Also glad you were able to be of help to the family when they needed it. That can come at great personal cost, in my experience, so know you aren't alone.EPer: partlycloudy
(Sept. 2014) Deindustrialization Redeploys Workers to Growing Service Sector
"The decline [in the U.S. industrial sector since 1980] has prompted debate about offshoring—outsourcing operations overseas and trade protection. Displaced workers whose jobs moved to other countries have reason to be concerned ... The U.S. experienced a declining share of agricultural employment, a rise and subsequent decline of industrial employment and, most recently, a rise in service employment. This process is known as 'structural transformation'".
"In China, the share of industrial employment increased from 17 percent in 1978 to 30 percent in 2013 ... Wages in China have risen dramatically and it faces the challenge of transitioning to a service-based economy ... Globalization and international trade allow the U.S. to engage in high-value-added manufacturing and services while importing low-tech goods from emerging economies ... U.S. manufacturing cannot compete with emerging economies’ low labor costs for unskilled workers. Instead, the comparative advantage of the U.S. and advanced economies is in producing high-tech and high-value-added goods and services, which is why these countries’ wages and standards of living are higher."
The Dallas Fed concludes: "Policies that aim at protecting the manufacturing sector in the U.S., such as import tariffs, export subsidies and restrictions on offshoring, ultimately interfere with the process of structural transformation and can reduce long-term growth. Expanding U.S. industrial employment would require an increase in world demand for American manufactured goods, which can be achieved only by reductions in U.S. wages and living standards. Instead, policymakers should acknowledge the importance of a growing service sector and consider focusing resources on compensating displaced manufacturing workers and incentivizing them to acquire skills to engage in higher-value-added activities."EPer: Bud Meyers
But at least the FRED graphs are loading, although it looks like the actual site is a disaster as well, so gone is easily obtaining raw data for analysis. Upward, onward!
I think it's pretty clear that the U.S. Government has been using international trade as a foreign policy tool, to strengthen our leverage with strategic countries and to befriend countries that might otherwise threaten us (especially China) and to continue the fight against communism. This policy has required us to ship manufacturing jobs to low wage countries, and the great shame is that Americans who lost well paid jobs have had to accept lower wage employment and have not been properly compensated.
I agree entirely with the argument that appropriately designed tariffs could be used to level the playing field and to create large numbers of jobs in this country. But I do not think this would be in line with the foreign policy objective of sucking other countries into our orbit through use of trade.
As a result of automation, export of jobs to other countries, computerization of clerical jobs, destruction of small retailers, the U.S. has become more and more a labor surplus economy with increasing numbers of people employed or underemployed in low wage jobs, often in sub-subsistence jobs.
I think we need to promote technological progress and expand high wage employment through massive increases in government spending on really important goals like hugely ramped up exploration and exploitation of the solar system and much stronger investment in research in energy, the hard sciences, and medicine. Such expenditures would go largely to private subcontractors. Where would the money come from ? Taxes and borrowing.
This might seem like pie in the sky. And probably is.EPer: boblite
So glad to see you are back.
Always take care of family first.
JonEPer: Dr. Jon
I don't think the problem is too much T. In fact, the men in question are mostly low-T types. I've dealt with them, from time to time.
The problem is basic human wickedness, without the restraints which kept in check earlier in the history of American academia. Donna Shalala was big into this at UW, B4 she went to Washington, and while she might be a high T type, I don't think that was what was driving her.
Humans want to build monuments to themselves. Mostly, it is guys, but guys tend to take the lead in most things. Not really clear why, but it is probably that goal orientation which results from prenatal neurological apoptosis.
Surely, nothing of significance is ever accomplished, except someone thinks it is worth doing, and devotes thought, energy, resources to accomplish it.
It is not the desire to do great things, but the twisted, narcissistic, self-absorbed notion that building monuments to themselves, and living in luxury and privilege on the backs of the students is worth doing.
The problem is the humanistic "Glory to Me in the Highest" thinking. The problem is spiritual.
As Nebuchadnezzar said, "Is this not Babylon the Great, which I have built for the Glory of my Majesty?"
The problem in academia, as in most of American life, is that people have become their own gods.
And surly gods deserve to have monuments built in their name. Surely they deserve to be worshipped, and lavished with everything desirable.
The reason that academia was the way it was when we were children is that it had grown from a world view which was quite different.
Even though the ideology of the academics had drifted far from its foundation, (when the purpose of Yale was to train pastors and missionaries) the lingering effects of this culture of service, of a higher purpose, even of sacrifice of self, were still strongly felt.
But when the children of the baby boom, full of rebellion, because they were rejected (a natural consequence of the changing social dynamic resulting from the technology revolution) grew to take control of these institutions, they smashed all of that. It was like a conquering army, taking what they wanted, destroying most of the rest.
(By the way, the teenage rebellion phenomenon is by no means universal. It is mostly an American phenomenon, though with parallels in other western cultures. Roughly, it shows up in the same places as allergies do (also a western phenomenon) because its causes are correlated, though not the same.)
So now we find these institutions ruled by those who were the most aggressive self-promoters. The tenure track is so ugly, I have stayed out of academia altogether.
When I get calls from students raising money for the schools I attended (work-study, I suppose) I always explain to them that I will help them by not contributing. Because if I give them money, the university will use it to build buildings. And they will fill those buildings with people who need to be paid, but who will do nothing to help the students to receive an education. And they will be paid from their tuition. So their tuition will go up.
Then I explain that the actual cost of education has gone down every year for the last 20 years (because of technology) and that they are participating in the greatest generational wealth transfer in the history of the world (from students to their mostly 30-60 something university staff) This is like $2T, and still going up.
Hopefully I can radicalize a few of them.EPer: Dr. Jon
We can always compete with China by mirroring their pay scale and removal of regulations. The problem is liberals think they are protecting workers by clamoring for minimum wages, unions, forced benefits, and regulations, but they are actually destroying jobs. If I owned a business, and Worker A is willing to work for $3 an hour and Worker B insists on receiving $11, I'm going with Worker A every single time, and you would too. I am tired of liberals who refuse to concede this very basic, fundamental economic choice.
As far as the workers themselves, I'm also sick and tired of people who 'don't have enough money to buy', yet go out and borrow anyway, as if they are magically about to get a 12% pay increase next year to pay the bill and the credit card interest. Making ends meet is frequently an excuse - they want a certain lifestyle regardless of how much money they have, and are willing to borrow from the future in their fatalistic striving.EPer: Dale (not verified)
I just started back with our analysis,but since jobs are nowhere, wages flat, the same lies about "worker shortage" as the middle class has disappeared, I doubt any of this can be sustained.
Thanks for the additional detail figures. I saw autos & parts and wondered who exactly is buying up these cars? Wages are flat, rents are high....
I believe I saw a host of downgrades yesterday on Q3 estimates.
a lot of the 2nd quarter gains were just rebounds from the winter depressed 1st quarter...the 14.1% annualized rate of increase in durables goods consumption, which accounted for .99% of the GDP increase, will be particularly hard to match...almost half of that was an increase in consumption of motor vehicles and parts, which grew at a 19.1% annual rate and added .45% to GDP all by itself; in addition, real outlays for durable household equipment and furniture grew at a 12.9% rate, while real consumption of recreational goods and vehicles rose at a 13.3% rate, as all durables consumption benefited from a negative 1.9% deflator...
investment in equipment was also growing at an unsustainable rate of 11.2%, which added .63% to 2nd quarter growth.. investment in industrial equipment grew at a 27.3% rate and investment in information processing equipment grew at a 26.6% rate...blips in growth like that cannot be sustained...EPer: rjs
The decline of manufacturing jobs is far more than a China issue.
Wood construction materials -- in permanent decline.
Wood furniture -- hit by housing downturn + outsourced to lower-cost markets than China.
Glass, clay, cement, concrete, lime, gypsum -- hit by housing downturn.
Primary metals -- hit by housing downturn + outsourcing.
Structural metal products -- hit by housing/commercial construction downturn.
Valves and fittings -- hit by industrial downturn.
Ammunition and ordnance -- less war.
Industrial machinery -- hit by industrial and commercial/retail downturn, except oil/gas.
Computers and electronics -- in permanent decline, outsourced to lower-cost markets.
Household appliances -- consumer/housing downturn + outsourcing.
Transportation equipment -- still in recovery.
Office furniture and fixtures -- demand still weak + outsourcing.
Food manufacturing and processing -- automation + some outsourcing.
Textiles and apparel -- permanent decline, heavily outsourced to places beyond China.
Paper making, paper products and printing/publishing -- permanent decline.
Chemicals -- many enduring sources of downward pressure.
Many of these jobs are never coming back. Everything related to construction will recover in time, to some degree. In many industries, American labor costs and productivity are uncompetitive. The only hope in those areas is to reduce production cost enough to gain advantages from proximity and turnaround time (3D printing?).EPer: Randy Reece (not verified)
Thank you for the feedback. My argument is really a broad generalization, so your point about case by case issues is well taken. Historically, the rule of thumb was to allow geographically-limited and luxury goods into the country. Of course, there is no obvious theoretical basis for this. My general thinking on "exceptions" at this point remains a work in progress, but the rule of thumb I've set myself is to allow anything which increases the productivity of the industrial sector (e.g. energy products), along with geographically based goods (I don't importing coffee will ruins us). This is based on the idea that the real measure of wealth is in the diversity of industries you have, because the greater the productivity gains (the cheaper the output) the more sectors are generated. So as the number of sectors grow, the richer the country will be (measuring wealth is something Ricardo said was not possible; I agree with him). For example, if it wasn't for the prod gains of the industrial revolution we'd still all be subsistence farmers so to speak (that's one sector instead of 1000s).
I have no objection to exporting knowledge, because protectionism would protect you from any negative wage consequences. For example, if say a cellphone company wants to build a factory in every nation, then all the nation's workers gain from the company's knowledge, while at the same time earning enough to purchase the phones they produce. The only exception that immediately comes to mind are those for national security.
As for market forces resolving trade imbalances, I would argue that it only leads to pointless destruction. An example I have used in my previous writing is a very simple one. Say there are two identical nations side by side, with the exact same national output (standard of living). They are identical in every respect (culture, taste, production). The only difference is the quantity of gold each country posses. Thus they have different price levels, say 10 to 1. If they open to free trade, one nation will be decimated by imports, and the other exports its wealth (cannot fully consume what it produced) resulting in nothing more than inflation. Chaos ensues. The result is destructive for both. Notice gold, like under the Articles of the Confederation, did not prevent ruin, because no one recognizes that gold, like paper money can be nothing more than an "arbitrary scale." Instead, the classical economists made the mistake of treating gold, not as domestic measure, but as supply and demand good (QTM). Economics never recovered from this error in my view.
By MMT, did you mean Modern Monetary Theory?
best regardsEPer: Econ_unmasked
Thank you for giving me a chance to post. I think your site is exactly what America needs. This is no longer about theoretical musings, but national survival in my opinion. Nor is it any longer about Left and Right, who both ironically share free trade as a philosophical foundation. In short, fixing America will require us to pull together and recognize my neighbor's prosperity in turn is my own. Several years ago a national reporter took interest in my interpretation of another field of science which sent shock waves through the industry after the story broke (hoping to revive this story again in a much broader scope). Without him, my analysis would have amounted to nothing. So in a like wise manner, without your site, I would not be able to move forward with this discussion. Thank youEPer: Econ_unmasked
Since we've been down it seems the powers that be want to make it seem like all is good, the economy has recovered and people are fine. Hardly the truth. Now the evidence is pouring in offshore outsourcing does what it implies, it ruins lives. Jobs are shipped abroad and we import poverty.
"Conservatives believe the economy functions better if the rich have more money and everyone else has less. But they’re wrong. It’s just the opposite. The real job creators are not CEOs or corporations or wealthy investors. The job creators are members of America’s vast middle class and the poor, whose purchases cause businesses to expand and invest. America’s wealthy are richer than they’ve ever been. Big corporations are sitting on more cash they know what to do with. Corporate profits are at record levels. CEO pay continues to soar. Corporations aren’t expanding production or investing in research and development. Instead, they’re using their money to buy back their shares of stock. Consumers don’t have enough money to buy. The median household’s income continues to drop. Adjusted for inflation, it’s 11 percent below its level in 2000. One factor here has been a sharp decline in union membership. Another structural change is the drop in the minimum wage. Today it’s well below where it was in 1979."
(1979 was also when unionization peaked in the U.S.)EPer: Bud Meyers
You covered a lot of territory, any one paragraph is easily worth its own blog. :-)
I have some thoughts on free trade but haven't had time to organize them. Certainly as a practical matter free trade has done the American middle class no favors. Here are a few random thoughts on free trade:
-- agree with MMT that it is foolish to export scarce natural resources in return for little pieces of paper. Better to be an importer of scarce natural resources than an exporter.
-- but -- and here I am in disagreement with MMT -- I see no harm in exporting knowledge products. When you export a knowledge product, you don't lose any knowledge. To the contrary, the more knowledge product you make, the more knowledge you gain. Better to be an exporter of knowledge products than an importer.
-- if you outsource the production of knowledge products, you lose knowledge and the other country gains knowledge.
-- free trade creates a "race to the bottom" where any business that can relocate, has an incentive to relocate to 3rd world countries with cheap labor and few regulations. Effectively, we surrender our national power to regulate commerce.
-- free trade has pretty much killed unions except for public sector and service sector unions that don't have to compete with 3rd world countries.
-- in the long run, market forces may indeed tend to resolve trade imbalances, but in the long run we're all dead. In the short run people get laid off and it's difficult for older workers especially to find new careers.
-- in general, I think trade should be evaluated on a case by case basis, based on whether importing a particular item is in our best interest. I'm inclined to protect our knowledge industries. I wouldn't mind a tariff on manufactured goods. But if some other country wants to give us their scare natural resources in return for our little pieces of paper, I'm probably OK with that.EPer: mtngun
China has captured so much of U.S. manufacturing one has to wonder if it is even possible to come back. Great article and very glad you shared it with us. So few realize the founding fathers and America itself used tariffs and various measures to gain a trade advantage, which in turn built up America.
i've been trying to get over here with coverage when i can, but this summer has been one major project after another...just finished a bathroom remodel, now i have to get a new barn built before winter...i should be able to contribute weekly come November...EPer: rjs
The fact prices are very uneven depending on states seems odious. Thanks for writing this up! I am back and am just starting to work on the site. I have a family thing that took up all of my time, on top of the "cannot rely on the Fed" disaster.
Is there actually any reason or law that foreign earned profits of multi national companies cannot be distributed as dividends? I am not aware of any. The stock holders can be people and entities from all over the world.
MS products are used and purchased all over the world. US population is about 5% of the world population. PCs are eubiquitous arround the world.
I checked an income statement of Microsoft and it showed 30% taxes paid on profit. US corperate tax is about 35%. MS income is mostly for IP. So there! Ha! What are you talking about?EPer: Anon (not verified)
Yes, they are needed and no, capitalism is not the problem. What you are witnessing in the US today is corporatism, or economic fascism. This is a precise term and I do not use it as a slur. We need the rule of law, just government and a stable economic system built on capitalism if we are to survive as an enlightened, democratic country. The only way to dispose of these systems is to embrace anarchy, which is an every man for himself proposition. Sure, an individual can go totally off the grid, in the wild, living on a steal or barter system - but your life will be brutish and short. This is not a possible way of life for a society. You speaks here of the wonders of communism, but I and many others who have lived under it will tell you differently.EPer: Jellobiafra (not verified)