. Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy. The market is pretty good at picking winners. Washington likes to take money away from the w…

> Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy.

Even if Asian countries can consistently do that, which I doubt (there's a serious case of survivor's bias here), that doesn't imply that the US can. The American political class is fundamentally incompetent.

After watching the health care discussion on Friday, did anyone think "those are the folks who I want running something important"?

Whenever I see a politician, my reaction is thatt I don't want that person in charge of anything having to do with my life.

Re: US Manufacturing Is Not Dead

#30

Post by chipsy »

bokonist wrote: post #27
Darmani wrote: post #23

Earlier quoted context omitted.

No, America just winds up also buying much better and cheaper automobiles.

No, because in my example America has no source of foreign exchange it cannot buy autos from Japan, it has nothing to offer Japan in return (it's a simplified example, but it shows an underlying dynamic that can and does exist). EDIT: to clarify, there are also examples where increased foreign industry will benefit America. For instance, if Kuwait doubles its productivity, oil imports to the U.S. will be much cheaper…

Right. To be a participant in a global marketplace means having specialties you can trade on. This is why a common strategy of the emerging economies of the world, past and present, is to heavily protect and subsidize infant industries so that they aren't crushed by foreign competitors. As they establish themselves, the barriers can be gradually lowered until the industry is competitive on the open market.

Free-trade policies tend to be most beneficial to the market incumbents; but I would note that even when a foreign company simply comes in and exploits cheap labor, the workers will get better wages, and even if that doesn't directly benefit their own lives, it can give their children a better lifestyle and education.

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