> The US has added around 800,000 jobs in manufacturing employment over the last two years, employing around 13 million workers
It's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
1. 50% tariffs on China, and
2. $100B of subsidies to chip makers and green tech...
The reversal of Reaganomics we're living through will become permanent for at least another generation, and for good reason. Maybe a good time to start a company selling to the government.
> solution to decades of economic misery for middle class blue collar workers was 50% tariffs on China
Who could have thought that manufacturing using western labor and laws, can't compete with manufacturing in a totalitarian regime with no respect for human lives/rights or the environment? /s
Free trade should only happen as long as the trading partners share similar laws and regulation on human rights and environmental protections, otherwise people and the environment get screwed for the sake of corporate profits, so tariffs should always be in place to level the playing field and prevent such exploitations.
Reagan launched the Uruguay Round of trade negotiations that led to the creation of the WTO, which itself resulted from the Bretton Woods system and the General Agreement on Tariffs and Trade (pre-cursor to WTO) that were established after WWII. The US had been on that trajectory for a long time before Bill Clinton put it into overdrive!
Why the downvotes? The US totally was the driving force around creating and growing globalization. How is this not known to be true, its history at this point.
I think your comment would be received better if you rewrote it without the part about ‘so many people don’t read history’. For what it’s worth, I upvoted that comment before reading the one I am responding to.
This community can be picky about tone and phrasing (which I believe keeps things mostly civil), don’t take the downvotes personally. Some users may have felt the ‘not reading history’ part was targeted at them, even though you were speaking generally.
It’s because Americans generally do know this. All the things coming to a head now were brought up as concerns back then. The position of the average America, the entire time deindustrialization was happening, was that Americans were being sold out by the wealthiest class and they were told economics isn’t zero sum as a rebuff.
I think it is important to separate free trade agreements between highly developed nations and under developed nations. For example, when NAFTA was enacted, Canada was already very rich (like the US), but Mexico was much poorer than both. It was pure labour arbitrage on both parts.
Boomers saying: "I don't want my kid to go to machineshop in HS, he'll turn out to be a plumber" is what did it too.
Building things has been looked down upon for 40 years because boomers thought it was a step backwards since their parents worked on the assembly line.
"We'll just design things and have people elsewhere do the building" is one of the dumbest ideas. How do you think you learn how to build things without building things? Who's going to build the next big thing? Oy!
A great litmus test to see if an educational administrator is knowledgeable on STEM is to see if they regard woodshop/metalshop/autoshop as purely "vocational".
Bare in mind, vocational still means "not college bound" == "useless" == "doesn't look good in the US news rankings"
Ive talked to superintendents and they just give me a blank stare when I told them that a great way to get kids to understand the cartesian coordinate system is in machine or woodshop, reading a blueprint, schematic etc. Actually doing the work is better than a word problem. They have no respect for it and this is in the best educated state in the US with supposedly the best school system.
Bottom line, if we are going to build things again, it needs to start in the schools.
I'd argue this attitude is sexist. Boys tend to learn best with hands on instruction[0], like woodshop, and as we see girls are outnumbering boys in college and the trend is increasing. Instead of including activities and topics that engage boys, we push boys into special education classes and feed them drugs to punish them for not being more like the girls.
Learning the cartesian coordinate system from shopwork may work for some but my experience is the majority of tradespeople, even very skilled ones dislike STEM and academic subjects and see their trade as a body of facts and hands on skills not something systematic from which to learn abstract mathematical principles. The few who can are well equipped to be actual engineers.
Sounds like a crappy change, because when I was in 8th grade in MA they literally had us take a class learning to use a blueprinting desk and the Cartesian coordinate system.
> Building things has been looked down upon for 40 years because boomers thought it was a step backwards since their parents worked on the assembly line.
No, it was looked down upon because the pay to quality of life ratio was much better in white collar careers. It probably still is for the most part. Wake me up when the same people are deciding between becoming plumbers or electricians rather than lawyers or doctors or engineers.
But that was the goal. If they didn’t make it to the doctor/lawyer/engineer/financier level, then middle management or consultant or whatever other desk job would have to do.
Either way, a Mon to Fri 8 to 5 salaried gig with benefits requiring little travel and no health risks was a comparably better goal to aim for due to the lack of sufficient price premium for the non desk job labor.
> NAFTA + China-WTO accession really did not help American manufacturing.
American manufacturing was declining way before NAFTA or China. The anti-japanese/asian period of 70s and 80s existed for a reason. The way we are attacking china today is how we attacked japan in the 80s. The only difference is that china isn't going to back down like japan did. Far easier to bully a nation that you militarily occupy.
The trend isn't going to change. Manufacturing will go to ASEAN and India next. All the propaganda about "factories in the US" exist to distract from that reality.
Gov also isn't just federal, there's state and local! In general, the federal government is really bad at procuring pure software products (with some exceptions like Scale AI).
Edit to add: If you're building in the space, YC cofounder matching also does events targeted to gov once in a while, and I personally am doing some ideating if you want to chat
"All you young fellas building tech companies that aren't making any money, meanwhile Town Hall has a contract out for $100k/year to clean the floors and no one's bidding on it."
"The contract requirements are geographically spread over the State of Alabama in the following counties: Clarke, Monroe, Wilcox, Dallas, Autauga, Lowndes, Montgomery and Elmore along the R.R. “Bob” Woodruff Lake, William “Bill” Dannelly Reservoir and Claiborne Lake. Alabama River Lakes consists of approximately 1,092 miles of shoreline, 39,452 acres of water and 68,006 acres of land. Facilities include 6 Class A campgrounds, 38-day use/land water access areas, 9 Multi-purpose Areas, 3 Visitor Centers/museum, 9 maintained but undeveloped Natural Resource areas, 2 Contractor maintenance Compounds, along with a Resource Management Office and other associated operational facilities. Provide services for maintenance, repair, minor construction (as defined in AR-420-1 and DA PAM 420-11) including all planning, supervision, administration, labor, equipment, materials, supplies, and replacement or repair parts that is required for performance of this contract.
The contract scope of work will include, but is not limited to, some or all of the following types of work: maintenance and repair of buildings, facilities, offices, water and electrical systems, concrete structures, maintenance facilities, operational areas, roadways, vehicles, boat docks, bathhouses, washhouses, toilets, gatehouses, security fences, sanitary disposal systems, launching ramps, playground equipment, bulletin boards, game courts, playgrounds, telephone lines, picnic sites, campsites, and other related facilities."
Pick science or health instead of defense from the list on the left.. but you would be missing out on "MDA23-T002: AI-Informed Algorithms Combined with Differential Game Theory to Support Swarm-on-Swarm Engagements"
An eye opener is the list of top contractors to the US government:
The coolest one is Atlantic Diving Supply (No. 24): it started as a small dive shop that just happened to be located in Virginia Beach.. some Navy Seals kept ordering things from them.. then 9/11 happened..
Maybe we shouldn’t consider this a success while subsidies are happening? We also gave $535 million to Solyndra to manufacture solar panels in 2009 and they imploded once our tax dollars stopped being funneled (as much) to them:
The real test will be once they stop taking our taxes and handing it to businessmen if they can stand on their own merits. Until then this is charity to the private sector.
That's a bold claim. Coming out of WWII the US had virtually the only operational factories in the world. Arguably protectionism caused incumbents to become moribund and fall behind foreign firms. The steel industry is a great example. By the time tariffs came down US steel plants were half a century out of date and producing steel that was either too expensive or too low in quality compared to competition. For another angle on just steel, the Chinese industrial policy caused such a glut of steel that they were frantically searching for things to do with all of it, and ended up doing a bunch of stupid and wasteful projects that diverted funds from more useful endeavors.
The US also protected furniture and garment production into the 90s. Had that not been the case, the transition int hat industry likely would have been much smoother and no so apocalyptic for workers.
Underlying your claim is the notion that technocrats can or could ever know what an economy as large and complicated as the US "should" be producing.
Underlying your perspective is the idea that economic activity is only about growth or efficiency or "winning". Governments have very different interests, such as maintaining social order, protecting vital industries and spurring innovation. A government doesn't care if their industrial policy is sub-optimal from a growth-uber-alles perceptive. Only a tiny sliver of libertarian-types think that way and those people rarely if ever hold significant political power.
So my point is that protectionism undermines things like innovation by creating protected industries that don’t need to be innovative.
Maintaining order is an odd goal for an economic policy no? But on that note, France is probably the most protectionist among developed western nations. Yet they have created a situation where a third of young people can’t find work and social cohesion is unraveling.
I didn't say governments were always good at it. But every one of the East Asian tigers owes its first-world status to aggressive industrial policy. And despite France's issue with unemployment and immigration, you'd still rather be born there than almost any other nation on the planet. And I'd add, NASA is industrial policy. ARPA is industrial policy. University funding is industrial policy. Government-directed investment is responsible for a significant chunk of technological development since the dawn of... industrial policy.
I would argue that both China and Vietnam owe most to their success to market reforms and not to particular industrial policies. Prior to Deng, China couldn't even produce enough food, and they had industrial policy for years(every 5 in fact). South Korea is a US satrap that has been showered with development dollars since the 1950s, and even still the economy took off after liberalization and a turn to democracy. Moreover SK's cozy connection between state an industry spawns endless scandal, is eroding trust in the state, has create a perverse system of cram schools and test taking to get onto corporate ladders that is absolutely crushing young people there, and a number of other social and political problems. Japan has also seen its industrial policy turn to shit. The bending to Toyota's quixotic dream of hydrogen cars has hobbled the whole auto industry there and has stalled the roll out of any charging infrastructure for EV. They were well positioned due to a history in auto engineering and electronics to have become an EV powerhouse and a leader in battery tech, but industrial policy fucked that up, because policy makers were convinced that Toyota the national hero knew better.
The 5th Republic has been teetering on the edge of collapse for the last few. years, so I wouldn't be so bullish on France.
BY ARPA I'm not sure if you're referring to the Advanced Research Projects Agency or the American Rescue Plan which is now stupidly called ARPA sometimes.
Um yeah, NASA was pretty cool back in the day when they were shooting V2s at the moon. But later efforts like the shuttle were kind of boondoggles because it was tethered to goofy military spying stuff, so it ended up being shitty for science and a dead end for anything commercial. That's not really a great success story for industrial policy IMHO.
This is the first time I've seen a non-politically motivated accusation that cutting off money had anything at all to do with their failure.
The tech reason was that they had a way to make thin film panels which was super promising for driving down costs due to a silicon shortage. But then Diamond based silicon tech emerged, eliminating the silicon shortage and reducing input materials, which outcompeted thin film on price.
Such is the way of innovation. Looking only at subsidies gives you a false picture.
Wasn't solyndra given a loan that requires repayment? Government funded grants, loans and research are reasonable for developing damn near all of our fundamental tech. The internet has it's origins as ARPANET to connect universities/military installations.
The government wasn't picking winners and losers, anymore than VCs or banks pick winners and losers. It was loans for well proven tech development, and has a fantastic track record for financial success.
We've subsidized things we consider strategically or economically important for, what, at least a century now?
It doesn't make sense to think of infrastructure and technological capacities as less important than agriculture anymore, when it comes to keeping some significant presence locally.
I hear this a lot about Clinton, as if it is a condemnation. Seems conveniently forgotten that it was a Republican Congress, and Republican's were the ones pushing globalization, to help big business with all that cheap labor. And Clinton went along with it to be 'bipartisan'.
Do we think globalization failed? because it seems to me it's just getting rebooted from the business side. The cultural impact seems too out of the bag, railing against globalization in a Clinton context just seems like bad lens to be looking through
Part of why the US working class has been so angry isn't just the economic misery but the decades of being gaslit by politicians pretending that outsourcing to countries with no OSHA, no EPA, no concerns about carbon emissions, no workers rights, no unions, and radically lower wages is going to create jobs in America.
It's a clearly absurd proposition on its face. Of course that's going to depress wages and destroy jobs, especially in manufacturing.
I'm all for free trade with other free countries with similar levels of rights for workers and concern for the environment. Outsourcing elsewhere should be taxed proportionally to the gap in these areas.
If you want a simple to implement solution, a tax on a combination of wage disparity and CO2 emission disparity would be enough to capture most of the relevant differences. The latter can be very objectively checked using satellite imaging.
Problem with this policy is that it will prevent poor countries from ever getting up the ladder. It also ignores the fact that many advanced human right respecting countries got there not without plundering less fortunate for generations.
How is that a problem for the United States, for instance?
Do officeholders in the United States have any responsibility to people in foreign countries beyond that in ratified treaties?
Do we have any moral obligation to make restitution for our great-great-grandparents' crimes to the great-great-grandchildren of the victims? And what level of punishment is going too far?
You do not have to do shit. But you do not live in the vacuum and unless you take interests / complaints of the other parties into considerations sooner or later you would face problems. Karma.
Well given the policy of the US the last 70 years we’re boned if karma is coming for us.
Back to shrugging off the idea poor people on the other side of oceans are going to pick a fight with me specifically. I live in the middle; after rowing over the Pacific they’ll have to get through a lot of other people first.
Hey you should probably stop buying toxic technology and flying; would hate for the kids to karma your elder form.
Shit n hellfire; anyone making use of modern technology has little wiggle room to pontificate about why and how others are oblivious to reality of their choices.
We're not all in this together. If there are any problems that arise naturally, I'm not personally averse to working out something mutually beneficial.
But if that were a threat, then I'd like to see some other country make good on it.
Not really. Trade with rich nations could certainly speed up the process but the bitter truth is we have no one but ourselves to blame for the rampant poverty and corruption. It's precisely this corrupt mentality and dependence that stops poor countries from becoming rich. There's a literal communist in the presidency of my country, a leftist party who's enjoyed power for decades by essentially keeping people poor so they'll be thankful for the handouts.
These agreements are not the only cause, if everyone would have kept on buying locally produced products, the jobs would have remained. Problem is that we bought the cheaper products, making it impossible for companies producing locally to stay profitable. We want our cake and eat it too.
That doesn't really make sense. In no universe can you expect people to buy more expensive products. Government intervention (tarrifs, taxes, regulations, whatever) or some other measure is needed to protect local companies.
I don't think GP was implying we should expect it.
But it's fair to point out that there's a certain hypocrisy in complaining about jobs being lost to overseas while simultaneously buying goods made offshore in preference to those made locally.
Note that I certainly accept on average this has been a beneficial arrangement for both sides, but it's the unevenness of how the wealth has been spread around that strikes me as the real issue.
Not an entirely honest appraisal of the dismantling of US manufacturing in the 80s.
Big corporations didn’t reluctantly close down factories, hat in hand, because people weren’t buying their products. They moved the manufacturing offshores and people kept buying the products they always have.
You can't blame the corporations, if they wouldn't have moved the manufacturing while the competition did, they wouldn't have been able to compete on price, and consumers would have bought the cheaper options.
The US is wealthier than ever and unemployment is persistently low. My fairly simple analysis of those two facts leads me to believe it's not a lack of jobs, but inequality that drives the misery.
3. Fracking. Cheap, abundant energy which is uniquely close both to very educated labour pool and either the most navigable river basin in the world, or the ocean.
Saudi Arabia, Russia and other countries may have more oil than US, but it's too far from there places where it would be usable for manufacturing.
And fracking itself was developed with massive amounts of government subsidy, which is conveniently forgotten whenever the issue of "subsidies" comes up.
There's also the political motivation of banks, which blindly trusted fossil fuel investments, leading to massive investment that was unprofitable in the first round of fracking.
When it comes down to it, fossil fuels are surviving, and continue to survive, largely as a cultural and political effort, as much as a technology effort. And once we move away from them we will be saving massive amounts of money that can be directed towards improving the economy in other areas that improve people's lives rather than damage their lungs and cause climate change.
"President Reagan decided Friday to impose punitive 100% tariffs on a wide variety of goods produced by Japanese electronic giants in retaliation for Tokyo’s failure to abide by the semiconductor trade agreement between the two nations"
Reagan also jacked up the national debt pumping $$$$ into defense technology and hardware development, but I suspect you know that neither tarriffs nor unrestricted government spending without an eye towards the debt is what "Reaganomics" is popularly remembered as.
Outside of the more immediately-public-facing stuff like tax cuts, Reagan's legacy is very much a "do what we say, not what we did" situation.
The original post's point seemed to me to be "Reaganomics was bad for manufacturing jobs", and listed tariffs and subsidies as two things that are good for manufacturing jobs that were a reversal of Reagonomics. Do you agree that was the original point?
But Reagan implemented both tariffs and subsidies that were good for manufacturing jobs. So how are tariffs and subsidies a reversal of Reaganomics?
My point is this part: "Outside of the more immediately-public-facing stuff like tax cuts, Reagan's legacy is very much a "do what we say, not what we did" situation."
A common definition is something like "widespread tax cuts, decreased social spending, increased military spending, and the deregulation of domestic markets" - https://www.investopedia.com/terms/r/reaganomics.asp - and in common parlance it is heavily associated broadly with "trickle down" ideas. Subsidizing manufacturing and putting more regulation around trade run counter to that. Especially when you're subsidizing not-immediately-defense-focused manufacturing. Reagan and the neoliberal era as a whole was very bad for most manufacturing, the existence of one area that Reagan invested in doesn't disprove that, but it should've led its supporters to say "hey, that worked, maybe it would be useful in other areas too."
Even the tax stuff, right? The idea being pitched was that lower rates would result in higher government revenues but in practice the old tax rates were not at such a point that they were strangling productivity in the ways that would've been required for that to be true. Yet the legacy is simply "tax less" instead of any associating remaining with the "we actually think we can get more revenue to fund our spending" part.
But the tax cuts haven't been reversed. The top marginal rate when Reagan took office was 70%, it has been between 35% and 40% for the last 30 years. So where is the reversal of Reaganism that explains an increase in manufacturing jobs?
Where is the economic statistic that you can point to as being X during the Reagan years that was recently changed to Y, and that you think explains the increase in building factories over the last two years?
more than a hundred large companies consolidated into just five, from 1980 to 2000.. those five are [ Boeing, Lockheed-Martin, Raytheon, Northrup-Grumman, General Dynamics ] .. wages are associated with management practices, eligibility and "where did all that money go". For us civilians who do not build weapons, this was maybe not as great as some here say it was...
Another important factor is that China's workers make more money than they used to, especially relative to the West. There's not as much of a cheap-labor-arbitrage opportunity as there was in the early 2000s.
Surely though there's still plenty of places in the world that, on the basis of labour costs, it would be vastly cheaper to operate than in the US. On that basis I'm not convinced wage growth in SE Asia is the primary reason the US manufacturing industry is deciding to reshore. Is the same phenomenon occurring in other wealthy countries that haven't put in place taxpayer funded incentives to do so?
> there's still plenty of places in the world that, on the basis of labour costs, it would be vastly cheaper to operate than in the US.
Keep in mind costs aren't just what you have to pay people but also things like regional security, the risk of the government nationalizing your company and assets, ability to get skilled/capable/honest people.
Basically there has to be a degree of stability, including a centralized government that can provide a certain level of law and order in order to attract capital. Otherwise you have to price in the costs of missing a day of work because the factory is being shelled by government/anti-government groups, etc.
Corruption is fine, bribes are fine, because they can be priced in and managed, what can't be managed, planned for and predicted is instability.
For the record my bet on where the next big booms will be is Indonesia, Mexico and to a lesser extant west Africa.
> Keep in mind costs aren't just what you have to pay people but also things like regional security, the risk of the government nationalizing your company and assets, ability to get skilled/capable/honest people.
Also a lot of those same stability/security concerns, but applied to the trip from here to there, likely across the ocean, which is something that people have largely taken for granted for years now other than some stories of Somalian pirates.
Mexico stands out to me as a country that hasn't lived up to its potential in that regard. Certainly there's no shortage of potential cheap labour, given the number of refugees making their way across it. And regional security and ability to get hold of necessary skilled workers shouldn't really be an issue, when you have the US right next door. It's hard not to see why it wouldn't be significantly to the US's benefit to ensure Mexico (and other central American countries) can become a global manufacturing hub, so I do wonder what the primary forces working against it might be.
>so I do wonder what the primary forces working against it might be.
Extreme corruption, lack of rule of law, extreme violence to name a few. Mexico is basically a failed state: the government doesn't even control large parts of the territory it claims, ultra-violent drug cartels do. How is that a good place to build factories?
Other central American counties are at least as bad. El Salvador has a higher death rate from violence than war-torn Syria during the height of its civil war.
Countries farther south would be much better bets, but they still have huge problems with corruption. Brazil, Chile, Peru, etc. aren't nearly as bad, and do have their own manufacturing industries (Brazil is home to Embraer, for instance).
> the government doesn't even control large parts of the territory it claims, ultra-violent drug cartels do
> Brazil, Chile, Peru, etc. aren't nearly as bad
Brazil is just as bad.
Drug gangs essentially own their territory. Brazilian state is legitimized by the police's monopoly on force. Gangs don't allow police in their territories which implies the laws of Brazil don't apply there. They have seceded from brazilian territory and established their own parallel government without anyone noticing.
It's common knowledge that local businesses operating in those places are doing so with the blessing of these drug lords. They even took on the role of police by punishing small time criminals who interfere with with their drug dealing operations by scaring away customers. They implement barbaric punishments like cutting off the fingers of thieves or shooting their hands. People living in those places may not even get mail because it's too risky to send mailmen in there, I've seen people who had to go to some remote post office to pick up correspondence.
It's actually kind of impressive. Shows what a people can do when it has the balls to organize and most importantly to arm itself.
Assuming your assessment is accurate (I don't pretend to have any expertise in the matter!) then the question becomes why certain countries/ regions suffer such corruption and lack of rule of law, and more importantly, why is it so hard to fix?
Japan and Korea have plenty of domestic manufacturing. Europe also has some off shoring into the peripheral countries into its customs union.
The issues are generally that in the next largest potential cheap manufacturing sources (South Asia, SE Asia, Africa) they’re either not big enough or have extremely poor logistics and red tape. A big part of the East Asian miracles have been extensive infrastructure and bureaucratic emphasis on making exports as efficient as possible.
How is south Asia possibly not "big enough - it's literally based around the most populous country in the world! But yes, obviously logistics and friendly regulatory regimes are a big part of it.
(FWIW I was including China/Japan/Korea in "SE Asia" in my post. Obviously all three have now developed beyond the good sources of cheap labour that they had started out as in the last 50 or so years. But there are still other plenty of potential candidates to follow the same path, both in Asia and elsewhere in the world).
Japan and Korea have plenty of domestic manufacturing.
This is industrial policy, not free markets. Both countries strongly encourage domestic manufacturing (including farming / food production) through a wide range of social pressure ("lifetime employment"), tax breaks, tariffs, and regulations. There is no doubt that a lot of that manuf could be moved to much cheaper countries, which would enrich a few, at the expense of many.
They’re deciding to restore because the US population has made it clear on both sides of aisle that they want these companies to be employing Americans to start reversing the economic rot we’ve left outside a small number of tech hubs. It has nothing to do wages or even economics for the most part. It’s policy to rebuild once wealthy areas of America that also happens to be good for the defense sector so.
Well. The reasoning is still valid. The corporations will follow cheap labor (or total cheapest cost, which labor is big variable).
What you are saying is that both sides have agreed to put policies in place to make foreign goods more expense, to the point that domestic labor can be competitive, and corporations will move manufacturing back to the US.
But as others have posted as questions. Is this sustainable? If the US is not competitive unless barriers are put in place, can that be done indefinably, or will this naturally reverse again when the US Gov can no longer afford to prop up a more expensive and inefficient workforce.
Folks bring factories back to the US once they scale to the point that automation can be afforded. It has a high buyin, so volume has a threshold where the marginal cost is justfied.
In all those cases, there's little or no job growth. Just a couple administrators and engineers. Nobody on the line, because there is no line, just robots and conveyors.
> In all those cases, there's little or no job growth. Just a couple administrators and engineers. Nobody on the line, because there is no line, just robots and conveyors.
Someone has to maintain the robots and conveyors, unless you’re assuming that has also been automated. I suppose this could also be contracted out if it hasn’t been automated.
Yes that's often mentioned. But the human cost is a percent of what old-style factories employed
Sure factories employ skilled labor. But very few. And what are unskilled laborers supposed to do?
American has 30M folks who's employment has descended to service industry (teller, cashier, food service). They can't all be retrained as Engineers, even if we needed 30M more Engineers which we don't.
> I'm not convinced wage growth in SE Asia is the primary reason the US manufacturing industry is deciding to reshore.
It's not. This is disaster planning.
We're being forced to bring production back home because we can't keep outsourcing to a region subject to control by a potential adversary. If war breaks out with China, access to Taiwan for chips or Vietnam for socks is going to become difficult. Blockades will be immediate.
If this were about money, we'd move production to South America. That we're keeping it this close to home after years of shopping everything globally suggests we're building infrastructure for a supply chain that can't be interfered with by foreign governments.
It's already moving to Mexico in droves; north MX near the border is where a ton of stuff gets made. Canada supplies the resources and Mexico does the Hencho-ing.
You also need a stable government where you can invest and have your factory survive long enough to be worth it. War and corruption makes many cheap counties not worth investing in.
I would add Viet Nam to that list. Lots of low cost / low value goods have moved from China to Viet Nam in the last ten years. Plus, the gov't is pro-business. Communist in name only.
it's been fascinating seeing the expanded representation in imported goods. I bought a baseball the other day and it was made in Cambodia. I think that was a first for me. Seeing lots of tools shift to Taiwan which has long been in the tool fabrication business. Textiles from India. Seems like the stuff I'm seeing in stores in the last say 6 months have dispersed away from China. I think a lot of plastics still come from China I want to say though.
It also doesn't hurt that advanced robotics (an area the west has traditionally done well in, sometimes being more advanced) has continued to have breakthroughs.
"lights out" manufacturing[0] can happen with more and more things. The humans in the process can become minimal (thus shifting more costs to fixed capital costs rather than variable costs)
> Maybe a good time to start a company selling to the government.
Why do you think this sudden rise in industrial investment? The US didn't turn attractive overnight. This is the "economy" selling to the government their $280Bn CHIPS package.
> It's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
A 50% tariff does not affect attractiveness. You did not address the core issues, as the tariff will hide it. What will happen is free market economy at play: As the issues are hidden behind tariffs/protectionism, the US will keep falling behind China until you are significantly behind that you can't catch up. Then you become a real third-world country.
I dunno, my wife works in commodity management and the number of companies she's helped get out of China lately is staggering and they've straight up begged her not to move at times. Begged. I can't imagine how this looks higher on the food chain.
Economic philosophy always ignores the real humans who will exist regardless what cherry picked economic markers indicate.
Reality will never care about any human philosophy. Humans will invest agency in interesting things regardless of some model in a vacuum anyone can conjure. Finance is has something very in common with religion; something humanity has zero obligation to perpetuate.
You have no idea what you’re talking about because we’ll just “fix” the philosophy to align with the reality. Trying to “fix people” to serve the philosophy is not happening.
Is a 2020s factory in any significant way similar to a 1970s factory?
Given a factory from each era that produces roughly the same product and quantity, how many are employed at each? What are their inflation-adjusted wages?
It seems difficult to believe that modern factories can employ enough people for your blue collar middle class dreams to become reality. The difference in population alone is 200M vs 330M. And even modest improvements in automation has the modern factory at something like half the personnel of the 70s-era factory for the (roughly) same output.
To be fair, I'm having trouble thinking of many examples of factories that might even be comparable. Auto and auto parts, obviously, are still big. But then I can't come in and say "tires" (included in the previous). What's even left?
There's a number of factories around me. They make things like:
Semiconductors
Telecommunications equipment
Elevator/Lift equipment
Agricultural equipment/trailers
Aeronautical parts (both mechanical and electronic/sensor)
Planes
Helicopters
Printing services
Nutrition supplements
Cars
Just a few off the top of my head.
These all seem to be growing a lot, as I see a lot of new buildings all the time. Many of these are definitely for domestic consumption, I'll grant you that.
My guess is that the increase in tariffs had little, if anything, to do with it; the article doesn't mention it but does cite CHIPS and the IRA. If anything the tariffs were one of the causes of our recent spike of inflation.
My own opinion is that 40 years of globalization have lifted a billion people out of poverty and now the global pay scales aren't so vastly different. It is becoming more economically viable to produce things in the US. (Which will also put pressure on higher inflation.)
Has any manufacturing facility supported by the CHIPS and Science Act been completed or made operational? The parent commenter is citing manufacturing employment numbers, which are unlikely to be impacted by prospective factories.
Has the Inflation Reduction Act had any positive impact on manufacturing either? Its main provisions seem to be related to economic redistribution, climate change, and infrastructure, all of which may have long-term impacts on industry and employment, but don't seem to have done much in those areas yet.
CHIPS/IRA was the carrot. The tariffs, sanctions, rampant IP theft, supply chain shocks, Chinese lockdown labor shortages, specter of global conflict, energy shortages, etc were the stick. I suspect the whole is greater than the sum of the parts. Organizations are not rational robots that weight every factor and risk optimally. The conversation is probably more just wild gesturing at everything while cargo cult mentality takes over in the dozen boardrooms that control a majority of economic activity.
I doubt these are the stable union jobs with decent benefits from 50 years ago. If we really want to reverse Reaganomics we need to increase taxes on corporate profits, capital gains, and inheritance.
If you increased tax receipts you could justify more government building and partnerships or grants. Make those grants pay union scale or require union contracts.
US federal government spending obviously isn’t constrained by tax receipts. You’d think that would be clear in this day and age of consistent trillion dollar annual deficits. Thus spending programs should be judged based on outcomes and not nominal cost.
I’m all for a strong middle class. However, I don’t see how an inheritance tax that forces children to sell their parents farm or business to pay estate taxes is supposed to accomplish that though. If I wanted a large permanent asset-free working class I’d definitely aggressively tax intergenerational wealth accumulation, resting assured that the upper classes would easily dodge it with trusts, corporations, expatriation, or some other tax avoidance strategy. That sounds like an excellent strategy to crush the remaining middle class.
inheritance tax kicks in around 10 million dollars. it doesn't touch the middle class. it touches billionaires who die and leave a hundred million to everyone in their family.
Billionaires have trusts and foundations and lawyer knows what else. It doesn't touch them at all.
Also a 700 acre farm, which is an at most medium size family farm, could easily have a nominal value north of 10 mil even though there's no way it's returning 1 million a year net. Same for a modestly profitable small business.
Shouldn't small businesses and farmers plan ahead and create a plan for divesting before they die or purchase life insurance with a payout large enough to cover the taxes at death? It seems like these problems are easily dealt with.
We are constrained by our politics which mean in practical terms that whichever side is out of power pretends to care about deficits. "Free" chunks of money are up for grabs to spend with impunity.
There are not just tariffs to china. It's became expensive for all countrys to sale things to the US. 10 years ago, we produced a lot for the US market in our factory, now I think, almost nothing.
I had a professor remark once (this is circa 2009) that we should all learn a highly skilled trade around advanced manufacturing because eventually offshoring will reverse itself and by your early 30s you'll be in a prime position to profit immensely off the re-shoring of advanced manufacturing equipment and processes
Maybe he was right. I'm in my early 30s now, and I don't regret becoming a software engineer, but all the highly skilled tradesmen I've met in the last 5 years make at least what I do, often more, and have the benefit of actually owning their own businesses or real, meaningful slices of other ones.
I'll boldly admit I don't think I would like over physical labor and I do wonder about the toll of it long term, but they make a killing, especially the ones willing to travel all over the US.
Granted, the highest earner I know has both a degree in CS and Industrial Engineering, and goes all over the place working with industrial robotics and makes piles of money doing it. More than elite SV companies in the last 3 years, IIRC, if you discount the stock based compensation package (simply salary to salary comparisons) its north of 300K.
And arguably better retirement benefits, I think 12% goes to the 401K and they get bonuses every quarter right now. Well invested I bet he'd come out ahead. Can't for the life of me remember the name of the company though.
EDIT: forgot to mention the folks making tons of money on the DoD now starting to require things made in the USA and sourced raw materials from either inside the US or from friendly approved countries from the last few years either, and I don't think that's going away any time soon. They've in the last 2-3 years started paying lots and lots of money to get suppliers that are US based and source their raw material from friendly nations only, and they pay alot of money to make it worth while.
I really envy anyone working in Industrial Robotics. It's such a fascinating field. Automating physical things is so much more rewarding than automating digital things.
Maybe not surprisingly, the real money in this field is in maintenance and ensuring uptime. The robots are cool to develop too but its really hard to get a job doing that directly unless you're a startup with funding from a VC or have an incredibly good resume, but there is a cottage industry of people (businesses or business units usually) that make lots of money maintaining deployed fleets and developing patches / augmentations for existing robotics.
I think its hard to break into in some respects, compared to other fields (you need some certifications iirc in addition to a degree) but my limited, anecdotal exposure suggests its quite interesting and lucrative.
That said, my sample size is small, and on the other end of the spectrum, I know a few folks who maintain complex CNC equipment and develop software for it (using a language I don't recongize, I think its proprietary) and while they make good money, its not better than you can make as a senior engineer at a reputable place as a web developer, for example.
Maybe it's different where you live, but here in California you don't need a degree to do industrial robotics. It certainly doesn't hurt, but unless you're in controls people aren't too picky.
Not all of industrial robotics, but what they do, which is maintain and develop software for robotics in critical settings and oversee maintenance related to, I believe did, or at the very least, they are highly incentivized to get them after getting hired.
The one outlier example I gave is specifically tailored for medical equipment.
My dad ran a robotics engineering company after being vp of engineering for a company Siemens bought that did factory automation (conveyors first, then of course robots). Playing doom in his office while he overworked into the night is when I learned about computer networking mostly...I follow in his footsteps in the overwork)
Anyway, in automotive manufacturing right now frequently the industrial automation firm is told they will be paid net 240. This is insanity. It leads to unnecessarily long projects as the firms have to figure out how to cash flow enormous expenses.
In the meantime, inexperienced competitors regularly fixed bid quote something that cannot be safely and timely built for the quoted budget, ignoring profit. They win the project and they're worn down to a nub and either go under or deliver to avoid being sued into oblivion, so it's a horrific race to the bottom.
The latter behaviour I witness regularly in the software consultancy industry and it's a bothersome thing.
It’s fun when you’re working for the robot manufacturers but traditional software engineering is a lot funner to me. Robots are either programmed with a proprietary language that abstracts anything interesting away or with a joystick. PLC programming is funner but the tooling is still garbage and most of the fun things are also abstracted away unless you are doing servo motion. Things like ROS are typically used in industry. Worked in factory automation for a few years until I realized that software paid better and had better tools.
FWIW, re: comparing to "elite SV company" compensation, it doesn't really make sense to discount stock, since stock at the "elite" SV companies is effectively cash, because they're public. Unless you mean that your friend is also making a significant amount of stock, but since you can't value it (e.g. the company is private), it's harder to compare to the "elite" SV companies.
I know Google was handing out $385k total compensation offers ($200k salary, $150k stock, $35k annual bonus) in 2020 to senior software engineers, and Google's 401k matching is 50%.
First is Google is an outlier, even among Silicon Valley. So is Meta. They both are well known for very high total compensation. I also specifically didn't say FAANG for this reason. There's other high compensation places that I would bucket in as top 5% that aren't in the acronym (Microsoft comes to mind) which very good TC packages.
Second is I removed stock because stock is hugely outsized in value for tech companies, and most of these jobs aren't going to have RSUs. If you compare salary to salary however, its a better metric. I know an industrial HVAC specialist that pulls in north of 300K in just salary, and has great retirement benefits. In fact, better than you might see even at say, Apple on both fronts, for most people, and importantly, they're young (7 years my junior).
One thing alot of the highest paying trade jobs have in common though, is travel travel travel. The folks who work only local jobs do well enough, but not near the gangbuster rates the travel folks are pulling in.
Source: I have friends and extended family who are all trades people. Plumbers, carpenters, masons etc. as well as a few who work in other engineering disciplines (like industrial engineering & robotics). Blessed with a large enough extended family that I think I get a decent idea of whats out there
I don't know anyone in the trades who is going to pull north of 200k unless they own the business. In which case my Ex's father comes to mind; he owned a plumbing business and had 4-5 vans out servicing clients.
He made 300+, and busted his ass to get it. Most of his guys were in the 60-85k range.
HVAC at 300k is an absolute outlier, and there are going to be some serious tradeoffs in terms of how brutal that's going to be on your body. Gonna be some long, hot days.
Yeah, my in-laws own one of the biggest construction businesses in our area and they don't pull nearly $300k out of the business a year. For most trades it's an extremely tough way to make $70k a year.
> Second is I removed stock because stock is hugely outsized in value for tech companies, and most of these jobs aren't going to have RSUs.
RSUs are the companies you're talking about are effectively cash, and they make up a significant portion of the compensation for the "elite SV" companies. So yes, if you exclude ~40% of the compensation for the "elite SV" companies, then you friend is probably making more.
> the highly skilled tradesmen I've met in the last 5 years make at least what I do, often more, and have the benefit of actually owning their own businesses or real, meaningful slices of other ones.
_This_. A lot of software developers think they are the only high earners out there. Skilled tradesmen are making a killing in europe as well. And unlike software engineers, the path to starting an actual business is much shorter and the growth potential much higher.
I get that when you live in a forest all you see are trees, but 99% of software companies are not in rather VC markets, nor have VC competitors.
There are massive problems that come with "scale" - problems most people don't want. The VC model is all about the exit, whereas, again, 90-something-% of businesses, trades included, are focused on long-term sustainability, not on the "exit".
Sure, the VC space us very visible, very "loud", gets a lot of press, and so on. And of course 100% of non-vc owners don't get to be billionaires, but to VC world is a tiny sliver of the software world.
My experience is that you are either in/will be in the vc space - or you are in a specialized/regulated industry (finance/health) or you are a consulting firm.
Even living outside of SV I don’t see a lot of in between firms.
I'm in a space that doesn't remotely interest VCs, it's not a regulated industry, and we're not a consulting company. Actually we're in 3 such spaces.
I also teach other (working) developers and while some are in health care the vast majority are unregulated.
But to be fair, you've likely never heard of us, or our ilk. We do the boring office software that underpins every boring industry. We're not self-driving cars or exoskeletons, we're data in, data processing, data out.
Our market isn't sexy enough, or wide enough for VCs, we don't need millions of $ anyway, so we've never bothered to ask for it. We do boring things like make a profit, and fund growth out of cash-flow. We hire slowly, and we don't do layoffs.
A good test for me of whether you are a consulting firm is “how many customers do you have?”, “How many of them provide significant revenue?”, “how much work serves only one customer?”
There are many boutique SaaS firms - but if you only have a few customers, the business looks more like an outsourced internal team then an independent concern.
happy to be proven wrong on this point, would give me some ideas for my career :)
Any competent tradesman is making a living wage on basically day 1 with his business. A software business (not writing software for someone else, selling your own software) is much more difficult.
Why compare a tradesman to a software entrepreneur? The tradesman sells his skill and labor in exchange for money. A more direct comparison would be a SWE selling his skill and labor in exchange for money. Or, a manufacturing entrepreneur creating a product and selling it. In both apples-to-apples cases they either make money on day one, or it takes a long time to make money.
The apples to apples comparison that pops to mind is a tech consultant. Where you own a client funnel and have some potential to scale and delegate. How hard is it to create this client funnel in IT vs manufacturing?
I do agree with you, it's just the wording in the parent made it seem like a different scenario. When a software friend of mine says "I'm starting a business", I get a very different picture than a software friend of mine saying "I'm starting consulting". If a tradesman says "I'm starting a business" I envision him still doing similar work, but also finding clients, figuring out contract details etc.
Yes exactly. Doing SWE as a 'contractor' type as a tradesman, very difficult because you have to find customers, and most customers have software teams and aren't just calling up SWE to work a few days. Trades have easier time being expert at X, and people can call them up and get them immediately to do X.
Construction is very cyclical. My wife's family owns a construction business and they knew a lot of guys like this, and then 2008 happened. Most of them lost everything. Wife's family almost did the same. Had to go bankrupt, but managed to dig back out.
skilled tradesmen are on skid row here in California.. no building, race to the bottom hiring practices when building happens. Unions filled with red-tape rules and "hurry up and wait" situations. really distressing and sad to hear unrealistic enthusiasm from people in completely different cost of living and hiring environments.
I married into a family that owns a construction business, and I don't think the impressions of how much the trades make or how easy it is to start a trade business I see around here are in any way grounded in reality. It's a very tough way to make a decent middle income living for the vast vast majority, and almost all of them end up bankrupt or close to it during at least one economic downturn.
These are jobs that either aren't even yet on the spectrum of automation (carpentry, plumbers, industrial HVAC & electricians) or as I referenced in more detail, folks who work on the robotics that "replace the jobs" or are otherwise augmenting the spectrum (in the outlier instance, its medical industrial systems stuff. I think they make surgical robots)
Unless the robots are either going to become good at swinging hammers or designing, maintaining, and install themselves, I think these are some of the safest jobs you can have, if there is such a thing
I highly doubt this and even if it becomes legitimately true, people have been claiming we’re all being replaced out of jobs for the last 2000 years. It’s not happening.
>have the benefit of actually owning their own businesses
This sounds like a business is just something that happens to fall on your lap while you're fixing a pipe rather than something that you build with your blood sweat and tears. Most tradespeople make nowhere close to 300k. Their success is credited to their hard work, not their happening to choose the trades.
I should have addressed this more sufficiently, but there are a couple different things I'm saying here so let me clarify:
One is being the trades is rewarding, yes not all bring in 300K+, but I don't know a single trades person, many often my junior, who don't bring in a good income pretty comparable to software engineers at non FAANG companies make (typically 150K+) and I don't think any of them are carrying high debt student loans (many states even pay for trade education outright) and their benefits can't be beat, esp. if they're union.
The second is that there are trade businesses that do earn, esp. right now in the industrial sector, but they all have a singular thing in common: Travel Travel Travel. thats the name of the game. They're gone alot. For instance, my cousin is an industrial electrician, and works on windmills. He travels all over the midwest and Texas to do the work, is rewarded quite handsomely for the privilege, but is gone over half the year. Has no wife or kids currently, so there is that, but its taxing. Other trades folks I know have businesses and do pull in alot, but the "grind" can be very real at times, but I've been told that its rewarding, because its yours at the end of the day
Third is in a specialized sliver of robotics / industrial systems, you can make a fortune, but its not so outsized across the board. Medical systems are a big one, robotics are being really big in surgeries, and there's alot of money to be made there
I dont know what trades you have in mind, other than that you mentioned industrial robotics, but most trades people without college are not making anywhere close to 150k. The really successful ones do though, and maybe thats who you are talking to.
When you say trades are you just talking about industrial robotics and the like? My family owns a construction business and the only tradespeople making anywhere close to $150k own their own business, and even then it's pretty rare to clear that kind of money. In my experience a tradesperson in the top 5-10% of the distribution might make around what a software engineer in the bottom 25% makes, and it's a pretty long hard road to get there.
I dont get it. Why did he say it will reverse? Do you think other countries arent offering freebies or a high skilled labor at cheaper rates than the US?
The US has outsourced so much, this cash dump is just going to head straight into the pockets of cronies who will then say 2-5 years they need more.
I suspect that the reliance on China for manufacturing combined with what sort of sanctions would be enacted when they attempt to invade Taiwan, would encourage the US and its European allies to insure they had a good manufacturing base to rely on. We have seen a number of things from the war in Ukraine but two that I think have been really impactful were the challenges of ramping up munition production in the US and the impact of factories rolling out thousands of inexpensive drones/week and those drones being deployed on the battlefield gave everyone a reassessment of some of the national security risks of globalization. Basically the lesson is that industrial war requires an industrial base. In WW2 the US had a vibrant industrial base that could be pivoted to providing war material.
Industrial base takes time to spin up, but if you have solid economy (as the US currently does) then using monetary policy and other incentives to push capital toward industrial base development is good for the country. It also plays well on TV since these factories are revitalizing towns and cities that previously were suffering from a lack of industry.
As a result, I don't see these shifts so much as a "reversal of Reganomics" so much as a realization from the Russian-Ukraine war that "globalism" isn't something authoritarians really like. And if you're primary trading partner is run by an authoritarian regime, that is bad.
Not blaming Reagan specifically, but the consensus that emerged in the early 80s was that all GDP growth was good, even if it skewed away from manufacturing toward finance, etc.
This basic belief allowed us to write trade deals that reduced manufacturing capacity relative to non-manufacturing.
Totally agree with you the Ukraine war has been incredibly important in previewing what would have been much worse in a Taiwan war.
I think supply chain risk through peak COVID is also a huge factor giving this shift momentum. Supply chain shocks were comprehensible and visible to most Americans and impacted practically every business owner. It kickstarted renewed calls for localism and reassessments of worst-case scenarios for business continuity. Bringing up the home industrial base is a necessity for shortening those supply chains and bringing that risk under control.
Reducing risk from suppliers based in countries where government policy is less predictable or west-aligned was also highlighted by the pandemic. Shanghai locked down in May 2022, for example, and I am sure many Americans were surprised and annoyed at the time.
The one-two of COVID then the Russia-Ukraine war seems to have knocked us into a new alignment. Remains to be seen how it plays out against our current, difficult social backdrop.
Reagan wanted to get the U.S. back on the gold standard, which leads to balanced trade. He was talked out of it by Fed chair Volker.
What you call Reaganomics goes back to Nixon. I suppose that's probably just as well for you, but I don't think any administration between 1971 and 1991 (or even 2011 or now even) really thought "hey, let's take blue collar jobs and send them to Japan, and later China! haha! suckers!". Nixon didn't take the U.S. off the gold standard because that was something he yearned to do -- he did it because it was the only way to fund the then federal deficit. Sure, we would have been better off staying on a gold standard and being forced to cut that deficit, but every politician from Nixon onward -Democrat and Republican alike- kicked that can into the future. It's a non-partisan issue. Getting off the gold standard created easy credit junkies everywhere, and here we are. Junkies don't care about ideology.
This is CHIPS and IRA at work, largely. The government decided we needed more manufacturing, paid people money to do that, and... now we have more factories and manufacturing jobs. People get all balled up over policy decisions like this because of politics, but the truth is that Keynesian economics is pretty simple to understand and it works exactly the way you'd expect it to work.
That's what the article says, but the chart in the article casts quite a bit of doubt on that explanation (it's obviously an accelerator). Indeed, two paragraphs later, the article states "Census Bureau data reveals manufacturing construction spending has escalated from January 2020 until April 2023 in every region except New England and the Mid Atlantic."
If you assume that people make plans before spending a lot of money, you would think that the tipping point was back in 2019 or so. In fact, I know people that make machines that are used to make and outfit factories and they've been running at capacity for a long time. You might think it's crazy looking at that chart, but factory construction in the USA is currently constrained by availability of parts and people. People want to spend more than they're currently spending...
First, the rise in spending is 2x. That's a huge effect, and there's nothing in 2019 that would explain it reasonably. And it only leads the bills' enactment by a few months. Isn't the more obvious hypothesis that people started investing speculatively a few months ahead of the bills? I mean, these bills largely amounted to campaign promises. It was abundantly clear after November of 2020 ensured a trifecta government that something along these lines was going to pass.
Second: you're basically making stuff up with that 2019 argument. That's not the way incentive spending works at all. If you have free money on the table as a corporate executive you record that revenue immediately, you don't put it in the bank to "plan". In fact, most bills like this make it largely impossible to "save" the funding anyway, and for exactly this reason: politicians want their results now, now in the next administration.
There are many factors involved. Just to point out one, when the freeze and blackout hit Texas many makers of adhesives got stuck with volatile products in pipes and pumps. The reconstruction effort from that has been big enough that it is still going on.
I want to make sure americans have the first shot at the job but I also want to make sure that the USA does brain drain the rest of the world so that there is absolutely no way to compete with us.
I am all for immigration reform as long as it prioritizes americans heavily. This means no H1B abuse but with congress getting massive subsidies from H1B mills, I don't think this will happen.
I dont think smart people ever toppled a government. Dictatorships usually rely on many, many, not smart people. They collapse when these people became hungry and desperate. If they are well fed and entertained they will happily “eat” the smart people.
So if you want dictatorships to collapse it’s best to let the smart people leave, so no one can run the country, and the not smart people get angry at their government.
I worked for a while at a farm processing potatoes ... Let me tell you that they aren't lacking Mexicans (most people didn't speak English and this was in Florida)
I think they're trying to say "an efficient and effective process that treats guest workers less like criminals at the mercy of big ag." There are many interests who benefit from keeping undocumented people undocumented.
Currently people born outside the US make up ~15% of population in the USA. Let’s say you want to increase that to 20% over $x years.
Now you need 5% more houses, 5% more cars, 5% more electricity, 5% more infrastructure, and ~33% more immigrant support services.
Immigration is not a simple sticky-plaster - it has deep impacts on every part of your country’s infrastructure and services. It can work, but it ain’t easy: I live in New Zealand where ~30% of our population is people that were not born here (New Zealand is quite picky about who gets to come here, so we have less structural problems than some European countries that accept large numbers of refugees with little opportunity to filter for the most suitable people).
New Zealand has been building housing at a fast pace to keep up with the ~50% increase over the “native” population. How many places in the US can absorb the pressures of increasing immigrant numbers?
When it comes to light manufacturing, sure, but they’ve struggled to just get to a point where they can do sophisticated heavy manufacturing at any kind of quality and this has been the result of US policy helping them out here. It wasn’t until Trump that this process ended and it became policy to not allow China to build a competitive heavy manufacturing industry. We will see if they pull through and become a rival in that regard as well; but I’m betting that now we’ve cut off their military from our tech and are pushing our companies out of China that they stagnate.
Their “miracle” was a US creation, a policy to build them up to create a counterbalance to Russia. It’s gonna take ten years to tell, but China is already feeling these effects and feeling them hard.
This was situation 10+ years ago. PRC's been phasing out low value add light industry for years. US export controls tried to limit PRC modernization even pre-Trump (see 5axis CNC bans, trying to cripple PRC compute under Obama). US didn't help - they were outplayed despite efforts to contain PRC progress. Yet PRC inidgenous heavy industries now basically competitive in nearly every sector hence trade wars since PRC indigenous efforts are increasingly displacing western products. Exception being aerospace and semi both of which are closable gaps. Everywhere else PRC has more or less caught up. By most metrics, PRC's already pulled through and still rapidly climbing up value chain, innovation indexes etc. The "effects" is PRC increasingly entrenched in supply chains everywhere, including friendshore destinations that's basically reassembling PRC components - see PRC trade with said destinations increasing proportional to US imports from said countries. It's how PRC went from capturing $8 in assembling fees from each iphone 3G to 25% of value add since iPhoneX. Or how PRC become largest car exporter.
That linked comment is also cherry picked stupid. PRC exports to US/west near record levels, WHILE exports to global south has officially surpassed western bloc, i.e. PRC is MORE factory of the world than at any point in the past. The drop in exports is due recent to global economic downturn that saps demand everywhere, but it's sapping from hilariously record high exports during covid. Meanwhile PRC export:GDP is like 20% down from 35% high in 00s, i.e. it's one of the less export dependant major economies in the world responsible for substantial global exports (including heavy industry) but it's not even an export driven economy anymore.
On demographic front, the reality is PRC is minting OECD combined in skilled talent every year and last 5 years of PRC topping citation (controlled for quality), innovation index is just lag affect of PRC growing with fraction of that talent. The PRC miracle is basically doing all that with ~20% skilled workforce, because at PRC scale that's enough to be globally competitive. Now it's in process to grow that competitive workforce to 50-70% skilled in next 30 years, which is adding anohter couple US worth of talent into the mix.
China is no longer the "world's factory". It will stagnate for 10+ years, similar to Japan's lost decades, but with worser birth rate than Japan today. It reported 8M babies in 2022, low that was last reached in 1940s.
We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years. (factories moving out, which decreases downstream economic activities such as real estate and retail).
I see marriage rates falling by about 50% over the past decade. But this claim seems unlikely, or perhaps just badly skewed by the seasonality of things.
He is probably talking about the "520" Marriage Day. May 20 is a popular national marriage day (due to tradition) and many couples choose to get marry on that day in China.
This year's 520 marriage rate is ~40% of last year's.
With a larger population combined with more of a chance of living past the age of 5, you need fewer births to get the same population growth rate globally. As the world population rapidly urbanizes we will settle into a new normal that will still approach Earth's carrying capacity faster than we can adequately react.
Human population has overshot in 1971[1], what are you talking about? Carrying capacity has long been exceeded, we’re living thanks to the phantom carrying capacity[2].
By your numbers and those of others, both Eastasia and Eurasia are taking it on the chin. Oceania suffers from sociopolitical rot but the economy is pretty lively.
> China is no longer the "world's factory". It will stagnate for 10+ years, similar to Japan's lost decades, but with worser birth rate than Japan today.
idk, Japan seems like it thought the party would go on forever, whereas China does seem to have clear eyes with it comes to world politics (eg. long-term investment in the rest of Asia and Africa).
> We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years.
Do you recall NAFTA? or the quick rise of China not long after? These are still studied as huge exogenous economic shocks in business schools!
> China does seem to have clear eyes with it comes to world politics
You're hyping up Xi Jing Ping, who is considered an idiot in most elite circles including Putin, too much. One belt and one road is now considered a failure with Italy, the most prominent member, dropping out of it this year. Most of the countries that took on the debt are unable to pay it back, and China has had to forgive a lot of the loans recently. And no one has aligned US, Japan, South Korea, Taiwan, Philippines, India, Australia, Nato quite like China in recent years. The most recent focus in G7 was squarely on China.
> NAFTA
with respect to NAFTA, US manufacturing only consisted of 15% US economy in 1994 https://www.stlouisfed.org/en/on-the-economy/2017/april/us-m..., whereas Chinese manufacturing consisted 30% of China's economy today. Also, the difference is, the laborers in US manufacturing moved to other higher paying jobs, as a result, average income went from 25k to 30k in 2000. Whereas what we're seeing now with Chinese laborers is that they're moving back home to countryside to farm (< $1 a day)
>You're hyping up Xi Jing Ping, who is considered an idiot in most elite circles including Putin, too much.
I don't really care what Putin says but I do think they are thinking more long-term. Only here and in Europe do people think in terms of election cycles. Don't get me wrong, I am not a Xi fanboy, and I definitely don't want to the US to be like China in general terms, but I just disagree with you. I think they know that the US-centric money flow was capricious and they have been long making plans for when it isn't what it was.
Now, put those in real numbers and you will see the effect! Also, do you not think 15% of the world's biggest economy taking a fucking as being significant? We had to pivot to service industries after that!
I can tell that you have a hard-held opinion on this and I am not fighting with you, I just think that your original post was not as nuanced as reality.
Long term would be recognizing that almost every authoritarian nation is poorer than almost every democracy. Mexico's gross national income is higher than China's on a per capita basis.
I think you misread my point. My point regarding NAFTA was that US did not actually lose a portion of its economic output when the manufacturing declined. The old factory workers switched to a more profitable job, thus the income increase. In fact, the country was then joined by migrant workers from Mexico because of NAFTA taking away their farming jobs in Mexico. Thus US's economy thrived in 90s.
But when China lose most of the foreign manufacturing jobs, it lost a significant portion of its economic output. Because now these workers just went back home to countryside to farm.
One government sponsored number, vs multiple numbers pointing to China's economic decline, which multinationals check in order to gauge the real health of China's economy. Multinationals know the real numbers, which is why they're all leaving.
>On a quarter-by-quarter basis, GDP grew 2.2% in January-March, data released by the National Bureau of Statistics showed, compared with expectations for a 2.2% increase and a revised 0.6% rise in the previous quarter.
You do realize that the Yuan losing 7% against the dollar meant that export numbers looked like it dropped by a similar percentage in May right? The reports are all using USD to show such a huge drop. In reality if the reports were to use RMB, exports only dropped .8% meaning they are exporting roughly as much as before in raw numbers.
Right now China isn't pouring money into industry because it frankly never needed it. With the opening, more money is now being pumped into reopening services in China, that's why when you look at the PMI for services it's much higher, because people are taking money out of industry (unless it's high tech oriented) and parking it in services. People aren't necessarily consuming more, but it doesn't mean they aren't using much more services than they previously were, and eating out more, etc. GDP doesn't only look at industrial output.
BTW. All the other numbers you cited in the other articles were also provided by the Chinese government.
It's also fundementally omitting how much PRC has entrenched itself as global factory than ever.
PRC exports to US/west near record highs while trade with global south have exceeded western bloc. The only reason export decline notable is because PRC exports has increased so spectacularly in the past few years (export value grew from 2.5T in 2019 to 3.6T in 2022) that there's nowhere to go but down when global economy underperforms. Net export value is still up ~40% since 2019 - exports stats can be confirmed bilaterally. PRC exports grew as much in last 4 years (~1T) as it did in decade between 2008-2018 (1.4T-2.4T). Meanwhile US increased imports from "friendshore" countries mirrored PRC increased exports to those countries, i.e. it's tarrif engineering and US import dependence on PRC ultimately still increasing.
This is great news, just anecdotally I have personally seen 3 large factories come up in my state in the last 2 years. All related to EVs and battery supply chain but still quite the pace.
Perhaps I'm just bad at economics, but it always seemed to me that the countries making all the stuff would eventually hold all the power (and I say this as someone working in tech who produces nothing tangible). The fact that it costs exorbitant amounts to construct new buildings, railways, etc. in the U.S. and how our cities almost look antiquated or frozen in time compared to Asian cities shows that we missed a generation or two and probably need to catch back up now.
Santa Barbara is a small town with a college/tourist/military economy. New York is an outlier by US standards in every sense, but if you've ridden the subway there you know it feels old, even though it's one of the best systems in the world on paper.
Yes, NYC looks and feels like an aging, antiquated city to me. I'd put D.C. above NYC -- it feels cleaner, newer, more efficient. Even London somehow feels less aged than NYC. Sydney, Helsinki, Copenhagen, and Amsterdam are a tier up again, and then cities like Tokyo and Singapore look like they're from the future.
A lot of what you think of as "Paris style" is much newer than New York City. NYC has plenty of buildings older than that, and more importantly, its grid pattern is even older.
New York does have many newer buildings, while Paris deliberately prevented much modernization after that. Downtown Paris has no skyscrapers except the Eiffel Tower itself, but it does have modern business centers pushed off to the outskirts of the city.
> and how our cities almost look antiquated or frozen in time compared to Asian cities shows that we missed a generation or two and probably need to catch back up now.
It takes 75+ years for a rebar building to reach end of life. The US just built up during earlier decades than many of those Asian cities. In another 30 - 50 years those antiquated buildings should start getting replaced.
It always seemed to me that the country buying all the stuff holds the real power. It just feels far more possible to find alternative manufacturers than it is to find alternative markets.
lots of commodity markets are stuck on "lowest price wins". That means that management does not have as many options as you might think, since they will be put out of business if they cannot compete on price. This really happens quite a bit. Survivors of this brutal system are known to stockpile cash and other assets, for example Apple and their cash piles.
Actually US and China is disengaging, and we can already see what would happen if trade were to stop tomorrow, by what's happening now.
China June 2023: Massive reverse migration by laborers back to countryside, Shanghai population down 135k compared to 2021 https://www.scmp.com/economy/china-economy/article/3215126/s.... Physical retail closures up to 80%. Entirely empty malls in Beijing, Shanghai, and Shenzhen. Real estate prices dropping 30-50% in tier 1 cities. Shanghai, Shenzhen and Beijing having 50k+ used homes for sale in span of 2 months. Shipping containers pile up 7 stories in every port https://www.scmp.com/economy/china-economy/article/3210870/c....
You can tell any story you want by cherry-picking headlines and ignoring the broader context. Pundits like Gordon Chang have been predicting post-Mao China's imminent collapse since 1989.
They've always been spectacularly wrong because they don't understand China and don't want to.
You can brush any counterpoints away you want by mentioning pundits who are too early in their prediction.
Sure, let's talk about broader context and macro trends. unless something big changes, these macro trends won't go away:
- alignment of dictatorship vs free countries. China, Russia, North Korea, Iran vs US, Europe, Japan, Taiwan, South Korea, India, Australia, Philippines, Canada.
- dictatorship is losing. China is propping up all the dictators around the world, and its losing that power
- China demographics collapse
- China's rising and insolvent local government debts, which can no longer generate income by selling land. because China has too many buildings - 6 billion by last count. and demographics collapse. and lack of jobs
- Tech sanctions on China. China's inability to catch up on tech.
which indicates China's stagnation and decline for the next 10-20 years.
unfortunately far-right populist illiberalism is on the rise globally. (and also far-left populist demagoguery too, maybe unsurprisingly.) although, hopefully, that'll pass as the current median voter gets a grasp of reality (and get inoculated against social media fueled craziness at least a bit)
here's the thing, humanity got lucky. there was a nonzero chance that china and the dictatorships could have triumphed. if China didn't botch the chance to overtake US in 2008 with a capable dictator. if China got its hands on many advanced US military technologies. if Russia didn't botch the Ukraine invasion. if covid didn't have a vaccine, except one that China developed.
I'm sure most of us are aware of the gulags that China ran in 2022, in the most prosperous city like Shanghai, with welded doors, lack of food, arbitrary killing of pets, moving their own citizens against their wills to camps or cells with no running water and unsanitary conditions. with cries in tall buildings from families in the middle of night for food. If. you haven't seen these things, go watch it online. Imagine if somehow China succeeded, and that's all of humanity's fate.
We’ll think about it from the tech perspective: the companies that control marketplaces and access hold all the power.
Sure you have companies like apple that make $$$ from hardware, but most HW players in tech get slowly replaced offshore. Silicon Valley was silicon valley because of hardware. Now it’s mostly software, and HW is increasingly a commodity.
It’s the same thing elsewhere in the economy… it’s easier to set up a factory to sell something anywhere, but when you control buyers, you’re rich. The US is still the shopping powerhouse of the world… and even massive markets like China can’t consume as much because they just don’t have as much money.
Software is a lot closer to service work than hardware. It’s way less interchangeable and mostly sits “at the top” of the stack. DuckDuckGo Vs Google Vs ChatGPT shows why a lot of software isn’t a commodity, it’s a service.
And software that could be a commodity is often given away for free (Open Source).
The lower in the stack you are, the closer you get to commodity. Eg SQL databases - often somewhat interchangeable for different target features, but also language and expectations don’t match exactly, so there’s high cost to switching. That’s why Oracle now has to fight cloud providers, MSFT, and a ton of open source projects for business. Comparably, several languages (C, Java/Script, Python) have multiple compilers/interpreters with much better compatibility and little commercial options.
Economic power is held by those that are difficult to replace. THe US gave up on manufacturing because it's low skill work that is easy to replace, just follow the lowest labor cost. Generally I believe that the countries with educated workers and capital will eventually hold all the power.
China becomes less of a competitor on costs as wages rise there. Once the manufacturing wage differential gets into the 4:1 range, offshoring is less attractive. In the 2:1 range, offshoring starts to be a lose. That happened with Japan two decades ago.
In order for this to be effective, these factories need to be able to produce at a desirable profit. The reason so much manufacturing drained out of the US in the first place was corporations seeking improved profits. That's not to say many won't succeed, but we need to ensure that global competitiveness is imbued into these operations. Southeast Asia and India remain inexpensive.
Yep, this is why re-shoring manufacturing to the US is (and will be) inflationary. For about 30 years we were exporting inflation to places like China.
Geopolitical risk is a thing too. Making less on profit now offsets the potential disruption on all exports if China were to fight a proxy war with the US.
I shudder to think of all of the "materials", documented materials and undocumented bonus materials, going into these completely non-FDA-regulated supplements.
It’s about time. We probably need to go even faster, like face melting faster to remain competitive/relevant. Frankly though, this is just one of the dimensions. There is also the “people will need to work harder” dimension. That will be a harder adjustment for people. Nevertheless this is a good news
This isn't necessarily the win that some people think that it is.
Do you like your standard of living? For most, you should when compared. That comes from one type of economy. This is another type, incoming. And there are no guarantees as to what your change in standard will be.
One rhetorical question might be: is your standard of living better or worse than in China, which is replete with factories? Neither does Bangladesh have a factory shortage.
Who owns the factories being built? It will surprise some to know that foreign ownership will be heavy.
One objective trend is foreign pressure to reduce the cost of exported goods, which means foreign buyer downward pressure on wages as exported goods make up larger portions of the economy.
Don't expect wages to be in Federal Reserve Notes. Do expect a continuing rise in corpocracy and feudalism. Do expect large pools of immigrant labor that will serve to minimize wages.
Great! But I imagine a lot of jobs we'd expect to be gaining will be automated. With the state of AI and robotics this trend will accelerate. We also lose a lot of interdependency which has its own problems.
Manufacturing employment is roughly at the same place now that it was in 2020, and still substantially lower than where it would have been had the pre-pandemic trend continued, and even that was nowhere near returning the US to pre-2008 levels.
Construction spending is a terrible proxy for manufacturing - both because the size of a building you need isn't pegged to the value of your output (e.g. a $100 million dollar shop making aerospace components might have a tiny fraction of the footprint of a $1 million sweatshop making t-shirts), and because the cost of factory construction is determined by the cost of construction in general (i.e. if there was a real estate boom building residential buildings then you're competing with that for construction materials, equipment, labor, etc).
But also looking at FRED data we see that manufacturing sector productivity has doubled since ~1990, so it's not clear that headcount is the best proxy either. And if we look at industrial production or sector output we're still near (plateauing) all time highs
Would be interesting to see 'profit per employee' over time and see how productivity plays agains employment. Ultimately, we want full employment with competitive wages. Profitability relative to employment should tell us if we're on the right track.
If you want to see a renaissance of manufacturing employment, then headcount is clearly the metric that matters.
The fact is that offshoring of manufacturing was a myth - the jobs never left, the industries just transformed in such a way that old, labor intensive processes were eliminated. Those jobs, and the economic prosperity they brought, are never coming back. It's merely a coincidence that at around the same time US manufacturers were computerizing their operations China was building 1920s level industrial facilities.
Certainly none of the data is indicative of a sudden boom in US manufacturing in the past 2 years which could be attributable to any recent decisions or events.
I work in a factory and the opportunities to improve with custom software are huge.
Typical MRP/ERP solutions limit the way information flows around a factory. We have custom software running most of everything. It's a lot of CRUD and data pipelines. But wow are our processes easier to automate than I've seen with other systems, such as SAP.
Good. Bringing jobs home is a good idea. It might be cheaper overseas, but making things here where there are stricter safety regulations will get rid if some if the ethical quandaries around buying from a sweatshop.
Not to mention that also means that we will hold more power and ensure longer stability...why buy from China that could go to war with our allies and restrict our access to their manufacturers when we can just ask a factory in the next state over to make it?
I hope this trend is real and will continue. Manufacturing is so important to a country. It creates jobs. It builds talent. It stimulates innovation. It improves the lives of millions of people. It keeps a country's defense strong and sustainable. Without a robust and comprehensive manufacturing sector, I don't know how the US can proper in the future. I pains me to see that BYD could produce millions of masks in days in spotless and fully automated factories, while GM workers labored at those manual machines that looked like the scraps from the Soviet Union. Oh, and the $20K toilet? The $200M+ fighter jets? The inability to manufacture the screen of Kindle even if we want to? The list goes on, and I truly want to see the current-day version of the US manufacturing of the roaring ages: cheap, innovative, best workers in the world, full domestic supply chain, and etc.
Maybe fewer jobs per square feet, but it's the natural evolution of manufacturing. What matters is we need engineers and workers on the floor so we can innovate and develop more senior talent.
Why? More jobs are still more jobs, no? In addition, each factories may hire fewer people than 50 years ago, but I hope we have a lot more factories. Having more skillful talent does not contradict my hoping that more Americans will have chance to get a decent job.
There is a mother of all recession happening soon coupled with intense effort to dedollarize. Those factories will end up abandon without recouping their original investments. I have seen how this playout. In the 60s and 50s there were doable because things are cheap and Americans have the Japanese-like ingenuity and innovation. In the 90s, Internet happened and end of cold war. In the 2000s, Chinese supplement worldwide inflations with their cheap goods and students as American human resources together with Indians. In the 2020s USA lost huge chunk of Asian human resources and facing high inflations. Americans still able to hold off due to residue economic growth from Clinton-Bush era. Coming decades they will face immense headwinds with their poorer quality of non Asian immigrants, lack of resources (oil and rare earth no where at Russia level), lack of gold (Fort Knox havnt been publicly audited for more than half century), military weak (Talebans humiliated pentagon and inpending Ukrainian defeat as American sponsored proxy state), population disparity (India+China+Russia+Asean) going to make America looks like 3rd world country population or Monaco at best. Already working in HR fields, I am seeing a lot of capable Americans execs sending their kids to Asia. Some even ditched American citizenships. You can search for extreme end of examples like Severin and Dyson. But those in the "millionaires" range make up the huge bulk of these well to do American leaving western world.
Are you sane? Oil-wise, America's proven reserves are around 47 billion barrels and russia's 80 billion. Rare metals? See the news piece about the fairly recent Japanese discovery of a huge deposit in their territorial waters (yeah, hard to mine and extract from under seabed but still possible). Population? Russia's population is predicted to fall to ~83 million by 2100, and China has the 2nd worst birthrate in the world after South Korea, ~1.2 (the US has ~1.7, the replacement level is 2.1, but the US compensates it by attracting migrants where China can't, they want maintain their homogeneity to maintain stability, they can't have too much diversity with races, ethnicities, religions, languages and are racist towards immigrants), worse than Japan. It's actually possible (not guaranteed, but still possible) that by the end of the century the US will be more populous than China. russia is entirely irrelevant (except for nukes and raw materials), China is strong but faces too many hurdles. Seems like usual standard anti-Americanism at work. But I agree that India has chance to overtake America (demographic benefit, native exposure of English, democratic governance, huge investments into infrastructure since Modi, etc. They need to keep pumping money into infrastructure, increase spending on education to eradicate illiteracy, on R&D, ensure gender equality, resolve intercommunal tensions and violence between Muslims and Hindus (since religiosity levels tend to fall with growing economies, they'll secularize and become less religious), less red taping, and eventually they'll be on par with America or even stronger). If you're looking for the eventual new superpower, in the long term it will likely be India, not China (let alone russia).
The reason all the factories left the US is because of unfair Chinese currency manipulations. The Chinese have pegged the Yuan to the dollar at a rate of 6 to 1. Since the dollar defines unit labor costs, what pegging the Yuan means is a CEO gets 6 Chinese workers for every 1 American worker. It's really like 4 to 1 when you take into account shipping costs for Ocean and Air freight. Other countries do not enjoy most favored currency status. In other countries, the value of the dollar would change if we had a huge trade imbalance which would eventually equalize. But not with China. But pegging the Yuan is only half the problem. The bigger problem is artificial intelligence and automation. With automation, every job becomes menial and corporations can pay less wages. And eventually, corporations will have total automation where workers are no longer needed. But workers are also consumers. And without consumers having money, our economy will collapse. So every year as we move closer to total automation the workers are begin driven closer into poverty. At some point, to prevent total economic collapse, there needs to be a new source of income for consumers. Consumers need to become the new workers doing the hard work of consuming. Consumers need to be paid for consuming is the only answer for ensuring enough economic velocity so everyone has enough money to get their needs met.
308 comments
[ 1.7 ms ] story [ 560 ms ] threadIt's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
1. 50% tariffs on China, and
2. $100B of subsidies to chip makers and green tech...
The reversal of Reaganomics we're living through will become permanent for at least another generation, and for good reason. Maybe a good time to start a company selling to the government.
Who could have thought that manufacturing using western labor and laws, can't compete with manufacturing in a totalitarian regime with no respect for human lives/rights or the environment? /s
Free trade should only happen as long as the trading partners share similar laws and regulation on human rights and environmental protections, otherwise people and the environment get screwed for the sake of corporate profits, so tariffs should always be in place to level the playing field and prevent such exploitations.
Don't allow Google or US media imports? Sorry, you can't export cheap manufactured goods.
A lot of American Exceptionalism comes from the fact that EU got absolutely destroyed by world wars while the US got to keep chugging along.
This community can be picky about tone and phrasing (which I believe keeps things mostly civil), don’t take the downvotes personally. Some users may have felt the ‘not reading history’ part was targeted at them, even though you were speaking generally.
Building things has been looked down upon for 40 years because boomers thought it was a step backwards since their parents worked on the assembly line.
Bare in mind, vocational still means "not college bound" == "useless" == "doesn't look good in the US news rankings"
Ive talked to superintendents and they just give me a blank stare when I told them that a great way to get kids to understand the cartesian coordinate system is in machine or woodshop, reading a blueprint, schematic etc. Actually doing the work is better than a word problem. They have no respect for it and this is in the best educated state in the US with supposedly the best school system.
Bottom line, if we are going to build things again, it needs to start in the schools.
[0]https://www.goodtherapy.org/blog/how-boys-learning-styles-di...
No, it was looked down upon because the pay to quality of life ratio was much better in white collar careers. It probably still is for the most part. Wake me up when the same people are deciding between becoming plumbers or electricians rather than lawyers or doctors or engineers.
Either way, a Mon to Fri 8 to 5 salaried gig with benefits requiring little travel and no health risks was a comparably better goal to aim for due to the lack of sufficient price premium for the non desk job labor.
American manufacturing was declining way before NAFTA or China. The anti-japanese/asian period of 70s and 80s existed for a reason. The way we are attacking china today is how we attacked japan in the 80s. The only difference is that china isn't going to back down like japan did. Far easier to bully a nation that you militarily occupy.
The trend isn't going to change. Manufacturing will go to ASEAN and India next. All the propaganda about "factories in the US" exist to distract from that reality.
if only I knew what the government wanted to buy. Besides weaponry that is.
Edit to add: If you're building in the space, YC cofounder matching also does events targeted to gov once in a while, and I personally am doing some ideating if you want to chat
Email in profile
--Some old dude about 15 years ago.
https://sam.gov/opp/57075abba039462f8ed76c2641de3394/view
"The contract requirements are geographically spread over the State of Alabama in the following counties: Clarke, Monroe, Wilcox, Dallas, Autauga, Lowndes, Montgomery and Elmore along the R.R. “Bob” Woodruff Lake, William “Bill” Dannelly Reservoir and Claiborne Lake. Alabama River Lakes consists of approximately 1,092 miles of shoreline, 39,452 acres of water and 68,006 acres of land. Facilities include 6 Class A campgrounds, 38-day use/land water access areas, 9 Multi-purpose Areas, 3 Visitor Centers/museum, 9 maintained but undeveloped Natural Resource areas, 2 Contractor maintenance Compounds, along with a Resource Management Office and other associated operational facilities. Provide services for maintenance, repair, minor construction (as defined in AR-420-1 and DA PAM 420-11) including all planning, supervision, administration, labor, equipment, materials, supplies, and replacement or repair parts that is required for performance of this contract.
The contract scope of work will include, but is not limited to, some or all of the following types of work: maintenance and repair of buildings, facilities, offices, water and electrical systems, concrete structures, maintenance facilities, operational areas, roadways, vehicles, boat docks, bathhouses, washhouses, toilets, gatehouses, security fences, sanitary disposal systems, launching ramps, playground equipment, bulletin boards, game courts, playgrounds, telephone lines, picnic sites, campsites, and other related facilities."
https://www.sbir.gov/sbirsearch/topic/current
Pick science or health instead of defense from the list on the left.. but you would be missing out on "MDA23-T002: AI-Informed Algorithms Combined with Differential Game Theory to Support Swarm-on-Swarm Engagements"
An eye opener is the list of top contractors to the US government:
https://en.wikipedia.org/wiki/Top_100_Contractors_of_the_U.S...
Caltech, MIT, Stanford... SpaceX is 53.
The coolest one is Atlantic Diving Supply (No. 24): it started as a small dive shop that just happened to be located in Virginia Beach.. some Navy Seals kept ordering things from them.. then 9/11 happened..
https://en.wikipedia.org/wiki/Atlantic_Diving_Supply
https://en.m.wikipedia.org/wiki/Solyndra
The real test will be once they stop taking our taxes and handing it to businessmen if they can stand on their own merits. Until then this is charity to the private sector.
Or more realistically, charity to one part of the private sector paid for by all of our great grandchildren.
The US also protected furniture and garment production into the 90s. Had that not been the case, the transition int hat industry likely would have been much smoother and no so apocalyptic for workers.
Underlying your claim is the notion that technocrats can or could ever know what an economy as large and complicated as the US "should" be producing.
Maintaining order is an odd goal for an economic policy no? But on that note, France is probably the most protectionist among developed western nations. Yet they have created a situation where a third of young people can’t find work and social cohesion is unraveling.
The 5th Republic has been teetering on the edge of collapse for the last few. years, so I wouldn't be so bullish on France.
BY ARPA I'm not sure if you're referring to the Advanced Research Projects Agency or the American Rescue Plan which is now stupidly called ARPA sometimes.
Um yeah, NASA was pretty cool back in the day when they were shooting V2s at the moon. But later efforts like the shuttle were kind of boondoggles because it was tethered to goofy military spying stuff, so it ended up being shitty for science and a dead end for anything commercial. That's not really a great success story for industrial policy IMHO.
"The 5th Republic has been teetering on the edge of collapse for the last few. years, so I wouldn't be so bullish on France."
OK, I don't think we're going to see eye to eye on anything if you hold those kind of hyper-cynical views.
The tech reason was that they had a way to make thin film panels which was super promising for driving down costs due to a silicon shortage. But then Diamond based silicon tech emerged, eliminating the silicon shortage and reducing input materials, which outcompeted thin film on price.
Such is the way of innovation. Looking only at subsidies gives you a false picture.
It doesn't make sense to think of infrastructure and technological capacities as less important than agriculture anymore, when it comes to keeping some significant presence locally.
And recall Globalization was championed by Bill Clinton.
Donald Trump pumped up Tariff’s against China.
Joe Biden pushed for chip and green subsidies.
It's a clearly absurd proposition on its face. Of course that's going to depress wages and destroy jobs, especially in manufacturing.
I'm all for free trade with other free countries with similar levels of rights for workers and concern for the environment. Outsourcing elsewhere should be taxed proportionally to the gap in these areas.
If you want a simple to implement solution, a tax on a combination of wage disparity and CO2 emission disparity would be enough to capture most of the relevant differences. The latter can be very objectively checked using satellite imaging.
Do officeholders in the United States have any responsibility to people in foreign countries beyond that in ratified treaties?
Do we have any moral obligation to make restitution for our great-great-grandparents' crimes to the great-great-grandchildren of the victims? And what level of punishment is going too far?
Back to shrugging off the idea poor people on the other side of oceans are going to pick a fight with me specifically. I live in the middle; after rowing over the Pacific they’ll have to get through a lot of other people first.
Hey you should probably stop buying toxic technology and flying; would hate for the kids to karma your elder form.
Shit n hellfire; anyone making use of modern technology has little wiggle room to pontificate about why and how others are oblivious to reality of their choices.
But if that were a threat, then I'd like to see some other country make good on it.
Big corporations didn’t reluctantly close down factories, hat in hand, because people weren’t buying their products. They moved the manufacturing offshores and people kept buying the products they always have.
Saudi Arabia, Russia and other countries may have more oil than US, but it's too far from there places where it would be usable for manufacturing.
There's also the political motivation of banks, which blindly trusted fossil fuel investments, leading to massive investment that was unprofitable in the first round of fracking.
When it comes down to it, fossil fuels are surviving, and continue to survive, largely as a cultural and political effort, as much as a technology effort. And once we move away from them we will be saving massive amounts of money that can be directed towards improving the economy in other areas that improve people's lives rather than damage their lungs and cause climate change.
March 28, 1987:
"President Reagan decided Friday to impose punitive 100% tariffs on a wide variety of goods produced by Japanese electronic giants in retaliation for Tokyo’s failure to abide by the semiconductor trade agreement between the two nations"
-- https://www.latimes.com/archives/la-xpm-1987-03-28-mn-698-st...
That Reagan?
50% tariffs are rookie numbers.
Outside of the more immediately-public-facing stuff like tax cuts, Reagan's legacy is very much a "do what we say, not what we did" situation.
That sounds like manufacturing jobs to me.
The original post's point seemed to me to be "Reaganomics was bad for manufacturing jobs", and listed tariffs and subsidies as two things that are good for manufacturing jobs that were a reversal of Reagonomics. Do you agree that was the original point?
But Reagan implemented both tariffs and subsidies that were good for manufacturing jobs. So how are tariffs and subsidies a reversal of Reaganomics?
A common definition is something like "widespread tax cuts, decreased social spending, increased military spending, and the deregulation of domestic markets" - https://www.investopedia.com/terms/r/reaganomics.asp - and in common parlance it is heavily associated broadly with "trickle down" ideas. Subsidizing manufacturing and putting more regulation around trade run counter to that. Especially when you're subsidizing not-immediately-defense-focused manufacturing. Reagan and the neoliberal era as a whole was very bad for most manufacturing, the existence of one area that Reagan invested in doesn't disprove that, but it should've led its supporters to say "hey, that worked, maybe it would be useful in other areas too."
Even the tax stuff, right? The idea being pitched was that lower rates would result in higher government revenues but in practice the old tax rates were not at such a point that they were strangling productivity in the ways that would've been required for that to be true. Yet the legacy is simply "tax less" instead of any associating remaining with the "we actually think we can get more revenue to fund our spending" part.
Where is the economic statistic that you can point to as being X during the Reagan years that was recently changed to Y, and that you think explains the increase in building factories over the last two years?
Here's a chart illustrating this point: https://i.insider.com/532ccb18eab8eadc39f33da6
Probably don't have chain correct, and it is different for different industries.
But there was definitely a progression of 'local salary goes up', 'time to move to next cheapest country'.
Keep in mind costs aren't just what you have to pay people but also things like regional security, the risk of the government nationalizing your company and assets, ability to get skilled/capable/honest people.
Basically there has to be a degree of stability, including a centralized government that can provide a certain level of law and order in order to attract capital. Otherwise you have to price in the costs of missing a day of work because the factory is being shelled by government/anti-government groups, etc.
Corruption is fine, bribes are fine, because they can be priced in and managed, what can't be managed, planned for and predicted is instability.
For the record my bet on where the next big booms will be is Indonesia, Mexico and to a lesser extant west Africa.
Also a lot of those same stability/security concerns, but applied to the trip from here to there, likely across the ocean, which is something that people have largely taken for granted for years now other than some stories of Somalian pirates.
Extreme corruption, lack of rule of law, extreme violence to name a few. Mexico is basically a failed state: the government doesn't even control large parts of the territory it claims, ultra-violent drug cartels do. How is that a good place to build factories?
Other central American counties are at least as bad. El Salvador has a higher death rate from violence than war-torn Syria during the height of its civil war.
Countries farther south would be much better bets, but they still have huge problems with corruption. Brazil, Chile, Peru, etc. aren't nearly as bad, and do have their own manufacturing industries (Brazil is home to Embraer, for instance).
> Brazil, Chile, Peru, etc. aren't nearly as bad
Brazil is just as bad.
Drug gangs essentially own their territory. Brazilian state is legitimized by the police's monopoly on force. Gangs don't allow police in their territories which implies the laws of Brazil don't apply there. They have seceded from brazilian territory and established their own parallel government without anyone noticing.
It's common knowledge that local businesses operating in those places are doing so with the blessing of these drug lords. They even took on the role of police by punishing small time criminals who interfere with with their drug dealing operations by scaring away customers. They implement barbaric punishments like cutting off the fingers of thieves or shooting their hands. People living in those places may not even get mail because it's too risky to send mailmen in there, I've seen people who had to go to some remote post office to pick up correspondence.
It's actually kind of impressive. Shows what a people can do when it has the balls to organize and most importantly to arm itself.
The issues are generally that in the next largest potential cheap manufacturing sources (South Asia, SE Asia, Africa) they’re either not big enough or have extremely poor logistics and red tape. A big part of the East Asian miracles have been extensive infrastructure and bureaucratic emphasis on making exports as efficient as possible.
What you are saying is that both sides have agreed to put policies in place to make foreign goods more expense, to the point that domestic labor can be competitive, and corporations will move manufacturing back to the US.
But as others have posted as questions. Is this sustainable? If the US is not competitive unless barriers are put in place, can that be done indefinably, or will this naturally reverse again when the US Gov can no longer afford to prop up a more expensive and inefficient workforce.
In all those cases, there's little or no job growth. Just a couple administrators and engineers. Nobody on the line, because there is no line, just robots and conveyors.
Someone has to maintain the robots and conveyors, unless you’re assuming that has also been automated. I suppose this could also be contracted out if it hasn’t been automated.
Sure factories employ skilled labor. But very few. And what are unskilled laborers supposed to do?
American has 30M folks who's employment has descended to service industry (teller, cashier, food service). They can't all be retrained as Engineers, even if we needed 30M more Engineers which we don't.
It's not. This is disaster planning.
We're being forced to bring production back home because we can't keep outsourcing to a region subject to control by a potential adversary. If war breaks out with China, access to Taiwan for chips or Vietnam for socks is going to become difficult. Blockades will be immediate.
If this were about money, we'd move production to South America. That we're keeping it this close to home after years of shopping everything globally suggests we're building infrastructure for a supply chain that can't be interfered with by foreign governments.
You mean Vietnam surely?
"lights out" manufacturing[0] can happen with more and more things. The humans in the process can become minimal (thus shifting more costs to fixed capital costs rather than variable costs)
[0]: https://www.roboticstomorrow.com/article/2016/10/is-a-robot-...
Why do you think this sudden rise in industrial investment? The US didn't turn attractive overnight. This is the "economy" selling to the government their $280Bn CHIPS package.
> It's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
A 50% tariff does not affect attractiveness. You did not address the core issues, as the tariff will hide it. What will happen is free market economy at play: As the issues are hidden behind tariffs/protectionism, the US will keep falling behind China until you are significantly behind that you can't catch up. Then you become a real third-world country.
Reality will never care about any human philosophy. Humans will invest agency in interesting things regardless of some model in a vacuum anyone can conjure. Finance is has something very in common with religion; something humanity has zero obligation to perpetuate.
You have no idea what you’re talking about because we’ll just “fix” the philosophy to align with the reality. Trying to “fix people” to serve the philosophy is not happening.
Given a factory from each era that produces roughly the same product and quantity, how many are employed at each? What are their inflation-adjusted wages?
It seems difficult to believe that modern factories can employ enough people for your blue collar middle class dreams to become reality. The difference in population alone is 200M vs 330M. And even modest improvements in automation has the modern factory at something like half the personnel of the 70s-era factory for the (roughly) same output.
Semiconductors
Telecommunications equipment
Elevator/Lift equipment
Agricultural equipment/trailers
Aeronautical parts (both mechanical and electronic/sensor)
Planes
Helicopters
Printing services
Nutrition supplements
Cars
Just a few off the top of my head.
These all seem to be growing a lot, as I see a lot of new buildings all the time. Many of these are definitely for domestic consumption, I'll grant you that.
My own opinion is that 40 years of globalization have lifted a billion people out of poverty and now the global pay scales aren't so vastly different. It is becoming more economically viable to produce things in the US. (Which will also put pressure on higher inflation.)
Has the Inflation Reduction Act had any positive impact on manufacturing either? Its main provisions seem to be related to economic redistribution, climate change, and infrastructure, all of which may have long-term impacts on industry and employment, but don't seem to have done much in those areas yet.
I’m all for a strong middle class. However, I don’t see how an inheritance tax that forces children to sell their parents farm or business to pay estate taxes is supposed to accomplish that though. If I wanted a large permanent asset-free working class I’d definitely aggressively tax intergenerational wealth accumulation, resting assured that the upper classes would easily dodge it with trusts, corporations, expatriation, or some other tax avoidance strategy. That sounds like an excellent strategy to crush the remaining middle class.
Also a 700 acre farm, which is an at most medium size family farm, could easily have a nominal value north of 10 mil even though there's no way it's returning 1 million a year net. Same for a modestly profitable small business.
that's what you said and that reads plainly to me like you are implying a causal relationship.
Maybe he was right. I'm in my early 30s now, and I don't regret becoming a software engineer, but all the highly skilled tradesmen I've met in the last 5 years make at least what I do, often more, and have the benefit of actually owning their own businesses or real, meaningful slices of other ones.
I'll boldly admit I don't think I would like over physical labor and I do wonder about the toll of it long term, but they make a killing, especially the ones willing to travel all over the US.
Granted, the highest earner I know has both a degree in CS and Industrial Engineering, and goes all over the place working with industrial robotics and makes piles of money doing it. More than elite SV companies in the last 3 years, IIRC, if you discount the stock based compensation package (simply salary to salary comparisons) its north of 300K.
And arguably better retirement benefits, I think 12% goes to the 401K and they get bonuses every quarter right now. Well invested I bet he'd come out ahead. Can't for the life of me remember the name of the company though.
EDIT: forgot to mention the folks making tons of money on the DoD now starting to require things made in the USA and sourced raw materials from either inside the US or from friendly approved countries from the last few years either, and I don't think that's going away any time soon. They've in the last 2-3 years started paying lots and lots of money to get suppliers that are US based and source their raw material from friendly nations only, and they pay alot of money to make it worth while.
I think its hard to break into in some respects, compared to other fields (you need some certifications iirc in addition to a degree) but my limited, anecdotal exposure suggests its quite interesting and lucrative.
That said, my sample size is small, and on the other end of the spectrum, I know a few folks who maintain complex CNC equipment and develop software for it (using a language I don't recongize, I think its proprietary) and while they make good money, its not better than you can make as a senior engineer at a reputable place as a web developer, for example.
You would make more in webdev or ML though.
The one outlier example I gave is specifically tailored for medical equipment.
But the pay was nowhere near that of a software dev job in SV.
Anyway, in automotive manufacturing right now frequently the industrial automation firm is told they will be paid net 240. This is insanity. It leads to unnecessarily long projects as the firms have to figure out how to cash flow enormous expenses.
In the meantime, inexperienced competitors regularly fixed bid quote something that cannot be safely and timely built for the quoted budget, ignoring profit. They win the project and they're worn down to a nub and either go under or deliver to avoid being sued into oblivion, so it's a horrific race to the bottom.
The latter behaviour I witness regularly in the software consultancy industry and it's a bothersome thing.
I know Google was handing out $385k total compensation offers ($200k salary, $150k stock, $35k annual bonus) in 2020 to senior software engineers, and Google's 401k matching is 50%.
First is Google is an outlier, even among Silicon Valley. So is Meta. They both are well known for very high total compensation. I also specifically didn't say FAANG for this reason. There's other high compensation places that I would bucket in as top 5% that aren't in the acronym (Microsoft comes to mind) which very good TC packages.
Second is I removed stock because stock is hugely outsized in value for tech companies, and most of these jobs aren't going to have RSUs. If you compare salary to salary however, its a better metric. I know an industrial HVAC specialist that pulls in north of 300K in just salary, and has great retirement benefits. In fact, better than you might see even at say, Apple on both fronts, for most people, and importantly, they're young (7 years my junior).
One thing alot of the highest paying trade jobs have in common though, is travel travel travel. The folks who work only local jobs do well enough, but not near the gangbuster rates the travel folks are pulling in.
Source: I have friends and extended family who are all trades people. Plumbers, carpenters, masons etc. as well as a few who work in other engineering disciplines (like industrial engineering & robotics). Blessed with a large enough extended family that I think I get a decent idea of whats out there
He made 300+, and busted his ass to get it. Most of his guys were in the 60-85k range.
HVAC at 300k is an absolute outlier, and there are going to be some serious tradeoffs in terms of how brutal that's going to be on your body. Gonna be some long, hot days.
RSUs are the companies you're talking about are effectively cash, and they make up a significant portion of the compensation for the "elite SV" companies. So yes, if you exclude ~40% of the compensation for the "elite SV" companies, then you friend is probably making more.
_This_. A lot of software developers think they are the only high earners out there. Skilled tradesmen are making a killing in europe as well. And unlike software engineers, the path to starting an actual business is much shorter and the growth potential much higher.
Scaling software to the same level of revenue as a trade business is as easy if not easier. For one you don’t need that many employees
There are massive problems that come with "scale" - problems most people don't want. The VC model is all about the exit, whereas, again, 90-something-% of businesses, trades included, are focused on long-term sustainability, not on the "exit".
Sure, the VC space us very visible, very "loud", gets a lot of press, and so on. And of course 100% of non-vc owners don't get to be billionaires, but to VC world is a tiny sliver of the software world.
Even living outside of SV I don’t see a lot of in between firms.
I'm in a space that doesn't remotely interest VCs, it's not a regulated industry, and we're not a consulting company. Actually we're in 3 such spaces.
I also teach other (working) developers and while some are in health care the vast majority are unregulated.
But to be fair, you've likely never heard of us, or our ilk. We do the boring office software that underpins every boring industry. We're not self-driving cars or exoskeletons, we're data in, data processing, data out.
Our market isn't sexy enough, or wide enough for VCs, we don't need millions of $ anyway, so we've never bothered to ask for it. We do boring things like make a profit, and fund growth out of cash-flow. We hire slowly, and we don't do layoffs.
We have lots of competitors just like us.
There are many boutique SaaS firms - but if you only have a few customers, the business looks more like an outsourced internal team then an independent concern.
happy to be proven wrong on this point, would give me some ideas for my career :)
He heads out to the sites/jobs he has that day to see that the teams know what to do, then heads to the golf course.
Sometime in the late afternoon he makes the rounds again to see how the jobs have progressed that day. Does some book-keeping in the evening.
I envy him. I would be surprised if he completed college (although I know his kids all have now).
Unless the robots are either going to become good at swinging hammers or designing, maintaining, and install themselves, I think these are some of the safest jobs you can have, if there is such a thing
This sounds like a business is just something that happens to fall on your lap while you're fixing a pipe rather than something that you build with your blood sweat and tears. Most tradespeople make nowhere close to 300k. Their success is credited to their hard work, not their happening to choose the trades.
One is being the trades is rewarding, yes not all bring in 300K+, but I don't know a single trades person, many often my junior, who don't bring in a good income pretty comparable to software engineers at non FAANG companies make (typically 150K+) and I don't think any of them are carrying high debt student loans (many states even pay for trade education outright) and their benefits can't be beat, esp. if they're union.
The second is that there are trade businesses that do earn, esp. right now in the industrial sector, but they all have a singular thing in common: Travel Travel Travel. thats the name of the game. They're gone alot. For instance, my cousin is an industrial electrician, and works on windmills. He travels all over the midwest and Texas to do the work, is rewarded quite handsomely for the privilege, but is gone over half the year. Has no wife or kids currently, so there is that, but its taxing. Other trades folks I know have businesses and do pull in alot, but the "grind" can be very real at times, but I've been told that its rewarding, because its yours at the end of the day
Third is in a specialized sliver of robotics / industrial systems, you can make a fortune, but its not so outsized across the board. Medical systems are a big one, robotics are being really big in surgeries, and there's alot of money to be made there
The US has outsourced so much, this cash dump is just going to head straight into the pockets of cronies who will then say 2-5 years they need more.
Industrial base takes time to spin up, but if you have solid economy (as the US currently does) then using monetary policy and other incentives to push capital toward industrial base development is good for the country. It also plays well on TV since these factories are revitalizing towns and cities that previously were suffering from a lack of industry.
As a result, I don't see these shifts so much as a "reversal of Reganomics" so much as a realization from the Russian-Ukraine war that "globalism" isn't something authoritarians really like. And if you're primary trading partner is run by an authoritarian regime, that is bad.
This basic belief allowed us to write trade deals that reduced manufacturing capacity relative to non-manufacturing.
Totally agree with you the Ukraine war has been incredibly important in previewing what would have been much worse in a Taiwan war.
I think supply chain risk through peak COVID is also a huge factor giving this shift momentum. Supply chain shocks were comprehensible and visible to most Americans and impacted practically every business owner. It kickstarted renewed calls for localism and reassessments of worst-case scenarios for business continuity. Bringing up the home industrial base is a necessity for shortening those supply chains and bringing that risk under control.
Reducing risk from suppliers based in countries where government policy is less predictable or west-aligned was also highlighted by the pandemic. Shanghai locked down in May 2022, for example, and I am sure many Americans were surprised and annoyed at the time.
The one-two of COVID then the Russia-Ukraine war seems to have knocked us into a new alignment. Remains to be seen how it plays out against our current, difficult social backdrop.
Reagan wanted to get the U.S. back on the gold standard, which leads to balanced trade. He was talked out of it by Fed chair Volker.
What you call Reaganomics goes back to Nixon. I suppose that's probably just as well for you, but I don't think any administration between 1971 and 1991 (or even 2011 or now even) really thought "hey, let's take blue collar jobs and send them to Japan, and later China! haha! suckers!". Nixon didn't take the U.S. off the gold standard because that was something he yearned to do -- he did it because it was the only way to fund the then federal deficit. Sure, we would have been better off staying on a gold standard and being forced to cut that deficit, but every politician from Nixon onward -Democrat and Republican alike- kicked that can into the future. It's a non-partisan issue. Getting off the gold standard created easy credit junkies everywhere, and here we are. Junkies don't care about ideology.
Sample result:
Thank goodness they said "no"!That's what the article says, but the chart in the article casts quite a bit of doubt on that explanation (it's obviously an accelerator). Indeed, two paragraphs later, the article states "Census Bureau data reveals manufacturing construction spending has escalated from January 2020 until April 2023 in every region except New England and the Mid Atlantic."
If you assume that people make plans before spending a lot of money, you would think that the tipping point was back in 2019 or so. In fact, I know people that make machines that are used to make and outfit factories and they've been running at capacity for a long time. You might think it's crazy looking at that chart, but factory construction in the USA is currently constrained by availability of parts and people. People want to spend more than they're currently spending...
Second: you're basically making stuff up with that 2019 argument. That's not the way incentive spending works at all. If you have free money on the table as a corporate executive you record that revenue immediately, you don't put it in the bank to "plan". In fact, most bills like this make it largely impossible to "save" the funding anyway, and for exactly this reason: politicians want their results now, now in the next administration.
I am all for immigration reform as long as it prioritizes americans heavily. This means no H1B abuse but with congress getting massive subsidies from H1B mills, I don't think this will happen.
"The rest of the world" might have a little problem with that.
Good. Smart people having more leverage will topple places with shitty governments faster or consign those countries to the dustbin.
So if you want dictatorships to collapse it’s best to let the smart people leave, so no one can run the country, and the not smart people get angry at their government.
They will just kill bad dictator and install "good" one
Now you need 5% more houses, 5% more cars, 5% more electricity, 5% more infrastructure, and ~33% more immigrant support services.
Immigration is not a simple sticky-plaster - it has deep impacts on every part of your country’s infrastructure and services. It can work, but it ain’t easy: I live in New Zealand where ~30% of our population is people that were not born here (New Zealand is quite picky about who gets to come here, so we have less structural problems than some European countries that accept large numbers of refugees with little opportunity to filter for the most suitable people).
New Zealand has been building housing at a fast pace to keep up with the ~50% increase over the “native” population. How many places in the US can absorb the pressures of increasing immigrant numbers?
China totally outclasses the USA when it comes to manufacturing.
https://www.statista.com/chart/28031/manufacturing-racing-ba...
This comment gives a better perspective https://news.ycombinator.com/reply?id=36247499&goto=threads%...
Their “miracle” was a US creation, a policy to build them up to create a counterbalance to Russia. It’s gonna take ten years to tell, but China is already feeling these effects and feeling them hard.
That linked comment is also cherry picked stupid. PRC exports to US/west near record levels, WHILE exports to global south has officially surpassed western bloc, i.e. PRC is MORE factory of the world than at any point in the past. The drop in exports is due recent to global economic downturn that saps demand everywhere, but it's sapping from hilariously record high exports during covid. Meanwhile PRC export:GDP is like 20% down from 35% high in 00s, i.e. it's one of the less export dependant major economies in the world responsible for substantial global exports (including heavy industry) but it's not even an export driven economy anymore.
On demographic front, the reality is PRC is minting OECD combined in skilled talent every year and last 5 years of PRC topping citation (controlled for quality), innovation index is just lag affect of PRC growing with fraction of that talent. The PRC miracle is basically doing all that with ~20% skilled workforce, because at PRC scale that's enough to be globally competitive. Now it's in process to grow that competitive workforce to 50-70% skilled in next 30 years, which is adding anohter couple US worth of talent into the mix.
- exports plunge by 7.5% in May, far more than expected https://www.cnbc.com/2023/06/07/chinas-exports-plunge-by-7po...
- profit tumbles 18% in April https://www.reuters.com/world/china/china-industrial-profits...
- chip progress stagnating. Oppo chip design unit completely shut down https://techcrunch.com/2023/05/12/oppo-chip-disbands-phone-c.... Japan stops shipping semiconductor equipments to China https://asia.nikkei.com/Business/Tech/Semiconductors/Japan-c.... China is still stuck on 14nm chips.
- multinationals moving supply chains out of China faster than ever. Tesla asks Chinese suppliers to build plants in Mexico (June '23) https://cnevpost.com/2023/06/08/tesla-asks-chinese-suppliers.... BYD make EVs in Vietnam (May '23) https://www.reuters.com/business/autos-transportation/chines.... On top of older news this year that Apple wants Foxconn to move out 50% of its production lines from China by 2025. And Dell's production completely out of China by 2027.
China is no longer the "world's factory". It will stagnate for 10+ years, similar to Japan's lost decades, but with worser birth rate than Japan today. It reported 8M babies in 2022, low that was last reached in 1940s.
We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years. (factories moving out, which decreases downstream economic activities such as real estate and retail).
I see marriage rates falling by about 50% over the past decade. But this claim seems unlikely, or perhaps just badly skewed by the seasonality of things.
This year's 520 marriage rate is ~40% of last year's.
https://xueqiu.com/5539280156/251074532
https://www.scmp.com/economy/economic-indicators/article/320...
https://www.statista.com/statistics/250650/number-of-births-...
https://news.sina.cn/gn/2023-01-17/detail-imyanfvn6707213.d....
(Figure 3)
2017 - 17.23 million
2018 - 15.23
2019 - 14.65
2020 - 12.00
2021 - 10.62
2022 - 9.56
Note that this is official Chinese gov statistics. Their numbers are known to be untrustworthy.
1: https://medium.com/@CollapseSurvival/overshoot-why-its-alrea...
2: https://www.resilience.org/stories/2005-03-06/dependence-pha...
idk, Japan seems like it thought the party would go on forever, whereas China does seem to have clear eyes with it comes to world politics (eg. long-term investment in the rest of Asia and Africa).
> We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years.
Do you recall NAFTA? or the quick rise of China not long after? These are still studied as huge exogenous economic shocks in business schools!
You're hyping up Xi Jing Ping, who is considered an idiot in most elite circles including Putin, too much. One belt and one road is now considered a failure with Italy, the most prominent member, dropping out of it this year. Most of the countries that took on the debt are unable to pay it back, and China has had to forgive a lot of the loans recently. And no one has aligned US, Japan, South Korea, Taiwan, Philippines, India, Australia, Nato quite like China in recent years. The most recent focus in G7 was squarely on China.
> NAFTA
with respect to NAFTA, US manufacturing only consisted of 15% US economy in 1994 https://www.stlouisfed.org/en/on-the-economy/2017/april/us-m..., whereas Chinese manufacturing consisted 30% of China's economy today. Also, the difference is, the laborers in US manufacturing moved to other higher paying jobs, as a result, average income went from 25k to 30k in 2000. Whereas what we're seeing now with Chinese laborers is that they're moving back home to countryside to farm (< $1 a day)
I don't really care what Putin says but I do think they are thinking more long-term. Only here and in Europe do people think in terms of election cycles. Don't get me wrong, I am not a Xi fanboy, and I definitely don't want to the US to be like China in general terms, but I just disagree with you. I think they know that the US-centric money flow was capricious and they have been long making plans for when it isn't what it was.
>with respect to NAFTA, US manufacturing only consisted of 15% US economy in 1994 https://www.stlouisfed.org/en/on-the-economy/2017/april/us-m..., whereas Chinese manufacturing consisted 30% of China's economy today.
Now, put those in real numbers and you will see the effect! Also, do you not think 15% of the world's biggest economy taking a fucking as being significant? We had to pivot to service industries after that!
I can tell that you have a hard-held opinion on this and I am not fighting with you, I just think that your original post was not as nuanced as reality.
But when China lose most of the foreign manufacturing jobs, it lost a significant portion of its economic output. Because now these workers just went back home to countryside to farm.
there is a lot wrong with starryeyed libertarianism, but free trade with allies is absolutely not in the bad parts.
https://www.barrons.com/articles/us-growth-gdp-china-economy...
What other numbers don't lie? 20.4% youth unemployment rate https://www.cnbc.com/2023/05/29/record-youth-unemployment-st.... 22% drop in daily home sales in 2023 vs 2022 https://financialpost.com/pmn/business-pmn/chinas-april-prop.... Yuan losing 7% value against dollar https://www.cnn.com/2022/05/13/investing/china-covid-yuan-us.... and on and on.
https://www.reuters.com/world/china/china-q1-gdp-grew-45-yy-...
>On a quarter-by-quarter basis, GDP grew 2.2% in January-March, data released by the National Bureau of Statistics showed, compared with expectations for a 2.2% increase and a revised 0.6% rise in the previous quarter.
Right now China isn't pouring money into industry because it frankly never needed it. With the opening, more money is now being pumped into reopening services in China, that's why when you look at the PMI for services it's much higher, because people are taking money out of industry (unless it's high tech oriented) and parking it in services. People aren't necessarily consuming more, but it doesn't mean they aren't using much more services than they previously were, and eating out more, etc. GDP doesn't only look at industrial output.
BTW. All the other numbers you cited in the other articles were also provided by the Chinese government.
PRC exports to US/west near record highs while trade with global south have exceeded western bloc. The only reason export decline notable is because PRC exports has increased so spectacularly in the past few years (export value grew from 2.5T in 2019 to 3.6T in 2022) that there's nowhere to go but down when global economy underperforms. Net export value is still up ~40% since 2019 - exports stats can be confirmed bilaterally. PRC exports grew as much in last 4 years (~1T) as it did in decade between 2008-2018 (1.4T-2.4T). Meanwhile US increased imports from "friendshore" countries mirrored PRC increased exports to those countries, i.e. it's tarrif engineering and US import dependence on PRC ultimately still increasing.
Does Santa Barbara or NYC really look antiquated compared to Mumbai? Or Da Nang? Or Fukuoka?
Maybe if you're trying to compare Detroit to Shenzhen or Tokyo.
Because London was partially bombed and rebuilt within the last generation.
New York wasn’t. NYC was built a while ago, and a lot of that infrastructure and builds still work.
https://en.wikipedia.org/wiki/Haussmann%27s_renovation_of_Pa...
A lot of what you think of as "Paris style" is much newer than New York City. NYC has plenty of buildings older than that, and more importantly, its grid pattern is even older.
New York does have many newer buildings, while Paris deliberately prevented much modernization after that. Downtown Paris has no skyscrapers except the Eiffel Tower itself, but it does have modern business centers pushed off to the outskirts of the city.
It takes 75+ years for a rebar building to reach end of life. The US just built up during earlier decades than many of those Asian cities. In another 30 - 50 years those antiquated buildings should start getting replaced.
If US-China trade were to stop tomorrow, US would suffer 100x more than China due to lack of critical goods. China would have a dearth of greenbacks.
China June 2023: Massive reverse migration by laborers back to countryside, Shanghai population down 135k compared to 2021 https://www.scmp.com/economy/china-economy/article/3215126/s.... Physical retail closures up to 80%. Entirely empty malls in Beijing, Shanghai, and Shenzhen. Real estate prices dropping 30-50% in tier 1 cities. Shanghai, Shenzhen and Beijing having 50k+ used homes for sale in span of 2 months. Shipping containers pile up 7 stories in every port https://www.scmp.com/economy/china-economy/article/3210870/c....
US June 2023: not much.
They've always been spectacularly wrong because they don't understand China and don't want to.
Sure, let's talk about broader context and macro trends. unless something big changes, these macro trends won't go away:
- alignment of dictatorship vs free countries. China, Russia, North Korea, Iran vs US, Europe, Japan, Taiwan, South Korea, India, Australia, Philippines, Canada.
- dictatorship is losing. China is propping up all the dictators around the world, and its losing that power
- China demographics collapse
- China's rising and insolvent local government debts, which can no longer generate income by selling land. because China has too many buildings - 6 billion by last count. and demographics collapse. and lack of jobs
- Tech sanctions on China. China's inability to catch up on tech.
which indicates China's stagnation and decline for the next 10-20 years.
I'm sure most of us are aware of the gulags that China ran in 2022, in the most prosperous city like Shanghai, with welded doors, lack of food, arbitrary killing of pets, moving their own citizens against their wills to camps or cells with no running water and unsanitary conditions. with cries in tall buildings from families in the middle of night for food. If. you haven't seen these things, go watch it online. Imagine if somehow China succeeded, and that's all of humanity's fate.
Sure you have companies like apple that make $$$ from hardware, but most HW players in tech get slowly replaced offshore. Silicon Valley was silicon valley because of hardware. Now it’s mostly software, and HW is increasingly a commodity.
It’s the same thing elsewhere in the economy… it’s easier to set up a factory to sell something anywhere, but when you control buyers, you’re rich. The US is still the shopping powerhouse of the world… and even massive markets like China can’t consume as much because they just don’t have as much money.
And software that could be a commodity is often given away for free (Open Source).
The lower in the stack you are, the closer you get to commodity. Eg SQL databases - often somewhat interchangeable for different target features, but also language and expectations don’t match exactly, so there’s high cost to switching. That’s why Oracle now has to fight cloud providers, MSFT, and a ton of open source projects for business. Comparably, several languages (C, Java/Script, Python) have multiple compilers/interpreters with much better compatibility and little commercial options.
China becomes less of a competitor on costs as wages rise there. Once the manufacturing wage differential gets into the 4:1 range, offshoring is less attractive. In the 2:1 range, offshoring starts to be a lose. That happened with Japan two decades ago.
Our raw materials are tested by our lab when they're received and again after mixing/encapsulation.
You don't know what you're talking about.
Do you like your standard of living? For most, you should when compared. That comes from one type of economy. This is another type, incoming. And there are no guarantees as to what your change in standard will be.
One rhetorical question might be: is your standard of living better or worse than in China, which is replete with factories? Neither does Bangladesh have a factory shortage.
Who owns the factories being built? It will surprise some to know that foreign ownership will be heavy.
One objective trend is foreign pressure to reduce the cost of exported goods, which means foreign buyer downward pressure on wages as exported goods make up larger portions of the economy.
Don't expect wages to be in Federal Reserve Notes. Do expect a continuing rise in corpocracy and feudalism. Do expect large pools of immigrant labor that will serve to minimize wages.
https://fred.stlouisfed.org/series/MANEMP
Construction spending is a terrible proxy for manufacturing - both because the size of a building you need isn't pegged to the value of your output (e.g. a $100 million dollar shop making aerospace components might have a tiny fraction of the footprint of a $1 million sweatshop making t-shirts), and because the cost of factory construction is determined by the cost of construction in general (i.e. if there was a real estate boom building residential buildings then you're competing with that for construction materials, equipment, labor, etc).
https://fred.stlouisfed.org/series/IPMAN
https://fred.stlouisfed.org/series/OUTMS
But not everything is a plateau. Fabricated metal reached an all time high post covid: https://fred.stlouisfed.org/series/A32SNO
Same with semis: https://fred.stlouisfed.org/series/IPG3344S
The fact is that offshoring of manufacturing was a myth - the jobs never left, the industries just transformed in such a way that old, labor intensive processes were eliminated. Those jobs, and the economic prosperity they brought, are never coming back. It's merely a coincidence that at around the same time US manufacturers were computerizing their operations China was building 1920s level industrial facilities.
Certainly none of the data is indicative of a sudden boom in US manufacturing in the past 2 years which could be attributable to any recent decisions or events.
Typical MRP/ERP solutions limit the way information flows around a factory. We have custom software running most of everything. It's a lot of CRUD and data pipelines. But wow are our processes easier to automate than I've seen with other systems, such as SAP.
Not to mention that also means that we will hold more power and ensure longer stability...why buy from China that could go to war with our allies and restrict our access to their manufacturers when we can just ask a factory in the next state over to make it?
Today factories in the US are built automated. No jobs, not for anybody but an accountant, an administrator, a couple of engineers.
We have around the same factory employment today as in 1945. Despite growing population by more than 2X. 13M mostly non-skilled. Maybe 5%
Could I please borrow your time machine?