I suspect that I agree with the position articulated by Noah Smith in his piece at Bloomberg View, critiquing the idea that we can “bring back manufacturing jobs”, more than this post might suggest. Rather than take on his points one by one I’ll put my thoughts into a series of questions about policy. When I present a dichotomy, assume we can only select one (I know it’s more complicated than that).
- Should the objective of policy be to maximize the number of low wage jobs? That’s what the Germans call “the American model”.
- Should we subsidize consumption or employment? Right now we impose steep taxes on employment, suggesting that we want less of it.
- Should we subsidize immigration? Failing to enforce our own laws is a form of subsidy. We’re doing that with respect to legal and illegal immigration.
- Why do we subsidize the creation of intellectual property? Hypothetically, a residual can be attached to any good or service.
- Why do we subsidize imports? It might not be obvious but we subsidize imports in dozens of ways including requiring different things from domestic and foreign suppliers.
These all boil down to a much bigger question: what kind of America do we want?
I think the policy objectives should be to maximize the number of high wage jobs, to stop subsidizing consumption and increase the subsidies to employment, that we should not subsidize immigration, that we should cut the subsidies for the creation of intellectual property, and that we should not subsidize imports. I want a much more egalitarian United States in which more people are employed in creative, highly compensated work.
To achieve my goals we’d need to reduce subsidies on some things and increase the subsidies on others.
We may seem some manufacturing return to the US, but since we compete with low wages by being more productive, it just doesn’t seem likely that we see a significant increase in manufacturing jobs. Those high paying jobs will have to be found in other sectors methinks. That, I suspect will require a strong investment in research. Don’t see that happening unfortunately.
Steve
Mr. Smith spends the first half his screed explaining why manufacturing will never return, and then, he spends the second half admitting it can. He does not change his position, but rather, he uses a sleight-of-hand to change the context of manufacturing from labor intensive factories to robotic ones.
Somehow Chinese peasant farm workers can operate a modern automated factory, but Americans cannot. I find this rather dubious. (Meaning: If you believe this, you are a complete and utter fool or a dumbass.)
Much like the American farm workers that were unemployed by modern agricultural techniques, the American factory workers that were unemployed by modern manufacturing techniques will find new jobs in the new economy.
Oh wait, those jobs in manufacturing plants were not upgraded. As opposed to manufacturing since the Industrial Revolution or possibly Gutenberg’s press, expensive labor intensive jobs were not replaced by cheaper less labor intensive jobs. Instead, cheaper workers replaced their expensive predecessors doing the same labor intensive jobs.
Now, new manufacturing will be less labor intensive, and the beneficiaries will be mostly lower skilled workers. The now less expensive advanced manufacturing techniques will produce the new jobs. Products, not yet conceived, will be manufactured, and they will employ the recently unemployed or newly employable.
The available smartphone & tablet apps did not exist 15 years, and except for a few, it was not able to be conceived. Amazingly, the same people who deny this possibility are the same ones who are immersed in this reality.
The buggy whip factories are simply myth, and are nothing more than the imaginations of feeble minds. Buggy whips are one type of leather good, and a leather goods manufacturer had multiple other products to produce.
The horse-drawn carriage manufacturers simply re-purposed their carriages for the automobile. (The Model-T had quite a bit of wood.) The history of carriage manufacturers does not fit the ‘buggy makers’ myth.
The free trade/open borders policies we have pursued for 40 years or so have substantially increased the size of the economy despite the loss of manufacturing. But, the increase in GDP as gone entirely, 100%, the to Upper Class. Middle Class incomes have stagnated, and the Upper Class has actually clawed income away from the Working Class, whose incomes have been falling.
Another point not often made is that we have replaced high profit/high wage/high tax generating enterprises with their opposite. Taxes have not risen fast enough to fund our government, and we are accumulating vast debt. Right now, our annual budget deficit is as large as the defense budget, and in a few to several years the annual interest payment on our accumulated debt will be the largest item in the federal budget.
I submit that we would be better off with zero immigration and a mercantilist trade policy. We would sacrifice growth, but the whole country instead of just the Ruling Class would be better off for it. The Ruling Class would suffer somewhat.
You bring up some very worthwhile points, TastyBits. I have first-hand experience of work processes being redesigned to be performed by minimum wage workers with limited English or literacy so I know that takes place.
The worst crime is the subsidization of all the Amerikan breeding, especially when we can easily attract potty-trained, multi-lingual and skilled adults into employment and entrepeneurship from abroad.
“But, the increase in GDP as gone entirely, 100%, the to Upper Class.”
Nothing is 100%. But….
It’s definitional. If the distribution of Upper Class is defined as from the top 35-40% then it’s largely true. And it’s true that the top 5% have done disproportionately even better. But if you just redistribute you will break the machine, to the detriment of the bottom 95%. Better to look at policies to facilitate the opportunities for the bottom 50%, and eliminate the capacity of the very top to manipulate in their favor. And in that last sentence lie all the arguments as to how.
During my lifetime the United States has gone from 90% of both wealth and income in the hands of those ±2 standard deviations from median income to 90% of both in the hands of those in the top decile. I don’t believe that’s either an accident or the consequence of the natural order of things. I think it’s a consequence of policy.
I don’t think that outcome was a deliberate objective. I think it was the result of a combination of bad assumptions, the short-sighted pursuit of increasing GDP, and the enthusiastic support of those who recognized they were benefiting.