Comment by epistasis

The ratio of domestic sales and domestic production has widened over the same period. In 1970 the ratio of domestic production to domestic sales was .933, in 2019 that ratio is .796.

Though we are making more total cars, were making a smaller percentage of all cars sold.

As another commenter pointed out, the cars we make today are amalgamation of parts and design work done overseas. That isn't necessarily a bad thing if you view globalization favorably, but it is another factor when considering the value created in the US with regards to vehicle production.

Eh this is bending the word "produced". In 1960 all the parts were made in the US likely from raw materials mined & refined in the US. That's very different from today.

> Can you explain how tariffs are an effective tool against foreign governments subsidizing industries? It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.

They neutralize the subsidy's effect on pricing and prevent the subsidizer from taking over your market, at least.

> It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.

The subsidy is already a tit, the tariff is tat. Zero-sum is at least better than just taking the blow and having a negative-sum outcome for yourself.

I can explain it.

I'd like my critical supply chains to be in North America. Ideally, I'd have a free trade zone with Mexico and Canada. Tariffs, two-sided, reduce trade, and bring me closer to that reality. I'm okay paying slightly more for that security.

I'd like the same thing in the EU too, and in other major world blocks.

There's a slight efficiency gain from specialization, where each country brings a skillset, but it's totally not worth it to me versus the brittleness which comes with it.

Remember how the Covid supply chain disruptions cascaded? That's a tiny fraction of a really bad natural disaster.

Maybe zero sum on a global scale but not zero sum in terms of where industry gets developed.

>Can you explain how tariffs are an effective tool against foreign governments subsidizing industries?

Because the US is a huge market, and if you can't sell your goods here competitively (because tariffs price you out), it hurts your business. It's a negotiating tool.

> typically end up being tit-for-tat and relatively zero-sum.

That pretty much sums up all economic policy honestly. It will always be tit for tat since one aide can only respond to the other and doesn't directly control their economy.

Average productivity per manufacturing worker in the US grew on average by 3% per year in the 1950–1980s and 4% per year in 1990s (https://www.bls.gov/opub/mlr/2002/06/art4full.pdf), i.e. its current output is comparable with that of ~50m people working in 1969, so a 30% decrease in total manufacturing employment was probably well compensated for (putting aside the social welfare point of view).

How does this square with 5G radios being almost entirely made in Asia? As in the entire chain from antenna design to finished chip happens >90% in Asia by dollar value.

None of the things you mentioned come even close in terms of complexity, on a per cubic volume basis at least.

A few counter examples:

1. TSMC (supported by the ROC government[https://dominotheory.com/tsmc-and-taiwans-government-two-boa...])

2. Korean chaebols (Samsung, Hyundai, LG etc, supported by ROK government[https://www.investopedia.com/terms/c/chaebol-structure.asp])

3. Japanese heavy industries (Japanese government support)

The government support are a combination of low interest loans, import controls and financial subsidies.

Does “government intervention” include subsidies and R&D, in your account? I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.

> Most of the time it doesn't turn out great.

I don't know why people say this. The reason China beat us out in manufacturing of many goods is BECAUSE of government interference. They have a much more top-down leadership style that allows these gains in efficiency. They've streamlined.

But even looking at the US' history this hasn't been the case. The only reason we got out of the Great Depression was because of the most radical government-backed economic policy ever: The New Deal. Even today HUGE sectors of our economy, like defense, are paid for on government money. Those are jobs, companies, entire industries.

> There are reams of economic literature trying to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great.

These sentences are just propaganda. There’s no factual basis for them.

There are no markets without government intervention. Statements like this are more like religious incantations than appeals to “research” of some kind.

Well I do think the security argument does stand, you don't want to outsource navy carrier construction to China for example. Just don't expect a thriving economy to be built around it.

> to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great.

Is this really accurate? Most places regulate, surely there is a reason for that? It works pretty well compared to the infamous ‘self regulation’.

Yet the most successful nations on the planet go against this economic wisdom and do subsidize industries they deem important and/or protect them with tariffs. The US did this until the 1960s. China does this now.

I have no idea what you could mean by this unless you have a very specific personal definition of “government intervention in the market”.

The literature makes it clear that government intervention in markets is broadly necessary; the disagreement is around the how and what and why.

There’s a lot of navel gazing around these sorts of analyses. Consider that the entirety of the tech industry exists in its current form due to federal spending.

The Silicon Valley story is well known; the SAGE project really created the classic IBM.

It’s a terrible thing.

De industrialisation in the UK led to the annihilation of the middle class.

Yes. Here's an example: https://research.upjohn.org/cgi/viewcontent.cgi?referer=&htt...

Excerpt:

> "The computer industry, in turn, is an outlier and statistical anomaly. Its extraordinary output and productivity growth reflect the way statistical agencies account for improvements in selected products produced in this industry, particularly computers and semiconductors. Rapid productivity growth in this industry—and by extension the above-average productivity growth in the manufacturing sector—has little to do with automation of the production process. Nor is extraordinary real output and productivity growth an indicator of the competitiveness of domestic manufacturing in the computer industry; rather, the locus of production of the industry’s core products has shifted to Asia"

The whole document is well worth a read.

Here's another article: https://qz.com/1269172/the-epic-mistake-about-manufacturing-...

Not sure what podcast you're talking about, but since we're trading vague recollections, my recollection was opposite. Manufacturing as % of GDP certainly went down, but gross value added did not.

Also, hedonic adjustments are typically applied to CPI figures, not figures like GDP or value added, so I suspect you have some facts crossed.

Well, you can (partially) thank the Jones Act for US ship building being so abysmal.

The US was a shipbuilding superpower because it had what Europe did not, access to vast untapped timber. It wasn't until globalization that the US lost its shipbuilding industry.

China has the largest navy in the world. And the gap with the US keeps growing.

Times are changing.

Excellent quote. While the effect of American music is huge without a doubt let me go off on a personal tangent because it's related.

I have immigrated from my homeland (first to Canada and then Malta) and I usually say "I had the bad luck to be born in Hungary but I fixed that when I could". In other words, I am not particularly fond of the country / people living in there. But it being my mother tongue, growing up there has an interesting effect: some Hungarian songs have a much stronger emotional effect than any in say English. These are not even songs I knew as a child. I am actually quite curious whether there has been scientific research in this.

Markets

Debatable.

Maybe our economic policy should go deeper than 101-level economics then! Because comparative advantage is a dynamic quantity which changes over time, and while some advantages (like geography) are fixed, others are built by investment.

Here's a video [1] which explains why, in 1955, manufacturing household goods was cheaper to make in the US than in China (and why, at the time, they thought this manufacturing dominance was the thing that backed the US position as a global superpower). It's not because Americans worked more cheaply than Chinese workers, it's because American factories had a well-developed tool-and-die expertise, which meant that when anyone in the world wanted to make something, they were well-advised to travel the US to get it made.

Econ 101's comparative advantage is true at an instantaneous point in time, which is a good start, but if perhaps it's just "knowing enough to be dangerous". Economic policymakers (and company leaders) would do well to think about comparative advantage as planning an optimal trajectory over time, which can mean sacrificing a short-term optimum in exchange for a long-term optimum, and if there even is a textbook solution for that, it's going to look less like a 101-level intersection of straight lines, and more like an iterative optimization over nonlinear differential equations.

[1]: https://www.youtube.com/watch?v=QU6nsfoNWDI

They didn't do a very good job of pricing in politics.

Just because they're "lower value" subsectors doesn't mean they have significant real-world impacts.

This sort of announcement will inevitably be used shortsightedly for political reasons. Someone will interpret "We have 3nm at home" as "We can do something foolhardy with Taiwan" or "We can throw up a big, non-surgical tariff". This will soon be followed by "did anyone mention that the 3nm chip is useless without a galaxy of half-cent supporting parts that we outsourced decades ago?" or "people consume products other than highly binned silicon dies, and now we have supply crunches and price spikes from televisions to toasters to turmeric?"

> The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years.

All of that manufacturing growth is semiconductors, and most of that measured semiconductors growth is simply Moore's law. I don't think anybody would say that the US is worse at making transistors today than it was in 1970, but that's table stakes; everybody is better at making transistors than they were in 1970. Automotive manufacturing has also done well (in part thanks to trade barriers). When it comes to everything else -- vacuum cleaners, fans, washing machines -- that manufacturing output is not doing so well.

I don't teach economics 101 nor taken a class. What about the other corporate departments that are being outsource?

The company I previously worked for not only outsourced product manufacturing to South Korea with assembly in the USA, after I left. They also outsourced customer service (CSR) to south Asia. Texas VCs bought the company and are trying to maximize all returns on their investment.

Companies like American, that produce branded products, have a whole department that helps their sales reps with moving customer support, be it email, physical letter, and or phone, to south Asia to reduce office management costs in the USA. They also could just be outsourcing invoicing while CSR is a local provider.

Manufacturing is a simple concept that is heavily politically pushed. The other departments that are needed to support products seem to be ignored. ML has a great likelihood of perpetuating this with real-time vocal transitioning. The CSR in India can sound like some person from New Jersey and break the accent barrier. This would put the customer at ease when sharing the same vocal tones. Consumers would be none the wiser.

> but this means giving up on doing other things you could use the resources for.

Aka giving up the security and being more vulnerable to volatility. The pendulum can swing too far, as resilience cannot be measured in dollars.

Econ 101 is mostly nonsense. Read up Steve Keen.

Tell me specificly which niche that Samsung focuses on: >Product: Clothing, automotive, chemicals, consumer electronics, electronic components, medical equipment, semiconductors, solid-state drives, DRAM, flash memory, ships, telecommunications equipment, home appliances >Services: Advertising, construction, entertainment, financial services, hospitality, information and communications technology, medical and health care services, retail, shipbuilding, semiconductor foundry

https://en.wikipedia.org/wiki/Samsung

Samsung is also very closely tied to the Korean government.

>I think if you start to deep dive into the industries that left, you'll find the reasons were often more complicated than simple labor costs

Care to share any of the reasons?

Here are reasons that I know about; EPA regulations, OSHA regulations, their supply base relocating.

https://www.forbes.com/sites/stevedenning/2011/08/17/why-ama...

Don't get me wrong though, we shouldn't roll back our regulations but we should however ensure that what we buy is manufactured in that same conditions that we would demand at home.

> There was no capital investment, because why pay to have a huge line that isn't being used.

I'd like to suggest that what Tek did worked back then, and the same insightful leadership wouldn't simply copy the solutions from 20 years ago.

Thus the problem is "there was no capital investment, because there was no visionary leadership," and the problem is also that the short-sighted leadership simply saw "a huge line that isn't being used," instead of a workforce ready to take your company into the next century.

> Military are terrible customers ... You spend a lot of effort and business just evaporates.

This only applies to companies that lack vision, that seem to only be able to keep stamping out the same widget as 20 years ago.

> Tek already struggles to compete against cheaper, adequate solutions.

Seems like a lack of leadership, instead of an existential proof that Tek can't compete.

> We've traded the manufacturing we had 50 years ago for other things. It's not possible to specialize in "everything."

This actually sounds like the kind of visionary leadership that Tek or the larger Portland metro needs.

If I sound combative, please only read this in a curious voice. What kind of visionary leadership could rise from the ashes of the Silicon Forest?

Tek would have cost reduced that gear and it was in progress when it was all torn down. Tek would have also continued to make more great gear. That spirit stopped.

Tek was also getting nice returns on several of the more successful startups.

Vollum was no fool.

Snark mode = 1

You mean traded our future for baubles and trinkets today?

Yeah, I agree!

Snark mode = 0

I will ask again:

Where does our next generation of skilled labor come from?

And don't tell me we won't need it because automation. I have automated many things and will do so again, but I never managed to find a robot looking for a good meal, or a home, etc...

At some point we need to look at this in terms of our own, or we will be living in even more of a dystopia than the already growing one threatens to be.

If we do not ask and answer the question, "how do our future leaders and builders, mechanics make it?", they won't. And the cost on that is a lot higher than many will admit it is.

Sure the scope did change, and Tek made those moves as they should have.

There was a great argument for trading some capability to continue to build new products on now current processes, with the same rapid feedback loop in place.

That should have happened rather than the very aggressive tear down and brain drain we actually saw.

The key point being ongoing and regular investment in the company and people would have yielded more and better products that would compete just fine, not just be the cheapest.

That organization would be smaller, but still potent and a lot more nimble, able to continue supporting technical engineering across many fields.

And as I have mentioned up thread, couple that with returns from smart spin-off investments and an ongoing innovation culture rather than just a cost cutting one and we would have seen more than we did.

I would also argue the big push to apply software was sexy, and took the air right out of hardware efforts. Lack of investment there was not about the lack of returns, and it still is not about that. They are just a different kind and over a longer time.

Ignoring those has bled the region of a lot of capability. It is much harder to make things and here we are trying to understand how the next generation makes it on hair, laundry and food.

Making things is important. And it is not the cheapest way of course. Having a large percentage of people unable to build lives is and will continue to be very expensive. Crime, need for government services and more abound.

Early on, the promise of new tech and automation was a reduced need to work as much and or at the least maintaining respectable standards of living.

Put simply, it was supposed to cost less to live and for the most part these things did not happen.

Something needs to.

Not to mention the demonetization of the working class(i.e. the dumb redneck stereotype) and the job class itself with the association of manufacturing jobs as dirty and unneeded with the goal of a service economy as the new future.

https://www.forbes.com/sites/stevedenning/2012/01/31/is-the-...

https://www.forbes.com/sites/stevedenning/2011/08/17/why-ama...

...compared to what? Growth is just one way of representing market health, and it's one that is typically pushed by capital for obvious reasons.

If you're talking about efficiency or productivity, you don't need markets for either of these, you just need any kind of economy to work with. Industrialization only intersects with markets (or capitalism for that matter), they aren't the same thing.

True. That shift would be in the last couple of years. Maybe Vietnam is next China. But this is still an emerging event. What China did to the US already happened.

What does it mean to be a major player in manufacturing technology 4000 years ago?

And you would imagine that quality of life would be better if the U.S. found itself on the losing side of a major war? Your premise that there seems to be hopelessness is more of a media driven phenomenon than reality. There is just no evidence that "the future is trending downward" - at least in the U.S. Every measure you look at shows that for Americans life has improved and continues to - especially in comparison with our global contemporaries.

> There only seems to be hopelessness on the horizon. [...] As someone who also feels like the future is trending downward, [...]

What are you talking about? We are living in an age of unprecedented global peace and prosperity. Most people never had as good as today, and things are set to improve further.

Not all economic growth contributes to national security the same way. In particular, outsourcing a large share of your manufacturing to your primary geopolitical adversary is a poor strategy.

Huh, why, how?

People in mainland China have gotten massively richer over the last few decades, but America did not have to pay more for imports. If anything, the increase in productivity made Chinese imports relatively cheaper.

Just further evidence of the accelerating returns to capital. It just makes less and less sense for America to be engaged in highly wealth-distributive (i.e. labor intensive) activities, more sense for it to engage in capital-intensive ones which, by definition, accrue further benefit to the owners of that capital. Yikes!

The jobs, and in many cases the expertise held by the people working those jobs.

I think this was the angle epistasis was coming from: not just that chips are physically being formed within the boundaries of the US, but that citizens are involved, being trained and garnering the practical experience that comes with being intimately involved.

So, so much of this sort of experience has been lost over the past few decades, and the fallout is palpable: how many discussions have played out right here surrounding the challenges of manufacturing anything, even trivial bits of plastic, at scale without spending years traveling across the world, dealing with language and cultural mismatches, ensuing mistakes and quality issues?

We're in a weird place now, wrt manufacturing skill - there are still plenty of individual crafters, folks who can make one-off or small runs of high-quality goods... For a pretty high cost per/ea. But scaling is troublesome; to hit that economy of scale requires a lot more people with maybe journeyman-level skill, folks who cut their teeth in a large operation and are looking to specialize - and those large operations aren't here.

I've read the thread and have been very familiar for decades with these debates.

There are two separate questions:

1) Has USA manufacturing increased or declined in its output (measured in things, not $)?

2) If output has declined in terms of things, is this ok because of comparative advantage? Is this ok because the US mains a competitive edge in the highest value most technically advanced products?

As for 1), you say "The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years." Are you familiar with the term "researcher degrees of freedom"? "manufacturing output in real dollars" is an impossibly complicated statistical construct with infinite researcher degrees of freedom. There are infinite opportunities for "Getting Eulered" https://slatestarcodex.com/2014/08/10/getting-eulered/ That is why I insist on starting with the most straight-forward numbers -- how many cars? How much steel? And then layering on adjustments on top of that. If steel is down but it is compensated by some other high value product being up, OK, but show me the calculation, show me the work. Otherwise your argument boils down to "Trust the US government's impenetrable statistical calculations, we are getting richer comrade"

As for 2), when I first heard that argument from the most prestigious and credentialed economists twenty-five years ago, my toys and clothes said "Made in China" while advanced technical products like my computer motherboard was made in the USA. Now it's OK that the motherboards are all made abroad and because the most technically sophisticated motherboards are made in the USA. Well, it seems to me like the areas where the USA has comparative advantage in making the most technically advanced products is becoming a smaller and smaller every year. Just this year we are made aware of how much Boeing has lost ground to Airbus. Seems to USA is increasingly reliant on low-tech exports like soybeans, or worse, exporting dollar bills. It seems to me like our trade deficit is gaping wide, which means our real export is living off our status as the global reserve currency. Which feels nice until ones military might is no longer able to support that status (see 16th century Spain). Seems to me that the US is losing ground on military relevant manufacturing -- particularly drones but also steel, ships, etc. And without that, it will not be able to maintain its status as reserve currency in the long run.

I didn't include typewriters on my list of goods. I only included items like cars and motherboards that were as economically relevant at the beginning measurement point as they are at the endpoint.

If you think that the manufacturing output in some of the things I listed declined or stagnated -- but it is countered by the fact that US manufacturing of other newly invented goods has increased -- then please specify what those goods are. Seems to me like the US manufacturing also lags in newly invented goods -- like drones.