The Decline of the U.S. Machine-Tool Industry and Prospects for Recovery (1994)

There are numerous books on this topic. Obviously not everyone agrees with them, but Alfie Kohn's "Punished by Rewards" is an excellent starting point for reading about what we know about the connections between motivation, creativity and rewards.

"U.S. firms are at a further disadvantage in that their foreign competitors benefit from sustained government incentives to invest in advanced industrial equipment."

True then, and true now. If you want to buy a machine, you are basically on your own, and machine financing isn't favorable, it's on the contrary somewhat predatory.

But this article was written prior to Haas really taking off in the 90s and 2000s, and I think Haas has been somewhat successful in selling into North America, if only for relatively cheap, low-quality, general-purpose machines.

And, if you extend the axis of that graph back past 1980, I think Germany, Japan and the UK were dominating advanced machine tool manufacture since their industrial revolutions. I am not convinced that USA was EVER a real leader in advanced machine tool manufacture, I think it was always traditionally imported. Correct me if I am wrong. Sure, the Americans made crappy low tech Bridgeport mills and engine lathes by the millions, then relied onto that technology for 100+ years (and are still trying to make it work). The Haas vertical mill is the new Bridgeport mill, it is 30 years behind state of the art, and American industry is still buying that en masse.

I think that the computer industry was successful enough in the 1990s, American policy makers were essentially OK with losing ground in the machine tool industry. Then the computer industry also got offshored.

But remember! The equipment and production lines were originally shipped offshore wholesale, the production lines can get shipped back, but American land, energy costs, wages, taxes and other input costs are too high to make it work (without protective tariffs).

raising the marginal cost of labor lessens the amount of labor hired. there is no scenario in which it leads to more people working the job. unionized labor did not make it harder to offshore - in fact it accelerated offshoring, automation, and a shift to manufacturing in the South of the country.

having lower costs of goods usually benefits the economy more than more prosperous labor (not necessarily the local economy), although the net welfare increasing thing is context dependent. in competitive markets, vast majority of labor cost decreases are captured by the consumer.

Not sure what that means. There are many potential outcomes that could be defined as "equalizes".

At one limit, no country in the world, except for China, has a solid industrial base. In other words, nobody makes anything except for China.

OK, then their standard of living continues to increase. Got it.

In, say, 50 years, the cost of doing business in China starts to become less competitive. This, assuming no manipulation. This creates an opportunity for other nations to return to participation in various industrial sectors. However, this also means fifty years of utter destruction around the world. This also comes with loss of skilled workforce, manufacturing plants and the infrastructure necessary to support industrial activities.

Regrettably, by that time, most industrial capacity around the world would have been utterly destroyed. So, this reentry into manufacturing will likely be characterized by making low value products. For example, making screws, wire, some types of clothing, etc. Assembly operations might also make sense for lower tech products. This will only make sense if shipping parts from China to country X and then assembling there is economically viable. Tough to predict five years from now, much less fifty.

This process of "equalization" (in quotes because it really doesn't have a solid definition) most likely brings with it a further and non-trivial destruction of economic drivers in the US and Europe (and everywhere else). This, in turn, will result in terrible outcomes and economic collapse of the kind these societies are not used to (this is certainly the case in the US, Europeans have gone through serious consequences of the world wars).

I will not claim to be smart enough about these things to understand what the solution might be. Go to Walmart or shop on Amazon and it is impossible not to come out thinking that the damage is done and must of this is not reversible. I don't know. What I do know is that something has to change or things are going to get worse, much worse. We are not going to float entire economies on the back of AI and data centers.

I have always found the aspects of the history of Argentina have serious parallels with how large western economies have damaged themselves from the inside. Coincidentally, I just came across a nice and concise historical perspective of how this country went from being one of the top economies in the world to barely having the industrial output and economy to survive. Here it is:

https://www.youtube.com/watch?app=desktop&v=jGnl4Re8Gpk