A New Great Depression?

No, of course not; this isn’t even officially a RE-cession yet. This article, however, draws some disturbing statistical parallels in income inequality and laissez-faire government policies. And the author doesn’t even get into what I think is the greatest danger to the US economy; the evisceration of the manufacturing sector in the name of global “free” trade. I still maintain you cannot be an economic superpower if you don’t make anything and all your jobs involve repairing things made in other countries or delivering pizza.

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Published in: on April 3, 2008 at 10:31 am  Comments (28)  

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  1. < < I still maintain you cannot be an economic superpower if you don't make anything and all your jobs involve repairing things made in other countries or delivering pizza. >>

    What do you think of the argument Tom Friedman and others make that a) America is still by far the most dynamic source of innovation in the world, b) that in the Information Age, information-based economies will thrive with or without large manufacturing sectors, and c) for that reason (among others) we are well poised to remain the world’s economic superpower for a long time to come?

    I just read “The Lexus and the Olive Tree” and found Friedman’s more optimistic view of America’s future a welcome break from the usual doom-and-gloom. On the other hand, there’s a more skeptical side of me that is still troubled by our shift from a producer to a consumer nation, and I don’t see how 300 million+ people can all have information-based jobs. Surely there are still things that America can and should make better than the rest of the world, right?

  2. The only reason quotes are needed around “free” is that trade is more free and fair than it was before the agreements, but there are still tariffs and restrictions. There’s still a ways to go yet, over the objections of Pat Buchanan and others who hate letting people choose.

    “Surely there are still things that America can and should make better than the rest of the world, right?”

    Eric is right. We tend to get beat at things we aren’t as good at. I don’t think Americans are lousy at everything. If we are paying people $50 or so to make cars and the work is actually worth from $10-$20 an hour (and the overhigh wage can only be “protected” by eliminating people’s right to choose the best products), that is not sustainable.

  3. Sort of an interesting sidenote: my wife is Chinese and is finishing her PhD in Mechanical Engineering at UT. I don’t know the exact numbers, but it seems like the majority of graduate students in science and engineering at UT are either Asian or Indian. Initially, I thought that was kind of a depressing statement about America, but after meeting some of these students I began to realize that the vast majority of them plan to STAY in America and are well on their way to citizenship. So what this suggests to me is that our science and engineering potential in this country is NOT diminishing; it’s just changing color, so to speak. And it says a great deal about the enduring power of our country that so many of the best and brightest from two growing economic powerhouses overseas (China and India) STILL would prefer to live in the U.S. I hope that trend continues.

    The other interesting thing I observed is that when my wife’s parents were here visitng, or any of her Chinese friends’ parents were here visiting, they were always amazed and flabbergasted to learn that so much of what they saw and liked was built not by the government, but by individuals, private organizations, businesses, etc. THAT, to me, is why America is still so great, and will continue to be so for a long time.

  4. “On the other hand, there’s a more skeptical side of me that is still troubled by our shift from a producer to a consumer nation, and I don’t see how 300 million+ people can all have information-based jobs.”

    I couldn’t have said it better. Information is all well and good, but if you don’t make your own stuff, you are dependent on whoever does.

    “If we are paying people $50 or so to make cars and the work is actually worth from $10-$20 an hour (and the overhigh wage can only be “protected” by eliminating people’s right to choose the best products), that is not sustainable.”

    But is IS sustainable to eliminate all the $50/hour jobs and instead have all our cars made overseas for $10-$20/hour? Especially when the jobs left behind are lower wage? Ironic that during this awful era in which you argue Americans were denied “choice,” we had full employment, an expanding middle class, and the highest standard of living on Earth. Perhaps we just didn’t realize how deprived we really were…

  5. There’d be an auto factory building boom in the US if typical auto workers were paid the $10-$20 or so that is the fair wage for such unskilled labor.

    “Ironic that during this awful era in which you argue Americans were denied “choice,”

    No quotes needed around choice, actually. So, what golden age are you looking at? No doubt one with water fountains for “colored” people only, and no Internet. I know you aren’t like him, but I could not help but think a little of one of Pat Buchanan’s protectionist screeds that I read in newspapers. Or Lou Dobbs.

    Anyway, during whatever golden age you mention, there were fewer countries that were good at manufacturing. Things have changed now.

  6. “There’d be an auto factory building boom in the US if typical auto workers were paid the $10-$20 or so that is the fair wage for such unskilled labor.”

    I always find it interesting that “fair wage” is considered synonomous with “low wage.” And we aren’t competing with countries that pay $10-$20 per hour; we’re competing with countries that pay $10-$20 per day. By your own definition, “free” trade drags American living standards down, not world living standards up. This is precisely the opposite of how “free” trade has been sold to the public.

    “So, what golden age are you looking at? No doubt one with water fountains for “colored” people only, and no Internet.”

    Wow! Hard to get more non-sequitur than that! Did you know Hitler was a vegetarian?

    “Anyway, during whatever golden age you mention, there were fewer countries that were good at manufacturing.”

    So “good at manufacturing” means the same thing as “paying your workers at least 50% less”?

    “Things have changed now.”

    On that we agree. Now, America is willing to allow its manufacturing sector to be systematically disasembled. You still haven’t explained to me how it’s good for Americans to live in a country that doesn’t make anything. Cheap goods don’t do people much good if they don’t have the money to buy them…

  7. ” always find it interesting that “fair wage” is considered synonomous with “low wage.””

    Whether or not it is “low” is entirely subjective, and differs wildly depending on who looks at it. A fair wage is one agreed on by both partners. Either party is free to walk away from it if it is not fair.

    “And we aren’t competing with countries that pay $10-$20 per hour; we’re competing with countries that pay $10-$20 per day”

    What Japan pays its auto workers is on the high end, not low end.

    “By your own definition, “free” trade drags American living standards down,”

    No quotes needed on “free”, unless it is to point out that there are still too many trade restrictions. Free and fair trade also means US exports (jobs!) and better goods for Americans to buy.

    “Wow! Hard to get more non-sequitur than that! Did you know Hitler was a vegetarian?”

    Good. Then we can get rid of any idea that things were great when the government was a lot more fascist and instituted “protectionist” trade policies. I see you have invoked an odd form of Godwin’s law too.

    “You still haven’t explained to me how it’s good for Americans to live in a country that doesn’t make anything”

    It isn’t. I am not so down on America as you are. I think there are things “we” are good at making, just like there are things other countries are good at making.

    “So “good at manufacturing” means the same thing as “paying your workers at least 50% less”?”

    If someone is grossly overpaid, yes. Especially when there is a clear choice between lowering wages to real-market value and just closing the entire factory and firing everyone. Flint, Michigan has the latter (more like no manufacturing instead of “bad manufacturing”, thanks to an organization that refused the former.

    “Cheap goods don’t do people much good if they don’t have the money to buy them…”

    This is as irrelevant as mentioning German leaders being vegetarian. The reasonably-priced goods sell, quite well. Do you want totals in billions of retail sales per year? People clearly have the money to buy them.

    “On that we agree. Now, America is willing to allow its manufacturing sector to be systematically disasembled”

    No. What is different is that a lot more countries are good at making things. Enough with tired American exceptionalism. Those who do a crappy job get weeded out, instead of being propped by by draconian laws.

  8. ‘It isn’t. I am not so down on America as you are. I think there are things “we” are good at making, just like there are things other countries are good at making.’

    And which things would those be? Cars? Computers? Steel? Textiles? Airplanes? Consumer appliances? And as for the things we are “bad” at making, what are the workers who USED to make those things supposed to do once their employers are “weeded out” by the All Powerful and All Knowing Invisible Hand? They will NOT be making the same amount of money. What are they supposed to do? How is it good for America’s future to force down wages? You do know real wages have been, at best, stagnant for 20 years? Again, how does this help America?

  9. There are still a bunch of things Americans do make and even export. It’s not all gloom and doom.

    The buggy and horse-collar factories are all gone, and they found other things to make.

  10. Here’s the stark reality, as I understand it: globalization is here to stay, whether we like it or not. The Invisible Hand may indeed seem cruel and unfair in its workings, particularly to those people who thought they could rely on having the same job until they die, only to find that those jobs are now being done overseas cheaper or better or both. But the cruel reality is, no one is born with a right to a certain job or a certain wage. Nor in this country is anyone LIMITED to a certain job or a certain wage. Rather than fight in vain against the forces of capitalism that most of the world has now embraced (for better or worse, and whether we like it or not), we would be better served to help make our workforce more adaptable and innovative through better-quality education and training. I think we do our fellow countrymen a disservice to let them believe they have a right to do the same job their whole lives. That’s not reality for the vast majority of us; certainly not me or anyone I know. For better or worse, ours is a dynamic, ever-changing, fluid and mobile society. The old days of living and working in the same town, at the same factory or company, for your whole life are simply gone for most of us. And I’m not convinced that’s an entirely bad thing. Inconvenient, yes, challenging, yes. Inherently bad or wrong, no. As the old Chinese proverb goes, we should look at every challenge or crisis as an opportunity, and in this case the opportunity is for our country to cultivate the most creative, flexible and adaptable workforce on earth so we remain a competitive world power for centuries to come.

  11. That is rather well worded, Eric.

  12. Thanks! Every once in a rare while I feel a moment of unusual lucidity, and then my mind plunges back into darkness. 🙂

  13. Soooo…the “magic hand” will somehow instaneously create “magic jobs” to replace the real ones that have gone overseas? In that case, put me down as a capitalist atheist, or at least an agnostic. And the analogy with industrialization is inapt; replacing farm jobs with factory jobs let to a net increase in both wages and living standards. Replacing high-paying facotry jobs with lower paying service jobs does not increase wages or living standards. The idea that “globalization is inevitable” sounds perilously close to the “inevitable march of Marxism” rhetoric one used to hear out of the old Eastern Bloc, and is about as persuasive. NO ONE is playing by the rules we are; there is not another country on Earth that allows it’s basic industries to be taken over by economic competitors. How many European airlines are owned by American companies? How many Japanese toll roads are built and operated by American companies? None, because everyone but us realizes that bartering away control of infrastructure and allowing one’s manufacturing sector to expire, also extinguishes sovereignty. If we don’t make anything, what happens if the countries that do make things decide they don’t like us anymore? I have yet to see a single shred of evidence that the new globalist religion is ultimately good for America, which is my ONLY yardstick of measurement, economic theory be damned.

  14. Globalization is nothing other than the ability of individuals to make informed economic decisions with much less regard to such blocking factors as international boundaries. Its opposite is fascism or “national socialism” where the ruling class of a country makes economic decisions for everyone.

    So, it is really the inevitable march of freedom to make our own choices. Is that so bad? I much prefer the invisible hand of us making our own decisions to the jackboot of government forcing the wrong decisions on us.

    “I have yet to see a single shred of evidence that the new globalist religion is ultimately good for America”

    The religion analogy is a good one. There is a complete separation of “church” and state in this. If you hate Mexicans and love Poles, you can choose to only buy Polish. And vice-versa. It’s your choice. I respect the right of Pat Buchanan to make economic choices, but I don’t want his choices forced on everyone. Sounds like a good idea to protect trade choice just like religious choice.

    Now, what brand of car do you drive?

  15. The opposite of globalism is Nazism? Wow! Just…wow…

  16. < < The idea that "globalization is inevitable" sounds perilously close to the "inevitable march of Marxism" rhetoric one used to hear out of the old Eastern Bloc, and is about as persuasive. >>

    Except that Marxism relied on totalitarian governments and a near-complete denial of freedom to their citizens in order to spread. Globalization is the exact opposite, and in fact was fueled largely by the collapse of Marxism and the subsequent rush of most of those countries to be more like us. In order to reverse it, a whole lot of governments would have to agree on radically limiting the freedom and choice of individuals and businesses. Even if you and I both agreed that would be a good thing, I don’t see it happening. The genie is out of the bottle. In fact Tom Friedman points out in “The Lexus and the Olive Tree” that globalization was actually well underway in the early 20th century, but was interrupted by WWI, the Great Depression, WWII and the subsequent Cold War.

    < < If we don't make anything, what happens if the countries that do make things decide they don't like us anymore? >>

    I have a hard time believing we’ll ever NOT make anything. We might not make the same things we always did, but we’ll find new things. I don’t believe Americans will ever be so stupid that they can’t find economic niches to exploit in the global economy. Come on, give us a LITTLE bit more credit.

    And it might be worthwhile to reflect on the fact that all of these people and industries overseas are producing products primarily for U.S. consumers, because we’re so enormously WEALTHY, and for other other countries who are trying to be more LIKE us. And most of the science and technology other countries are using as they try to catch up with us on decades of lost progress comes from the U.S. We’re not exactly in a terrible economic position viz a viz the rest of the world, no matter what jobs have been outsourced. We ought to spend less time and energy figuring out how to turn the clock back and more effort on how we can adapt to and thrive in the world economy.

    And I’m no cold-hearted laissez-faire capitalist. I believe governments can and should play a productive role in ensuring that their citizens are well prepared to compete in the global economy, and should sign trade deals and create laws that protect people and the environment from the most rapacious aspects of unchecked capitalism.

  17. When the government bullies people more and prevents them from making their own personal decisions, the government is being more fascist.

    Socialism is the ruling class controlling personal economic matters, and if it is done out of some person’s perceived “national interest”, it is national socialism. The capitals are avoided, as to not refer to actual Nazi Party(s), but to instead to refer to nationalism as being the justification for the movement toward socialism (government making people’s decisions againt their interest and their will).

    (I’ll let slide your change of topic to actual Nazism. And that is what it is, a change of topic made by you).

  18. < < Now, what brand of car do you drive? >>

    I just ordered a brand new Prius! I voted with my wallet for less gas, better fuel efficiency and a cleaner environment.

    Fear me! Look upon my Prius and despair, ye’ greedy oilmen!

  19. Eric, once again you said it so well. I agree with everything you said.

    And governments “productive role in ensuring that their citizens are well prepared to compete in the global economy, and should sign trade deals and create laws that protect people and the environment from the most rapacious aspects of unchecked capitalism.” should not be a license for free reign for government to punish Honda and Honda buyers because Ford just can’t stop building subpar cars.

  20. @eric: “I just ordered a brand new Prius!”

    Not only that, your decision supports the American worker. Toyota employs more and more American workers at good high-wage jobs while GM and Ford can only fire workers.

    Toyota pays auto workers in the US an average of $48 or so an hour. Come on, Crank, is $48 a poverty wage?

  21. I didn’t know that about Toyota, but it’s nice to hear. I hope GM, Ford and every other car manufacturer starts putting more effort into creating better and better hybrids (or even better, non-gas fueled cars).

  22. Toyota looked into opening a factory in Michigan a year or two ago, but the UAW organized protests to let the Toyota representatives know that they were not welcome and should go build their factories elsewhere.

  23. Eh, sigh. Okay, lots of lovely philosophical arguments for this alleged “free” trade; STILL no evidence that it is good for America. How does “globalism” make America stronger and/or richer?

  24. Well for one, globalism has opened lots of new markets for American goods and services that didn’t exist or were very limited during the Cold War. Take just one American company, say a Microsoft or a Dell, and look at all of the former Communist-bloc countries that are now using those products. Those profits help employ hundreds of thousands of people in the U.S. True, companies like Dell may outsource some of their services overseas, but they still employ vast numbers of people in the U.S.

    I’ve traveled a lot in my life, and still do for my current job, and it’s weird how every country I go to is starting to look more and more like the U.S. Everywhere you look you see familiar brand-name American products. True, some of those products are also manufactured overseas, but they’re still products of American companies situated in the U.S. that employ millions of people.

    One of the main points Friedman makes in “The Lexus and the Olive Tree” is that globalism is largely the spread of American consumer culture throughout the world. In fact most critics of globalism (overseas, at any rate) see it as a form of American hegemony–a very real and tangible manifestation of our economic strength–and not as a threat to that strength.

  25. I think it is better that Americans have the choice to buy a Lexus, rather than have the government deny the choice.

  26. < < I think it is better that Americans have the choice to buy a Lexus, rather than have the government deny the choice. >>

    And it’s even better if everyone in the WORLD has the choice to buy a Lexus, if they want it and they can afford it.

    On the other hand, I would personally prefer they buy hybrids. 🙂

  27. Also, it belatedly occurs to me that we have used the ideas of free trade and globalization interchangeably in this discussion, when in fact free trade is only the economic dimension of globalization. There are political, technological, cultural and other dimensions as well. I think it’s true that America benefits more in some dimensions of globalization than in others, and that economics is not at the top of that list. But it can be, if the will is there.

    Probably the main reason I welcome globalization is not that I’m a rabid capitalist, but that I think a more globally interconnected world (technologically, politically and culturally as well as economically) will be an inherently more peaceful one. If the price for that world is that we have to find new things to build, then I don’t think that’s too high a price.

  28. You are right about “free trade” and “globalization” being related but different terms. As for Dell, that IS an example but a bad one. For one thing, Dell doesn’t make ANYTHING, much less computers, as the company itself brags. They don’t even really design new computers. They are at best a Home Shopping Network for consumer electronics, with 100% of the construction outsourced. Their total employment is miniscule compared to the overall economy AND they just announced 900 layoffs in the Austin area. Next!


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