patrick.net

Kevin says

You simply fail to see this because you don’t understand economics at all.

Economics is a complex subject and I honestly don't think anyone really understands it.

Economics is essentially the study of scarcity but modern productivity has turned this on its ear. If everyone had access to the capital to engage in productive enterprise suited to them we could collectively create immense amounts of hard wealth, much more than we are capable of consuming.

So much of the national income goes to wastage in excess labor output devoted to luxury goods and economically meaningless services.

No economy can detach itself from the fundamentals of wealth-creation indefinitely. Smith's theories of comparative advantage are useful but not the final word on the long-term wealth of nations.

Kevin says

4X says

Good points, however, with 15 million unemployed in the US i would have to assume that by inshoring those 3 million jobs would come in handy. This was not meant to prove anything, just a question that I was seeking answers for.

If the United States stopped buying things from other countries we would have a higher unemployment rate than we do today. You simply fail to see this because you don’t understand economics at all.

well help me understand...it sounds like what you are saying is that if we were the #1 producer of all goods for the planet we would be no better off than we are now. Explain?

I am confused, not being argumentative.

Kevin says

If the United States stopped buying things from other countries we would have a higher unemployment rate than we do today. You simply fail to see this because you don’t understand economics at all.

Fact: There is a massive and unsustainable imbalance that gives us cheap tube-socks right now in exchange for ruining our society and impoverishing our future.

Squanderville vs. Thriftville

text-formatted article

4X says

it sounds like what you are saying is that if we were the #1 producer of all goods for the planet we would be no better off than we are now. Explain?

Comparative advantage means eg. instead of paying $10 for a domestic manufacture we pay $2 to China and then spend $8 on something else we want. If this "something else" is a good or service of domestic origin then we're probably ahead, wealthwise. Just paying people to work isn't a solution, they've got to be productive, too, otherwise we're better off just paying the $2 to China and paying people not to work.

The problem with this is that the economy is more than an exchange of goods and services at efficient price levels and not all goods and services enrichen us equally. There's a lot of rentierism going on which taxes efficiency and diverts the velocity of money into unproductive products of labor. Ie. the factory owner being driven around in his Audi A8 doesn't make the factory town any richer.

The story of globalization so far is winners among people whose jobs can't be sent to India or China (eg. politicians, newspaper publishers and opinion column writers), an uneasy middle class, and a largely f----ed working class that has to figure out how to make a living in this world.

Troy says

4X says

it sounds like what you are saying is that if we were the #1 producer of all goods for the planet we would be no better off than we are now. Explain?

Comparative advantage means eg. instead of paying $10 for a domestic manufacture we pay $2 to China and then spend $8 on something else we want. If this “something else” is a good or service of domestic origin then we’re probably ahead, wealthwise. Just paying people to work isn’t a solution, they’ve got to be productive, too, otherwise we’re better off just paying the $2 to China and paying people not to work.
The problem with this is that the economy is more than an exchange of goods and services at efficient price levels and not all goods and services enrichen us equally. There’s a lot of rentierism going on which taxes efficiency and diverts the velocity of money into unproductive products of labor. Ie. the factory owner being driven around in his Audi A8 doesn’t make the factory town any richer.
The story of globalization so far is winners among people whose jobs can’t be sent to India or China (eg. politicians, newspaper publishers and opinion column writers), an uneasy middle class, and a largely f—-ed working class that has to figure out how to make a living in this world.

ok, now that makes sense in the fact that since we have lost our comparative advantage and wage payin jobs are going overseas to our 40:1 comrades. Looks like a rework of WTO, NAFTA and GATT agreements is in order to prevent those jobs from leaving. Sir James Goldsmith reccomended that we only have free trade with "like" economies and not with 3rd world nations whose wages are 40 times lower.

Elliemae shall bend over and take this one.

Her car is outta the shop. It's doing well. Or so she thought...

http://money.cnn.com/2010/03/02/autos/GM_recall/index.htm

At this rate, I'll not have to worry about gas costs. I can't get a tank full before it visits the shop again.

Any society (country, empire, etc.) that no longer produces its own goods is done, over with.
We can have all the professional sector service economy stuff we want, yet we make nothing.
Sorry, it's over in the long run. Manufacturing is where it's at.

I'm often bemused by the eagerness of those who are (presumably) not millionaires/billionaires to jump to the defense of certain policies that have helped steadily transfer the wealth of our nation from the many independent manufacturers/business owners into a few blue serge pockets on Wall St.

Sir William Goldsmith (incidentally, a billionaire) had some very interesting and prescient observations to make regarding our trade policies back in the early nineties, perhaps best summarized by this:

"...one of the characteristics of developing countries is that a small handful of people controls the overwhelming majority of the nation's resources. It is these people ... who assemble the cheap labour which is used to manufacture products for the developed world. Thus, it is the poor in the rich countries who will subsidize the rich in the poor countries".

Quite a template for advancing the global community.

But hang in there folks; the age of automation will eventually wrest us all from the drudgery of toil, manufacture and craft. We can lay around and eat chips and dips while a fleet of cheap, self-propagating Daleks take over the heavy lifting.

I'll stick with my US made Honda. I think they build Civics in Ohio.

I dispute the parts of the article which implies that it's OK not to have electronics, textiles, etc produced in the US. We need those industries also. Not everybody is cut out for a management position.

Austinhousingbubble says

But hang in there folks; the age of automation will eventually wrest us all from the drudgery of toil, manufacture and craft. We can lay around and eat chips and dips while a fleet of cheap, self-propagating Daleks take over the heavy lifting.

I assumed this was the way the world worked until the dotcom bubble, where we were creating a lot of wealth yet home prices just rose to match incomes, and then some.

This troubled me but I did not have an intellectual framework to plug in what was the difference between real estate valuation and other forms of capital.

Then I came across Georgism, and then, later, Mason Gaffney's _The Corruption of Economics_, and the difference between land and what the neoclassical schools call other forms of capital became pretty clear.

Whoever owns the land will always take their share of the producer surplus. There's never enough land, not until we start making floating colonies or moonbases.

Troy says

There’s never enough land, not until we start making floating colonies or moonbases.

Bzzzt, wrong. There's never enough land if everyone wants to live on a plantation. Otherwise there's plenty of LAND for just living on. The USA is still from a 50,000 foot view largely empty.

Land suitable for farming? Maybe. The USA has not even begun to see starvation for "land" in raw sense. Clean drinkable water, now there's an issue that may bring some consternation in my lifetime.

Back on topic. I love my 1997 Toyota Camry and will not part with it until it falls to pieces beneath me. A very solid and fixable car. But before that I had never owned anything that wasn't a GM product. I still think they have potential for comeback but should they? Must we surrender industry entirely?

Maybe the debate is wrong. Maybe it's time for a NEW American car company not burdened with the legacy of 50+ years of making the same crap? The choice to bailout GM was I think wrong because it keeps the Big 3 in place and they will by their mere presence crush upstarts.

I have hopes Tesla or SOMEONE will come along and show what is possible. After all corporations like people get old and fossilized, the difference is we prevent the corporations from dying when they probably should.

The current trade imbalances are temporary. As soon as China can’t sell tube socks for $1 anymore because they can’t find people willing to work for ten cents an hour,

Except that, despite how capitalist China looks these days, they're a communist nation. A rather big factor to leave out of the equation.

sorry, they’ll NEVER be made by humans in america again, despite all the wishful thinking).

I doubt if anyone is pining for the golden days of tube sock manufacture (although nothing beats a hand-linked toe). That said, you will never see a fully automatized manufacturing base in your lifetime.

Furthermore, if we stopped importing most of the cheap crap we import from China, NOBODY would make that stuff at all.

Sounds like progress already!

You think McDonald’s is going to put little plastic toys into happy meals when they cost more than the food?

Now there's a sacred cow. Are Happy Meal toys considered durable consumer goods? They certainly don't hold up well as fodder for your viewpoint. Fuck 'em, besides -- kids shouldn't be eating that dogshit anyway.

If it wasn’t for the child slave labor making those things, they just wouldn’t be made, and not importing them would not lead to any new jobs in America (though it would lead to fewer jobs in China, which means less need for infrastructure, which means less money for American firms like GE and Caterpillar)

No. If according to you, the current trade imbalances are only temporary, (vague), then you will simply see the Chinese eventually buying their own goods and services.

Why such a vocal proponent of what is clearly a fucked and failing system? Are you importing the plastic bits that go on the end of shoelaces or something?

Austinhousingbubble says

Why such a vocal proponent of what is clearly a fucked and failing system? Are you importing the plastic bits that go on the end of shoelaces or something?

I agree with Kevin. I don't think he's really a proponent, just a realist.

Austinhousingbubble says

..... importing the plastic bits that go on the end of shoelaces or something?

Aglets, they are called aglets.

4X says

It is a known fact that today we are raising families on 2 incomes, where as in the 1950s where the prices matched the salaries families were being raised on a single income. Home prices do not match the incomes, food costs do not match the incomes, transportation costs do not match the incomes.
Lets say a person makes 45K a year or $2200/mo:
Mortgage on a 1600/SQFT home in LA: $2500/mo
Rent a 1600 SQFT home: $1500
Food: $600
Auto Insur: $100
Auto Car note: $300
Auto Gas: $400
In this scenario whether you rent or own you will need to downsize to a cottage in the ghetto in order to survive, so most parents realize they need a dual income household which leaves the children to raise themselves.

Luckily, the US as a whole is not well described by using LA as an example.

I agree with Kevin. I don’t think he’s really a proponent, just a realist.

Then perhaps you, too, are a pathological contrarian ; )

When someone frames the disastrous reality of our free trade agreements (including "child slave labor") so glibly, it's hard not to see it as something of a defense -- or at the very least, acceptance of the status quo as a necessary evil for industry.

This notion that we *need* to buy crappy baubles from China so that China will, in turn, have money to buy our raw materials or the plastic injection molding apparatus to manufacture said baubles to perpetuate a vicious cycle? Complete nonsense. Show me hard evidence that the Western world would implode like The Great Pit of Carkoon if this all went away tomorrow.

Here's the reality: the American middle class has not been advanced or enriched by free trade (unless you measure the debt to fund it as wealth) -- on the contrary, it has been subsidizing its own slow demise. The system has failed.

Aglets, they are called aglets.

Ah! I knew there was a name for them, but couldn't remember.

jvolstad says

I’ll stick with my US made Honda. I think they build Civics in Ohio.

The point of the post is that you do not support as many American jobs as you do Japanese nationals.
This is not including the supply chains, which may or may not be the same parts companies shared by all auto-manufacturers.

Ford = 70K American Workers
Toyota - 70K Japanese Workers, 7K American Workers
Honda - 25k American Workers

As we discuss more and more, I think it best that no one company dominate as in all (Toyota, Honda, Nissan, Ford, GM, etc.) most likely create about 500k in American jobs. Should 1 fail, it would not be good....especially FORD or GM.

tatupu70 says

4X says

It is a known fact that today we are raising families on 2 incomes, where as in the 1950s where the prices matched the salaries families were being raised on a single income. Home prices do not match the incomes, food costs do not match the incomes, transportation costs do not match the incomes.
Lets say a person makes 45K a year or $2200/mo:
Mortgage on a 1600/SQFT home in LA: $2500/mo
Rent a 1600 SQFT home: $1500
Food: $600
Auto Insur: $100
Auto Car note: $300
Auto Gas: $400
In this scenario whether you rent or own you will need to downsize to a cottage in the ghetto in order to survive, so most parents realize they need a dual income household which leaves the children to raise themselves.

Luckily, the US as a whole is not well described by using LA as an example.

Yep, however, both coasts are the same. Rural America has its own troubles with much slower economies.

The trade deficit ex-petroleum went to 1998 levels in 2009:

SF ace says

Yes, the US needs a vibrant auto industry but the changes must come in two fronts:
Stiffen the tariffs on BMW’s Lexus, Mercedes, etc. When people choose to buy them in lieu of the tariff overwhelmingly over say a Cadallic, then our tariffs are too low. The balance is out of whack. It is not like Europeans, Japanese are driving Cadallacs. You don’t see European trucks and SUV’s on the American soil as much, so I bet the tariff is stiffer on these items.

I hear that BUICK is huge in China, Japan and Europe. I think the foreign markets and American trucks are keeping GM/FORD afloat for now....there seem to be some changes in the direction of FORD/GM as their old BOATS are not around any longer. Ford has the EDGE, ESCAPE, FLEX, FOCUS and FUSION which are targeting the economy class vehicles pretty well. FORDS Lincoln line isnt the best designed luxury vehicle and most likely would benefit from a EURO design. GM/CHRYSLER on the other hand havent seemed to shifted their focus. Outside of Cadillac I dont really see any viable options for economy class vehicles with the EURO styling.

Of course, determining an appropriate tariff is a delicate balancing act. There are probably thousands of different tariffs on different item with different countries and works both ways. There are probably general trade agreements and parameters to abide by. It is time to hire specialist to look at each items and we’ll need to start from scratch and draft a new agreement. 5M manufacturing job loss to overshore manufacturer is simply unacceptable. Manufacuring also supports capital and related industry. If nothing else, that trend has got to stop. If other nations lodge a protest, which could damage trade relations, so be it. Not just on cars, how about cell phones, furniture, chips. Some of these should be manufactured in the US. I understand some things like clothes and shoes are lost cause, even if it is still ultimately imported we should impose higher level of tariff. The $$ should be used to fund other manufacturing incentives that can be done here at a strategic level. Ultimately, it just feels like we are on the short end of tariff policies and that has to changed.
Of course, tariff’s are no good unless the car manufacturer raise their game! There is simply too many undesirable junk domestic brands. Think of the Chrysler brand, that is a horrific lineup and no amount of tariffs will help. US cars have no/weak branding even domestically. Cars are one of those things you have to get people excited about. The most identifiable US brands, the Escalade, F150, and Corvette are flawed on the premise of relying on cheap gas. We can’t compete on the high end against BMW’s and Mercedes, and we can’t compete on the low end, like the Honda’s and Toyota’s because of their profit margins. There is simply no profitable market left when the gas guzzler market left.
The definition of management failure is “auto industry”. Like any manufacturing concern, you compete on branding, costs and/or technology. It seem like all these companies did was add more confusing brands and options which is not a competitive advantage. How did we get to a point that we cannot compete on neither of these things? Maybe one company, but all three companies? What exactly did the executives in these companies did to earn their pay? Granted, car manufacturing is a complicated business but it seem like we knew nothing about our competitor while our competitor knew everything about us. It’s not like there is a lot of big inherent advantage in manufacturing a car in places like Japan and Germany.

..and then again do we want to ruin the markets for TOYOTA, HONDA, and NISSAN who combined employ 100K Americans. Tough call....and I know I am going against my statements but ultimately all I care for is a strong American economy.

The deep recession is actually a blessing for the US auto industry in a way as the business model and direction was severely flawed and it takes something like this to make philosophical and structural change. It is not like selling any car is easy nowadays considering the economic conditions, but in 2-3 years, we’ll be back on record setting sales and hopefully by then, the US manufacturer will have risen their game and sell a fair share domestically and internationally. Auto industry employment will be back. Look at what is happening to Toyota, we can take share back, only when we manage the companies diligently.

I have a feeling that HONDA or NISSAN is going to overtake TOYOTA as the number 1 vehicle sold in the US....NOT FORD OR GM. Reason being is that Ameircan car manufacturers have a stigma that is working against them with the American people. American people do not have principles and continue to tout American vehicles as the BOATS of yesteryear that break down or have transmission problems. When in reality, FORD definitely turned around their safety, reliability ratings after 2007....GM maybe not so much outside of their CADILLAC lines. But when havent Cadillacs been solid vehicles. Both GM/FORD need to invest in a EUROPEAN design for their future vehicles to stick....similar to what TOYOTA, HONDA and NISSAN have done.

4X, I don’t feel any less American buying a foreign brand. In fact, probably tariffed a fair amount to compensate in lieu of being built in the US. However, true protection comes from within, if you build cars people will buy on their own and is profitable, that is true protection and strengh and a better reason to be proud

.
That being said, CADILLAC is the king of the road today with their CTS, DTS, ESCALADE and SRX models. If ESCALADE were reasonably priced it would most likely be the number 1 seller in the world. GM/FORD are working hard to turn around 20 years of stigma that was based on factual data that found their vehicles had tons of issues.

It will take about 10 years I suppose, then hopefully the markets will be ours to dominate.

@Kevin

What I argue, as I have in other posts, is that we should *NOT* be focusing on the creation of “jobs”. We should be focusing on maximizing wealth, and then efficiently distributing that wealth so that everyone benefits.

I think it was you that mentioned we should invest heavily into a national rail system and subway system that makes commuting easier and promotes business through ease of access to labor. What other methods do you see as viable options for improving our economy?

4X says

What other methods do you see as viable options for improving our economy?

I'd like to toot my tax horn and say we should tax commercial site values a lot and improvements not at all (other than for various footprints -- mainly shadowing and local traffic impact) . This would encourage development and move some if not much land out of idle hands to people willing and able to put the land to work at more optimal uses.

Canadian-style single-payer insurance with Japanese-style cost controls.

~80% of the population should have access to a natural-gas powered bus grid that runs ~80% of the buses at 10-15 minute intervals. Right now our oil trade deficit is worse than our goods import:

Nukes. A lot. Plus a new manhattan project for solar and battery technology.

Apparently 1 out of 4 people in jail in the world are in the US. We should probably legalize drugs and do some urban redevelopment. The redevelopment of the previous century didn't turn out that well but perhaps that's because we did it on the cheap. It should be possible to house anyone in our major inburbs for $400/mo for a nice 2 bedroom garden apartment. That is around $250,000 of fixed improvements carried at the government's cost of money at 2%.

Education could use some more investment too.

So, that's energy, education, healthcare, housing, local transportation, crime, urban redevelopment. It's a start. We've got the money -- 20% of this country owns almost 90%+ of the wealth -- but lack the unity of will.

The question kinda becomes where's the wealth creation opportunities for the 80% of the population that doesn't have a good education. I don't have an answer for that. Perhaps with our productivity we don't need wealth creation (ie jobs) for everyone. A basic life without luxuries isn't that capital intensive to just dole out. I understand this idea is contentious and reasonable people can disagree : )

Education. Everything else follows. I think kids should be in school 9-5, 50 weeks a year, and they need to be educated in fundamentally different ways, not the industrial era “3 Rs”.

The terrible truth is that there is no equality where natural aptitude is concerned. All the college credits in the world are not necessarily going to create a fleet of high minded, highly skilled magnates in lucrative, cutting edge careers. I do agree, however, that real gains could be made in revamping the public school system. It's too much of a one-size-fits-all, high-volume mill with a lousy quality control department, from K-12 and on through Universities/Technical Colleges.

That said, scratch 50 weeks a year. A disproportionate amount of a person's life is spent in classrooms as it is. Look around -- there are more than enough hyper-educated cataleptic automatons out there in careers they'd blow in a second if only their Lotto numbers came in.

There's too much theory and not enough practice, which is where one finds a real education. I hear of students (my neighbor is a Biophysics Prof) simply navigating coursework by gratifying a professor's ego/agenda in order to get their ticket punched. There should be more focus early on in discovering what field of study within which a student might naturally excel and bring something to. Probably the best way to do that is to place students in environments/situations outside of the classroom where certain aptitudes might have a chance to emerge/evolve.

Call me a dreamer, but personal fulfillment is an essential economic underpinning and driver. If you had a working public full of more people who truly loved their work, the result would be a more sound economy, very possibly less consumer debt, better product, and an overall better social fabric.

Troy says

4X says

What other methods do you see as viable options for improving our economy?

I’d like to toot my tax horn and say we should tax commercial site values a lot and improvements not at all (other than for various footprints — mainly shadowing and local traffic impact) . This would encourage development and move some if not much land out of idle hands to people willing and able to put the land to work at more optimal uses.

So you are saying that land that is sitting and not being used should be tax heavily to encourage its usage?

4X says

So you are saying that land that is sitting and not being used should be tax heavily to encourage its usage?

Ideally all land underdeveloped land (compared to its zoning) should be redeveloped or abandoned to the city, no?

This is just a standard Georgist boilerplate position. Density is good in that it can make for more efficient (walkable) neighborhoods and a variety of lifestyles. Manhattan was kinda brilliant in setting aside such a large chunk of the island while encouraging density everywhere else. Zone more density and you can zone more parks, too. Win-win.

Here's what Churchill said in 1909 on this topic:

"The greater the population around the land, the greater the injury the public has sustained by its protracted denial. And, the more inconvenience caused to everybody; the more serious the loss in economic strength and activity -- the larger will be the profit of the landlord when the sale is finally accomplished. In fact, you may say that the unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done. It is monopoly which is the keynote, and where monopoly prevails, the greater the injury to society the greater the reward to the monopolist. This evil process strikes at every form of industrial activity. The municipality, wishing for broader streets, better houses, more healthy, decent, scientifically planned towns, is made to pay more to get them in proportion as is has exerted itself to make past improvements. The more it has improved the town, the more it will have to pay for any land it may now wish to acquire for further improvements."