Time for the U.S. Economy to Reindustrialize 80 comments
Michael Steinberg
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The Wall Street Journal’s “Tinkering Makes Comeback Amid Crisis” stirred my thoughts on the limits of America’s dependence on a knowledge-based economy. The article focused on engineering students at prestige universities wanting to actually create physical things. Students are migrating from the virtual world of software science to hobby-ing with computer controlled milling machines in their dorm rooms, school workshops and membership machine shop clubs.
The Journal’s “Obama to Warn Asia Against Relying on U.S. Consumers” reports that the President is reiterating his call for the US to get back to making things for itself and the rest of the world. In “Larry Summers and Jeff Immelt Preparing for Post-Consumer Economy” and "US Needs to Convert from a Consumer to an Industrial Economy", I highlighted that companies such as Eaton (ETN), Ingersoll-Rand (IR), Parker Hannifin (PH) and Rockwell Automation (ROK) could be the beneficiaries. Now it appears that both the President and these companies are developing a young following.
While the President will be emphasizing balance during his Asian trip, the underlying message to the world is that the US consumer is finished, spent out, and will never return. The President doesn’t want foreigners to lend us any more of our own money to buy any more of their trinkets. The inherent conflict between the Administration and the Federal Reserve is the sustainability of our economy based on recycled dollars. Obama would rather recycle the Pound, Euro, Yuan and Yen in our favor. Bernanke still believes that the US consumer will save the world.
The previous conventional wisdom was that it is too expensive to make anything in the US, so we must concentrate on the high value-adding knowledge-based economy to be competitive. That proved a failure as each time the Fed pumped up the “economy”, i.e. money supply, it only created asset bubbles – not more industrial capacity or real innovation. True innovation and the real knowledge-based industries evolve in fits and starts; therefore they will never be enough to drive an economy as large as the US.
Now it’s time to take a step out of fantasyland. The US needs a “core” economy that supports all skill levels, personal spending that matches personal income, and an energy policy that matches consumption with its percentage of the world population and its accesses to resources.
Whether the Fed likes it or not, the central bank can no longer play US consumers like a violin. We are already diverting too large a portion of our consumption to energy. So that leaves the availability of work for all skill levels as the central focus.
It is time to end all the rhetoric about the need for better education and fair trade for the US to compete in the world. Both are overused excuses in the same manner as pharmaceutical companies say they must gouge consumers to support research. While the quality of our education varies substantially, the high-end is still extremely competitive. Education and skills are not stubbing our economy. And trade will become fairer as our consumers adjust spending to match their incomes.
So what will force the economy to reindustrialize? I believe it will come when many of the knowledge-based commerce businesses such as banking, finance and accounting become utilities. Yes, the Bank of America (BAC) Electric Co., the Citigroup (C) Electric Co., the JP Morgan (JPM) Electric Co., the Wells Fargo (WFC) Electric Co., and even the Faux Goldman Sachs (GS) Virtual “We are not a retail bank” Electric Co. As services lose their ability to value-add, industrials will pick up the slack and jobs will fill in at all skill levels.
I am not advocating the doom of the knowledge-based technology sector, just a substantial decline in the knowledge-based services sector because of the realization that most services have never been value adding. And non-value adding services could never have been the foundation of a sustainable economy.
I am betting that President Obama’s vision of the US and world economies will be right by default.
Disclosures: Author is long BAC, C and WFC.
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This article has 80 comments:
Eamonn Fingleton's "In Praise of Hard Industries, Why Manufacturing, not the Information Economy, is the Key to Future Prosperity," written in 1999, makes an extremely good case for the need for the US to retain (or rebuild) its manufacturing and industrial base.
It also includes, in its 3rd chapter, an incisive and prescient critique of financialism. If there is one lesson coming out of the meltdown of our financial system, and any hope for constructive change, it is in the area of rebuilding a strong manufacturing capacity in the US, providng real jobs that create value.
Manufacturing can only be competitive if performed by machines. Sure, some humans are required to supervise, but that requires more education than simply turning screws on an assembly line.
Capitalism failed. The banks screwed us over. We gave an inch, they took a mile. It's time to realize that the economy was doomed the minute we allowed interest into the equation. How can I pay back more money than existed in the first place?
The US and indeed the world need to realize we are nearing a transitional change in consciousness that will enable us to being the move away from money. Let's stop trying to fix what we already know is conceptually flawed at a fundamental level, and focus on reinventing ourselves, our society, and our future.
The's the 'bottom line' philosophy at work. We need more than the 'bottom line' philosophy. Enhancing shareholder value is NOT the only viable creed for business. Japan has a 'employee for life' philosophy. There are different ways of doing things, depending upon how highly you put ethics and doing the right thing for the society. If you view the public as lambs to be slaughtered -- the 'bottom line' philosophy -- then social catastrophe is guaranteed. In America we like to fight, we like to have adversaries: the working man (unions) is the enemy of business (although thinly disguised); and the consumer is a fool ripe for fleecing.
Business in America needs to grow a soul. We need to realize we are all in this together. If Goldman Sachs wants to treat Americans like peasants, then the peasants just might treat Goldman Sachs like the French peasants treated Marie Antoinette.
>>We need more than the 'bottom line' philosophy. Enhancing shareholder value is NOT the only viable creed for business. Japan has a 'employee for life' philosophy.<<
And Japan has economically stagnated (or worse) for the last 20 or so years. No system is perfect, but "bottom line/enhancing shareholder value" capitalism (accompanied by reasonable safety and environmental regulation and, for the financials, leverage regulation) is the "continually reinvigorating" best of them.
The basic inputs from China into that equation are (land + infrastructure + transportation capacity to bring products to market), plus cheap labor.
The studies I've done of SEZ (mainly Jebel Ali in Dubai which is more logistics (with relatively higher labor costs)), is that what adds real economic value is the trickle down, not the margin made on the labor.
I suspect that if USA had a more coherent policy on importing labor to do jobs that (a) US workers don't want to do (b) so therefore they get done outside USA; there would be a significant spin off.
They'd like for us to turn back the clock to...what 1860?...1960?
And BTW, Japan's "employee for life" philosophy worked only for a few of the very largest manufacturers, and only for a while, as their export economy was growing and they had a labor shortage; but you should look again.
The better approach would be to accept the advantages of what you have and work to improve upon its disadvantages.
I think that executives should do likewise. In order for that to become possible some items, such as healthcare, insurance, food, utilities, transportation and other "essentials" are going to have to bite the bullet and become a little more affordable. Government will have to do it's part also by keeping spending, and thus taxes, lower for it's citizens. I'm probably in the minority thinking that President Nixon had a good idea when he was in office, of price and wage freezes for certain amounts of time. I realize it wasn't exactly free enterprise, but it was good at the time, in my opinion, but only if everyone in the country participated.
It will take 20 percent unemployment, which will happen yet, before our business partner, the government, decides to butt out and let someone start a business on their own at a cost that will make American products competitive on the world market.
America does not have the wealth it once had. I hear daily how we have borrowed our way to an affluent life style. Yet I have never once heard any practical suggestions as to how we back of the government intrusions that have been suffocating new businesses. The government has not laid off a single worker in this opening salvo of what will be a Great Recession. Government employees are waltzing through this thing unphased and strengthened. Their every missed dance step is on the neck of some schmuck who has an idea and a dream.
On Nov 15 09:13 AM Dan in mpls wrote:
> Has anyone here ever tried to start a small business???? The government
> will be your partner from start to finish. They (the government bureaucrat,
> will tell you how big a building you need, how many bathrooms you
> need, how many inches the toilet must be from the sink, how large
> a sprinkler system to install. They will assist you in designing
> your packaging, requiring labels of all sorts. They will dictate
> who you hire and how much you pay them. They will enlighten you as
> to how many hours your employees will work. They will decide who
> get pregnancy leave and day care. The list of help your business
> partner will offer is endless. Finally, once you are done with your
> startup phase and when you are successful, they will take a growing
> portion of your profits to support the legions of poor people in
> America who cannot work as they don't begin to have the skills necessary
> to hold an entry level job.
>
> It will take 20 percent unemployment, which will happen yet, before
> our business partner, the government, decides to butt out and let
> someone start a business on their own at a cost that will make American
> products competitive on the world market.
>
> America does not have the wealth it once had. I hear daily how we
> have borrowed our way to an affluent life style. Yet I have never
> once heard any practical suggestions as to how we back of the government
> intrusions that have been suffocating new businesses. The government
> has not laid off a single worker in this opening salvo of what will
> be a Great Recession. Government employees are waltzing through this
> thing unphased and strengthened. Their every missed dance step is
> on the neck of some schmuck who has an idea and a dream.
the u.s industrial base has been in trouble since 1981.
the author is right, bankstering does not add value.
> jack
Maybe you long for a world of children wearing diapers working in factories and cigarette companies advertising their health benefits, but we tried it once and decided it wasn't all that great.
On Nov 15 09:13 AM Dan in mpls wrote:
> Has anyone here ever tried to start a small business???? The government
> will be your partner from start to finish. They (the government bureaucrat,
> will tell you how big a building you need, how many bathrooms you
> need, how many inches the toilet must be from the sink, how large
> a sprinkler system to install. They will assist you in designing
> your packaging, requiring labels of all sorts. They will dictate
> who you hire and how much you pay them. They will enlighten you as
> to how many hours your employees will work. They will decide who
> get pregnancy leave and day care. The list of help your business
> partner will offer is endless. Finally, once you are done with your
> startup phase and when you are successful, they will take a growing
> portion of your profits to support the legions of poor people in
> America who cannot work as they don't begin to have the skills necessary
> to hold an entry level job.
>
> It will take 20 percent unemployment, which will happen yet, before
> our business partner, the government, decides to butt out and let
> someone start a business on their own at a cost that will make American
> products competitive on the world market.
>
> America does not have the wealth it once had. I hear daily how we
> have borrowed our way to an affluent life style. Yet I have never
> once heard any practical suggestions as to how we back of the government
> intrusions that have been suffocating new businesses. The government
> has not laid off a single worker in this opening salvo of what will
> be a Great Recession. Government employees are waltzing through this
> thing unphased and strengthened. Their every missed dance step is
> on the neck of some schmuck who has an idea and a dream.
"It is time to end all the rhetoric about the need for better education and fair trade for the US to compete in the world"
Are you saying the US should end it's fair/free trade policies? What are you exactly proposing?
On Nov 15 10:32 AM Mrudula Shah wrote:
> A very good, appropriate and timely thought expressed by Mr. Armstrong,
> which with a bit more sophistication can be good enough to be published
> in magazines like Forbes and The Economist. This is what we need
> to do. Exactly how will be the next step to think and implement.
If the plan is 6 dollar gas and a work force willing to work for minimum wage in a factory, the politicians who allow it will all be gone and continually voted out.
We need to draw "talent" away from financial engineering....which doesn't produce anything but paperwork into "real" industries. Too much of our best engineering talent ends up on Wall Street.....they make a bundle for themselves but nothing for those around them.
A few kids tinkering in their MIT dorm rooms with robots is nice, but believe me it takes MUCH more than that to re-industrialize an economy such as the US, Plenty of real hard education (not just tinkering), and oceans and oceans of capital. I do not see either one of those happening.
China is not a lone participant in this. They are merely the fulfillment house for the Federal Reserve wanting to play the economic hero year in and year out with easy money.
On Nov 15 09:16 AM Tom Armistead wrote:
> I am so sorry for all the hardhips you have endured. Respecting the
> rights of others just gets in the way of all kinds of wonderful entrepreneurial
> opportunities.
Consumer, labor and environmental groups hail each new rule but the reality is there are billions of people elsewhere in the world who are happy to live and work with less onerous regulations. So we have been gradually losing our businesses that make things in favor of "clean" business that only manipulate data and money.
To cover up the loss of business we have turned to borrowing and printing more and more money to continue our lifestyle. We could get away with this for years because of the good financial reputation we built up in the decades before the great wave of regulation started around 1970.
Now the borrowing and printing has reached a crescendo and our creditors are finally beginning to worry. One massive bubble after another is forming and popping, enabled by the increasing money supply. It is unclear just how the end game will play out but one way or another our standard of living will sink, as we have to start paying the piper for all the roadblocks we have placed before the businesses that sustain us. We can only hope the adjustment can be gradual, if it is sudden the effects will be much more ugly.
On Nov 15 09:13 AM Dan in mpls wrote:
> Has anyone here ever tried to start a small business???? The government
> will be your partner from start to finish. They (the government bureaucrat,
> will tell you how big a building you need, how......
On Nov 15 10:01 AM Shaftsinker wrote:
> ...your employees
> who have children have the right to not be fired in order for your
> country to retain a reasonable birth rater...
Its too late to turn back the clock...first it was Japan and now China and many other Pacific Countries with Mexico now being the low cost supplier. Of course I had to work in the aerospace industry to survive. The history of failure in manufacturing...even high tech manufacturing is a failure in the USA. We have run out of gas and ideas that would bring us back into manufacturing at this late stage...its going to be impossible to compete because of our high cost intrastructure. We need a new model and I have yet to see one that is potentially functional...MarvinMBA
Paint the building the required color, plant the right type of trees, make the bathroom window the required size, no big deal.
From there if you have a decent business plan and the ability to run a business, manage people, control costs, etc., you will do just fine.
I am really puzzled by the aliance of libertarian thinkers who just don't understand the concept that others have rights, with those who persist in flagellating themselves and their country because we operate at a competitive disadvantage to a socialist country that manipulates its currency in order to sustain an unfair business advantage for a state controlled economy.
It is really too wierd, the answer is fairly simple, let the Chinese work 60 hour weeks with no benefits and no rights, they can sell the resulting glut of cheap products to each other. In this country, we could import some CNC machine tools and other means of production, train people to run them, and go back to the way things used to be, with the advantage of increased productivity from using updated means of production.
On Nov 15 01:22 PM Windsun33 wrote:
> I think you totally missed the point. The "nanny" government goes
> far beyond what he said - it even gets down to the local level where
> they tell you what type and how many trees to plant, what colors
> you can or cannot use on the building, and how big the bathroom window
> must be in your business.
We need real economic business investment to be targeted in new technology (in machinery, equipment, & software). We need the Federal Government as the “playing field” has been historically, increasingly competitive, and even more imbalanced (because of dumping, subsidies, tariffs, currency pegs, etc.).
E.g., the “idiosyncratic” Corporate Income Tax (gathered from “Corporate financial statements”), in China is 25%, in Hong Kong is 16%, in Japan is 30%, in Mexico is 25%, in Russia is 20%, but it is a combined Federal & State 39.1% in the U.S. (2nd highest among OCED countries).
These figures are not strictly comparable (equally weighted); but the results are corroborated using the tax revenue as a % of GDP metric):SEE: www.taxfoundation.org/...
SEE also PriceWaterHouseCoopers study where the U.S. is higher than 101 other countries, out of 178: www.doingbusiness.org/...
I am not sure I get this but if it is meant to advocate building a manufacturing base without (qualified) human beings then this contributors view of the real economy in the real world is mightily skewed, imho.
Have you noticed that in countries (or areas) with a tradition of a strong small and medium manufacturing base, owned and operated by human beings, delivering top quality products and related services, the great recession is being managed as one of those economic ripples that is part of life. And home foreclosures are virtually nonexistent, just to mention one side effect. Even if the ride is getting bumpy again, their chance of survival is better than any proxy economy where it is left to others to do the real work. And China or any other “cheap” labor country is not such an issue either. Only the availability of enough qualified human beings.
Of course commentators who have never run a business (i.e. noted economists, analysts and media talking heads) pontificate about how wrong it is when, during harder times, companies hang on to their employees, thus preserving their real capital: human know-how. Another classic is when these egg heads worry about exchange rates, especially the ascent of the Euro (or falling Dollar), preach local consumption and predict the imminent demise of the “export dependent” economies of some countries that are full of specialist enterprises but are – oh wonder – still able to keep on selling to the world at large.
Our gurus forget that for excellent products and services there are only a few problems: Know and keep your customers happy, do not expand too fast and, if at all possible, stay away from banks and avoid going public. And since these successful leaders really, truly believe that their most precious asset is their people, they do not panic and have no worry, to share the burden of lean times, when necessary, as well as the profit during good times, even ownership of the company.
Have a good day
NB: As a side line: I heard somewhere that parts and replacement of critical steam generators for the US Nuclear Sub fleet have to be imported, serviced by specialists from abroad. Well if this is a indication tinyurl.com/l6g352 (one heavy forging press left in the US for ingots, less than half the size of foreign competition) then this may be more than just gossip?
Unfortunately, many in our society look upon productive labor as a dirty phrase and prefer to confiscate wealth from others.
On Nov 15 07:51 AM Tom Armistead wrote:
> You are too polite in labeling GS, BAC, JPM et al as participants
> in a knowledge-based economy. Too much of their operations are in
> the fantasy land of financialsim, and too little in the prosaic world
> of utilitarian financial products, loans that support industry and
> the creation of productive assets.
>
> Eamonn Fingleton's "In Praise of Hard Industries, Why Manufacturing,
> not the Information Economy, is the Key to Future Prosperity," written
> in 1999, makes an extremely good case for the need for the US to
> retain (or rebuild) its manufacturing and industrial base.
>
> It also includes, in its 3rd chapter, an incisive and prescient critique
> of financialism. If there is one lesson coming out of the meltdown
> of our financial system, and any hope for constructive change, it
> is in the area of rebuilding a strong manufacturing capacity in the
> US, providng real jobs that create value.
On Nov 15 11:26 AM Duude wrote:
> while organized
> labor owns his administration......
Organized labor doesn't own the Obama administration. The Parasitic Class of banksters, oligarchs and their 'bonus crybabies' do.
In theory this all makes sense but the chinese have kept their dollar pegged to ours making our goods more expensive and the main thing is this fallacy of education
Most peopel who should be working in factories still pretend that adegree will make them smart and marketable
Doesnt work that way most of my friends are educated and 95% that are doing well are salesmen which you dont need a degree for
College itself is too high priced and should only be for those who actually have mentally ability
I mean look at 50% of the posters on here and youll understand how ignorant our "educated" peopel really are
On Nov 15 02:55 PM flow5 wrote:
> Past due. We need comprehensive incentives (investment tax credits,
> and accelerated depreciation on research & development), from
> our Federal Government: to help reinvigorate our industrial manufacturing
> base (to produce higher quality & lower cost, goods & services),
>
Rebuilding the industrial base in each of our two countries on a sound basis will not be easy; pause for a moment to think three to five years ahead when a modern, highly efficient Chinese car manufacturing industry aggressively strives for world market share. This is only an example of the challenges that exist and will only get greater but these are not grounds for either undue protectionism (although, obviously, one sided open markets are not the answer either) or to assume that there isn’t a significant range of industrial rolls and products with which each of our nations can compete domestically and internationally. The following thoughts try to address two matters your article raises by implication.
First, the US dollar has been the world’s reserve currency since 1946 and, despite its many current problems, it is by no means clear that there is a substitute waiting in the wings to take its place. It remains the currency of account for international trade even though it is increasingly losing its standing as the undisputed measure of value (a trend that has its roots in the 1970s). Other nations accept (even if they will complain about it) that the US cannot resolve its share of the current debt bubble crisis without monetizing some portion of that debt. In short, the US, the UK and some other countries will have to engage in some currency devaluation but, provided this is done in a considered and organized manner over time in concert with all affected countries this need not end the US dollar role as the premier reserve currency or hurt the US economic position (it may in fact help the position). It must, however be seen to be a necessary part of a fair and responsible effort to place the global economy on a sound footing. No one should expect the US to retrace the mistakes of the UK in the 1920s in its misguided defense of pre-war value of the Pound. Both Canada and the US along with the global economy generally will benefit from a sensible, moderate and globally coordinated realignment of currency values and need to press firmly for this in due course.
Secondly, the US employment remuneration model developed in the 1940 (and adopted in Canada to a lesser degree) must be rethought. By this I mean the pattern first developed in the auto manufacturing industry whereby employers became the primary source of health insurance, retirement income and other benefits for workers and citizens only receive such benefits to any substantial extent through their employers. Some might argue (as was done by many during the GM reorganization last winter) that these benefits should be radically reduced or ended. Arguably his would be a mistake and it would be much better economically as well as socially if the national and state/provincial governments in our two countries took on a significantly larger share of this benefits provision load from business, funded these matters through taxes and offered these benefits generally to citizens.
This would place small and large companies on a level playing field in the competition for employees, promote greater labour mobility, remove regional discrepancies, improve employee and citizen moral, allow management to focus more on their core business plan and remove the advantage that foreign companies from mature economy nations have (their labour costs are lower insofar as the benefits component is concerned). Obviously there is a tax cost for this and the challenge would be to find efficient and effective ways to design and administer these programs (and ensure that an appropriate share of these costs are covered by personal and not business taxes) so that this shift creates a net economic benefit. The difficult political case would have to be made for significant tax increases but, if that could be done to support military spending during the Cold War and beyond, this should not necessarily be seen as impossible provided a sound case can be made.
Pullease! That this once-great society has to be hobbled to the requirements of obsessive control freaks only is repugnant to me. Look at the results; we're lying, faking and stealing our way to buy a bit more time until the whole ponzi collapses rather than paying our way. Courtesy of all those regulators, lawmakers, paper-pushers we have so much of whose concept of orderliness and control fails where it really counts, such as Wall St. And, hey, what is positive about resultant US finances after this era of mandates, edicts, costs and taxes? Or the educational system?
You obviously have never been to China and know nothing of how things actually work here. As a US citizen working in Shanghai, I can assure you that my factory workers here do have rights, often more than in the US. There is a minimum wage, there are mandatory severence packages if you lay people off, holidays (more than 2 weeks worth), 40 hour work weeks, double time if you have someone work on Saturday or Sunday, maternity leave, vacation, etc.. Chinese workers do have much lower wages (I can hire someone with an MBA for less than $800 per month). Workers actually enjoy many protections they don't have in the US. Successful US companies do offer better benefits, but they do so by choice where here they are government mandated. Don't mistake the China of 30 years ago for the China of today.
Also, if you don't realize that the plethora of intrusive government regulations in the US are extremely expensive and time consuming to comply with, you have obviously never run a business. No one is advocating child labor or 80 hour work weeks (although I have done those long weeks when working in the US), but the level of control on how businesses operate goes far beyond basic personal rights. There is a reason manufacturing left the US and it is entirely cost and regulation based.
On Nov 15 02:45 PM Tom Armistead wrote:
> Compliance with zoning laws doesn't seem too onerous to me.
>
> Paint the building the required color, plant the right type of trees,
> make the bathroom window the required size, no big deal.
>
> From there if you have a decent business plan and the ability to
> run a business, manage people, control costs, etc., you will do just
> fine.
>
> I am really puzzled by the aliance of libertarian thinkers who just
> don't understand the concept that others have rights, with those
> who persist in flagellating themselves and their country because
> we operate at a competitive disadvantage to a socialist country that
> manipulates its currency in order to sustain an unfair business advantage
> for a state controlled economy.
>
> It is really too wierd, the answer is fairly simple, let the Chinese
> work 60 hour weeks with no benefits and no rights, they can sell
> the resulting glut of cheap products to each other. In this country,
> we could import some CNC machine tools and other means of production,
> train people to run them, and go back to the way things used to be,
> with the advantage of increased productivity from using updated means
> of production.
It has sucked the industrial lifeblood from our economy.
The fundamentals of the US economy and society is such that there is no going back to cheap production costs in order to get factories back from China and Vietnam. In fact, what the US is doing is to find more cheap production places rather than think about moving it all back because the debt that US citizens have accumulated so far can only be paid off with higher wages, not lower wages.
People scream about government regulation but then someone dies and those very same people scream that the government didn't protect them. It's idiotic. There is a cost to having human rights and only a fool would think that it isn't worth paying.
The US model tends towards requiring a more highly-skilled workforce. It doesn't really matter whether jobs are off-shored or not, business segments which require large numbers of unskilled workers will be built by foreign companies anyway and leave a US company that doesn't do it dead in the water. A highly automated industrial base is certainly feasible but industries which depend on an unskilled workforce have been a dying breed for decades in the US and nothing we do will change that.
The falling dollar will certainly improve our exports and will build up our industrial base somewhat, after a lag of a few years (if the dollar stays low), but that's about the only driver. There is really nothing government can do about it short of trying to keep the dollar weak. A country like ours cannot improve its standard of living without improving efficiency, and improving efficiency basically means having a more highly-skilled workforce in a more highly automated environment.
-Matt
On Nov 15 02:45 PM Tom Armistead wrote:
> we could import some CNC machine tools and other means of production,
> train people to run them, and go back to the way things used to be,
> with the advantage of increased productivity from using updated means
> of production.
The industrial model worked only because energy came very cheap for a while. For most of its existence, the industrial model paid horrifically low wages, and still does in China and India. Only briefly in the Union era from about 1940 to 1970 were industrial jobs in the US fairly well paying. Thus those jobs moved to countries which would pay lower wages. Return such jobs here, they would pay the same kind of wages Chinese Coolies get, in order to be competitive.
Any future productivity we have will have to come organically from local craftsman working locally to produce the things their communities need. High Energy consuming Factories with long distribution lines to the end user is a Dinosaur. That time is coming to a close, and trying to return to it here in the US is a futile exercise.
RE
Everybody did exactly what they wanted, What regulatory restraints existed where methodically taken down in the name of the extreme libertarian and laissez faire ideologies that motivate discussion in this benighted forum.
On Nov 15 08:51 PM Leftfield wrote:
> "Paint the building the required color, plant the right type of trees,
> make the bathroom window the right size, no big deal." Tom Armistead.
>
> Pullease! That this once-great society has to be hobbled to the requirements
> of obsessive control freaks only is repugnant to me. Look at the
> results; we're lying, faking and stealing our way to buy a bit more
> time until the whole ponzi collapses rather than paying our way.
> Courtesy of all those regulators, lawmakers, paper-pushers we have
> so much of whose concept of orderliness and control fails where it
> really counts, such as Wall St. And, hey, what is positive about
> resultant US finances after this era of mandates, edicts, costs and
> taxes? Or the educational system?
There were a few CNC machines in the place, they were Kias. Kia is a Korean company, better known for making extremely competitive automobiles.
Chinese investment takes the form of building modern, productive factories. US investment takes the form of paying hedge funds to speculate in commodities, CDS, naked short-selling, and other destructive manipulations.
And those who speculate and manipulate with funds that should be invested in productive activities defend their actions with libertarian and laissez faire ideologies. The amazing thing is that the victims of this conduct worship those who defraud them, wish to emulate them, and demonize regulation which if pointed in the right direction would bring financialism to a screeching halt.
On Nov 16 12:03 AM Windsun33 wrote:
> Yeah, right. You obviously have not tried to hire any CNC operators
> or setup technicians lately. Or anytime in the past 15 years.
>
> On Nov 15 02:45 PM Tom Armistead wrote:
On Nov 15 10:32 AM Mrudula Shah wrote:
> A very good, appropriate and timely thought expressed by Mr. Armstrong,
> which with a bit more sophistication can be good enough to be published
> in magazines like Forbes and The Economist. This is what we need
> to do. Exactly how will be the next step to think and implement.
After all the discussion so far in this blog there's been no credible suggestion of how to get this done - but the point about getting government out of the way is a great start.
I'd love to see an engineering and manufacturing base return to the States. Unfortunately, in order to be competitive American workers either will have to accept less than our current minimum wage - or be given tax free status on what they can make (government revenues can be taken downstream on their production).
My point exactly. They pick on the little guy, let the fat political contributors get away with murder, followed by taxpayer assistance. This has been the means that has lowered objective standards in our society by almost every measure, including financial health. That the public, and even those who have the training and knowlege to know better, consider it benighted to even discuss it is appalling and bewildering to me.
Then again, it was egalitarian in that everyone was nearly poor, and had no official access to any consumer goods. Capitalism can work, just not crony capitalism. It's true though that laissez-faire is a disaster, although we don't really know because the govt played laissez-faire on the way up, and didn't let the thieves get murdered by their own decisions on the way down. Call that govt accomplice crony capitalism. There are countries we can emulate, though, like Switzerland and Taiwan, who have struck the right balance between free markets and regulation.
The trade: dollar goes lower so the dow/s&p can still go higher (but be in global growth businesses) because they are really going nowhere in dollar terms
You got sick or hurt ? You were fired.
Called up for military service ? Someone else took your job.
Clean air/safe work conditions ? No problem for your employer if your lungs/ kidneys/ eyes or something else was shot by the time you were forty -- see the first item.
No windows /not enough doors or too small or even barred ? -- You were dead if a fire broke out in the plant.
Yep, oh-those-costly rules and regulations. What purpose did they ever serve ? Those rules and regulations were paid for in blood by hard-working, long suffering UNION people.
But there are so many who did not study the history of the labor movement and have a clue. They did not live it, and their business school glossed over it.
On Nov 15 02:45 PM Tom Armistead wrote:
> Compliance with zoning laws doesn't seem too onerous to me.
>
> Paint the building the required color, plant the right type of trees,
> make the bathroom window the required size, no big deal.
>
> From there if you have a decent business plan and the ability to
> run a business, manage people, control costs, etc., you will do just
> fine.
>
> I am really puzzled by the aliance of libertarian thinkers who just
> don't understand the concept that others have rights, with those
> who persist in flagellating themselves and their country because
> we operate at a competitive disadvantage to a socialist country that
> manipulates its currency in order to sustain an unfair business advantage
> for a state controlled economy.
>
> It is really too wierd, the answer is fairly simple, let the Chinese
> work 60 hour weeks with no benefits and no rights, they can sell
> the resulting glut of cheap products to each other. In this country,
> we could import some CNC machine tools and other means of production,
> train people to run them, and go back to the way things used to be,
> with the advantage of increased productivity from using updated means
> of production.
On Nov 16 06:49 AM Don-n-ABQ wrote:
> Who is "Mr. Armstrong"?
Of course the Chinese just naturally do the right thing without any regulations or interfernece. I saw a photo of a shoeworker, he was gluing a sole onto a sneaker. But it was being done safely: he was wearing a dust mask. Not much use against vapors, but it looked like somebody cared what people thought.
On Nov 16 10:36 AM Bob 123 wrote:
> Tom, there's no point arguing with these right-wingers who do not
> understand how it used to be not so long ago.
>
> You got sick or hurt ? You were fired.
>
> Called up for military service ? Someone else took your job.
>
> Clean air/safe work conditions ? No problem for your employer if
> your lungs/ kidneys/ eyes or something else was shot by the time
> you were forty -- see the first item.
>
> No windows /not enough doors or too small or even barred ? -- You
> were dead if a fire broke out in the plant.
>
> Yep, oh-those-costly rules and regulations. What purpose did they
> ever serve ? Those rules and regulations were paid for in blood by
> hard-working, long suffering UNION people.
> But there are so many who did not study the history of the labor
> movement and have a clue. They did not live it, and their business
> school glossed over it.
good comment about where do you get large pressure vessels.
they are not made in the u.s.a.
i used to work in the coal-gasification industry (process conducted under about 1000 psig pressure). there was one factory in japan that made the size of equipment that was needed for our project.
> jack
around 1956 avery fisher was building high-end audio equipment in long island city. i still have my integrated tuner/preamp.
then they sold the brand to a japanese firm & you could buy 'fisher' stuff in department stores but it was all junk.
so gresham's law applies to more than just money.
> jack
On Nov 15 09:13 AM Dan in mpls wrote:
\ The government
> has not laid off a single worker in this opening salvo of what will
> be a Great Recession. Government employees are waltzing through
> this thing unphased and strengthened. Their every missed dance step
> is on the neck of some schmuck who has an idea and a dream.
1. industry
2. infrastructure
3. citizens savings, nest eggs
America's financial industry needs to release the strangle hold on it's citizens.
1. no more 30 percent loan sharking
2. Lend to small business
3. end the foreclosure cycle, and reappraise property at current market value. the banks have a hand in over-appraised property to start with, let's be fair with borrowers
4. get the US debt under control (Washington- the collaborator with the financial industry)
On Nov 15 01:29 PM Windsun33 wrote:
> Didn't Lenin say something like that also? Or are you advocating
> hiring and firing based on how many children you have?
A better approach is bankruptcy reorganization of our dead, overbearing, overreaching globalization junkies (at whose core finds the companies indicated here) and resurrection of national banking along lines Alexander Hamilton developed. Then, we can get on with the job of a massive build-out of 4th generation nuclear power facilities and a transformation from a hydro-carbon-based economy to a hydrogen-based economy, financing this at rates of interest the private sector simply cannot compete with.
My mother is a lifelong Democrat, usually, and was night supervisor at a nursing home. She marveled how inspectors would come in, make them change a window one year, change it back the next.
I had a rental property, built 1890, after many inspections suddenly had to change the original bathroom window to put a much smaller one. One that wouldn't allow escape.
Not necessarily big deals in themselves except that the legal system and the bloated government and regulatory systems are dysfunctional, destructive and unevenly applied. There are more than enough straws on the camel's back. This is tyranny.
On Nov 15 10:51 AM Gary A wrote:
> Well if the dollar is devalued enough we can have factories move
> here. Is that the plan? Problem is that assets are rising too fast
> if that happens, and it will still be too expensive to do business
> with 6 dollar gas. Maybe rail will be the only transport and maybe
> that is why Buffett decided to buy his big railroad.
>
> If the plan is 6 dollar gas and a work force willing to work for
> minimum wage in a factory, the politicians who allow it will all
> be gone and continually voted out.
Good old-fashioned, fundamental economics instead of "the market is a perfect, self regulating entity" drumbeat.
John Consentino
The president doesn't think about this at all. If it's not on the teleprompter it's not in the presidents mind. The president has never had a real job in his life. He has no idea of what it means to produce. If anything, I suspect the president wants exactly what is described here - please foreigners keep lending us money so I can be the dispenser of goody's.
I don't know what the answers are any more than any one else, but to imagine that anything meaningful is going to come from the state is a sign that we still have a long way to go through this process.
> jack
The main step would be to eliminate all taxation of corporate profits. Then tax income and profits from the sale of the shares at regular income tax rates, but not if the money is reinvested. This would fund business growth. The rate of investment would climb.
Second, eliminate the minimum wage law.
Third, stabilize the money supply.
Fourth, remove restrictions on the development of energy. Make businesses liable for pollution: court action. Let juries decide. Shut down the Department of Energy.