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America's advanced manufacturing problem and how to fix it

americanaffairsjournal.org

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Re: America's advanced manufacturing problem and how to fix it

#11

Post by ccooffee »

mschuster91 wrote: post #7
mdorazio wrote: post #6

Here are the key points the article suggests (it spends quite a long time explaining how we got here): 1) Improve the [government sponsored] Manufacturing Institutes 2) [federally] Back R&D for manufacturing technologies 3) Provide scale-up financing [by the government] 4) Use government procurement power to promote new manufacturing technologies 5) Direct production support [to sectors deemed critical] 6) Provide bo…

> On the second point, the elephant in the room is that smart people in the US can make 2-3X as much in software or finance as they can in manufacturing, so what do you think they're going to pick? Make unions stronger and kill off all of Wall Street finance shenanigans that's purely devoted to creating money out of thin air or skimming (especially HFT). That house of cards is going to crash hard anyway, so best tear…

"We've gotta destroy the economy to prevent the economy destroying itself!" isn't a rallying cry that is likely to garner much support.

Do you have any favored proposals for preventing "finance shenanigans"? Given the amount of money involved, I expect any government-driven reformation will be corrupted to serve private interests.

Re: America's advanced manufacturing problem and how to fix it

#12

Post by Animats »

Note the absence of tax policy changes that favor manufacturing. Here are a few:

* A tax on financial transactions. This is sometimes called a "Tobin tax". The US financial services sector has doubled in size as a fraction of the economy. It's currently around 12%. That's an overhead cost, and a big one. Could be half that.

* A tax on advertising. The tax deductiblity of advertising as a business expense should be limited. No more than a few percent of the cost of a good or service should be advertising. Domestic US advertising is almost zero sum, anyway, because Americans are spent out. All advertising does is move consumption around a bit.

* Standards for imports. If it plugs into AC power, it has to have UL certification. No more fires from power supplies, including small electric vehicles. Anything medical has to be sample tested after import. Criminalize willful violations. Hold resellers (i.e. Amazon) criminally responsible.

Re: America's advanced manufacturing problem and how to fix it

#13

Post by Jensson »

ccooffee wrote: post #11
mschuster91 wrote: post #7

Earlier quoted context omitted.

> On the second point, the elephant in the room is that smart people in the US can make 2-3X as much in software or finance as they can in manufacturing, so what do you think they're going to pick? Make unions stronger and kill off all of Wall Street finance shenanigans that's purely devoted to creating money out of thin air or skimming (especially HFT). That house of cards is going to crash hard anyway, so best tear…

"We've gotta destroy the economy to prevent the economy destroying itself!" isn't a rallying cry that is likely to garner much support. Do you have any favored proposals for preventing "finance shenanigans"? Given the amount of money involved, I expect any government-driven reformation will be corrupted to serve private interests.

> "We've gotta destroy the economy to prevent the economy destroying itself!" isn't a rallying cry that is likely to garner much support.

That is exactly what you need to do though, blow up the dam now and release the water instead of waiting for it to build up and destroy the entire city. They do that small scale by increasing interest rates already, but sometimes you maybe need to do more.

Re: America's advanced manufacturing problem and how to fix it

#14

Post by joe_the_user »

mensetmanusman wrote: post #4

I work in one of the last remaining large industrial manufacturing labs in the US. Some of my colleagues worked at Bell before that was shuttered. My sense from talking to the previous generation is that financialization of the US has started (finally) failing the American people. The previous generation cashed in on major profits by off shoring (Kodak), but we overdid it. In a round about way our company is run by p…

Yeah, "financialization" is absolutely the answer and the articles' claim of lack institutional integration (or whatever) seems wrong.

You can look at how Boeing gutted it's highly skilled Pacific North West operations to move lower skilled, lower paid areas elsewhere and generalize this to a multitude of similar industries.

Re: America's advanced manufacturing problem and how to fix it

#15

Post by zdragnar »

roenxi wrote: post #9
mdorazio wrote: post #6

Here are the key points the article suggests (it spends quite a long time explaining how we got here): 1) Improve the [government sponsored] Manufacturing Institutes 2) [federally] Back R&D for manufacturing technologies 3) Provide scale-up financing [by the government] 4) Use government procurement power to promote new manufacturing technologies 5) Direct production support [to sectors deemed critical] 6) Provide bo…

When did China ever rely on protectionism? I'm sure they have bouts of it here and there but the overt part of their strategy has been a willingness to work hard for low wages combined with refusing to let Chinese land or companies be sold to overseas buyers. But I claim no expertise. There should be a more serious effort to figure out what China's strategy was before there is a conversation about how best to copy it…

> Focusing on why China succeeded is more interesting and harder to get good information about.

It isn't that hard, really. They had a massive population in relative destitute poverty that was willing to work very hard for a small, but significant, increase in their quality of life, starting with Deng Xiaoping's market reforms through fairly recently.

The surplus of cheap labor is shrinking, and the current "made in China 2025" plan is intended to drive the growth further by shifting more portions of their economy away from foreign services and goods.

The tactics are largely the same, though: massive subsidies to local companies that disadvantages foreign ones, tacit acceptance if not outright approval of theft of trade secrets from those foreign companies that do business in China, and until recently anyway, kept the yuan pegged to the USD, meaning that it is far cheaper to buy Chinese goods than elsewhere. Now, it is tied to a basket of currencies, but held in a fixed range, so it remains intentionally undervalued.

All of this put together ensures that foreign countries will buy Chinese goods and services, and that Chinese people will also prefer to buy locally.

Think of it as a "cold" trade war. Why they were allowed in the WTO with such policies I'll never know.

Re: America's advanced manufacturing problem and how to fix it

#16

Post by jjoonathan »

roenxi wrote: post #9
mdorazio wrote: post #6

Here are the key points the article suggests (it spends quite a long time explaining how we got here): 1) Improve the [government sponsored] Manufacturing Institutes 2) [federally] Back R&D for manufacturing technologies 3) Provide scale-up financing [by the government] 4) Use government procurement power to promote new manufacturing technologies 5) Direct production support [to sectors deemed critical] 6) Provide bo…

When did China ever rely on protectionism? I'm sure they have bouts of it here and there but the overt part of their strategy has been a willingness to work hard for low wages combined with refusing to let Chinese land or companies be sold to overseas buyers. But I claim no expertise. There should be a more serious effort to figure out what China's strategy was before there is a conversation about how best to copy it…

It's no secret how export-driven development works. Trade surplus/deficits are controlled at a policy level by debt issuance/purchase. Run a surplus and your export economy will thrive. Run a deficit and your export economy will die.

Running the reserve currency requires running a deficit (others want to export their savings, so you need to import their savings). This pumps assets and dumps exports.

Re: America's advanced manufacturing problem and how to fix it

#17

Post by bell-cot »

Obvious Solution: Re-establish the military draft, but with a far smaller pool of potential draftees - and make sure the families of current & recent members of Congress, Wall Street big-shots, Fortune 500 CxO's, McKinsey consultants, and such are all assigned to serve in front-line "meat shield" battalions on the western shores of Taiwan, just south of Korea's DMZ, etc.

Re: America's advanced manufacturing problem and how to fix it

#18

Post by avs733 »

bell-cot wrote: post #17

Obvious Solution: Re-establish the military draft, but with a far smaller pool of potential draftees - and make sure the families of current & recent members of Congress, Wall Street big-shots, Fortune 500 CxO's, McKinsey consultants, and such are all assigned to serve in front-line "meat shield" battalions on the western shores of Taiwan, just south of Korea's DMZ, etc.

Or maybe just treat blue collar workers better? And enshrine such treatment into law so this doesn’t happen again.

That would seem to be simpler

Re: America's advanced manufacturing problem and how to fix it

#19

Post by serf »

roenxi wrote: post #9
mdorazio wrote: post #6

Here are the key points the article suggests (it spends quite a long time explaining how we got here): 1) Improve the [government sponsored] Manufacturing Institutes 2) [federally] Back R&D for manufacturing technologies 3) Provide scale-up financing [by the government] 4) Use government procurement power to promote new manufacturing technologies 5) Direct production support [to sectors deemed critical] 6) Provide bo…

When did China ever rely on protectionism? I'm sure they have bouts of it here and there but the overt part of their strategy has been a willingness to work hard for low wages combined with refusing to let Chinese land or companies be sold to overseas buyers. But I claim no expertise. There should be a more serious effort to figure out what China's strategy was before there is a conversation about how best to copy it…

Production in China has included benefit from the opposite side of protectionism for some time now; when most countries abide by trade laws, those that don't gain increased exposure to international markets by virtue of offering cheaper goods via production-sans-design.

China itself may not, but the production groups within China have a pretty exhaustive recent history of largely ignoring IP regulations whenever profitable, and the market response has been widely happy-to-consume.

For a single example look at the history of composite bicycle manufacturing from the 60s onward, with specific detail on the emergence of China produced composite bicycles in the 90s -- it wouldn't have gotten off the ground at all without blatant IP theft spurring the first half.

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