Lots of good replies to my comments. The Bulls board always impresses me for its ability to have a conversation at a high level.
Before I get into specifics, I want to point to two general examples.
- Professor sits down and does the math and shows that a bumble bee can't fly. This is to the point where its an urban myth but its a story much like the boy who cried wolf that illustrates a point. When a mathematical or statistical analysis comes to a conclusion that is obviously not true, then the math is wrong.
- The oil industry's efforts over the past decade to discredit global warming. The lengths some people went to in order to prove that global warming wasn't real or man made were laughable. The obvious issue there is that the people pushing it had a personal financial incentive to cloud over reality.
OK, on to the discussion
Dantown8587 wrote:http://www.marketwatch.com/story/us-manufacturing-dead-output-has-doubled-in-three-decades-2016-03-28 Technology and new ways of organizing work have revolutionized the American factory since the Golden Age of the 1980s. Today, U.S. factories produce twice as much stuff as they did in 1984, but with one-third fewer workers.
That has literally nothing to do with globalization. Globalization is essentially pandering to the masses but not the real reason businesses don't manufacture here. American manufacturing is not going down, it's going up. LABOR is going down, not up. Globalization cannot explain that.
This is a common point made by globalists. Its the "bumblebees can't fly" argument that makes no sense. Walk into WalMart or Target or Home Depot. Look at where everything was manufactured. Virtually everything was made outside the US. I'm a little older than most here so I remember a day when that wasn't true.
We manufacture a much lower percentage of the goods we use than we did decades ago. This is an incontrovertible fact. If we manufactured more of the goods we use, we would employ more people. Those people may be far more productive than they were years ago but there would be more, high paying jobs and that would trickle through the economy.
I do want to focus on automation because this strikes at base economics.
Median income tends to stagnate in developed countries unless something drastic happens that can impact an entire economy. Let's say you haven't liked what's happened in the previous 40 years of the US economy (1975+) but look at the preceeding 110 years of history on the US economy
- Ended slavery (more jobs)
- Fought Civil War (more available jobs)
- Took off with industrial revolution (new jobs)
- Manufacturing was viable business (landing spots for people who didn't go to college)
- Fought two world wars that took millions of men out of the work force
The growth of the US economy from 1860 to 1980 was never going to be repeated from 1980 on because the United States was never going to remove 500K 18-30 year olds (aka about .5% of the population) and wages were low because, well, wages were low without protections like minimum wage. Each of those events created new jobs that could be done with unskilled labor and provide basic necessities to families. Now, you HAVE to go to college to have a fighting chance to do that and that costs a lot of money.
It is impossible to just have a ton of unskilled workers make "a lot" of money for multiple generations; it's only available to growing and non-developed countries. Once you reach a point of maturity in a country, wages get high enough that capital is invested in. China is going to see this as well.
OK, a long time ago, people used to hit things with rocks to shape them. That was cumbersome and slow. Someone eventually came up with the idea of attaching a stick to the rock. That stone hammer sped things up. Then we figured out metal and made normal hammers which lasted longer. Eventually we came up with nail guns that allowed a single person to put in a tremendous number of nails. His productivity went up and in the short term, one guy could replace dozens.
All along the way, our standard of living was going up and up. Productivity does that even if it creates short term dislocations. Automation (read: multi axis robots) are just the new version of nail guns allowing less people to produce more.
Its important to understand the why and how of productivity improvements leading to a better standard of living:
- New technology allows company X to replace many workers with less
- Company X has a short term surge in profits
- Company Y and Z get the same technology and undercut company X on price****A******
- Consumers now get goods for less money and spend the extra income on something other than company X's goods. Now their standard of living is better because for the same money they get more stuff.
- The other stuff than consumers are now demanding requires labor. The displaced workers from companies X, Y and Z get jobs there. With full employment, you get wage pressures. ****B****
End result: Full employment, normal profit margins, consumers now get more stuff making their standard of living higher.
Why is basic economics not working today like it did for the past 100K years? Two answers:
- Corporations have got in bed with governments and have acted to stifle competition. This isn't a globalization issue but its a huge problem worth a different discussion. By constantly merging or shutting out competition, corporations have made it so that they don't get undercut on price and can retain the profits they make from higher productivity. This is one of the primary mechanisms of income disparity in the US.
- By globalizing, we turned our closed system into an open system. Unskilled labor has to compete with billions of people around the world unlike before, where you would have full employment and then wage pressures. Dantown is touching on this in multiple places but the reality is that in order for their to be real wage gains, the ENTIRE PLANET has to get close to full employment. That's going to take a while.
Dantown8587 wrote:And oh yeah, median income is up.
Its just going back up to where it was. If this continues year after year for about a decade, then we might be on to something.
The Bordeaux transmission plant.
What is that you ask? Well, its where a tremendous number of transmissions for Ford Explorers and Rangers were made for a very long time at a cost penalty. That's right, Americans were paying about $100 more per vehicle just so that they could drive a vehicle with a higher quality problem transmission imported from France.
Why would Ford do something that stupid? Content legislation. France demanded that if Ford wanted to sell cars in France, they had to employ French workers. Just about every country other than the US does it. This very minute light housings are being assembled in South America instead of the US at a cost penalty to the US corporation because the South American countries demand that the work is done there.
A lot of the studies I read are asinine. They read like the oil companies denying global warming. Of course, there are many labor intensive jobs that are not competitive in the US but there are countless others being moved out of the US due to legal reasons (ie. VAT, content legislation, etc.) The fact that studies gloss over this makes me question their motivation.
