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 winners and give it to the incumbent losers that bribe lawmakers.
Yeah, that part seems like it needs more support. The situation for the largest and most diverse economy on the planet is a little bit different than the situation for those Asian countries. Our economy is far too complex for this sort of central planning to be effective. Also, politicians are idiots, and need to secure votes from the workers in industries currently existing, not the industries of the future.
> 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.
Also, although some of the quasi-planned economies (where "winners" were picked and subsidized) in Asia have been remarkably successful, it doesn't necessarily follow that the relationship is causative, or that they wouldn't have been successful anyway, had that selection process not happened.
A lot happened in the 20th century in Asia that keeps it from being a repeatable experiment, much less a model that can be followed elsewhere. The effects of WWII and the consequent rebuilding on Japan, and urbanization and the so-called "demographic dividend" (http://en.wikipedia.org/wiki/Demographic_dividend) on many other countries in the area, shouldn't be underestimated.
I'm not sure how you saw this sentence: "Washington likes to take money away from the winners and give it to the incumbent losers that bribe lawmakers." and thought that Goldman was an example of the former rather than the latter.
"and thought that Goldman was an example of the former"
Clearly you didn't see where the AIG bailout money went to at the time, courtesy of then U.S. Treasury secretary Hank Paulson, former CEO of Goldman Sachs.
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.
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 longer a significant cost in manufacturing. We're getting there pretty quickly, and IMHO robotics has only recently (i.e., last two or three years) taken off, which should be able to continue the increased-productivity-per-human trend for a while yet.
Bad time to become an assembly line worker. Good time to get into robotics for manufacturing, probably.
I had a contract job in a tool & die facility a couple of years ago. It wasn't a factory, it was a "build-to-order" facility that had a wide variety of equipment in various places and they needed better tracking of their jobs and such. I didn't mention this to anyone, but I was struck by how much work was being done that could be automated in the near future. Tens of jobs dedicated solely to moving things around, which robots are going to be able to take over in the 5 year timeframe. Another tens of jobs that involve placing a metal part just so in a press and pushing two buttons (two so you have to use both hands). QA can't be replaced with robots entirely, but it could be helped. The bulk of the people on the floor were not doing things that required human judgment, even for human-class vision or human-class pathfinding. The future is basically now.
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 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.
How to do that is anyone’s guess (I’m betting on some sort of ‘basic income’), but it’s about time to start. We can’t think about work and earning money with our 19th and 20th century goggles on.
We gotta be really careful about how we do it. Were I single and not willingly in the scenario where I am going the extra mile to have and provide for a family (that best-case scenario for society), I might very well decide to just take your "basic income" and call it a day, but if society is going to have that "basic income" it's only going to happen if people like you and me and anybody else hanging around on HN don't rationally choose to take the option, if given. (I hate to pander to the audience, but the HN community really is set up around being a community of producers, so I'm not just trying to pander here.) And forcing me to work to provide for those others, the easiest obvious answer, would be slavery, full stop. There's enormous moral hazard in that idea. It also makes it very easy for a person born into a family who has chosen that option to not be around any person who can teach them the culture or the mental toolkit necessary to make the transition to producer, which would make "being poor" a one-way ticket for a family, on average. (Arguably a problem we already have in the inner cities, which in a way gets worse the more comfortable the "basic income" becomes.)
Mind you, I don't disagree. As a futurist looking out across the next thirty years I too see an increasing number of people who through essentially no fault of their own will basically have no marketable skills; they'll have skills, just not marketable ones. Somehow we've got to deal with it. But it's going to be enormously tricky; all the easy answers are wrong. All the politically acceptable answers both liberal and conservative are also wrong. I don't have a clue what the right answer is, either.
You would take, say, $1200 (a very high estimate) and call it a day? You can live, it doesn’t even have to be a bad life, but it’s not really all that much. I doubt many would find that to be enough. I wouldn’t. And I’m not even all that ambitious.
I think a basic income can create very strong incentives to make at least some additional money compared to traditional social security. There is no need to find a job that pays at least $1300 in order to make it worthwhile, for one (you get to keep your basic income no matter how much you make – minus taxes, so this is in a way not always true).
I would even think that something like a basic income is especially nice if you want to become self-employed.
(There would be higher taxes, probably much higher in the US, a little higher in Europe, but I – being one of those liberal Europeans – have no problem with that.)
I’m still kind of on the fence when it comes to basic income, though. I think finding the right way to do it (how to pay for it, how to organize it, what kinds of social security systems to slim down or abolish, etc. etc.) would be very hard indeed.
"You would take, say, $1200 (a very high estimate) and call it a day?"
$1200 what? You're missing a time element there. I assume "per month". I've lived on less than that before, with some comfort, and I was working, too! If I get to assume health care (not unreasonable in the world we're hypothesizing) and don't forget that I'm not working and I'm not worrying about working either, then yeah, that sounds like a pretty good deal for a single guy with no family.
And by the time we kick this into gear, society may well be able to afford more than that. We're not talking today's society (which already has unsustainable levels of social obligation), we're talking a 20-30 year minimum future society. Or at least I am, since I'm actually talking about the real possibility, not a hypothetical parallel universe where it exists today.
An important part of basic income, is a research effort on reducing the cost of basic living. with reduced costs , pressure on taxpayers would be reduced , which should help both politically and socially for the acceptance of this ideas.
Research is both DARPA level research , and investing money in 3rd world r&d and commercial efforts, since low cost technologies are bound to come from there.
Just as an example, The cost of an high rise apartment could be reduced to $8000(excluding land) using container building techniques.This shows a path of really cheap rent for really basic housing.
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.
(My comment was written from a German vantage point where the unemployed have to jump through tons of degrading hoops and everything is set up in a way which expects them to pick up work again sooner or later. I don’t know much about social security in the US, so I won’t comment on that.)
That partisan think-tank study is pretty laughable. Since when is quality of life judged by appliance ownership? I don't have healthcare, a proper education, job skills, and my neighborhood is dangerous but hey at least I've got AC and this wonderful color TV!
Job skills and education are a means to obtaining a good quality of life. The lack of them does not indicate a poor quality of life.
Quality of life is having desired goods and services, which the study indicates the poor have.
Regarding health care, do you wish to assert that health care available to the poor today is worse than health care available to the middle class in 1970?
I echo that sentiment. To share another testimonial, I work in a vaccine manufacturing facility with control systems and robotics. The only reason biologics manufacturing facilities haven't been built overseas with the same zeal as other factories is the stringent requirements by the FDA, MHRA, etc. on manufacturing facilities that use live cultures. Many of the technician jobs are similarly dedicated to pushing carts and transferring components to the robots for processing. Because of the reduced efficiency of old drug discovery methods, many of these jobs are taken by college educated science majors who are finding that jobs in drug discovery research are quickly dwindling.
However, I disagree with the idea that robots are going to be able to take over in a five year timeframe.
I agree with you that the capabilities for robotics to do these tasks exist. "The future is already here - it is just unevenly distributed." I doubt however whether large manufacturing companies would be willing to shoulder the huge investments needed to develop robotics for these applications even in a healthy financial climate. Maybe this type of development could come from a company that proposes to do consulting work for manufacturing facilities, for example, Honeywell.
Additionally, I've seen that while companies see automation as an asset in pharmaceutical manufacturing, they also view it as a huge liability, as a single automation error can lead to enormous problems that take time to detect and can have huge costs, while human error generally leads to small mistakes that can be corrected and detected easily. Not sure how it is in other manufacturing subindustries.
"However, I disagree with the idea that robots are going to be able to take over in a five year timeframe."
That's not quite what I said. I specifically meant that robots will be able to take over the task of moving things around in the five-year timeframe. That is, the guys moving bins of things from here to there. We've already seen warehouses adopting this technology with a fairly high degree of sophistication today, so it's not really a far-out prediction. I'm not predicting that something that doesn't exist will be created, I'm predicting that something that does exist will be commercialized to the point it will become irresistible.
Remember, even if the robots are initially expensive, to replace an employee for a year opens up about $50,000 in capital to play with, assuming a low-paid employee + insurance (yours, not the employee's) + overhead, give or take $20,000. $50,000 is becoming a lot of robot.
Completely taking over in five years, no, definitely not. Certainly not in the facility I saw. But the long-term job trend will be clear in five years.
I guess we both agree on the long term trend and at this point, that's all that really matters.
But the task of creating highly reliable industrial robots is really quite difficult and quite a bit more expensive than $50,000. We have 12 robots in our facility and the field testing and applications testing process for a similar facility elsewhere is taking approximately 2 years and counting. This doesn't include the entire development and specification process of developing the robots as well as the control systems. Each robotic system is upwards of $5,000,000.
A lot of this cost comes from the additional points of failure. Large systems are prone to failures due to small, cascading errors. This necessitates a larger testing and development period.
This is different I'm sure for other industries however. The cost of a failure is exponentially greater in pharmaceutical manufacturing as compared to other forms of manufacturing. Its possible that costs could be much lower in other industries where the cost of a failure is reduced.
Besides cheap labor, the secondary reason for overseas manufacturing is lack of (enforced) environmental laws. That advantage could last quite a while.
To me it is interesting to attempt to guess the winners in such a scenario (where robots for a lot of tasks are cheaper than asian unskilled workers). Could it be that countries like Dubai would become manufacturing centers? Some advantages for it as opposed to China/India would be: less corruption, no taxes, flexible and business friendly regulations in general and cheap energy.
I'm not sure this actually refutes a relationship between offshoring and manufacturing employment. It's possible it's purely a result of automation getting better, and would have happened identically with no major shifts of trade. But given that the increase in offshoring makes labor-intensive industries much cheaper to locate elsewhere, it's also possible that market forces have accelerated the U.S.'s shift to less-labor-intensive industries. That is, we haven't just automated existing industries as technology has gotten better, but have actively stopped manufacturing certain things that are hard to automate, even though there's still demand for them, because we can't compete with cheap labor. We then put our resources into manufacturing easier-to-automate things instead, which keeps total output high.
If you break down the total manufacturing data and look at labor-intensive sub-sectors, you don't see the same upward trend in output. US textile manufacturing, for example, has totally collapsed, not just in employment but also in output.
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.
Where are the corrections for population growth? I think the OP's claim might be true, but their case is not watertight.
A quote: "The real issue is manufacturing employment, which is dropping like a stone. And the reason for the drop is an increase in productivity." ...Really? Maybe it's only part of the reason? Macroeconomic phenomena are complex. 538 should be better than this! Give me nuanced analysis, with intellectually-honest qualifiers.
It's worth considering that industrial index he cites includes some things that most people might not consider manufacturing per-se, including construction, mining, and utilities. According to http://www.federalreserve.gov/releases/g17/Current/default.h... the only sectors in the index that have seen growth over 2% compared to 2002 levels are utilities (electric and gas) and business equipment (which seems to consist of "industrial and other", "transit", and "information processing"). Unfortunately there is no breakdown among them.
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 like corporations. While another country’s success might injure our pride, it would not likely injure our wallets. Quite the opposite: it would be more likely to provide us with a bigger market for our products and send our consumers cheaper, better-made goods to buy. A trade surplus might be a sign of weakness, a trade deficit a sign of strength. And, anyway, a nation’s standard of living was determined almost entirely by its productivity—trade was just not that important."
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.
Krugman's point is not that countries don't compete, but that global trade sums to zero, unlike the case for corporations. You can't tell if a country is 'winning' by looking at its balance of trade.
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.
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.
Why are either of them so interesting in the context of US manufacturing?
The single biggest thing to happen in the last few decades is a couple of billion people (re-)joining the world economy (the PRC, India, the former Soviet Union, etc.).
To the extent a lot of recent manufacturing is satisfying basic needs we take for granted, e.g. refrigerators, isn't that likely to be all to the better?
What I'm saying here is that this gets complicated. Economies of scale are likely to give the manufacturers in the PRC the edge in supplying the world's demand for refrigerators, but on the other hand their increased demand for say aircraft and especially jet and turboprop engines is directly to our advantage.
Or perhaps I should say, this isn't a simple matter of winners or losers at this gross a level (PRC vs. US, US vs. the world). I expect the share of US manufacturing vs. the world's to go down during this period and I expect the trajectory of PRC manufacturing to be wild compared to ours.
I believe much of manufacturing is building things from parts from elsewhere. I did work for a pottery wheel company and the wheels major components were from Mexico (the metal frame) and motor from China. I didn't really take a look at the other parts but likely those were from overseas as well.
Ever notice it is the guys with indoors, non-science desk jobs who are always pushing science, engineering, and manufacturing on your kids, but not theirs?
The market is pretty good at picking winners. Washington likes to take money away from the winners and give it to the incumbent losers that bribe lawmakers.