What is so good about manufacturing?

[glenn1]

who gives a shit about the rest of the world. i care about what goes on in my backyard.

The rest of the world gives a shit about the rest of the world. Your focus might be the U.S. and "what goes on in your backyard," but the rest of the world isn't standing still either. They will actively and aggressively pursue their own manufacturing to compete with higher cost U.S. manufacturing, which was my entire point.

If nothing else, U.S. based manufacturing has already shifted to markets and products where the value-add they provide overcomes the cost advantages of places like China. U.S. manufacturing has upgraded from a base of numerous low value-add sectors like textiles to higher value-add sectors like aircraft production. The U.S. is manufacturing just as much stuff, it's just higher-end goods and with higher productivity (i.e. fewer workers). Automation and efficiency in manufacturing frees up excess workers to create value in other sectors, and thus creates higher economic activity in the end than leaving them in low value-add manufacturing jobs.

http://mjperry.blogspot.com/2011/04/decline-of-manufacturing-is-global.html

 

[Genx87]

This!

I once read that there were 7 steps of life before the fall of every empire (in history). Step #6 was to rely on the slave labor of conquered lands for your goods and services. We are at 'Defcon 6'.

I dont think people are working for at the end of a gun in this country yet? However I do think we in the next century will enter into uncharted territory. And your step #6 may become a reality. But that reality is the slaves wont be humans but robotics and computers. How does a human population sustain itself when it can have robots perform their job? It could go two ways. Economic ruin or economic freedom we havent ever seen in the history of man kind.

 

[OverVolt]

The rest of the world gives a shit about the rest of the world. Your focus might be the U.S. and "what goes on in your backyard," but the rest of the world isn't standing still either. They will actively and aggressively pursue their own manufacturing to compete with higher cost U.S. manufacturing, which was my entire point.

If nothing else, U.S. based manufacturing has already shifted to markets and products where the value-add they provide overcomes the cost advantages of places like China. U.S. manufacturing has upgraded from a base of numerous low value-add sectors like textiles to higher value-add sectors like aircraft production. The U.S. is manufacturing just as much stuff, it's just higher-end goods and with higher productivity (i.e. fewer workers). Automation and efficiency in manufacturing frees up excess workers to create value in other sectors, and thus creates higher economic activity in the end than leaving them in low value-add manufacturing jobs.

http://mjperry.blogspot.com/2011/04/decline-of-manufacturing-is-global.html

So this is why there is a global youth unemployment problem? :awe:

 

[werepossum]

I dont think people are working for at the end of a gun in this country yet? However I do think we in the next century will enter into uncharted territory. And your step #6 may become a reality. But that reality is the slaves wont be humans but robotics and computers. How does a human population sustain itself when it can have robots perform their job? It could go two ways. Economic ruin or economic freedom we havent ever seen in the history of man kind.

Personally I let my slave play a lot of video games and surf some really kinky porn, and it never has to leave the house to fund all this. Which one of us is the slave again?

Your "Economic ruin or economic freedom we haven't ever seen in the history of man kind" comment is spot-on. I think eventually we'll be where Milton Friedman suggested, where government pays everyone a stipend sufficient for basic subsistence and those wanting a higher standard of living will work in service jobs. However, moving to that level before human labor is largely redundant guarantees that we'll have economic ruin as the masses vote themselves largess and seek to maximize the basic stipend while minimizing the rewards to those "fortunate enough" to work. In other words, just like today only faster . . .

 

[zinfamous]

Because everyone can't be teachers, doctors, etc. You cherry picked top level service jobs (that are needed of course) to try to downplay manufacturing. Manufacturing provides good paying jobs for middle and lower class earning folks as well as benefits for most (although that's even starting to fall).

The idea that we can import out way to utopia and let everyone in the country be salesmen (service jobs) isn't working out too well, I would say.

Works OK as long as you can borrow your way to buying the stuff but then what (as is happening now)? Also works when you can keep a bubble going of some sort to make up for the loss of wages and outflows of money for all of the imports.

If we keep ripping out the better paying 'making stuff' jobs from the middle and lower class people and replacing them with lower wage service jobs (Walmart, McDonalds, etc), we'll continue to see the foundation decay to the point that the building (USA) will collapse. Hope you have a corporate jet or parachute....

What you are suggesting is that the masses essentially become salesmen (they all can't be teachers, doctors, lawyers, etc) and sell imported products between each other. That will work out really well....yep....really well.

yep, the push to a finance economy was a goal to create higher-paying jobs. Never mind that it's a sector that can only employ a very small fraction of the people that you can at the base of a real economy.

Those jobs simply get vaporized because the new Finance Wizards deem them more efficient to be shipped overseas. Who cares if unemployment here leads to eventual disaster for everyone. A select handful got theirs when they could...stashed away overseas, of course. HOW DARE the de-regulators "take away" that "hard-earned" cash that they actually made possible for the new wizards to earn.

 

[Engineer]

http://our.walmartcommunity.com/pledge/?adid=1500000000000038730120&veh=eml

:hmm:

 

[glenn1]

yep, the push to a finance economy was a goal to create higher-paying jobs. Never mind that it's a sector that can only employ a very small fraction of the people that you can at the base of a real economy.

Those jobs simply get vaporized because the new Finance Wizards deem them more efficient to be shipped overseas. Who cares if unemployment here leads to eventual disaster for everyone. A select handful got theirs when they could...stashed away overseas, of course. HOW DARE the de-regulators "take away" that "hard-earned" cash that they actually made possible for the new wizards to earn.

So you feel we should seek to create jobs for people no matter how little economic value they add? Before Industrialization basically everyone in the U.S. worked, of course it was almost always in farming (typically subsistence farming). Should we seek to replicate that model in manfucturing?

For example, if we forbid automation we could add lots of clerical positions to the finance sector, but are we really better off? Just think how many more people we could hire if during the next highway project we only use shovels rather than bulldozers and steamrollers. Heck, we could hire even more than that if we make the workers use teaspoons rather than shovels to dig their holes.

 

[werepossum]

So you feel we should seek to create jobs for people no matter how little economic value they add? Before Industrialization basically everyone in the U.S. worked, of course it was almost always in farming (typically subsistence farming). Should we seek to replicate that model in manfucturing?

For example, if we forbid automation we could add lots of clerical positions to the finance sector, but are we really better off? Just think how many more people we could hire if during the next highway project we only use shovels rather than bulldozers and steamrollers. Heck, we could hire even more than that if we make the workers use teaspoons rather than shovels to dig their holes.

Definitely not. Automation is progress, and it's axiomatic that fewer people can work in manufacturing as automation becomes more capable. I think the issue is our trade balance and our national security. For the former, our huge and long-standing trade deficit proves that we have been unable to compete, which only makes sense. There is nothing inherently inferior about someone in Mexico or Vietnam or China; they can be trained to do the same manufacturing jobs as can we Americans. Therefore we can only compete on cost of labor or regulatory burden, both of which are losing propositions against most of the world unless we want to become a third world nation. Another argument is that our IP will turn the tide, but increasingly we see this is not the case, and I see nothing that will change this coming up.

For the second, loss of our manufacturing base means we are less capable of sustaining a long war, which in a world war scenario puts us back on our nuclear stockpile. Besides the fact that we are continuously reducing that, once both sides have nuclear weapons one can no longer win a war, only make sure that both sides lose (and take the rest of the world with us.) Even a trade war can become catastrophic if a nation can't satisfy its basic needs.

 

[unokitty]

In 1900 rural America accounted for 60% of the total population. Today, that is 16%. During the last 100 years, Americans moved out of agricultural jobs and into manufacturing and service ones. Nobody argues for bringing back agricultural jobs. Nobody wants America to return to an agrarian society. Likewise it is not clear to me why anyone should want to go back to an industrial America where jobs are generated by assembling iPhones. ..

The future can be found in American companies such as Apple, Facebook, and Google. They don’t make any tangible products, but they command huge value. Facebook, with billions of dollars in revenue, has only about 3,000 high-paid employees. Google, the world’s largest Internet search company, has fewer than 30,000 employees in the U.S. Neither is Apple a big job generator; it has only about 40,000 American workers. Foxconn, in contrast, hires more than 1 million workers making iPhones and all other iProducts. Those who are obsessed with jobs probably would trade Facebook for Foxconn. I, on the other hand, would rather have Facebook than Foxconn. And I am sure that most would agree with me. In the future, America will need lots of companies like Facebook, not lots of Foxconns.

We do not want iPhones to be made in America. We are fortunate that China is willing to work really hard to assemble them for us. I would rather my children designed iPhones than made them. For our young generation, 400,000 workers in rows and rows assembling iPhones is a scene that they could comprehend only in a Charles Dickens’ novel. The day that America starts to assemble iPhones will be the day that China is designing those cool products. That will be a day when our smartest and brightest young people are flocking to China.

From:
The Real Reason the U.S. Doesn't Make iPhones: We Wouldn't Want To

The World changes, you can't go back to an agricultural economy and you can't make Apple assemble Iphones in the US.

Uno

 

[Engineer]

From:
The Real Reason the U.S. Doesn't Make iPhones: We Wouldn't Want To

The World changes, you can't go back to an agricultural economy and you can't make Apple assemble Iphones in the US.

Uno

True, you can't. However, as a group, you can vote yourselves THEIR money (taxes) and distribute it. Just a matter of time...

 

[Doc Savage Fan]

From:
The Real Reason the U.S. Doesn't Make iPhones: We Wouldn't Want To

The World changes, you can't go back to an agricultural economy and you can't make Apple assemble Iphones in the US.

Uno

Unfortunately, a large segment of our population are incapable of jobs requiring intellectual horsepower. These people used to be able to make a decent living in manufacturing. Now that these good paying jobs have greatly diminished over the years, they're now being forced into more menial jobs with much lower wages...or worse, burdening society by sucking on the teat of government assistance.

The loss of manufacturing is causing the ever-growing wealth disparity within our nation. In a perfect world, everyone would have great paying jobs at Facebook or other like-kind companies. But in reality, a large segment of our population aren't "equipped" enough to hold these kind of positions and many don't want to work in those professions as well.

Here's the rub....nobody is doing a damn thing to help find a pragmatic solution for this population segment. But this won't stop our politicians from pointing accusing fingers and blaming each other...after all, they desperately need our 'informed' votes and they'll tell you exactly what you want to hear in order to get it. And the funny part...we'll actually believe them.

 

[unokitty]

...you can vote yourselves THEIR money (taxes) and distribute it. Just a matter of time...

That's a hypothetical construct. The reality is radically different. Fact is, returning that manufacturing to the US would radically increase Apple's corporate taxes.

Manufacturing in the US would also greatly increase Apple’s tax bill and this would be by far the largest cost to the company of reshoring this work.

We should note that Apple pays full US corporate income tax on the profits it makes from sales in the US. They don’t try to offshore any of those profits at all. However, Apple is set up rather cleverly with regard to profits it makes in the rest of the world. The details are boring but it does mean that they have a tax rate of around 2% on the profits they make everywhere except in the US. If they were to bring this into the US it would have to pay the US corporate income tax of 35% minus the 2% already paid: which is why they don’t do it.

The important thing about assembling iPhones in the US would be that this method of reducing the tax bill simply would not be available. It is reliant upon the idea that Apple is manufacturing in China and then selling in Germany, France, the UK. If it were manufacturing in the US it simply could not protect those foreign profits in the same manner. All of the company’s profits would be subject to that US corporate income tax rate of 35% (minus the usual allowances for R&D and so on).

From:
If Apple Brought iPhone Manufacturing To The US It Would Cost Them $4.2 billion

According to Forbes, returning that manufacturing to the US would increase the US taxes on Apple's profits from 2% to 35%. In fact, the increase in cost of US taxes would greatly outweigh the increase in labor costs.

Since 1989, Apple has made over $2 million dollars in campaign contributions. Over a half million dollars to Obama alone. In addition, they have spent over $15 million dollars lobbying. While I may be sympathetic to your tax ideas, I doubt that they will carry much weight with the politicians that make the tax laws. Unless, of course, you can make similar contributions.

Uno

 

[Engineer]

That's a hypothetical construct.

There are other taxes that can be implemented besides corporate taxes. If the masses in the US with lower pay and no benefits (and dropping) swell to enough of the population, they WILL vote themselves the money of the ones above them and take it.

If people don't have what they need (or in some cases, what they want), they'll find a way to get it.

As for the business taxes, I am of the opinion that something needs to be done (all the way to just abolishing them) to get jobs back in this country. Income taxes can make up for business taxes if there are many millions of people put to work (not to mention the reduced load on the social program system...but that's for another thread.

 

[unokitty]

Unfortunately, a large segment of our population are incapable of jobs requiring intellectual horsepower. These people used to be able to make a decent living in manufacturing. Now that these good paying jobs have greatly diminished over the years, they're now being forced into more menial jobs with much lower wages...or worse, burdening society by sucking on the teat of government assistance.

The loss of manufacturing is causing the ever-growing wealth disparity within our nation. In a perfect world, everyone would have great paying jobs at Facebook or other like-kind companies. But in reality, a large segment of our population aren't "equipped" enough to hold these kind of positions and many don't want to work in those professions as well.

Here's the rub....nobody is doing a damn thing to help find a pragmatic solution for this population segment. But this won't stop our politicians from pointing accusing fingers and blaming each other...after all, they desperately need our 'informed' votes and they'll tell you exactly what you want to hear in order to get it. And the funny part...we'll actually believe them.

Let's be clear. US manufacturing is doing well. The problem seems to be that US manufacturing jobs are decreasing.

But this is not new. Its been going on for decades. For example:

Drucker pointed out U.S. manufacturing production rose by almost 40 percent between 1973 and 1985, even as manufacturing employment declined. “No increase in manufacturing production, no matter how large, is likely to reverse the decline in the number of blue-collar jobs in manufacturing or in their proportion of the labor force,” Drucker wrote in The Frontiers of Management. On the contrary, manufacturing jobs, like farming jobs, should go down in number even as productivity rises. “But,” Drucker noted, “that is not a conclusion that politicians, labor leaders, or indeed the general public can easily understand or accept.”

Here's a question. If US manufacturing is bad, why have Japanese, German, and Korean car manufactures all built new auto plants in the US?

Uno

 

[Engineer]

Here's a question. If US manufacturing is bad, why have Japanese, German, and Korean car manufactures all built new auto plants in the US?

Uno

I suspect that as their economies advanced, it became cheaper to build them here. Just a guess though.

 

[dank69]

Haven't read the thread so maybe this has been answered already but manufacturing is good because it adds tremendous value to raw resources. I'm no economist but I have to imagine that manufacturing is one of if not the biggest contributor to GDP.

A "manufacturing job" doesn't have to be a guy on an assembly line painting the nipples on an anatomically correct barbie doll. It can be the guy programming the robots to paint the nipples. It can be the guy developing the perfect color nipple paint.

The world is moving on from the time when you could earn a living pressing one button all day long. Meanwhile, the majority of America spends its time demeaning kids with school smarts as "brown noses." What hope do we have if we, as adults, don't collectively grow up past the point of stuffing geeks in lockers? One doesn't have to look any further than P&N to find plenty of examples of people dismissing statistics as "psuedoscience" rather than taking the time to try to actually understand them. No, no. Intellectuals (used as a perjorative) are pushing their hoity toity book learnin' on the rest of us 'Muricans.

 

[mammador]

Manufacturing, mining, farming create wealth. Service jobs merely distribute it.

what then is "creating wealth"?

 

[shady28]

what then is "creating wealth"?

First, wealth itself :
"Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English weal, which is from an Indo-European word stem.[1] An individual, community, region or country that possesses an abundance of such possessions or resources is known as wealthy."

"Adam Smith, in his seminal work The Wealth of Nations, described wealth as "the annual produce of the land and labour of the society". "


Economists usually include things like service industries in wealth creation, but that isn't exactly right. Some kinds of services add to wealth creation, or are necessary for its creation.

To give an example of a kind (like many) that doesn't : Suppose the fed passes a 20 page law on how taxes should be paid on shoelaces. Since the law is so complex, one must get a tax expert to decipher the law and determine how much you should pay on your shoelaces. This tax expert is providing a service.

Does this service produce wealth? Absolutely not. No resource or product is generated, no value is created. It is in effect an 'administrative overhead' that actually sucks resources from true wealth-generating activities.

Now when you start talking about other services, like say a truck driver, it's not so clear cut. They are a necessary part of wealth creation.

But I would submit that, just like the tax expert above, a huge portion of the services industry not only does not create wealth but inhibits its creation.

 

[glenn1]

First, wealth itself :
"Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English weal, which is from an Indo-European word stem.[1] An individual, community, region or country that possesses an abundance of such possessions or resources is known as wealthy."

"Adam Smith, in his seminal work The Wealth of Nations, described wealth as "the annual produce of the land and labour of the society". "


Economists usually include things like service industries in wealth creation, but that isn't exactly right. Some kinds of services add to wealth creation, or are necessary for its creation.

To give an example of a kind (like many) that doesn't : Suppose the fed passes a 20 page law on how taxes should be paid on shoelaces. Since the law is so complex, one must get a tax expert to decipher the law and determine how much you should pay on your shoelaces. This tax expert is providing a service.

Does this service produce wealth? Absolutely not. No resource or product is generated, no value is created. It is in effect an 'administrative overhead' that actually sucks resources from true wealth-generating activities.

Now when you start talking about other services, like say a truck driver, it's not so clear cut. They are a necessary part of wealth creation.

But I would submit that, just like the tax expert above, a huge portion of the services industry not only does not create wealth but inhibits its creation.

I hire an efficiency expert (a "service provider") who reorganizes my manufacturing facility and assembly line which results in a doubling in my production output. Did the expert create wealth or did he not create wealth? Or is he suddenly engaging in manufacturing rather than a service and thus falls into the "mining, manufacturing, farming" wealth generating category?

 

[shady28]

I hire an efficiency expert (a "service provider") who reorganizes my manufacturing facility and assembly line which results in a doubling in my production output. Did the expert create wealth or did he not create wealth? Or is he suddenly engaging in manufacturing rather than a service and thus falls into the "mining, manufacturing, farming" wealth generating category?

I pretty much addressed that kind of thing with the example of the truck driver, but in direct answer - no he did not create wealth. He increased the rate of wealth production.

Be careful not to confuse 'trade' with 'wealth'. The sources of wealth 'trade' their wealth for 'services', in some cases to increase their ability to create more wealth, in other cases for their own benefit. But those services do not create wealth, and the source of wealth is always the same. Mining, farming, and manufacturing.

You could remove all the truck drivers from my example from the planet, and another service industry will take its place. Remove all the farmers from the planet, and it doesn't matter how many truck drivers you have - we'll all starve to death.

 

[Engineer]

You could remove all the truck drivers from my example from the planet, and another service industry will take its place. Remove all the farmers from the planet, and it doesn't matter how many truck drivers you have - we'll all starve to death.

What if robots did all the farming (would they be considered farmers)? :hmm:

 

[shady28]

What if robots did all the farming (would they be considered farmers)? :hmm:

Sure

Here's a challenge. Tell me an industry that creates wealth that does not require a manufactured, mined, or farmed product to manipulate / use / trade in order to create that wealth.

 

[Engineer]

Sure

Here's a challenge. Tell me an industry that creates wealth that does not require a manufactured, mined, or farmed product to manipulate / use / trade in order to create that wealth.

You're preaching to the choir here!

(Although what about 'software writing'? That's a product as far as I'm concerned as many believe it's a service). Once you put that product into another product (phone, PC, etc), you have a fully functional product. It is no different than a capacitor, resistor, etc. other than you can't physically hold it in your hands (flash drive doesn't count! )

 

[Dman8777]

Unfortunately, a large segment of our population are incapable of jobs requiring intellectual horsepower. These people used to be able to make a decent living in manufacturing. Now that these good paying jobs have greatly diminished over the years, they're now being forced into more menial jobs with much lower wages...or worse, burdening society by sucking on the teat of government assistance...

One of the things I've noticed since I moved to Germany is that service jobs here aren't viewed as some sort of personal failure, as they are by many in the US. I know people who are proud to work retail for example. They know their departments and their market and they can actually help customers make informed decisions. It's a stark contrast next to the depressed walmart zombies who are nearly impossible to find and know next to nothing about the products they're selling.

If the only jobs available for high school graduates in the US going forward are going to be in the service sector, the solution is to make those jobs worth seeking. That means providing health care at reasonable cost and supplying living wages. Of course, employers aren't going to do that on their own.

 

[yllus]

America (and the other Western nations) don't need manufacturing jobs; that's just our current shorthand for "America needs jobs a low-skill adult can do". That's not to denigrate people in manufacturing; there are obviously highly intelligent and highly skilled workers in that market. But the reason we say "America needs manufacturing" is because we're generally referring to jobs any human can be plugged in to do on fairly short notice. That minor point aside, let's talk about manufacturing.

I think for the most part, the economic savings we realize in North America by allowing foreign nations to build and sell us goods for cheaper than we ourselves could make them for are an obvious win. The commonly cited boogeymen of "forgetting" how to build things or what would occur if China one day decided to stop selling us things are ridiculous and unnecessary to disprove. However, I do wonder about the effect on the economy when spin-off companies from large manufacturers don't get their start in North America anymore.

A made up example: A tailor who works in the garment district of NYC who designs a new type of sewing machine to improve productivity or allows for a new design method; is that guy starting a Chinese company today instead of an American one? That worries me more than anything - we want new business to start here, not elsewhere.