The Credit Addicts Dilemma: Why the US is hemorrhaging good manufacturing jobs

by: Ian Welsh

Fri Jul 17, 2009 at 18:05


 

Fun graph, eh?

This is your manufacturing economy on globalization.  Bear in mind that these numbers are absolute numbers, they don't reflect the fact that the US population has grown significantly.

According to Mike Lux:

a high level Obama administration economic adviser is quoted as saying that America's export future resides in exporting "consulting and legal services, software, movies, and medicine."

Whistling past the graveyard would be the kind way to characterize that statement.  Typical Summers/Geithner "brilliance" might be the less kind way of putting it.

US manufacturing was never going to stay as high as it was, relative to the size of the population, after World War II.  The majority of the world's manufacturing capacity had just been bombed into rubble, after all.  A relative decline was always to be expected.

An absolute decline, however, is quite another matter, so let's do a 30 second seminar on international trade and development.

No country other than a city state has ever industrialized except behind trade barriers.  None.  There are no exceptions.  Mercantalism is how states industrialize.  The trade barriers can be classic tariffs (like the US used), they can be direct subsidies, they can be through interest rate policy or  they can be through making your currency cheaper than it otherwise would be.

For good chunks of the 2000's, the Chinese government spent about 10% of their entire GDP keeping the Yuan undervalued.  Other countries, like Japan and Korea also worked hard to keep their currencies undervalued (or the US dollar propped up, depending on how you want to look at it.)  This made their goods more competitive than they would have been otherwise and the direct result was the loss of US manufacturing jobs.  (One might also point out that this doesn't qualify under any definition as "free" trade).

This isn't the entire picture, just dropping the dollar won't fix the problem, because if that happens, the US gets creamed on resource costs (read: OIL).  This means the US is in a policy bind.  Drop the dollar and get slaughtered by resource prices.  Keep the dollar high, and lose jobs.

This isn't just a policy bind, it's co-dependency, in the worst sense, like when a drug dealer needs a customer's cash and the customer needs his fix.  Americans got something in exchange for this: they got cheap consumer goods, and funding for their overspending.  At some points during the 00's the American savings rate was negative!

In exchange manufacturing and other jobs were moved directly overseas.  Off-shoring went to China, outsourcing (of legal, administrative, call center and whatnot) went to India, Canada and Ireland (because they all have large numbers of English speakers).

Breaking this policy bind is simple enough: first you have to break US dependence on oil, then you can tell the countries which are selling you drugs (which you desperately want and need, don't blame them for your addiction to cheap credit and consumer goods) where to go.  Then you go through a very unpleasant withdrawal period, which as any ex-addict can tell you, is hell on earth.

But the status quo isn't so hot either, is it?

Want your manufacturing jobs back?  Get off oil, then you can get off easy foreign credit and cheap consumer goods.  Then you can have them back.  And maybe once they're back we'll be able to buy an appliance which isn't so lousy that it's expected to wear out in 5 years max and be thrown to the curb.

One can dream.

Ian Welsh :: The Credit Addicts Dilemma: Why the US is hemorrhaging good manufacturing jobs

Tags: (All Tags)
Print Friendly View Send As Email

Protectionism Is A Good Thing. (4.00 / 5)
I don't know how the term "protectionism" was co-opted by the right to make it sound like a dirty word.  Yes, we need to protect American jobs, schools, neighborhoods, citizens, children, seniors.  There's nothing wrong with policies that are intended solely to "protect" our own people.

I would go further and say that any economic policy by the government must start with the question of what is in the best interest of the American people.  There is no question that our people would be better off making things in our own country -- making shoes, clothes, cars, computers, building our own homes, making green technology, making drugs to really beat cancer and other diseases.  By taking all the productive jobs out of this country, the collapse of our communities has become almost inevitable.  What do we make?  Nothing.  We have "financial" MBA-types who steal money for a living, attorneys (like me) who are paid mouthpieces and produce nothing of substance, "consultants" to develop lies to protect the politicians, "media" to seduce and defraud the public, and lots of drugs to keep them numb.  

Who benefits by sending jobs outside the U.S.?  The wealthy and the corporate insiders.  GM, for example, can be "saved" by a massive infusion of taxpayer money, but what does that mean if all the jobs are taken to Mexico?  It means that the CEO and insiders will work at glass highrises in some U.S. city, the "profits" will be attributed to some subsidiary so no taxes will be paid, and the insiders will pay themselves hundreds of millions in bonuses.  In other words, if we do not save the under $100,000/year jobs, we might as well throw the whole corporation out.  I would tell GM to hit the road.  

Wall Street does nothing but corrupt our country and steal a big percentage of all the money in this country by manipulating the markets, including manipulating commodity prices to make us all pay enormous amounts in the grocery stories, manipulating the price of oil, manipulating housing, stealing everybody's savings and pensions.  I would bust up Wall Street, shut them down.  And seize their assets.  They contribute nothing, and they are criminals and thieves.

I disagree that buying tires from China is good.  Let's give Americans good jobs with decent wages, and they can afford to buy tires made here in the U.S.  Same for T-shirts.  We always hear that globalization allows us to buy $8 T-shirts.  It is without question that we would all be better off buying one T-shirt for $40, and keeping Americans employed making clothes.

Same for food.  The supermarkets import food from, for example, Mexico, where there are no sanitation or environmental restrictions on the farmers.  The supermarkets pay 50 cents/lb for tomatoes (instead of paying $1.50 if they were grown in the U.S.).  But guess what?  The supermarkets still sell the tomatoes to us for $2.99/lb.  In other words, the real savings goes to the corporations, not to the people, who are now routinely eating food that will sicken them, and sometimes kills them.  Little DDT on the salad?  Little salmonella, hepatitus in the fruit?  Same for the food imported from China.  No oversight.  Maximum profits to corporations, and our people have lost all the protections we once had for our food supply.  Not to mention that losing the ability to feed ourselves leaves us so vulnerable in the event of disasters, including wars.  

In addition, if every country grew their food and made most of their own products, the corporations would not amass the fortunes that they now have, which they use to corrupt governments and enslave people.  We would also save enormous amounts of energy if we just stopped shipping potatoes from one continent to the next, and instead equipped people throughout the world with the resources they need to grow all their own food.  

Any cross-national sharing should be cultural, medical, educational.  There are many ways we could use modern technology to improve relationships among nations, but turning countries into slave colonies for U.S. corporate interests is not going to help anything.  I would suggest that the best way to improve world relations would be to have an international baseball league, with all teams fully equipped and funded from some common tax on the rich.  Everybody loves baseball, not sweatshops.  It's a lot better than using 12 year old girls for 14 hour days to make -- cheap tires.

I would ban all imports and start over.  No more cheap tires, no more imported poisoned food.  Yes, we should be protectionist when it comes to protecting the American people.  The entire globalization has resulted in most Americans losing at least half of their total assets, our educational system is being crushed because the corporations no longer need an educated American workforce since we'll all be Warl-Mart Slaves in the future, we no longer have healthcare or pensions, wages have frozen if not gone backwards, the environment is possibly beyond repair, mass species are being wiped out by "globalization" of commerce.  I would end it all, shut it down, start over.  Let China struggle to develop an economy that will serve their own people, something other than mass pollution and slavery.  But our focus should be on creating a new American economy, from scratch.  And I would seal the borders for commercial purposes while we figure out our new system.

http://NABNYC.blogspot.com
 


Protectionism isn't necessarily (4.00 / 3)
necessary.  I would restrict capital flows (which is necessary for free trade to work) and institute actual free trade, which doesn't exist right now.  I would also institute carbon taxes on currency transactions to act as a tariff on countries which won't deal with their carbon problems.  You can also put in automatic tariffs for currency manipulation, something the government won't do as long as they know they are dependent on foreign oil and credit.

You can't be free when you need other people so badly, and the Chinese price has been that they industrialize by selling to the US.  In the long run they'll lose a lot of money, and they know it, but it doesn't matter, because what they're getting is worth much more than the cost.

What's that saying, know the price of everything and the value of nothing?  Chinese leadership knows the value of REAL economic growth, Americans know the price of consumer goods and taxes.


[ Parent ]
According to some (0.00 / 0)
"actual free trade" means that local governments can't have preferences for local businesses in purchasing decisions, or that give minority businesses extra points in competitive bidding. "Actual free trade" can mean no Postal Service, no government health service in Canada, more military contractors, etc.

[ Parent ]
I don't go that (0.00 / 0)
far, as you might expect.  Neither did Ricardo, so I think I'm not even far from what should be economic orthodoxy.  Of course, most economists don't seem to actually read what Ricardo wrote any more.

Ricardo's Caveat, for those who want more on the difference between free trade and free capital flows and why confusing the two makes comparative advantage not work.  (Not a discussion of government services, mind you.)

Slashing government services to compete can equally be considered dumping, actually, and I refer to it as either "governance" or "regulatory" arbitrage.


[ Parent ]
I have to ask, Ian (0.00 / 0)
Do you really believe that Ricardo is still applicable in today's world?

That's not being snide; just an honest question.


[ Parent ]
Sorry (4.00 / 3)
the fundemental problem is the Chinesse and others make a fraction of what US workers make.

Fair trade is an emply slogon designed to make people think something is being done.  But for those on the front lines, it is a sad joke.

This issue is not complicated.  You either impose an import tax, or you say goodbye to millions of American Jobs.

It is that simple.


[ Parent ]
Even if they were making a fair wage (0.00 / 0)
US goods wouldn't be competitive unless the Chinese stopped manipulating their currency.  Chinese workers are still radically underpaid, but they are making more than it appears at first glance, because the value of the yuan is so small that local goods are also kept very cheap.  

Of course, goods imported from outside China are prohibitively expensive for most people.


[ Parent ]
We make nothing? I beg to differ... (0.00 / 0)
We invent.  We discover.  Our laboratories are still the best in the world - academia, industry, government, you name it.  Of course, we're importing scientists and engineers from abroad because Americans would rather major in the humanities, if they can afford to go to college at all.  Many of our brightest are sucked into the financial sector to waste their talents moving money around.  

But even with these handicaps, we manage to accomplish amazing scientific and technological feats.  Using lab equipment, I might add, that is far more likely to be made in the good ol' USA than abroad.  Too, research jobs are comparatively difficult to offshore because the requisite mindset of free and open inquiry isn't easily replicated.  If we're to have any kind of viable economic future, we had best take concrete steps towards increasing our social and financial investments in R&D.


[ Parent ]
You are importing engineers from abroad because (4.00 / 3)
they are cheaper - not because you don't have them here; and there is no way you can employ this nation on R & D alone.   Last but not least, manufacturing is national security.  If you can't make anything including planes, bullets, bombs and guns, just how the hell can a country defend itself?  

Some might be happy with living in their mom's basement as our economic policy, but I prefer self-sufficiency for this country.   We need to be able to feed, defend, cloth, house and employ/fund ourselves.  Instead we do rely on cheap poisonous goods from China while we devastate the people in our own country.    


[ Parent ]
Don't import, educate (0.00 / 0)
Of course there's no way we can employ the entire nation on R&D alone.  But the future will always rely more on technology than the present; tech will always be a growth industry, so why not ensure that we get as many jobs as we can out of it?

Yes, we import engineers.  Some of that is because they're cheaper, but some is because we don't train enough of them.  Science is another matter; we don't produce nearly enough scientists to fill our graduate schools.  Not even close.  There's a reason that so many PhDs are granted to foreign students, and it's because fewer Americans choose science as a career.  That might have something to do with the $200,000+ starting salaries available in a certain industry that contributes little more than moving money around, inflating bubbles, and wrecking the economy.  But it might also have to do with the way we underfund science education (and education in general).

As for the emphasis on national security, I hardly think we need to worry about that for the next couple of decades; our defense budget is too high as it is.  Nor do I think we should become Fortress America and shut out the rest of the world.  We share an environment; we can't just close the borders and pretend we're on a different planet.

Lastly, I'm afraid I don't see the connection between strengthening our scientific and technological expertise and "living in their mom's basement as our economic policy."  Could you clarify?


[ Parent ]
Fortress America? I don't think anybody said that but you. (0.00 / 0)
This is what is happening to our tech jobs.  The few IT jobs they are leaving here are narrow and specific in task and require at least five years of previous experience.  If they keep sending all the entry level stuff to India, just how the hell are new people going to get the skills and experience the companies want?  

I handled the Chrysler headquarters outplacement, and we had hundreds of engineers with double master degrees that can't find jobs because no one wants to pay their wages.  You are drinking the kool-aide when it comes to the myth about American education.  

National security means being able to build the things we need to defend ourselves if attacked. The attack could be financial, cyber, or bombs.   Since China has all our money because we send it there in exchange for cheap, poisonous crap, how do we get the goods or the money to buy the things we need to defend against China or one of her allies?  I don't care how much the defense budget it.  There will be 10 years of war toys to replace; and if you think they won't replace them, well...  

The only jobs being left in this country are those involving landscaping, Walmarts, and plastic with a blow dryer.  They do not pay a living wage, leaving Americans dependent and equivalent to children living in their parents basements because they can't afford a life of their own.

Fortress America?  I don't think anybody said that but you.  However, I have no problem with it if that is what we are required to do.  I am a citizen of the United States and not the globe.  That is just more kool aide to keep the great unwashed in their place.  


[ Parent ]
One can dream. (4.00 / 2)
That's the operative statement.

Remember, your poverty (and lack of a decent education) is good for the corporate/financial interests that control the government and the country. If you are ill-educated and poor you will work for less and you will then rely on credit to get by, thus putting you in a debt slavery position as well.

"You load sixteen tons, and what do you get?
Another day older, and deeper in debt.
St. Peter don't you call me 'cause I can't go,
I owe my soul to the company store."

True then, truer now.

This is why the powerful will fight publicly financed elections tooth and nail, because it is the only thing that can effectively take away their power.  Imagine a Congress not beholden to corporations and insurance companies.

You may say that I'm a dreamer,
But am I the only one?


Yeah, who appointed Larry and Timmy, anyhow? (4.00 / 1)
I'm gonna get a PONY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I am in earnest -- I will not equivocate -- I will not excuse -- I will not retreat a single inch -- AND I WILL BE HEARD.  

software and legal services (4.00 / 3)
except software development is increasingly sent off shore and recently even legal services, especially research, are being sent off shore.

5 Years, Huh? (4.00 / 2)
Want your manufacturing jobs back?  Get off oil, then you can get off easy foreign credit and cheap consumer goods.  Then you can have them back.  And maybe once they're back we'll be able to buy an appliance which isn't so lousy that it's expected to wear out in 5 years max and be thrown to the curb.

I've lived in Long Beach since 1994.  Shortly after moving here, I bought a used frying pan.  A few months ago, it finally broke, at a most inconvenient time.  I did have another, packed deep away somewhere, but not where I could find, much less get my hands on it quickly.  And so I bought a new one at the store across the street.  Maybe three months later, it broke.

We're talking frying pans here people.  What chance do we have with appliances?

Remember when people used to get things fixed?


"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


cast iron Paul (4.00 / 1)
cast iron
And it's still made in America

Save Our Schools! March & National Call to Action, July 28-31, 2011 in Washington, DC: http://www.saveourschoolsmarch...

[ Parent ]
Telling other countries "where to go" (0.00 / 0)
I'm finding this whole diary and thread to be bordering on the unhinged and xenophobic. Face it, we live in an increasingly interdependent world. Fortress America won't work. Yes, we do need to reawaken the manufacturing sector of our economy. And we do need to give alternative energy sources some new advantages in the market instead of continuing to subsidize cheap oil. But I don't see how "withdrawal" is an advantageous policy. Do you even understand the ramifications of what you're advocating?

Save Our Schools! March & National Call to Action, July 28-31, 2011 in Washington, DC: http://www.saveourschoolsmarch...

Withdrawal (4.00 / 3)
is going to happen whether you like it or not.  Because the rest of the world is not going to keep lending the US so much money forever.

If you read my comment upthread you would notice that I don't believe in ending trade, by any means.  However, trade this unbalanced and this far from being a free market is not healthy.

Trade is like food.  Too much of it or the wrong kind can be as bad for you as not enough.

And mistaking things that aren't really trade (like free capital flows) for trade is as bad as thinking soft drinks=food.  A little bit's no big deal, a lot of it can make you really really sick.

If the withdrawal was done on controlled terms, it would be unpleasant but would lead to a new era of prosperity. It is now, however, extremely unlikely that is going to happen, because Obama isn't doing it, and by the next Democratic president, it's going to be too late.

The choice isn't "no withdrawal" vs. withdrawal.  Withdrawal is a given, just like a junkie who's running out of money and credit.  The only question is when and how bad.


[ Parent ]
Interdependancy is the real "given" (0.00 / 0)
Whether you like it or not, the future of the American economy is not totally up to us. The real "controlled terms" are that we'll probably never be totally energy independent, a whole lot of our manufactured goods will be made in other countries, and a lot of our consumer debt will finance development in impoverished countries. I just don't see where this alternative economy you're envisioning -- where we have no reliance on energy from other countries, the bulk of our goods is manufactured domestically, and speculative currency markets don't influence borrowing and lending -- is coming from.

Save Our Schools! March & National Call to Action, July 28-31, 2011 in Washington, DC: http://www.saveourschoolsmarch...

[ Parent ]
Ahh yesss...the old inevitability con. (4.00 / 2)


[ Parent ]
Please paint me your scenario (0.00 / 0)
eager to see it

Save Our Schools! March & National Call to Action, July 28-31, 2011 in Washington, DC: http://www.saveourschoolsmarch...

[ Parent ]
No scenario needed when refuting a proof by assertion. (0.00 / 0)


[ Parent ]
Free "trade" (4.00 / 2)
eras have happened before, and ended before.  Ending massive capital flows is dead simple, and I never said anything about manufacturing the bulk domestically, though it's not impossible either and in fact peak oil makes it more likely than you'd think.

shrug we'll see who's right in time unless one of us gets run over by a car or has a heart attack first.  But I'm pretty confident in this prediction.  That which can't go on, doesn't, and foreign countries aren't going to keep lending the US this sort of money forever.

In fact, they're already stopping and the a huge chunk of the deficit is going to have to be made up by the Fed buying treasuries.  (ie. printing money).  I'll write on that next week.

One way or the other, this era's coming to an end.  What happened to Russia in the 90's is odds on to happen to the US within 10 to 15 years.  Maybe sooner, there are those who think I'm way too optimistic.


[ Parent ]
federal deficit (0.00 / 0)
At the end of Bill Clinton's term, he/we had a budget surplus, and could have began paying down the federal debt. What is necessary to return to that situation is a return to the tax structure that worked well in the past (when the rich payed closer to their fair share of government costs). But they have used their ill-gotten gains to further purchase elected officials so fair taxing is harder to achieve now than ever. If we conclude that reform is now impossible, and the present course is unsustainable, what is left?... Wait until the collapse and pick up the pieces?....Revolution?....Continuing decline into slavery in the country our forfathers died for? Perhaps the continuing pain of radical extreem conservativisum we are STILL enduring will drive more of the public to vote their financial interests, instead of prioritizing the social issues that the rape-public-cans always push.

Government by organized money is just as dangerous as government by organized mob..... FDR

[ Parent ]
This is the part I really don't think you get (4.00 / 1)
We cannot lower the value of the dollar against the Yuan and still borrow from them.

And we cannot finance our debt without them.

This is the fourth or fifth time I have seen here a suggestion that we lower the value of the dollar against the Yuan.  If you try this, you will destrory our ability to finance our debt, and long term interest rates (which are already increasing) will explode


[ Parent ]
You (4.00 / 1)
won't be financing your debt with them this year, the Fed will be buying treasuries.  But that's the point, you need to get off the debt treadmill to a certain extent.  It will happen, whether you want it to or not.

[ Parent ]
a couple thoughts (0.00 / 0)
A lot of our trade deficit is people going into personal debt to buy a bunch of cheap crap they don't really need that quickly ends up in a landfill. Really, how bad is the downside to cutting back on that?

Federal government debt: Why do we even have that? The money supply is not static. We can control the money supply just as easily by allowing the government to simply print the money as we can by allowing private banks to print it and loan it to the government at interest. WTF?

miasmo.com


[ Parent ]
"They" keep telling you no you can't, and "you" keep listening. (4.00 / 1)
Your comment and the "be afraid" statement in it sound just like something a Republican/free trader would say to make sure the corporations and top 2% stay well heeled.

US offshores 22,000 green jobs to India

BANGALORE: As the Obama government gets ready to raise a protectionist wall against offshoring, the US firms seem to be shipping more jobs to India.

The US firms have offshored 22,000 green technology jobs to India since January 1, 2009, Doug Brown, co-author of the influential 2009 Green Outsourcing Report, informed TNIE.

"We see the (green job offshoring) trend increasing as the US and the UK outsourcing buyers are seeking lower cost in labour and energy consumption. There are few suppliers who match credentials and outcomes of Indian firms," he said.

The annual industry study by Brown-Wilson Group, which surveyed 4,000 global firms, was released last week.

The report lists Patni, HCL, WNS, Wipro, Mastech and Tech Mahindra among important Indian green vendors who are benefiting from the offshoring wave.

China Builds High Wall to Guard Energy Industry - NYT

When the United States' top energy and commerce officials arrive in China on Tuesday, they will land in the middle of a building storm over China's protectionist tactics to become the world's leader in renewable energy.

Calling renewable energy a strategic industry, China is trying hard to make sure that its companies dominate globally. Just as Japan and South Korea made it hard for Detroit automakers to compete in those countries - giving their own automakers time to amass economies of scale in sheltered domestic markets - China is shielding its clean energy sector while it grows to a point where it can take on the world.

Steven Chu, the American energy secretary, and Gary Locke, the commerce secretary, are coming here to discuss clean energy and global warming with Chinese leaders, and to see if progress can be made toward getting China to agree to specific targets for reductions in greenhouse gases. Agreement proved elusive during the Group of 8 summit meeting last week in Italy.

But Mr. Chu and Mr. Locke arrive as Western companies, especially Europeans, are complaining increasingly about Beijing's green protectionism.

China has built the world's largest solar panel manufacturing industry by exporting over 95 percent of its output to the United States and Europe. But when China authorized its first solar power plant this spring, it required that at least 80 percent of the equipment be made in China.




[ Parent ]
USER MENU

Open Left Campaigns

SEARCH

   

Advanced Search

QUICK HITS
STATE BLOGS
Powered by: SoapBlox