Lessons on Trade, U.S. Manufacturing from Chile
1. WEST CHESTER, PA — "With the world captivated by the plight of 33 Chilean miners trapped in a mine more than 2,300 feet below the surface, a local manufacturer of drill rigs is involved in the rescue effort. Schramm Inc. is a major manufacturer of drill rigs and the manufacturer of the particular rig — the T685 — that reached the trapped miners a few days ago. There are 40-plus Schramm drill rigs in Chile right now, said Edward Breiner, president and CEO of Schramm, in an interview Friday."
2. MILWAUKEE, WI -- "If not for a tiny camera system developed by Aries Industries of Waukesha, the families and rescuers of 33 trapped Chilean miners might not have caught a glimpse of their loved ones. Aries manufactures pipeline inspection and rehabilitation equipment for water, wastewater, natural gas, oil and disaster recovery services. The company manufactures a camera system that has been used many times in coal mine disasters in this country and was available to Chilean rescuers."
A few points:
1. Chile has achieved a great deal of economic success in the last twenty years, largely because it has pursued free market policies that include very open free trade policies. The OECD recognized Chile's economic success last December by inviting it to be the first South American country to join the club of developed countries, see CD post here. With a more protectionist approach to trade with high tariffs, Chile may not have had access to the drill rigs and camera systems manufactured in the U.S. that are now helping in the rescue of the 33 miners.
2. We hear a lot of news about the "death of American manufacturing sector," the "loss of millions of manufacturing jobs," and how this will contribute to some permanent decline in the U.S. economy. And yet the data show that manufacturing output was reaching historical all-time record highs before a sharp recession-related decline, and manufacturing output is gradually increasing and will probably be at record levels again within a few years (see CD posts here, here, and here). The manufacturers highlighted here are probably just two examples of the thousands of successful American manufacturers that are world-leaders in high-tech manufacturing equipment.
HT: Colin Grabow
131 Comments:
i think that most of the people who complain about the loss of american manufacturing are really complaining about something else: the loss of semi skilled manufacturing jobs that paid high wages and allowed a single breadwinner to buy a home and new cars and send his kids to private college.
i'm sure those jobs were swell when they existed, but they were a fluke created by the destruction of the rest of the world's manufacturing base and the massive demand created by rebuilding from ww2. huge demand and no competition makes for big paychecks, but that was never going to last. it's over now.
the rest of the world has caught up or even exceed us. "made in america" has a lot less cache for a car than "made in germany" and doesn't sound as reliable as "made in japan".
the uneasy middle ground of products that are not the best quality nor the cheapest has become a terrible place to try to do business. walmart can make money in gorcery, and so can whole foods, but the middle guys like safeway get creamed. this is doubly true of manufacturing.
the simple fact is not that the manufacturing jobs we have lost were crappy jobs. maybe they used to be good jobs back when there was no competition, but if they still were, they'd still exist.
the US spent a long time benefiting from the higher productivity of its workers. that's over. countries like japan and germany have more productive manufacturing workers. even some chinese plants do. countries like india, china, the phillipines, indonesia etc have much cheaper labor and come out ahead on the productivity/wages metric.
so, we find ourselves mostly in the uneasy middle. we are safeway in a world of walmart and whole foods. it's the wrong course. what we need to do is find areas of comparative advantage and focus on them. that may not be manufacturing at all. most manufacturing is pretty undifferentiated stuff. we're never going to make TV's again. i doubt we should even be making cars. i certainly can't think of an american car that's good value for money (apart from trucks, we seem to make good light and heavy trucks). the american car companies seem to be able to make quite competitive products overseas and are doing really well in markets like brazil and china. that pretty much tells you everything you need to know about american auto labor and restrictions.
the real question perhaps ought to be "why are we fighting this ludicrous losing rearguard action to defend the indefensible' as we try to prop up uncompetitive industries and save these fanciful "good jobs" we remember from leave it to beaver.
that time is gone. the longer we take to realize it, the more damage we'll do before the inevitable occurs. historically, manufacturing jobs are not the kind of jobs that drive you into the upper middle class. they are how you get out of the lowest of the low.
rather than lament the disappearance of our manufacturing jobs, we should applaud that we have found better things to do and are still getting what we need. there is no shortage of manufactured goods in the US. if anything, the converse is true. it did not hurt the US to see the % of workers participating in agriculture drop from 75% to 2-3%. it coincided with our prosperity. it was a good thing, not a bad one. manufacturing will be the same.
we need goods, but we don't need to make them any more than we need to grow our own food.
World GDP almost doubled from 2000 to 2008, from $32 trillion to $61 trillion (according to the World Bank, World Development Indicators).
Australia's GDP growth was much faster than Argentina, and Argentina's growth was much faster than Chile, which has a GDP of $170 billion (about half the size of Walmart's annual revenues).
Most are simply ignorant of the enormous value the Bush Administration, Wall Street, and Corporate America added to the U.S. and global economies. It was the "Invisible Hand" at its best.
Thanks, morganovich, for your insightful comment. I could only find one small thing to quibble with.
"i certainly can't think of an american car that's good value for money"
I've been completely satisfies with my Camry, which I've driven now for over a year. I have had no problems of any kind, and it's met my expectations completely.
ron-
isn't that a toyota? what i meant to say was a car made by US manufacturers. i realize that toyota, honda, bmw, and others produce good cars in the US.
such production does seem to raise an interesting question: why is it that foreign car manufacturers can open plants in the US and do well with them making quality product and nice profits while our own cannot?
it's not incompetence. our manufacturers do quite well when they open plants overseas. the ford plant in brazil is one of the most advanced in the world and cranks out cars that sell well and makes a great deal of money on a standalone basis.
it's not that our car makers don't know how to make cars.
so what could it be?
stultifying US regulations? maybe that hurts a bit, but that would affect BMW and toyota too.
seems like labor is about the only differentiator.
isn't it interesting how industries like airlines that managed to get out from under their unions have done so well? they made it through the huge oil spike really well. no BK's this time.
contrast that to the autos.
i find the union fight to keep their existing jobs at the expense of the whole industry to be about equivalent to burning the walls to keep the house warm. might work for a while, but eventually, you destroy the whole thing.
a parasite that kills its host winds up homeless.
ps.
unless, of course, the parasite can buy politicians and force taxpayers to build them a new one.
Peak, wasn't a good deal of the GDP growth in the US from 2000-2008 created on borrowed money? I don't recall that being considered a good thing. It's possible, of course, that I slept through the lecture on "The Invisible Hand Goes A-borrowing".
I also seem to recall that a large portion of that GDP growth was due to government spending, which almost never improves my standard of living.
Maybe GDP growth isn't the best indicator of economic health.
So by that small, Third World country taking the route of whoring itself out to the world, you're thinking a far larger country has to do the same to get any prosperity back.
morganovich said...
Fine, prop our nation up by any means possible, if it allows a restoration.
PeakTrader said...
Except where that administration advocated and supported immigration law fraud to take care of the more-skilled work, while ignoring illegal immigration to take care of the less-skilled work. No thank you.
"i certainly can't think of an american car that's good value for money"
At least you're willing to admit the transplants aren't American. The Camry is assembled to Japanese specifications, with localized modifications.
I doubt we should even be making cars.
If you want more granola-eating golfcarts that deliver less power per dollar, fine. For the rest of us that simply ask for a mass produced US car(and not a "global" one like the Opel Insignia with Buick badges on it), Detroit will have to do. Nobody else seems to bother filling the middle space that Detroit fills handily.
Third world hellholes and European countries have a tendency to make two types of cars. The choices are some underpowered, European/Asian inspired golfcart, or some overly expensive exotic that delivers everything in overkill. They do not deliver the happy, RWD-engined, suitably powered car that Detroit has learned to deliver for just under a century.
Fire the environmentalists and the greenies from all the car design studios. Then start doing things the Detroit Way.
rather than lament the disappearance of our manufacturing jobs, we should applaud that we have found better things to do
You presume wrongly. People have not found better things to do. If we did for the large scale, then we wouldn't care that those jobs disappeared. People now seem to care since that they retrained, and get attacked again, just higher up.
It's not as easy as that 1930's cartoon where they just jump on another line and begin working again.
"such production does seem to raise an interesting question: why is it that foreign car manufacturers can open plants in the US and do well with them making quality product and nice profits while our own cannot?
so what could it be?
seems like labor is about the only differentiator."
Bingo. I think you have nailed it.
Government efforts to keep sinking ships afloat only make matters worse.
Of course, it's not clear that government support of US automakers has much to do with economics.
If those good jobs were a
“fluke created by the destruction of the rest of the world's manufacturing base and the massive demand created by rebuilding from ww2”>
then how do you explain those jobs before WWII? Before WWII American real wages rose in every decade including the decade of the 1930s. After the 1960s real wages have not risen in any decade. American wages have been greater than the rest of the world for most of our history. Why is it only in recent decades that it has been a problem?
The Invisible Hand: 2000-2008
The Bush Administration
The Bush Administration inherited the worst stock market crash, since the Great Depression, and a recession. However, the Administration turned the recession into one of the mildest in history, after the record economic expansion.
Over a five-year period in the 2000s, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth, two million houses a year were built, 16 million autos per year were sold, U.S. real GDP expanded 3 1/2% annually, in spite of 6% annual current account deficits (which subtract from GDP).
The U.S. economy was most efficient, while Americans stocked-up on real assets and goods, and capital was built-up. It was one of the greatest periods of U.S. prosperity, and in a structural bear market that began in 2000.
The Bush Administration was adept minimizing the recession in 2008, until Lehman failed in Sep '08, which caused the economy to fall off a cliff. However, subsequent appropriate policy adjustments were implemented quickly.
Wall Street
Wall Street facilitated the building of the most efficient economy the world has ever seen, created and captured trillions of dollars of real wealth in the global economy, distributed that wealth to America's masses, and diversified the risk globally.
Corporate America
Corporate America offshored high cost, heavy goods, or goods with declining prices for big profits, imported those goods at lower prices, and shifted limited resources into emerging industries and into high-quality "core goods" of older industries with market power.
Morganovich, I think you are well versed in the schools of economics and finance. You are wrong about manufacturing and tend to be elitist on the subject.
"the real question perhaps ought to be "why are we fighting this ludicrous losing rearguard action to defend the indefensible' as we try to prop up uncompetitive industries and save these fanciful "good jobs" we remember from leave it to beaver."
Germany is quite prosperous with a strong manufacturing base supporting well paid workers. Exports of manufactured goods from Germany are what is making that country one of the top performers along with China. These two countries also have a Value Added Tax which allows taxes paid to be rebated when their manufactured goods leave the country.
The poor U.S. tax policy, in a world economy, has hurt the manufacutring sector to a devastating circumstance. U.S. goods and services that are exported can't have taxes shed at the border (border adjusted taxes) for sale to the rest of the world.
There are of course non-tariff barriers such as certification standards and inspections.
You can't explain the loss of manufacturing as simply shedding of undesirable jobs anymore then by simply stating our economic collapse in 2009 was caused by Wall Street brokers.
Morganovich, I couldn't agree with you more, with one caveat I'll get to.
A quick thought first, not really a disagreement: It does make sense to make cars here, when the logistics costs exceed the labor costs. Transportation costs are expensive. Throw in currency fluctuations and you can justify a plant.
I've watched the American auto industry destroy itself over the vary things you've described. As an automotive engineer, then program manager/manager, it was progresively harder to do my job while I was given less and less. Eventually, I concluded that the industry was destroying its future and present to maintain a way of life for the OEM factory worker that simply was not sustainable. I would present this argument to people as "when transplant car makers can make cars in America for half the cost of an American car company, you know you have a problem." You know, they still deny it. Kind of pathetic, really.
On to the disagreement: We do need manufacturing jobs. Given the vast population of barely educated, perpetually uninspired anchors, either we find a way to employ them, or we have to support them. Now I'm not advocating socialism. I want America to drop this arrogant attitude where we think we are better than everyone else and compete for these jobs. Really compete. You mentioned productivity of factory workers. You are more or less correct, Mexican plants are just as productive as American plants. American factory workers have nothing to argue in their favor other than proximity to where items are sold. So lets acknowledge this and set policy to build a better manufacuring base that is more sustainable.
How about a constitutional amendment banning institutional campaign contributions. Personal (individual) contributions only. Yes that means unions too. Then let's eliminate payroll taxes, torte reform and go from there.
Ron says: "...wasn't a good deal of the GDP growth in the US from 2000-2008 created on borrowed money? I don't recall that being considered a good thing."..."I also seem to recall that a large portion of that GDP growth was due to government spending, which almost never improves my standard of living."
Would you have preferred higher prices and interest rates. So, fewer Americans could afford to borrow?
Yes, living standards rose sharply along with government spending, although the budget deficit shrunk to $162 billion in 2007, while the economy expanded.
seth-
that one was rambling and incoherent even for you.
you first quote from me was not even said by me.
can you really thing that being too green is the problem with american cars? that's ludicrous. i'm not advocating golf carts, i'm advocating crappy companies that cannot turn a profit going out of business. either make products that people will pay more for or find a way to lower your costs or go away. the "keep the costs and live on subsidy option" is not OK.
your point on unemployment is absurd. in 2007, US unemployment was 4.6%. are you claiming that in 3 years, our entire manufacturing industry fell apart? it's a nasty recession, the worst in generations. unemployment will go up. but if you are going to claim that all these job losses are due to manufacturing erosion, you're going to have to answer the question of where all those 2007 jobs came from. 4.6% is VERY low unemployment, the lowest in US history apart from 99-00. so how is at that suddenly, in 3 years manufacturing jobs all went away and we were doomed?
james-
i think you are mistaking hourly compensation for total compensation.
http://en.wikipedia.org/wiki/File:US_real_compensation_1964-2005.gif
overall compensation has been rising all along.
put that together with a loss of manufacturing jobs, and the inescapable conclusion is that manufacturing jobs have been given up in favor of better jobs.
this notion that US wages are stagnant is simply false. the complexion of compensation has changed, but the trend is up.
buddy- read my post to james. manufacturing is down as a % of jobs, but income is up. thus, the notion that it's all the good jobs leaving seems tenuous.
germany has much higher structural unemployment that we do. the were over 10% from 2000-6 and got as high as 12%. that is the price of their coddled labor. so is capital substitution. germany has among the highest rates of capital use per worker in the world. this is because their workers are expensive.
sure, they are driving the EU right now, but they are still poor.
our per capita GDP (under PPP) is nearly 30% higher than theirs. if germany were a US state, they would be slightly poorer than alabama, our 45th poorest.
http://2.bp.blogspot.com/_otfwl2zc6Qc/S1G0KKd2DjI/AAAAAAAAMfA/JN1sFmb3VyQ/s1600-h/eu2008new.jpg
higher structural unemployment and much lower wealth does not seem like the model to emulate.
jason-
but why do they need employment in manufacturing? can we not create jobs somewhere else?
you could have made the same argument about the 75% of the US population that stopped being farmers. they found jobs doing something else, generally jobs that paid better.
why can't someone who made light bulbs mow lawns or build roads or houses or serve meals? why can't they be a customer service rep or and number of other jobs?
manufacturing is not the only source of jobs for semi skilled labor.
Jason Said...
"Given the vast population of barely educated, perpetually uninspired anchors, either we find a way to employ them, or we have to support them."
Who is this WE you mention? Why do WE have to support anyone or find jobs for them? What about personal responsibility?
"I want America to drop this arrogant attitude where we think we are better than everyone else and compete for these jobs. Really compete."
And, who is the WE in this sentence? Is it the same people you mention above who WE have to support? If so, then you are correct. Maybe THEY need to rethink what is owed to them, and what THEY must do to make a living. THEY need to really compete for available jobs.
Morganovich, don't you think your argument about structural unemployment in Germarny the result of absorbing the East German workforce? They are working their way through unemployment and the U.S. is not.
I have to defer to you on capital cost per worker. Could it be that the output per worker is also high based on the cost of robotics etc.?
I think you have to admit that the successful countries have a strong manufacturing base and that exports (goods and services) are essential.
"Would you have preferred higher prices and interest rates. So, fewer Americans could afford to borrow?"
In a word, yes. We as consumers and we as a country now owe more than we can ever hope to pay back without serious pain. How is that a good thing? There are no good paths forward from here.
Morganovich, there aren't many other low skill jobs that would be available. If I believed we could train the unwashed masses to do something semi-skilled we could talk about technical trades or something else. But construction and manufacturing are really all a huge group of Americans are capable of doing, or willing to do.
Clearly there are huge groups of spoiled, insipid, morons that may have the talent to do more. But we are doing nothing with our present cadre of oh-don't-worry-it's-not-really-socialism-but-really-it-is social safety net laws to entiice these people to run from their comfort zone in loser land to productive work. I mean there are really unemployed people who will not pick fruit. But I'll bet they would if they were starving.
But even these perpetually uninspired people aren't much good for anything than cannon fodder.
So, let's acknoledge the problem and try to help the free market reate something they can do, pay them a wage that allows profit and is globally competitive.
Ron H: The issue is the unproductive people are multiplying like rabbits. I don't want to help them at all. It makes me ill inside knowing the crap I've had to swollow to keep a job and feed my family over this last recession.
Regardless, we (read Americans) have to do something. If these Anchors are left to themselves, they will overwhelm the non Anchors. They will elect clowns who promise them the world, and raise taxes on the rest. (Wait a minute...) Or they'll riot and burn whole cities when the checks stop cashing
I stand by my words. We may not want to do anything for them, but they will force our hand. Let's acknowledge the problem, get ahead of this and do the things, through better policies, to get them productive and off the dole.
"They will elect clowns who promise them the world, and raise taxes on the rest. (Wait a minute...)"
Well, we (read Americans) can certainly do something about that. Elections coming up real soon, and again in 2 years. Let's hope we make the right choices.
"Let's acknowledge the problem, get ahead of this and do the things, through better policies, to get them productive and off the dole."
I believe it was Ben Franklin who said:
"I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it."
I don't know what policies you have in mind for making people productive when they are not, but it may not be possible.
Here is a thought provoking piece by a teacher on his experience with attempting to do just that. It's lengthy but worth the read.
I don't have a good answer.
sethstorm, are you a real person? Sometimes it's easier to believe you're a fictitious commentator manufactured by Prof. Perry to stir up additional discussion when interest begins to flag.
buddy-
i don't think structural enemployment in germany changed that much due to reunification.
they were running pretty consistently at 8% in the west prior to reunification (1983-90)
germany consistently has 2-3 points more unemployment than we do. (as an average across a business cycle.)
i also disagree about your notion that successful nations need to be big manufacturers. that may have been true in the 50's and 60's, but that time is long gone.
consider all the fabless semiconductor companies. they do designs for telcom, have them made at TSMC in taiwaan, then sell them all over the world for 70% gross margin. margins at TSMC are 30 points lower and achieving them requires constant, massive capital expenditure into equipment that will be obsolete in 3-5 years. in 2009 tmc earned 2.8 bn in operating income, but spent 2.7bn in capx. where's the free cash flow? why is that sort of manufacturing attractive? why bother stuffing computer components into a box or making an actual cell phone when there is no money in it?
manufacturing is rapidly becoming a commodity. it's easy to build stuff and you can do it anywhere. design is what people pay for, not the actual ability to produce. ask apple. ask sony.
the german ecomony is 30% manufacturing vs 22% in the US, but we grow faster and are much wealthier. services and information are the best industries for profit now. by developed world standards, our % of gdp is not particularly low. it's statistically the same as japan, within 1-2% of the UK, and not really that different from most rich countries. that's what happens when you get rich, you consume more services.
poor countries grow by hiking manufacturing, rich countries grow by increasing services.
so no, you don't need a big manufacturing base nor big exports to be successful. the is 4 times the size of our nearest competitor while manufacturing has declines and exports have been a small % of GDP.
you seem to be rooted in the notion that only "making stuff" has value. that, in my opinion, is a very dated view.
making stuff is mostly a commodity. it's the past, not the future.
jason-
hey, i'm all for letting wages drop until the market clears, but frankly, it's MUCH easier to create services jobs than manufacturing ones. manufacturing takes capital. you need a factory.
services are easy - nannies, pool guys, landscapers, house painters and whatever need little capital to get going.
so again, if full employment is your goal, services are the more efficient route and much better sheltered from wage price pressures from abroad.
defending/encouraging uncompetitive manufacturing jobs would be counterproductive.
Ron H: I think we are on the same page. Clearly, there will always be some totally dysfunctional people whom cannot employed. Let's just try to keep the numbers down to something we can resolve with present law enforcement.
The current world where payroll is taxed (how does this make sense) and the present legislative climate doesn't help employment at all.
Whaf I fear is that in the next several years, the entitlement programs will be found out for what they are - fantasies. And we will have to cut them. And the anchors will rise up, pissed off, and if they cannot vote out the politicians and get clowns to give them what they want, burn everything. Look what happened in the 2000 election and how nuts some people became when things didn't work out how they wanted it. Now make them hungry, disenfranchised and angry...it won't be pretty.
I'm willing to try reduce their numbers a bit by changing some laws here and there.
Morganovich, good points. But how many service jobs can we create?
jason-
it depends upon the demand for services, no?
how many manufacturing jobs can we create? at the moment, we seem to be losing them. our workers are unwilling to work for the wages that would allow them to manufacture consumer goods cheaply enough to export them to china and india. predominantly, that's because they have better options, mostly in services. even working at mcdonalds in the US pays more than a chinese clothing assembler.
in an econ class i used to TA, i used to talk about this in terms of "bread and circuses". it's a simple way to look at utility trade offs in a system.
in a developed economy, productivity goes up. each industrial worker produces more goods (bread). this is fine for a while while we all still need more "stuff".
but as an economy gets truly wealthy, spending on stuff drops as a %. there is little marginal benefit to a second microwave etc... thus, after a certain point, fewer and fewer people are needed to make all the goods we need.
to jump back to the roman metaphor, there is only so much bread you want to eat. after that, you spend your money at the circus. this means that more and more of us can work for the circus and provide vacations and massages etc. the biggest expansion is in healthcare. that's the luxury good people go for most aggressively past a certain point. there are limits to productivity in services to a much greater extent than in manufacturing. this keeps the number of employees demanded high, but the flip side is it makes their wages more stagnant, though not as badly as one might fear.
so, in a world where fewer workers are needed to bake all the bread, bakery jobs are always going to be more difficult to create. easier to just go with the flow and work for the circus.
buddy-
here's another way to look at it:
manufacturing is how you stop being poor, not how you get rich.
look at the regions of the US that are very wealthy: new york, san frnacisco, boston, LA, western connecticut, etc. none of these are manufacturing hubs.
look at the big manufacturing hubs in the US: detroit, flint, philly, pittsburgh, etc. they are all poor and fading.
so why would you want the former to imitate the latter? shouldn't it be the other way around?
make a list of all the richest cities/regions around the world. you'll find few that are manufacturing based. it's just not a great business anymore.
now look at all the areas most rapidly industrializing. they are all poor and working to be even lower middle class. the average income in shanghai or delhi is still a tiny fraction of the developed world. that's why manufacturing makes sense for them. at some point they will get wealthy enough that the cycle will start to run in reverse, but it's going to take a long time to get than many people's standards of living up to anything you or i might consider even lower middle class.
Could the following be indicative of a possible turn around?
More U.S. businesses abandon outsourcing overseas
Look sethstorm, there might be a janitorial job in it for you!!
Then again maybe not...
Mullen: National Debt is a Security Threat
The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff.
Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.(there's a bit more)
Well dang sethstorm!
So close but maybe but now it might not matter...
morganovich: "isn't it interesting how industries like airlines that managed to get out from under their unions have done so well?"
Can you explain what you mean by "get out from under their unions"?
The most profitable U.S. airline over the past decade has been Southwest Airlines. Southwest Airlines is also the most unionized of all the U.S. airlines.
As far as I am aware, no U.S. airline workgroup has decertified their union over the past decade. Do you know of a case where that has happened?
Jason: "But construction and manufacturing are really all a huge group of Americans are capable of doing, or willing to do."
Jason, have you done very much research - or even thought much - about the service sector of the U.S. economy? Do you know much at all about the diversity and level of skills required in that sector? That's the sector which has for many decades employed way over half the workers in this nation.
Historical employment by major industry sector
Jason: "But how many service jobs can we create?"
Millions and millions.
From 1960 to 2009, the service providing sector of the U.S. economy added 77 million jobs - 63 million in private enterprises and 14 million in government. Here's the breakdown of jobs in the U.S.:
1960
goods producing - 19.2 MM
service providing (private) - 26.7 MM
government - 8.4 MM
2009
goods producing - 18.6 MM
service providing (private) - 89.8 MM
government - 22.5 MM
For the past 50 years, the private service producing sector has been the source of job growth in the U.S. Why would anyone believe that will not continue?
can you really think that being too green is the problem with american cars?
Yes.
can you really thing that being too green is the problem with American cars? that's ludicrous. i'm not advocating golf carts, i'm advocating crappy companies that cannot turn a profit going out of business.
Well, I don't see any other mass manufacturers without Detroit's history in them stepping up to the plate. I see plenty of manufacturers from nations used to the formula of golfcarts & exotics, though.
either make products that people will pay more for or find a way to lower your costs or go away. the "keep the costs and live on subsidy option" is not OK.
Unfortunately it's not uniformly applied. That concept seems OK for applying to raw goods and US-based services, but not for multinationals or financial firms.
juandos said...
I do IT, not highly-contracted-out janitorial work. Short of having a security clearance, it's slim pickings for the immediate 30 miles.
morganovich said...
so again, if full employment is your goal, services are the more efficient route and much better sheltered from wage price pressures from abroad.
The problem is that they're too easily disposed of. The risk gets transferred on the person doing the work while the reward is not even close to matching the risk.
Ron H.
sethstorm, are you a real person? Sometimes it's easier to believe you're a fictitious commentator manufactured by Prof. Perry to stir up additional discussion when interest begins to flag.
Yes, I am indeed a real person.
Clearly there are huge groups of spoiled, insipid, morons that may have the talent to do more. But we are doing nothing with our present cadre of oh-don't-worry-it's-not-really-socialism-but-really-it-is social safety net laws to entiice these people to run from their comfort zone to productive work. I mean there are really unemployed people who will not pick fruit. But I'll bet they would if they were starving.
The problem is that starving them into work is hardly the way you get any quality out of them. You might get more than your share of backstabbers, though. How about just making it harder for employers to not hire for non-temporary work, and give those "spoiled people" no excuse to be spoiled?
can you really thing that being too green is the problem with american cars? that's ludicrous.
Yes. Start by removing the EPA's stranglehold. Then make it possible for Detroit to deliver the cars that are deemed offensive for the masses to have. Finally, deliver them.
i'm not advocating golf carts, i'm advocating crappy companies that cannot turn a profit going out of business.
The problem is that there is a shortage of companies that don't offer anything but the "golfcart or exotic" set of cars. No, rebadged & turbo-laden cars from Europe do not count as exceptions.
Jason said...
Clearly there are huge groups of spoiled, insipid, morons that may have the talent to do more. But we are doing nothing with our present cadre of oh-don't-worry-it's-not-really-socialism-but-really-it-is social safety net laws to entiice these people to run from their comfort zone in loser land to productive work. I mean there are really unemployed people who will not pick fruit. But I'll bet they would if they were starving.
That only makes the problem worse. Once you make it a case of desperation for someone to find work, businesses will wonder why they got a lot of backstabbing people. How about making it harder for employers to be picky/refuse?
Juandos said...
Look sethstorm, there might be a janitorial job in it for you!!
I do IT, which is something of a mixed bag regarding what sector or collar it is in. It's far from janitorial work.
As far as I am aware, no U.S. airline workgroup has decertified their union over the past decade. Do you know of a case where that has happened?
Delta's acquisition of Northwest does come quite close to that. It's easy to get your 50%+1 when you merger overwhelms the supporters.
the rest of the world has caught up or even exceed us. "made in america" has a lot less cache for a car than "made in germany" and doesn't sound as reliable as "made in japan".
I do not believe that this is true. An American built Honda or Toyota vehicle has a higher reputation for quality and reliability than an Italian built Fiat, or a German built Opel. The Toyota Sienna has a higher American content than the Ford Mustang, the Chrysler PT Cruiser, Chevy Impala and Chrysler 300.
isn't that a toyota? what i meant to say was a car made by US manufacturers. i realize that toyota, honda, bmw, and others produce good cars in the US.
The JD Power surveys show that Ford is doing as well as Toyota and Honda. And I am not exactly certain how one can claim that German cars are so good. Mercedes has had serious issues with their electrical system for years and is far from a viable fix. Its cars keep scoring extremely low on the reliability ratings and have been bad buys for years. VW has also had some serious quality issues and still makes cars that are too noisy, rattle far too much, leak coolant, idle roughly, etc., etc., etc.
The Bush Administration inherited the worst stock market crash, since the Great Depression, and a recession. However, the Administration turned the recession into one of the mildest in history, after the record economic expansion.
I love revisionism. Yes, Bush inherited a bubble that had just been popped after a long period of liquidity injections by the Fed. But he chose to 'fix' the problem by pushing for an even bigger bubble that burst as he was leaving office. He was a pro-government borrow and spend statist who pretended to be a conservative at a time when the United States needed a leader with the strength and conviction to let the markets liquidate malinvestments.
Over a five-year period in the 2000s, U.S. corporations had a record 20 consecutive quarters of double-digit earnings growth, two million houses a year were built, 16 million autos per year were sold, U.S. real GDP expanded 3 1/2% annually, in spite of 6% annual current account deficits (which subtract from GDP).
The reported profits were created by a massive injection of liquidity that weakened the USD and by accounting tricks. Now we see that the financial system is technically insolvent and that the earnings were an illusion.
The U.S. economy was most efficient, while Americans stocked-up on real assets and goods, and capital was built-up. It was one of the greatest periods of U.S. prosperity, and in a structural bear market that began in 2000.
This is a stretch. The US economy was based on financial gambling and speculation that depended on loose FASB rules, a compliant SEC, and an ever growing money supply. That was not sustainable and ended in disaster.
The Bush Administration was adept minimizing the recession in 2008, until Lehman failed in Sep '08, which caused the economy to fall off a cliff. However, subsequent appropriate policy adjustments were implemented quickly.
You can't spin this. The US financial system was bankrupt and still is. The economy, which depended on a growing money supply cracked and is still in serious need of repair. Bush and Bernanke deserve the blame because they ignored the warnings of people like Ron Paul and could not muster the courage to look over the horizon.
Wall Street facilitated the building of the most efficient economy the world has ever seen, created and captured trillions of dollars of real wealth in the global economy, distributed that wealth to America's masses, and diversified the risk globally.
Wall Street used accounting tricks to transfer wealth from savers and investors to financial insiders. It is now insolvent and can't survive without government intervention.
Corporate America offshored high cost, heavy goods, or goods with declining prices for big profits, imported those goods at lower prices, and shifted limited resources into emerging industries and into high-quality "core goods" of older industries with market power.
No. Good companies got tired of the scams and moved their operations to areas that taxed less and protected property rights more than the US does. This is why the US is in decline.
jet-
what i meant by "get out from under" is that there were drastic contract renegotiations. the unions came to the table for real and took big cuts and equity positions. the reason southwest has been more amicable from the beginning is the employees always had an equity stake.
once pay was brought into line with industry fundamentals, the airlines became viable as businesses.
i think the unions there made a smart and responsible choice. they realized that they were contributing to the problem and took steps to remedy that and save their employers.
sethstorm: "Delta's acquisition of Northwest does come quite close to that."
I do not believe the issue of Northwest's unions has been resolved yet, has it? If not, then that's not really relevant to the point we were discussing. But I do appreciate your comment anyway.
Morganovich said that airlines managed to "get out from under their unions" and thus have done well. Since no airline unions have yet been decertified, I'm simply asking morganovich what he means.
No. Good companies got tired of the scams and moved their operations to areas that taxed less and protected property rights more than the US does. This is why the US is in decline.
No, they moved to where they could get more cooperative "yes-men" governments, ones they could easily influence and corrupt. The US just has to pursue them.
I do not believe the issue of Northwest's unions has been resolved yet, has it? If not, then that's not really relevant to the point we were discussing. But I do appreciate your comment anyway.
You asked about there being any decertified airline unions, that merger would come close.
so again, if full employment is your goal, services are the more efficient route and much better sheltered from wage price pressures from abroad.
The problem is that the service-based industries have a nasty way of stripping reward but piling risk on the people that perform the work.
vangel-
http://www.jdpower.com/autos/ratings/quality-ratings-by-brand
peruse this yourself.
the only american brand above "average' is ford, and it only got there by getting 5 stars on "features".
mercedes, who you malign gets 5 stars.
you are entitled to your own opinion, but not your own facts.
your notions of comparing fiat to ford are not relevant. i'm not arguing that there are not crappy car companies in the rest of the world too. (though note that fiat also owns some of the world's top brands like ferrari). my point is that our workers are not more productive than the japanese or the germans. there is nothing we can build that they cannot. you cannot say the same of the us and the germans - we don't have a manufacturer here anywhere near porsche's league.
hey, someone buys US cars, so they clearly have a bit of a market, but it's shrinking.
wall st is insolvent? really? maybe you better tell goldman and morgan, i don't think they got the memo. didn't they pay that money back? what evidence do you have to support your assertion? seems to me that it's the insurance and retial banking guys that are still bleeding, not the pure wall st guys.
illiquid during a crisis is not the same as insolvent.
Coming from the person who thinks he can spend someone else's money better than the can: "No, they moved to where they could get more cooperative "yes-men" governments, ones they could easily influence and corrupt. The US just has to pursue them"...
"I do IT, which is something of a mixed bag regarding what sector or collar it is in. It's far from janitorial work"...
'If' that's the case why don't you ever have any information in your comments sethstorm?
Meanwhile another unionized airline is gone: Mexicana to cease all operations
seth-
so if the EPA is the problem, why can foreign car manufacturers do so well in the US? they face all the same rules.
what is this mythical lack of cars between golf cart and exotic you lament. that's just utterly wrong.
so what's an impala? a malibu? a camaro or a mustang? the whole lincoln and cadillac lines? mercury? buick? chrysler 300 and sebring? a zillion foreign models made by honda, acura, toyota, nissan, vw, volvo?
you are just making stuff up seth.
there is a ton of middle ground between fiesta and ferrari.
your comment about service industries being "riskier" is equally unsubstantiated. what evidence do you have of that?
"so if the EPA is the problem, why can foreign car manufacturers do so well in the US? they face all the same rules"...
Hmmm morganovich, you know I would've assumed that myself but considering the education from Professor Mark I now have to wonder about that little detail...
I still think you're probably right about the EPA rules applying all across the board but...
Meanwhile from the WSJ we have this opinion piece from Robert Barro: The Folly of Subsidizing Unemployment
My calculations suggest the jobless rate could be as low as 6.8%, instead of 9.5%, if jobless benefits hadn't been extended to 99 weeks.
The money line in my opinion: "The unemployment-insurance program involves a balance between compassion—providing for persons temporarily without work—and efficiency. The loss in efficiency results partly because the program subsidizes unemployment, causing insufficient job-search, job-acceptance and levels of employment. A further inefficiency concerns the distortions from the increases in taxes required to pay for the program"...
so what's an:
impala?
A car that barely fits the standard, but one I have no problem with driving.
a malibu?
A globalized-to-blandness platform car.
a camaro or a mustang?
Rarely accessible to mere mortals. Fun to drive though.
the whole lincoln and cadillac lines?
Lincoln: The only place Ford will sell you a large RWD car. Unless you like going to surplus lots for Police Interceptors.
Cadillac: Overpriced way to avoid a golfcart.
mercury?
A bunch of fancy smaller cars. They used to have a good RWD platform car though.
buick?
Opel's US rebadging unit, gutted of anything that would be specific to the US. Get the hint that going global makes the car worse.
chrysler 300 and sebring?
Put a decent engine in the 300, fix the interior, and you have a fine car.
a zillion foreign models made by honda, acura, toyota, nissan, vw, volvo?
Followers of the "golfcart-or-exotic" way.
The Folly of Subsidizing Unemployment
If the employers weren't acting holier-than-thou with inflated expectations, then there would be no problem.
so if the EPA is the problem, why can foreign car manufacturers do so well in the US? they face all the same rules.
They know how to build small cars, especially for Third World hellholes. They just localize it to meet the EPA's standards.
your comment about service industries being "riskier" is equally unsubstantiated. what evidence do you have of that?
The large amount of contracting out is telling.
Morganovich and and Jet Beagle, thanks for the responses. I have to admit, service jobs have more potential than I had given credit for.
One question, though, I've always thought service companies have a lower multiplier (total return to everyone) than industrial companies. Is this true from an economic sense? Or is it really a wash (they are the same)?
seth-
you have just destroyed your own argument. and demonstrated mine. you cannot dispute that there are lots of cars between golf cart and exotic. (and if you think a $22k mustang is out of reach of mortals, then you are only looking at the VERY low end of cars)
you argue that they suck. i agree completely, but that's because the designs suck, not because someone interfered and made them such. american car companies keep churning out the same crappy sedans no matter what the market wants. you can't blame the rest of the world because Chrysler is unresponsive.
lots of other companies adhere to the same rules and sell much better cars in the US. your whole argument seem to be that they know how to make better cars. hey, i agree.
but ford makes great cars in brazil. they are arguably much better than the ones here. they certainly sell well and are much more profitable.
so it comes back to "why can ford make good cars in brazil but not here"? i argue that it's labor making it impossible to deliver value for money.
if you disagree, what's your explanation?
why can our companies make cars overseas and make money but not here despite the fact that foreign companies can makes cars here and make money?
jason-
what do you mean by low multiplier?
i don't understand the question.
but ford makes great cars in brazil.
You mean golfcarts, with the Ford logo.
You've not proven your argument or even come close to disproving mine. While there are some issues with GM & Ford, they are bad at golfcarts.
"'If' that's the case why don't you ever have any information in your comments sethstorm?"
I believe that in the IT business one only has access to information when one is employed. Instead of "I do IT", sethstorm meant to say "I USED to do IT.
seth-
you are not even making the rudiments of sense.
who cares what cars ford sells in brazil? of course they are smaller and cheaper, it's a poorer country. the point is that they sell them profitably, just like honda and bmw sell the cars they make in the US.
so what's stopping the us guys from making cars we want? we can make competitive small cars overseas, but somehow not here. why?
you keep making these absurd "golf cart" claims about cars like an accord or a maxima or a supra. those are not golf carts. nor are they exotics.
what it it you think will return the us to automotive glory? the return of the studabaker? 6000 pound cars with tail fins?
what is it you think we need to make and why can't we do it?
ahhh, i just figured it out seth.
you are blaming the customer. it's the US consumers fault that they want a kind of car you call(for no good or valid reason) a "golfcart", and it's unfair that other people make them but we don't.
what americans really ought to do is want whatever crap detroit builds.
this is the same argument you use about forcing employers to hire people (and you).
it's as ridiculous here as it is in employment. the purpose of a car company is to build cars people want. if they can't, then they are not a good car company.
whatever your definition of "golf cart" is (which seems to be anything smaller than a '62 caddy but not a ferrari, though i'm still baffled by your opinion that a $22k mustang is somehow an exotic), it doesn't matter. if that's what people want, that's what good car companies will build. bad ones won't, and their sales will suffer.
if you keep making polyester leisure suits when the market stops wanting them, you'll lose share. the correct response it to update the fashions in your line, not berate the customer for wanting something new.
Ron H. said...
Make whatever nonsense you want. That's all you're doing with that reply.
morganovich said...
...and you still don't get it. At least not most of it.
Regarding employment, it's a matter of making it harder to refuse the large amounts of unemployed with no bad consequences to the employer. If it takes force not seen since the FDR era, so be it. Either they can be part of the solution, or they are part and parcel of the problem.
You're looking at closer to $24k for a Mustang. Not $22k. Detroit's being pushed in a direction that it is not fit for making. Get rid of the EPA's restrictions, fire the granola-eating folk at Detroit's Big Three, and let them fill in the middle. The middle that exists between golf cart, or mostly unaffordable exotic.
seth-
it's you who don't get it. employers "refusing the unemployed"? what are you talking about? it's their job to produce goods and services, not to hire. employers don't "refuse" employees. this isn't welfare.
what is it you think the EPA is doing and what kind of car do you think we'd be making if they went away?
mustangs start at $22k.
http://www.fordvehicles.com/cars/mustang/
are you arguing that even 24k is expensive or "exotic".
so what would not be a golf cart or an exotic? it seems to me that you think that every car on earth falls into one of the 2 categories.
show me the car you think we ought to be making.
sounds to me like you want a v8 engine, a huge body, and a $5k price tag.
btw-
your notion of "have the government force companies to 'be a part of the solution'" has a name:
fascism.
it's a failed ideology that is both economically and morally bankrupt.
mercedes, who you malign gets 5 stars.
you are entitled to your own opinion, but not your own facts.
My facts are fine. Mercedes does not make reliable cars.
http://tinyurl.com/5etncj
What you are looking at is the initial quality and on that front Mercedes does quite well, as one would expect given the price. But drive the car for a year and you find that it is not all that good when compared to what is offered by its competitors. And all of a sudden you notice that when you see a new vehicle coming towards you with one headlight working it is disproportionately a Mercedes.
The only Mercedes vehicle that I would purchase is the only one I consider reliable, the S-Class Sedan. But I can't see how I could justify the price given what I can get at a much lower price from other manufacturers.
vangel-
but what does any of this have to do with the fact the the rest of the world can clearly build cars as well as we can? (if not better)
you're bogging down in details to avoid the real discussion.
is durability or initial quality the correct measure of manufacturing prowess? i don't know. (though ford, chevvy, and chrysler do no better on durability and posche yet again leads the pack)
you were trying to argue that us manufacturing was of higher quality than the rest of the world. what's your evidence in any kind of mass market? it seems to me they make most consumer goods every bit as well as we do.
your notions of comparing fiat to ford are not relevant. i'm not arguing that there are not crappy car companies in the rest of the world too. (though note that fiat also owns some of the world's top brands like ferrari). my point is that our workers are not more productive than the japanese or the germans. there is nothing we can build that they cannot. you cannot say the same of the us and the germans - we don't have a manufacturer here anywhere near porsche's league.
I disagree. There are plenty of good American workers who are as capable as their foreign counterparts. The Japanese and German companies agree, which is why they build factories in states that have reasonable labour regulations and low taxes.
I would not disagree that the Europeans have a more diverse automobile market in which specialty builders with low build volumes are able to stay profitable. It would be easier for those players to excel in the limited segment that they serve than it would be for companies that sell into a much broader market.
your notion of "have the government force companies to 'be a part of the solution'" has a name:
fascism.
it's a failed ideology that is both economically and morally bankrupt.
So it is fine for a business to practice it, but if any individual person benefits due to the government acting in this direction, it's fascism?
At this point, if you're trying to scuttle the ship (in order to get your ideology in favor), I don't care what has to be done to thwart it.
You tend to stop caring when economics get this bad, and you feel the worse parts of the effects.
sounds to me like you want a v8 engine, a huge body, and a $5k price tag.
More like $15-18k new, the v6 is the fuel efficiency option, and an automatic transmission. As for the insistence on RWD, try quoting out transmission repair costs for FWD.
But you are correct that I don't mind the larger vehicles - just not their relegation to luxury vehicles.
so what would not be a golf cart or an exotic? it seems to me that you think that every car on earth falls into one of the 2 categories.
Cars off the same platform as the Impala, the older Malibus, truck-body minivans, Ford's RWD large-car platform (Panther), and US-assembled & made GM/Ford/Chrysler vehicles that manage to put in at least a V6 while managing to stick under $23k for an automatic.
VangeIV said...
The Japanese and German companies agree, which is why they build factories in states that have reasonable labour regulations and low taxes.
Explain the Honda Marysville plant in Ohio. North of the Mason-Dixon, and the state is not (yet) selling itself to foreign powers.
vangel-
my point is not that our manufacturing sucks, it's that we no longer have a huge advantage in terms of productivity or access to capital. for a long time, we got away with running a "loose ship" because the pressure from overseas was not that intense. those days are gone, and it's not just in cars. it's not our workers i'm maligning, it's our companies.
the big 3 ought to have a huge advantage over their foreign competitors. they don't have to ship cars here. that should yield both a price and turaround time advantage, but it doesn't. the fact that foreign companies can, as you say, use our workers to better effect than the big 3, tells you right where the problem is.
this goes back to my original post about trying to hang on to some halcyon days of manufacturing that are long gone. that itself is a big part of the problem. it keeps industries from adapting because they are hamstrung by labor that winds up killing the firms like a choker vine kills a tree.
manufacturing is never the way one gets rich, just how they stop being poor. the 45-70 period was a historical aberration.
losing manufacturing jobs is fine so long as the supply of goods is high enough. that's productivity for you.
so i don't really understand what you are arguing. i have driven damn near everything, and trust me, there is nothing from the US even in a league with porsche. could we make such cars if we tried, perhaps, but if so, then one might be led to ask, why aren't we?
porsche has the best margins in the auto business. nothing in the US even comes close.
so, if we are so capable, what's holding us back?
seth-
can you pass a turing test? these responses don't make any sense. it's not fascism not to hire. it's called private property. you are allowed to do with it as you see fit. when the government takes that ability away and starts setting employment targets and determining your asset allocation, yes, that's fascism. FDR was a big fan of the fascists, particularly Mussolini. why don't you go look it up. he tried to bring their policies here until the supreme court overturned his national recovery act.
http://www.civics-online.org/library/formatted/texts/recovery_act.html
read it. it's pure fascism.
Whenever the President shall find that destructive wage or price cutting or other activities contrary to the policy of this title are being practiced in any trade or industry or any subdivision thereof, and, after such public notice and hearing as he shall specify, shall find it essential to license business enterprises in order to make effective a code of fair competition or an agreement under this title or otherwise to effectuate the policy of this title, and shall publicly so announce, no person shall, after a date fixed in such announcement, engage in or carry on any business, in or affecting interstate or foreign commerce, specified in such announcement, unless he shall have first obtained a license issued pursuant to such regulations as the President shall prescribe. The President may suspend or revoke any such license, after due notice and opportunity for hear ing, for violations of the terms or conditions thereof. Any order of the President suspending or revoking any such license shall be final if in accordance with law.
With this law, all commerce was to be conducted only at the President’s pleasure. The law also instituted code authorities, modeled on Mussolini’s economic system, that would set prices, wages, production quotas and nearly every other business practice in an industry. To some extent, I would argue that the recent health care bill is the first modern American code authority.
seth-
we already make lots of cars like the ones you describe. the problem is not the EPA, it's that no one buys them. they were not regulated out of existence, they went away because not enough consumers wanted them.
it sounds to me like you have a car that you like and you blame the rest of the market for disagreeing with you (just as you blame employers for disagreeing with you over your value). sorry pal, that's what happens when tastes run outside the mainstream.
they stopped making the deodorant i like, so i had to pick a new one, but blaming right guard for that is stupid. if the product sold, they'd still be making it. unpopular products go away. sorry you liked the "mellow yellow" of cars, but that's life.
you have presented zero evidence that anything other than lack of demand made them go away.
VangelV, assets, goods, and capital are much more than paper, and they were more abundant in the 2000s than ever before, which improved U.S. living standards much greater than real GDP growth.
morganovich: "the reason southwest has been more amicable from the beginning is the employees always had an equity stake."
I agree in part. Stock options were important in the beginning.
Another important factor is the hiring and human resources practices of the company. Southwest does not tolerate any disrespect on the part of any employee. Employment screening is rigorous for all positions. Furthermore, employees at all levels who were unable to follow the Golden Rule have been asked to leave the company.
The equity positions afforded employees through stock options were important in the early years. But stock options have not been worth very much for a number of years. It is the real sense of camaraderie - the true teamwork exhibited by all employees - which has carried Southwest through potential labor strife the past two decades.
Jason: "I've always thought service companies have a lower multiplier (total return to everyone) than industrial companies."
"Service companies" is such a broad universe that I'm not sure it makes sense to generalize about them. It is true that most manufacturing companies have much higher barriers to entry than do what many people think of as service companies. The capital required to build automobiles or refine petroleum is much greater than that required to operate a trucking company or provide waste management services or set up a restaurant. So the potential number of competitors for the former are much smaller than those for the latter.
Consider, though. that some service providing companies also have high barriers to entry. A new company must have very deep pockets to compete at a noticeable level with FedEx and UPS. One cannot easily start a hospital and compete with such service giants Columbia/HCA and Tenet Healthcare. The brand value of insurance giants such as State Farm and Allstate cannot be easily overcome by new players in the insurance field.
Bottom line: the level of competition - and the level of resulting margins - depends on the nature of the particular service industry.
we already make lots of cars like the ones you describe. the problem is not the EPA, it's that no one buys them.
A car is a bit more longer lasting than a preference for deodorant. It's not just one car, two cars, or three cars. It's the Detroit way of making fuel efficiency second.
Explain all the environmental regulations regarding cars and how it's made them more like European golfcarts.
What part of CAFE do you not understand, for example?
Second of all, I'd like to know who else in the entire world that has no Detroit heritage or connection, that has no problem with bringing larger cars to the masses.
but what does any of this have to do with the fact the the rest of the world can clearly build cars as well as we can? (if not better)
It doesn't. I have no problem with your statement that the rest of the world can make great cars. I have no problem with your statement that American companies have serious problems with their own production methods. I simply quibble with the argument that American workers are inadequate. I maintain that well run companies can use American workers to compete with anyone.
The American problem is created by the corrosive effect of decades of lousy regulations that encouraged corporate structures that do not work well in a competitive automotive environment. The foreign companies have an advantage because they can set up factories that do not have the same issues as the established domestic counterparts.
I also maintain that thanks to foreign competitors the American players have gotten much better. Ford has taken huge steps to improve their operations and is coming along nicely. Its main problem comes from the government's bailout of GM, which has allowed for more capacity than the market can support and for lower profits for Ford. From what I can see, its survival as a North American producer is still not assured and its future is tied in to China and the rest of Asia.
is durability or initial quality the correct measure of manufacturing prowess? i don't know. (though ford, chevvy, and chrysler do no better on durability and posche yet again leads the pack)
They are pretty good indicators of what the producers are capable of. But it is not necessarily indicative of overall success because other factors matter. For example, I have a car nut friend who hates Mercedes' reliability. But when he buys a vehicle he still looks at getting a Benz. He simply buys two to make sure that when one is in the shop he has use of the other. He hates the Bosch electronics that go into the vehicles and assures me that the systems used in German cars are nowhere near as reliable as those in his Lexus. There are many people like him who purchase vehicles for status instead of other factors. My wife's friends, who are generally rich Chinese, buy purely for status and will not ever debate quality/reliability ratings.
My point is that in the niche markets that some of the manufacturers have targeted you can have great success due to past reputation, marketing buzz, and overall perception. That is harder to do when you have a broad base as the American manufacturers do, particularly when fuel efficient vehicles do not sell well during the good times.
you were trying to argue that us manufacturing was of higher quality than the rest of the world. what's your evidence in any kind of mass market? it seems to me they make most consumer goods every bit as well as we do.
No. I said that the American worker is not as bad as is being claimed. I also maintain that American vehicles are better now than they have been in the past.
I have to make a confession here. I treat cars as depreciating goods with a very limited purpose. I am 52 years old and am still on my second car. The first was a VW Jetta, which I drove for 15 years. It was very noisy and not nearly as reliable as I would have wished. The second is a Toyota Camry. It has 350,000 km on it and is still in very good shape. (Idles a bit rough but that can be fixed easily.) I hope to drive it until it dies some time in 2012 or 2013. My next vehicle will have a diesel engine so I am looking to VW and Mercedes unless Honda and Toyota get smart and introduce their engines to the NA market.
So it is fine for a business to practice it, but if any individual person benefits due to the government acting in this direction, it's fascism?
Practice what? A business should engage in voluntary transactions with its workers, suppliers, and customers. As long as it does not initiate force, or make false statements it should be free to do whatever it wants.
Fascism is when government uses its power to dictate conditions to business and controls the means of private production. When you say that businesses should be forced to hire you are advocating fascism. It is as simple as that.
At this point, if you're trying to scuttle the ship (in order to get your ideology in favor), I don't care what has to be done to thwart it.
Scuttle what ship? You are the one that advocates the use of force and aggression against individuals so that the perceived problem can be kicked down the road for a few months. How is that a good idea?
You tend to stop caring when economics get this bad, and you feel the worse parts of the effects.
Your writing seems to be as muddled as your thinking.
Explain the Honda Marysville plant in Ohio. North of the Mason-Dixon, and the state is not (yet) selling itself to foreign powers.
Wasn't the plant built 20-25 years ago? And is Honda building new plants in Ohio or Michigan or is it looking to add capacity in friendlier jurisdictions? From what I can recall, Honda was moving work out of Ohio to the US South.
vangel-
i agree with you that the problem is not our workers (though one could argue that the vocational education system in germany gives them a significant leg up). it certainly has to do with some of our management, but it also has do do with our organized labor. auto unions in germany are far more willing to make concessions when times are tough.
but there is another issue at play in the decline of manufacturing as a % of GDP: wealth.
the fact is that workers in the US get paid a lot. if wages are so much lower in the rest of the world and productivity is no longer that different, production moves to where it's cheap.
more than any other factor, our jobs go overseas because americans will not work for so little.
this is not, in and of itself, a bad thing. just a few years ago, we were pretty much at full employment with overall compensation rising. that would seem to imply that americans overall were finding better jobs than the manufacturing jobs that went away.
my point is not that our manufacturing sucks, it's that we no longer have a huge advantage in terms of productivity or access to capital. for a long time, we got away with running a "loose ship" because the pressure from overseas was not that intense. those days are gone, and it's not just in cars. it's not our workers i'm maligning, it's our companies.
I agree. You do not have an advantage because your government has screwed American producers. But it is hard to simply blame the idiot managers at American companies because of the environment they had to deal with. Can you imagine what would have happened to a CEO of Ford or GM if he told the unions to piss off in the 1960s? The UAW would have closed down operations and the government would have allowed actions that would prevent the company from producing product by using non-unionized workers. It was much easier to go along and make promises that would ruin the company in thirty years, long after the CEO was retired.
I do not mean to make excuses for the idiots. I only point out that given the environment, it was certain that the idiots and compromisers would rise to the decision making positions.
the big 3 ought to have a huge advantage over their foreign competitors. they don't have to ship cars here. that should yield both a price and turaround time advantage, but it doesn't. the fact that foreign companies can, as you say, use our workers to better effect than the big 3, tells you right where the problem is.
It tells us that the foreigners were able to skip the mistakes forced on the American manufacturers by the unions and their political allies.
this goes back to my original post about trying to hang on to some halcyon days of manufacturing that are long gone. that itself is a big part of the problem. it keeps industries from adapting because they are hamstrung by labor that winds up killing the firms like a choker vine kills a tree.
I agree with most of what you are saying about manufacturing. My quibble is with the details that you are looking at. As I wrote above, the power of government was used to force the companies to take a route that has ruined them. Under that environment it was very likely that the people who thrived in the system would not have the guts to do what was best over the long term and would be more than happy to look after their short term interests instead. By making the decision that was rational because it gave them the best personal returns they ensured the ruin of the company over the long run. That is as should be in a human world where actions are chosen by rational players who are trying to solve pressing problems and are given incentives that favour the short term.
VangelV, also I may add, there's a difference between absolute value and relative value.
I could show you a house and say it's worth $500,000 and you may agree. I could show you the exact house tomorrow and say it's worth $100,000 and you may say it's a bargain.
The paper economy you're talking about represents relative value. It has nothing to do with absolute value. A bar of gold doesn't improve when its price increases.
In the 2000s, the U.S. economy had tremendous improvements in real value, which I explained above, although relative values change.
morganovich, buddy pacifico, and vangel,
I agree that the U.S. cannot easily compete in labor-intensive, low-skilled manufacturing. But that hardly means manufacturing in the U.S. is in danger. I do not believe any nation has yet surpassed the U.S. in manufacturing value-added GDP. Here's some 2007 figures (in US$) for manufacturing value-added:
U.S. - $1,831 billion
China - $1,106 billion
Japan - $926 billion
Germany - $670 billion
Russia - $362 billion
The relative shares may have changed a little since 2007, but not a lot. Furthermore, it really doesn't matter if China eventually produces more than the U.S. As long as our manufacturing GDP keeps growing - which it has for decades, despite recession dips - we should not be arguing that the glory days of U.S. manufacturing are over.
Facts about U.S. manufacturing:
The U.S. in 2009 led the world in production of chemicals:
U.S. - $674 billion
China - $635 billion
Japan - $286 billion
Germany - $213 billion
France - $135 billion
manufacturing is never the way one gets rich, just how they stop being poor. the 45-70 period was a historical aberration.
I will not disagree too much with this statement except to point out that if you look at the new manufacturing powers you will find that workers have done very well by working in factories. They have done better than just stopping being poor, just as our manufacturing workers did many decades ago and our skilled manufacturing workers are doing today.
A skilled worker should earn enough to be in the middle class. Sadly, the government's redistribution schemes make that very difficult.
losing manufacturing jobs is fine so long as the supply of goods is high enough. that's productivity for you.
I agree.
so i don't really understand what you are arguing. i have driven damn near everything, and trust me, there is nothing from the US even in a league with porsche. could we make such cars if we tried, perhaps, but if so, then one might be led to ask, why aren't we?
A Porsche in a specialty product for a narrow segment. American producers don't really try to make a similar car because you don't have rich Americans racing down crappy narrow roads that are running on the side of steep mountains. They tend to produce muscle cars that are designed to go all out of flat wide roads because that is what you find in the US.
In short, I would not underestimate American ingenuity.
porsche has the best margins in the auto business. nothing in the US even comes close.
It is a good business with few natural competitors because they would have to spend a huge amount of cash for marketing bang of the Porsche name. That means that even if competitors have a better product you will have a hard time beating Porsche.
But you have to keep in mind that the company is tiny and is lucky to sell 100,000 vehicles per year. And that it is being caught by Audi, which has improved its products and is now well ahead of Porsche, BMW and Mercedes as far as premium Western European buyers are concerned. Even though I am not a car person I am a fan of the A8 package.
so, if we are so capable, what's holding us back?
Easy and you know it. Too much government meddling with the economy. High corporate tax rates and government using its power on behalf of unions is doing a lot of damage.
The paper economy you're talking about represents relative value. It has nothing to do with absolute value. A bar of gold doesn't improve when its price increases.
There is no such thing as absolute value. In unhampered markets value is always subjective.
In the 2000s, the U.S. economy had tremendous improvements in real value, which I explained above, although relative values change.
See the statement above. You need to go back to the drawing board and reject the notion of objective value.
VangelV, assets, goods, and capital are much more than paper,...
Correct.
...and they were more abundant in the 2000s than ever before, which improved U.S. living standards much greater than real GDP growth.
Again correct. But there is something that you are ignoring. While US production is higher than it was a decade ago and the standard of living has been improving, there is clearly an increase in the debt accumulated by Americans and their governments. The American experience is not sustainable because the currency is not viable. This means that there is a need for a major correction that will clear old debts and allow the economy to recover in a sustainable manner. But I do not see either the Republicans or Democrats having the courage to do what they must. Both parties, and their supporters, prefer to keep the game going just a little longer and to blow the bubble just a bit larger. Inevitably that leads to failure and you will see the US follow the path taken previously by Mexico, Argentina, Greece, Hungary, Yugoslavia, etc.
What part of CAFE do you not understand, for example?
I don't understand the political angle. When the CAFE standards drive some of the domestic manufacturers out of business how will Congress respond to the critics? Congress knows that we have a peak oil problem facing us and that manufacturers will have to make smaller lighter cars eventually. Eventually, the market will force manufacturers to make the right choices and those that don't will have to go out of business and take out of the market surplus capacity that prevents the remaining players from making healthy profits.
By meddling, Congress has weakened the entire industry and has caused scarce resources to be wasted on programs that the markets do not want to see at this time. (The Volt is a perfect example.)
"More like $15-18k new, the v6 is the fuel efficiency option, and an automatic transmission. As for the insistence on RWD, try quoting out transmission repair costs for FWD."
Seth, there are no new cars in your price range that meet your requirements, just as there are no jobs in your price range for your skills. Times have changed. Get used to it. Update your expectations. The cheap Camaro you bought last time no longer exists. The new one starts @ $23k
My error for not being clear. I would not disagree if you claimed that the average German worker is more skilled and better trained than his/her American counterpart. My point is that there is a sufficient number of American workers that can be very productive and useful to the manufacturing companies.
I also think that the same case can be made for the American managers and designers. My point is that when you have competent people put in a screwed up system and given incentives that do not include long term prosperity for the company and they are told to satisfy consumers that are given incentives to purchase certain products you will get malinvestments that respond to the incentives and not the unhampered marketplace.
I blame the outcomes on the governments and institutions that nurtured those outcomes even more than I blame the players.
Let me divert the discussion by giving the housing bubble example. We are told by the idiot analysts that the mortgage brokers and Wall Street players made serious errors that created the housing bubble. I disagree. The smart play was to go with the incentives and to get as much of a personal return as you could because if you chose not to play you would have been replaced by someone who did play the game. In a system where prudent lenders are bought out using the inflated stock of reckless ones it makes no sense to look to the long term because there won't be a long term for you. And if you make $10 million in bonuses over three years before you are fired so what? It beats working for 35 years to make $10 million.
I am arguing that competent rational players in the same incentive system as the auto industry had would have made the same types of moves. The flaw was moving away from a market system in the first place, not the specific actions taken once the government got into regulating the automobile sector.
Am I making sense?
the fact is that workers in the US get paid a lot. if wages are so much lower in the rest of the world and productivity is no longer that different, production moves to where it's cheap.
When I visited Bulgaria, Kenya, Egypt, Burma, and Cambodia I found countries where labour was cheap. When I went to Hong Kong and Singapore I noted that labour was pricey. Strangely enough there was little manufacturing in the former countries but quite a bit in the latter ones.
You know that what matters is productivity, not labour costs. As an example, the labour component of a ton of steel is very low. So it makes little sense to have steel mills in places with cheap labour unless you have other advantages. Yet, American companies are still losing share to foreign competitors that have severe penalties in the form of higher transport costs, duties, etc. This means that there is something other than direct labour costs that are important.
more than any other factor, our jobs go overseas because americans will not work for so little.
True. But the problem is that higher paying jobs are also going abroad for reasons other than direct labour costs.
this is not, in and of itself, a bad thing. just a few years ago, we were pretty much at full employment with overall compensation rising. that would seem to imply that americans overall were finding better jobs than the manufacturing jobs that went away.
I agree. The farm workers who lost all those jobs when the economy moved away from agriculture had no problem finding jobs that paid well. The problem that we have now is a mismatch of skill sets with the jobs that are open. It is hard to employ a communication major or someone who graduated from a gender studies program productively when you need a welder or a mill operator.
I agree that the U.S. cannot easily compete in labor-intensive, low-skilled manufacturing. But that hardly means manufacturing in the U.S. is in danger.
American companies can compete with foreign competitors. But they can't do it if Congress keeps doing what it has done the past few years or if the Fed keeps trying to destroy the dollar.
I do not believe any nation has yet surpassed the U.S. in manufacturing value-added GDP. Here's some 2007 figures (in US$) for manufacturing value-added:
U.S. - $1,831 billion
China - $1,106 billion
Japan - $926 billion
Germany - $670 billion
Russia - $362 billion
I am with Marc Faber on this one. The figures that are reported can create illusions if you are not careful. For example, the numbers include hundreds of billions of military equipment, which is expensive but does not produce all that many jobs or much in the way of value for the country. And the final sales figures include components not made in the US. When Boeing purchases a sub-assembly from XAC or SAIC (China) or landing gear from Goodrich (Canada) the value of the parts are counted in the final sales figure. While some adjustments are made to correct some of the double counting governments like to overestimate their numbers.
I also have a big problem with the Chinese and Russian numbers. Not too long ago China's National Bureau of Statistics found out that it had miscounted service sector and intermediate manufacturing activities. The size of the activity that was missed was massive, at over $250 billion. It is my belief that a great deal of activity is still being missed because Chinese manufacturers have no desire to tell the government everything and wind up paying more in taxes, fees, bribes, etc. The same is likely true in Russia, which has always had a decent sized black market over the decades.
Furthermore, it really doesn't matter if China eventually produces more than the U.S. As long as our manufacturing GDP keeps growing - which it has for decades, despite recession dips - we should not be arguing that the glory days of U.S. manufacturing are over.
My concern is the effect of the unsustainable debt and new regulations on manufacturing activities in the US.
v-
there is not question that manufacturing jobs are fantastic in the emerging world. compared to being a Chinese peasant, they're fantastic. but your comparisons with paces like bulgaria leave out some important variables like corruption and access to capital. just having cheap labor is not enough. some labor is cheap for a reason, just like some barrels of oil in the ground are. if it's to hard to extract the profits, it's just a stranded resource. i spent a bunch of time in sofia looking at some opportunities, and every single manager i spoke to either talked about having to pay off the government or of asset seizures. just labor is not enough.
nor is just productivity enough. it's always the ratio: production per hour/wages per hour. factored in must also be the costs of the capital to produce the productivity.
the fact is that now, even with a level regulatory playing field, we are going to have a really hard time competing with most chinese manufactured goods. they have all the access to capital and productivity enhancers, but lower labor costs.
autos are the sort of market we ought to be able to defend best as they involve local preferences and high technology content, but we seem hell bent on screwing it up. i resist blaming the "government" so much as the unions (who certainly get government support, so i agree it's a bit muddy) but the foreign plants in the us abiding by all our regulations do pretty well. it can't just be the regulations.
seth-
cafe has been around for decades, yet the fuel efficiency of the aggregate us light vehicle fleet has been in decline since the late 80'. (due to mix of vehicles)
there is no correlation between cafe and changes in market share. if there were, the big 3 would have gone nuts.
i agree it's a stupid law, but it's not what killed the impala. what killed the impala is that no one wanted one.
v-
one last quibble of a personal nature. (an please take this as it is intended in the spirit of goodwill that ought pervade all sportscar trash talk) i have no idea why you think that audi is somehow supplanting porsche as the car of the cognoscenti.
as one who has driven both product lines pretty extensively, i can tell you, no freaking way.
the S family competes much more with BMW's M's, though without the soul. audis drive dull. they just have no feel. audi does not make a sports car. they make sedans. even the s's are no fun. that badge is getting flogged mercilessly on sub par product.
the one exception is the R8, which is a hoot to drive, but horribly overpriced for a car that the new 911 turbo will blow the doors off of. (especially as you would not believe the blind spot. those carbon blades can hide a delivery van) driving an r8 in the city is TOUGH.
the TT is just an underpowered wanna be with a loose tail. it's handling is so inferior to a boxter that it's not even worth looking at.
i grew up racing and i have never driven an audi i'd want to own (again except the r8 because it's just so good looking, but in that price range, get an f430 and be done with it, at least then you'll get supercar handling instead of lamborghini sloppiness with a detuned engine)
i don't know where you heard this story about audi and Porsche, but i doubt it was from a sportscar enthusiast. for autobahn cruising, maybe you want a real back seat, but when it's time to put the hammer down, porsche demolishes audi. i've raced plenty of s4's and 6's, and an M3 will crush them while being much more fun to drive (the s4 has a nice price price point though) and a 911 turbo will spank anything in the audi line including the r8 that it's 30% cheaper than.
for a sedan, the m5 and m6 are much better cars than their ugly audi cousins if you want the power, and the 5 series is just a much nicer car that the a6.
audis are ugly and their noses don't hold in the corners.
blech.
nor is just productivity enough. it's always the ratio: production per hour/wages per hour. factored in must also be the costs of the capital to produce the productivity.
A high wage is not a problem if the productivity is high enough to keep the per unit cost lower than those of the competition. This is why the US, Singapore, Japan, and Germany have strong manufacturing sectors even though wages are high. As you wrote, low wages are not nearly enough.
the fact is that now, even with a level regulatory playing field, we are going to have a really hard time competing with most chinese manufactured goods. they have all the access to capital and productivity enhancers, but lower labor costs.
I worked in China and can assure you that the regulatory field is not even. Congress is destroying American companies by passing regulations that have a very high compliance cost and by keeping corporate taxes at very high levels compared to the rest of the world.
You also have to keep in mind that access to capital is not enough. You need skilled people and a good training system.
That again is where the US falls down on the job. While there are some great number of highly qualified workers the unionized environment does not allow for the flexibility necessary to compete most effectively.
When I worked in China it was clear that people wanted manufacturing jobs. They quickly learned all of the specifications and regulatory requirements and ensured compliance. If I wanted more people with specific training I could pick up the phone and make an arrangement to see the head of the training school. He would get the most promising people and ensure that they knew all of the required specifications and acquired the exact skills that I needed. In the US I would have to pick the most senior people that wanted the job because that is what the union had negotiated, which means that better people that were more suitable would have to settle for jobs in which they were less valuable.
vange: "When Boeing purchases a sub-assembly from XAC or SAIC (China) or landing gear from Goodrich (Canada) the value of the parts are counted in the final sales figure."
And those purchases are not included in the value-added GDP numbers I supplied. I think you know this, but yet you still want to distort the true condition of American manufacturing.
vange: "I also have a big problem with the Chinese and Russian numbers."
I communicate for only brief periods with those who use government figures when those figures support their points, but attempt to discredit such figures when they don't lend support. Are you one of those persons, vange?
jet-
i have to side with vangel on the statistics issue.
not all statistics are equal. gathering accurate information about GDP or CPI is difficult even with the best of intentions. add in political desires to make the world look rosy on your watch and they can get pretty shaky.
pretending the the numbers from ernon were just as valid as those of cisco is clearly foolish.
one should be suspicions of ALL statistics and constantly take their limitations into account. (like a 0.2% change in unemployment not being statistically meaningful).
to claim that there are issue with china and russia's number but to believe certain others is discernment, not dissimilitude.
Jet Beagle:
Then by all means find ways to make foreign cost more than our own, regarding those developing countries having an artificial lower cost. That, actually making it harder to refuse the unemployed and/or inflating qualifications.
Morganovich:
Never had an F-body Camaro. However, I can thank all the golfcart makers (and their supporters) for making Detroit-based manufacturers' fine cars depreciate fast. If there is another manufacturer that follows Detroit's formula and not Europe/Asia's, I would like to know. However, I have yet to see any of these companies do more than just provide a bland "global platform car".
Re: Government systems
If you're nearly at the end of your rope financially, and nothing has helped to fix it, you tend to not care for more problems. Solutions that get people back to work in short amounts of time do.
The largest problem is some businesses trying to wait people out and appear as they were genuinely in trouble. They deserve any action and pursuit against them. It may be what you say it is - but there are businesses who can survive that 'uncertainty' that have political grudges to settle. These businesses just want political favor, not just profit.
VangeIV:
Not sure what would satisfy your request. Just a human that is running out of options.
"I can thank all the golfcart makers (and their supporters) for making Detroit-based manufacturers' fine cars depreciate fast."
What?? The only thing that can cause such depreciation is owners willingness to get out of those disappointing clunkers as soon as they can, even at a loss.
"If there is another manufacturer that follows Detroit's formula and not Europe/Asia's, I would like to know."
Here's a partial list:
Hudson
Nash
Willys
Studebaker
Kaiser
American Motors
Packard
Note what they all have in common.
"If you're nearly at the end of your rope financially, and nothing has helped to fix it..."
sethstorm, have you considered getting a job? In my experience that's a great way to alleviate financial problems.
And those purchases are not included in the value-added GDP numbers I supplied. I think you know this, but yet you still want to distort the true condition of American manufacturing.
I know that they shouldn't be included but I have read enough accounting critiques of the way the reports are created to believe that some of it makes it on the reports. While subsequent revisions should make the reports more accurate it is doubtful that they really are as accurate as people seem to believe.
For a decent discussion about the tricks being used I suggest that you look at the material put out by John Williams at www.shadowstats.com.
I communicate for only brief periods with those who use government figures when those figures support their points, but attempt to discredit such figures when they don't lend support. Are you one of those persons, vange?
I don't trust any of the numbers coming from the Chinese government because I know how they are collected. I have sat in on more than enough discussions about data problems to accept the reported numbers as anything close to accurate. Once again I am with Faber on this one. Instead of looking at figures that are denominated in some fiat currency or another you are better off evaluating economic activity by looking at trend changes that deal in things like tons of copper used, tons of cement produced, number of containers shipped, etc. I also agree with Faber when he says that the level of activity in the service sector is greatly under-counted by bureaucrats and that the data issues make the production data very suspect.
seth-
you comment doesn't make any sense. what on earth are you talking about?
car makers succeed when they sell cars people want. you still seem rooted in the idea that people should want what you want (or what our carmakers make). you still have not described this apocryphal car you pine for. it doesn't. you just want a $30k car for $15k.
also: CAFE actually drove UP us manufacturers market share when it came out. i asked a friend in the auto business about this. light trucks and SUV's were not in the mileage figures. pretty much only we made them in the 80's. their popularity began AFTER cafe. if you look at the actual mileage of the aggregate US light vehicle fleet, it's been declining since the mid 80's. that's SUV's etc.
the us had that whole market. but we blew that one too. the japanese took share, and finally so did the germans, but back in the 80's, it was all big 3 and ours to lose.
hell, without cafe, US carmakers would have dropped even more share.
VangeIV:
Not sure what would satisfy your request. Just a human that is running out of options
I have faith in people who are left free to mind their own business and to pursue their own interests. What I want is for government to get out of the way and stick to its very limited role. The way I see it there is no need for the feds to do 90% of the tings that they do.
why don't you go look it up. he tried to bring their policies here until the supreme court overturned his national recovery act.
If that's the entirety of that act, it's a lot shorter than the current 2000+ page monstrosity for "health care reform".
It's just getting harder to believe the private sector and the government when more than a few use the crisis as a political weapon(workplace or government office). I'm just wanting the politicization of the crisis to stop or decrease a LOT.
It's just getting harder to believe the private sector and the government when more than a few use the crisis as a political weapon(workplace or government office). I'm just wanting the politicization of the crisis to stop or decrease a LOT.
A weapon implies power to initiate force. Companies have no such power because their transactions with shareholders, workers, suppliers, and customers are voluntary. A company can no longer force a worker to stay than a worker can force the company a price that is higher than the market would indicate. Only the government has the power to initiate force against others.
sethstorm, have you considered getting a job? In my experience that's a great way to alleviate financial problems.
That's the optimal solution - but it is easier said than done when you have 5:1 on average, and [hundreds]:1 for your location and line of work. Doubly so if one has a willingness to take work that's quite far away, or is an imperfect match.
Morganovich:
Let's get this clear - 15k-18k would be ideal. 23k-24k is pushing it, but tolerable. The one thing that really doesn't do well is to have a car go on a "global" platform and have very little US input beyond mere localization.
The problem will come around 2012-2013 when GM will become a political weapon for the GOP. That is, they would have no issue killing it(and a long-term political foe), taking all the knowledge with GM.
Companies have no such power because their transactions with shareholders, workers, suppliers, and customers are voluntary.
However, said companies can make choices that are technically "voluntary", but have the same effect as force when implemented. That is especially so when the company has a greater ability to negotiate in the company's favor versus having to compromise with an individual. They have a greater ability to refuse, more power to make that refusal stick, and more power to have that refusal to extend for as long as the company wishes to refuse. While it is all voluntary, force by virtue of limited choices & negotiating ability exists.
This comment has been removed by the author.
vangeIV: "you are better off evaluating economic activity by looking at trend changes that deal in things like tons of copper used, tons of cement produced, number of containers shipped, etc."
That data is worthless in measurement of the manufacturing sector, IMO. Number of containers shipped might indicate the physical size of exports shipped, but it says almost nothing about the value-added by manufacturing. Tons of cement produced may indicate the level of road construction or dam building or home building, but it doesn't indicate anything about how much value was added via the assembly of electronic goods.
If you refuse to use all Chinese government figures, I have no problem with that. But please don't try to argue that you know the state of an economy which employs 750 million people.
seth-
again, you cite price, but not features and whether the 2 are compatible. has it occurred to you that NO ONE can make the car you want at that price?
what you want is a car like ones that cost $22-25K for $15-18.
if someone could build those and make money, they'd be doing it and taking massive market share.
this isn't some conspiracy, it's economic reality. you have to either say: "i want these features" and pay what that costs or you have to say "i'll spend X dollars" and buy what that buys.
for you to be able to buy a car, someone has to want it less than you do. sounds like you want a certain car, but not enough to convince anyone to sell/build you one.
you're just fantasizing about prices from decades ago.
you sound like one of these guys who talks about how movies used to cost a nickel.
i'd love to buy apple stock at $20 too, but it doesn't work like that.
morganovich: "to claim that there are issue with china and russia's number but to believe certain others is discernment"
Perhaps I wasn't clear in my comment.
I have no problem with VangeIV or anyone else who refuses to accept any statistics about China which are prepared by their government. I do have a problem with those persons who accept Chinese government statistics which support their arguments and who reject those Chinese government statistics which do not.
seth-
you notions of "force" are ridiculous. it's not "force" to not offer a job. you make is sound as though an applicant is entitled to a job and failing to hire them somehow deprives them of rights. that could not be more wrong.
if i push you into the river to drown, that's force. if i fail to rescue you from a river you fell into because it looks to dangerous, that is not force. that latter is the situation with an employer.
by your logic, it's a use of force for you to walk off a used car lot without buying anything because the salesman really wanted to sell you a car and his kid needs braces.
companies shop for labor just as people shop for cars - when you find good value for money and see something that fits your needs, you buy it.
you seem to want to force companies to overpay you for you labor, but then want to underpay auto makers for their output.
that's awfully hypocritical.
Motganovich,
I am referring to the wages of as covered by the government’s Average Weekly Earnings as shown in “Table A-2. Current and real (constant 1982-1984 dollars) earnings for production and nonsupervisory employees on private nonfarm payrolls, seasonally adjusted” at http://www.bls.gov/news.release/realer.t02.htm with historical values at http://www.workinglife.org/wiki/index.php?page=REAL+WAGES++1947-2000
This is what the worker actually has to spend. Advocates of free trade prefer other measures of earnings including those that include the income from more than one job and overtime but this is an apples to apples comparison.
Your reference to “Real Compensation” did not define the term. I assume it includes benefits. Workers can not spend benefits. Bottom line these workers have less purching power than a worker doing the same job in 1973. Free trade has forced wages down more that it has brought down prices.
At the end of the day you are arguing that if the employer pays more this year for health insurance this year than last year the employee is better off now than last year even if part of the increase is passed on to him.
The problem will come around 2012-2013 when GM will become a political weapon for the GOP. That is, they would have no issue killing it(and a long-term political foe), taking all the knowledge with GM.
The knowledge is not all that valuable because there are other companies that can make much better cars.
However, said companies can make choices that are technically "voluntary", but have the same effect as force when implemented.
Not really. When someone uses force against you it is a violation of your natural rights. A company can't violate your natural rights because it can only interact with you contractually in which you have a say. If a company promised you a job for life it can't fire you unless it goes under or it compensates you for breaking the contract. If you signed a three year contract to stay with a company you can't leave for three years unless you compensate the company for breaking that contract.
That is especially so when the company has a greater ability to negotiate in the company's favor versus having to compromise with an individual.
Negotiation means that no force is used. When I negotiate with you I do not violate any of your rights and you don't violate any of mine. It is a voluntary arrangement that will only go through if both of us prefer it to the alternatives.
They have a greater ability to refuse, more power to make that refusal stick, and more power to have that refusal to extend for as long as the company wishes to refuse.
What part of voluntary contract do you ave a problem with? The market dictates who has an advantage between buyer and seller. Just as a company has no right to force you to buy a product that it prices too highly you have no right to force it to pay too much for your services.
While it is all voluntary, force by virtue of limited choices & negotiating ability exists.
No. There is no force involved. The fact that my friends could negotiate $200 an hour to search lines of code before Y2K does not mean that they forced the company to hire them. The fact that they had to settle for $40 an hour after January 1, 2000 does not mean that the company used force against them. The prices were set by the market as they should have been and no force was involved.
If you refuse to use all Chinese government figures, I have no problem with that. But please don't try to argue that you know the state of an economy which employs 750 million people.
I am saying that it is hard to get meaningful numbers. But you can tell what is going on locally during a visit. When my son counted more than 150 cranes during a 25 to 30 minute drive around the ring road in Xi'an I was quite sure that activity was significantly higher than it was the previous visit, when there was no ring road. When I went to Shanghai and saw new blocks of buildings where the old slums used to be I was quite sure that the level of economic activity was much higher.
And as Faber points out real commodity use matters and is quite telling about economic activity. When you see that China consumes significantly more steel, copper, zinc, nickel and coal than the US does, you can be sure that its level of economic activity is a lot closer to that of the US than the figures indicate.
Each year China has been adding new electricity generation capacity that equals that of the UK. Each year it has been building enough urban units to house the entire population of Canada several times over. It is building significantly more railway lines, bridges, roads, highways, than the US does. It is now building more cars, refrigerators, computers, television sets, toasters, toothbrushes, athletic sneakers, etc., etc., etc. As such it is fair to assume that China's real economy is about as large as that of the US, even if the American numbers are enhanced by such things as $2 billion dollar bombers, $6.2 billion aircraft carriers, $140 million fighters, etc.
VangeIV, Morganovich:
When there is a lower opportunity cost to deny someone work than there is for someone to refuse the offer, there definitely is a lopsided negotiation.
You seem to think that there is one standard of (economics) force, and any evidence that disproves that is automatically wrong.
Force can also be constructed by simply giving one party the natural ability to massively outdo the other. Do that, and you get "voluntary" decisions that really aren't.
At this point, if it takes a constitutionally valid, yet just as powerful reincarnation of the National Recovery Act, so be it to get a recovery. What has to stop is the lack of work, the inflated requirements, and the unwillingness to hire on permanent/secure/non-temporary terms.
When there is a lower opportunity cost to deny someone work than there is for someone to refuse the offer, there definitely is a lopsided negotiation.
Why should a company hire when it does not need people and it is looking at a deteriorating economic outlook? And instances when one side has the upper hand in negotiations are common. (Just look at the Labron James and Chris Bosh situations this summer.) When one side or another has little bargaining power it needs to accept a lower price than it was hoping to get.
You seem to think that there is one standard of (economics) force, and any evidence that disproves that is automatically wrong.
I have no idea what you are really saying. Do you?
Force can also be constructed by simply giving one party the natural ability to massively outdo the other. Do that, and you get "voluntary" decisions that really aren't.
A voluntary transaction does not involve any force. If you don't want to meet my price you don't have to buy my services. If I don't like your services, I don't have to use them. You do not have the right to force anyone to buy what you have to sell at a price that you want. When you don't get what you want the other side is not using force.
At this point, if it takes a constitutionally valid, yet just as powerful reincarnation of the National Recovery Act, so be it to get a recovery. What has to stop is the lack of work, the inflated requirements, and the unwillingness to hire on permanent/secure/non-temporary terms.
I have mixed feelings about your proposal. What you advise would destroy the US and would make me very rich. It would also destroy anything that Americans have in the way of savings that is not related to holding of precious metals or commodities. Just how does a fascist government that destroys the currency help you again?
"The problem will come around 2012-2013 when GM will become a political weapon for the GOP. That is, they would have no issue killing it(and a long-term political foe), taking all the knowledge with GM."
Seth, GM is already dead. It has been dying for a decade, and should have been allowed a dignified funeral in 2009 but the government decided to keep it on life support as a zombie. Nothing will bring it back to life as it once was.
"...taking all the knowledge with GM."
seth, if that knowledge was of value, GM would be a healthy, profitable company. Obviously that's not been the case.
james-
if your employer pays for healthcare, then you keep more of your cash paycheck by avoiding those expenses.
that is more purchasing power.
http://en.wikipedia.org/wiki/File:US_real_compensation_1964-2005.gif
if i paid you rent/mortgage, that would not up you paycheck, but it does free it up to use on other things exactly as if i did.
your argument here doesn't make any sense unless you are claiming that people wouldn't spend the money themselves. hell, on healthcare, that's about to be illegal.
seth-
by your definition all private property is bad and creates lopsided situations.
i'm not allowed to walk into your house and eat out of your fridge.
that's lopsided.
why can't i have your stuff?
unfair!
that's the nature of private property (like a business). you get to do with it as you choose.
you are demanding the right to tell other people what to do with theirs, but when ford wants you to pay 225 for a mustang instead of 15, you demand control over your money.
that's as hypocritical as is in illogical.
I have mixed feelings about your proposal. What you advise would destroy the US and would make me very rich. It would also destroy anything that Americans have in the way of savings that is not related to holding of precious metals or commodities. Just how does a fascist government that destroys the currency help you again?
Not sure where you get the currency devaluation/commodity price increase bit out of what I said.
Seth, GM is already dead. It has been dying for a decade, and should have been allowed a dignified funeral in 2009 but the government decided to keep it on life support as a zombie. Nothing will bring it back to life as it once was.
seth, if that knowledge was of value, GM would be a healthy, profitable company. Obviously that's not been the case.
The same could have been said of Chrysler in the 1980's, but they are not dead. They got bailed out and recovered.
GM makes cars that the other parts of the world won't make, instead of shoving mass amounts of golfcarts down people's throats like most of the world does. But if you have no problem having the environmentalists usurping car design, I am not sure what can be said for you.
morganovich said...
You're trying to stretch the willingness to fix a bad scenario into an absolute disregard for private property.
I'm just willing to consider solutions that make it harder for anyone who has a political grudge to get in the way of a recovery.
"The same could have been said of Chrysler in the 1980's, but they are not dead. They got bailed out and recovered."
Now wait a minute, isn't that the OTHER car company that just got bailed out...AGAIN?
You seem to be making my point for me. Whatever chemotherapy was used on Chrysler in the '80s didn't cure it. The cancer remained, and killed it again.
"GM makes cars that the other parts of the world won't make..."
Is that part of the reason they failed? They can't make the cars you prefer at the price you are willing to pay, so YOU have helped put them out of business.
"...instead of shoving mass amounts of golfcarts down people's throats like most of the world does."
You know, Seth, you have a strange view of how business happens. I've NEVER had a golfcart shoved down my throat by any dealer. Every time I've bought a new golfcart, I did some carefull planning and comparing and then voluntarily went to the dealer and said:
"Please take my money, and give me a new golfcart. That golfcart is worth more to me than the money."
The dealer said:
"Ok, I agree. I prefer the money to the golfcart I have now. We have a deal."
It's ALWAYS been a voluntary transaction, with no force or throat shoving involved. Both the dealer and I are better off afterward, because we have something we value more. I didn't have to buy, and the dealer didn't have to sell.
"But if you have no problem having the environmentalists usurping car design, I am not sure what can be said for you."
But I DO have a problem with that, but that is a GOVERNMENT USING FORCE problem, not a car problem.
You should be aware that large car makers like GM don't mind government regulation as much as you might think. They apply to every car maker, and the costs are passed directly to buyers. In fact, manufacturers ASK for government regulation that gives them an advantage in the marketplace. Think GE.
You know, Seth, you have a strange view of how business happens. I've NEVER had a golfcart shoved down my throat by any dealer. Every time I've bought a new golfcart, I did some careful planning and comparing and then voluntarily went to the dealer and said...
Build enough in volume, and that's what you get. Enough volume of golfcarts, keicars, and other car-like stuff to make anything Detroit-like to be overly expensive.
All it takes is for them to step up to the plate and go full-on Detroit with regards to car design. It is that simple, and no manufacturer is willing to do that. They just make the design smaller, throw in a generic 4-cylinder and hope nobody knows the difference.
Think GE.
I see a company that goes overly global. Yes, that is a bad thing.
Seth, you are a truly strange person. You avoid responding to the important parts of my comment. You are stuck in the past and it won't return.
"All it takes is for them to step up to the plate and go full-on Detroit with regards to car design. It is that simple, and no manufacturer is willing to do that."
Seth, hardly anyone but you wants a car like that anymore. That's why they don't exist except for a few niche models that don't sell well enough to pay the rent for a manufacturer. Those few are out of your price range in any case.
"They just make the design smaller, throw in a generic 4-cylinder and hope nobody knows the difference."
You insult car buyers with ignorant statements like that.
"Think GE.
I see a company that goes overly global. Yes, that is a bad thing."
No, that part is good. The bad part is getting a step ahead in CFL technology then hurting your competition by convincing government to outlaw any other kind in the name of a global warming scam.
morganovich,
You are missing the point.
My point is that real wages have declined since 1973. In 1973 non management non professional workers had more stable jobs with higher purchasing power than they have now.
No, that part is good.
The part where they get to sell out our nation and not be accountable to our nation is the huge bad part. And more than just folks that are behind the jumble of mutual funds.
You insult car buyers with ignorant statements like that.
Yet that is what the car manufacturers outside of Detroit do. Less granola, more Detroit.
james-
no, they didn't. you are mistaking tax efficiency with wage decline.
if i used to earn $100 and had to buy heath coverage worth $5 and now earn $100 but get health coverage worth $10 from my employer i have more disposable income. more even that the $10 differential, as i had to buy HC with after tax dollars.
hourly earnings are only part of the picture. benefits and stock options are a big part of most compensation packages now.
you cannot leave that out.
Post a Comment
<< Home