Mr. Grove correctly identifies the problem but avoids the obvious solution, perhaps because it's too painful to articulate. The phenomenally elevated standard of living that we have enjoyed in the U.S. since the end of WWII just isn't sustainable. The Chinese aren't devouring the tech market because they manage their economy. They're doing so because the Chinese worker will work for far, far less than any American worker. Americans currently still monopolize the high paying design & research job market but there's no reason to expect that Asia will indefinitely play second fiddle here.
To put it bluntly - the last decade was the beginning of a painful crash of the American economy back to earth. When we finally do reestablish equilibrium Americans will be back at work at assembly lines. A massive re-investment in hard science education, which seems extremely unlikely, might cushion the blow but there's only so much room for jobs in intellectual capital.
Lets also not forget that millions of people in China were starving 30 years ago. The flow of jobs into China pulled 1 billion people out of poverty. This is not insignificant and is not mentioned enough.
Americans will go back to work when we get to valuing intelligence and work ethic again. It may take a while.
This is a good thing. I disagree with your grim outlook about jobs in intellectual capital being a zero sum game though. Innovation begets more innovation. The more well-educated people around the globe that are innovating in ways that increase productivity, the more capital that is freed up to invest in more intellectually-intensive research and development. Hopefully the allocation of intellectual capital into non-productive activity the financial services sector has caused will be short-lived.
Why is it that you believe NA will regress to an early industrial economy as opposed to a future which parallels th equality demonstrated in the Europe-N.A. relationship.
Andy makes an excellent point: when we outsource the manufacturing and scaling processes to another country, what we lose in addition to jobs are the innovations and experience necessary to maintain a strong defensive econosystem with respect to our economy.
However, I disagree with Andy's recommendation that we should tax offshore labor - we should focus on making labor in the United States less expensive. Neuter the Department of Labor, get rid of labor regulations with heniously expensive and obnoxious unintended consequences like the mandatory 8-hour work day in California, eliminate the concept of wrongful termination, and put a muzzle on the EPA.
Negative incentives aren't the way to go to encourage job creation. Make the climate more hospitable for large businesses within the U.S. instead.
Have you actually ever been to an industrialized country that lacks an equivalent of the EPA and OSHA?
Go to Beijing, and enjoy the brown air, which is pretty unbreathable on the bad days, and just moderately smelly on the good ones. Whatever you do, don't drink the tapwater, because it'll make even local residents sick. Don't go for a swim in the river, either.
Be careful near construction sites; there are gaping holes with no signs, and if you fall into one and break your leg, tough. Also, if there's construction only on the higher floors of a building, slag from welding may rain down onto your head. Unless you're well-connected, don't even think about getting the construction firm to pay for your medical bills.
If you're a woman and your boss rapes you, and you're not connected, that's too bad. If you're a man and your boss rapes you, and you're not connected, that's even worse.
Californa's labor practices and tax laws aren't ideal, but I'd much rather work in California than China.
While I'll agree that OSHA/EPA are often overzealous when you look at the cost-effectiveness (i.e. dollars spent per statistical life saved), and that labor is expensive, I don't think the rapid abandonment of our standards in a race to the bottom is the solution.
The problem is that places like China have low/non-existent standards that are politically acceptable there (or citizens can't say otherwise). This is their comparative advantage -- not accounting for the externalities of their industrial efforts. As Larry Summers said, some countries in Africa are vastly underpolluted. Not great in the long term perhaps, but harmful for western workers competing for the same contracts in the short term.
So what do you do? Tarrifs on imported goods to make US production more competitive? Limiting trade to countries that have similar standards regarding externalities? Or is it okay for countries to have low/no work and environmental standards because that's (at least in the beginning) the road to economic development?
I'm sorry, I don't think this is the place for a thread that will inevitably devolve into tit-for-tat politics, but I really have trouble stomaching the commentary that the EPA should have less regulatory power over industry when proof of the big-picture bankruptcy of environmental deregulation is current gushing into the gulf at a few tens of thousands of barrels a day.
Yes, it raises costs to force industries to comply with environmental protection standards. Yes, this is bad for the short-term of our economy. But we will continue to suffer the consequences of the environmental harm we do, even at the current regulatory levels, and more so with "a muzzle on the EPA".
>Neuter the Department of Labor, get rid of labor regulations with heniously expensive and obnoxious unintended consequences like the mandatory 8-hour work day in California, eliminate the concept of wrongful termination, and put a muzzle on the EPA.
Enjoy your third world working conditions. But you are an executive and/or a shareholder, are you not ?
Actually, Andy is suggesting the same thing, cheapen job creation in the US, although he would do it through inflation, which is always more politically popular than deflation (except among people who live off their accrued wealth).
Tariffs on chinese goods would up the cost of those goods to slightly higher than what US-made goods could be sold for.
This will create jobs in America as companies create factories here.
There will be more jobs, and more money in the economy.
On the downside, everything just got a lot more expensive, maybe 50% more.
This is inflation. People don't notice it as much as they notice a 33% to 50% wage cut, especially since the most discontented members of society, the un and under-employed are no longer un(der)employed.
No, Aaronontheweb makes a good point. Of course he's not arguing in favor of environmental disasters or slavery-in-all-but-name. Pay attention to his main point: attack high labor prices here, rather than low prices elsewhere. Andy Grove can be protectionist if he wants, but just because he's not ashamed of it doesn't make it any better of an idea.
What he's saying is we've lost the ability to compete in the current manufacturing game. But that is Manufacturing 1.0.
We need to create and become the leaders of Manufacturing 2.0 which incorporates environmental and social externalities. Companies who don't operate along these principles should be taxed and those monies put toward continuously improving global standards.
What he's saying is we've lost the ability to compete in the current manufacturing game. But that is Manufacturing 1.0. Manufacturing 2.0 incorporates environmental and social standards and companies who don't operate along those principles should be taxed.
Aaronontheweb, why wait for government action? Come work at my apartment TOMORROW 16 hours/day for $0.20/hr. I'll try to find a way for you to inhale some heavy metals and asbestos while you work. Imagine the fun of trying to predict whether you will be functionally retarded or die of painful cancer first. Either way, you will die painfully, because I do NOT provide health insurance.
Seriously: How did we get from "life, liberty, and the pursuit of happiness" to "drive down everyone's quality life to match the world's most miserable and backward countries?"
Aside from technology that hadn't been invented yet, people in the West lived did very well in the late 20th century. Most people who bothered to show up for work had a balanced diet, adequate medical care, and usually a car. And they somehow managed to do it without rampant workplace death, child labor, or rendering the ecosystem uninhabitable for decades[1]. They even had fundamental civil rights like freedom of religion, freedom of speech, freedom of the press.
[1] Aside from notable exceptions like Love Canal, etc. But I see that as largely the result of ignorance; we now have a better understanding of the impacts of our behavior on the place we LIVE.
Citation? Evidence? Data? Or are you just saying that because economic experts like Thomas Friedman have drilled it into our heads for a decade or more?
An article worth reading for a lot of astute observations. Andy doesn't shy away from making painful points. One of his more striking quotes:
"But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work -- and masses of unemployed?"
(Actually, my guess is the over-dependency of faith of individual meritocracy will cause us to miss the deeper structural problems that Grove is pointing to.)
EDIT: (Anedoctal single point of data with limited context), My friend worked in a Battery startup company in the Silicon Valley. After the initial design phase, the VCs and management decided not scale up into manufacturing, they rather lay most people off and sell the design.
I think the core of the problem is the idea of the 40-hour work week. It is inevitable that more and more jobs will become marginalized and automated. That is a good thing: the goal of technological progress should be increased happiness, of which one component is increased leisure time.
As more and more jobs require less and less work performed by humans, the obvious solution is to work less hours. Instead of family providers working a total of 60-90 hours per week, they should be working closer to 40-50 in the somewhat-near future, with that number continuing to drop over time.
We obviously have 3 possible paths:
1. We return to the single-provider days of old
2. We scale back "normal" hours to be 20-30 hours per week per person.
3. We have high unemployment while many are working 70+ hour weeks.
Currently we are going with (3), and it just doesn't make that much sense. Either (1) or (2) would be acceptable to me, but (2) certainly seems more fair. I would love to get to a situation where families get to spend valuable time together and kids are raised by their parents.
I think an average of 25 hours per week would hit a nice sweet spot. It would allow companies to have 10-hour work days, either alternating 3/2 10-hour days per week, or 5-hour shifts 5 days a week. Jobs like programming could be designed to have 2 8-hour shifts per week (to perform actual development) along with 3 3-hour shifts (to address meetings, squash bugs, perform customer service, etc.). What is keeping us from this?
Instead, we have something like 15-20% of the population overworking themselves while another 15-20% are under- or unemployed. Something's gotta give.
I'm very interested in extrapolating some of these trends out -- America does not have a social system which allows society as a whole to benefit from GDP growth while jobs are destroyed.
My social history tells me that no other countries have been successful at creating such a system either.
Whether or not we have such a system, we may well be moving to a world in which the US can continue to increase GDP significantly while unemployment increases (efficiency increases, in other words). Successfully creating a Chinese middle class, and selling them our branded stuff only hastens that eventuality.
What happens to all these American unemployed people? In an ideal world, they would be artists and poets, inventors and writers, people who add to our cultural capital. The end-game here would (in my dreams) look a lot like Ian Banks' Culture books -- a utopian society which has moved past 'the age of scarcity'. Unfortunately, right now, places like Saudi are the closest we can look to for a society with, frankly, enough money for everyone.
In the interim, we are facing a sort of cultural crisis. America's PDI (Power Distance Index) is middling right now; the PDI describes out comfort with and exposure to, high levels of power differences in society, including wealth. Saudi has one of the highest PDIs in the world, meaning that they as a country haven't solved this problem of building an equitable society based on passive income production; in fact, their society is less equitable than many poorer countries. It is hard to imagine that we are aiming at anything else but a Saudi-ish social system if the GDP growth + unemployment growth trend continues.
I say this partly because Americans think of someone who is 'unemployed' as lazy, uneducated, etc. In fact, there's a significant undercurrent of that perspective in this thread. The reality is that if we are able to keep improving productivity while birth rates decline, there will eventually be less work. There might be more money, but there will be less work.
How do we deal with that? I don't have a good answer, but I still am part of the problem -- I would much rather spend capital on an automated solution for my business than hire someone.
It's interesting to hear this from Andy Grove. Intel of the 1990s was constantly being called out as an abusive workplace, exploiting H1B and "home grown" engineers, then laying them off when they got too old and sending their work overseas. Although I agree with most of his essay, I'm not sure I would want to be an employee in whatever scheme he is envisioning.
He doesn't quite come out and say it, but I almost see his own policies as what he's now reacting against. Saying something like: If I were in charge of U.S. policy, I wouldn't allow Intel to do the kinds of things it did when I was in charge of it.
I didn't read where Grove was proud of how Intel behaved during the '90s. In fact, I got the opposite impression from this article: Grove is writing from the pain and tragedy caused by competing with the Chinese on entirely Chinese terms. Where was the US during those years? Absent. Like a drunk staring into a Vegas slot machine in the wee hours of the morning going through the motions, but not really being there.
I have a question; does a company only exist to make profits?*
Whenever, someone starts a debate like this, or whenever I see a human being slaving away for a pennies in despicable conditions. I have to ask this question.
If and only if companies are entities that exist to make more and more money (not wealth) then you will inevitably run into such problems. The companies in the USA outsource that labor to China, or India only for earning more money, but are they creating wealth? By destroying the long-term sustainability of human civilization on this planet (I live a few kms from a few of these factories in India. You have to see in order to believe what they get away with)? By ultimately harming the very source of their wealth through such measures?
I have absolutely no idea about the implications of these concepts to make any categorical statement on them, but I think that David Packard and Bill Hewlett may have gotten it right. (see: http://www.jimcollins.com/article_topics/articles/the-hp-way...)
*profits are a pre-requisite to its existence. I want to ask if they exist only to do that?
The answer is yes. Wealth is the unlocking of human potential through productivity and efficient use of finite resources such as labor and goods. What these companies do is shift costs, not unlocking potential. Luckily for humanity, this is mostly a temporary condition. It only takes a few decades for labor markets to modernize and they will eventually run out of new markets to exploit.
Andy Grove is worrying about yesterday's jobs. He shouldn't be. No one was worrying about agricultural jobs disappearing, replaced by manufacturing jobs. As technology advanced, fewer farmers were needed to satisfy the basic needs of the consumer. As their basic needs were satisfied new needs for random widgets, plastic toys and entertainment devices appeared, creating opportunities in manufacturing. Today, service jobs has mostly replaced jobs in manufacturing in developed countries; The amount of service & creative work (e.g giving massages, selling products, and of course inventing the next digital device) output an American worker can produce makes it uneconomical to put the worker in a mundane factory making McDonald's toys instead. As technology advances and robotics replaces even factory workers in developing countries, more labor will be freed up to do other things. As had happened in the past, when the most basic consumer needs are resolved there will always be new needs arising; Where yesterday's consumer demanded shelter, food, clothing and a radio, today's consumer demands cars, houses, artwork, internet, hot water supply and monthly professional haircuts. The circle of increasing supply leading to increased demand and thus increased supply again is a virtuous one.
Completely disagree: we need technological paradigm shifts and work our buts off... That was the way to our current standard of living, successfully copied by the East, and it will be the successful path to future growth and industrial/scientific advancement. Not that socialist whiny I need more money and less work attitude a la dying Europe.
I.e. with the exception of sports (in the biological sense) like Tesla (also a big political factor there), what new Intel like startups are going to get the serious funding they require in today's political and economic environment.
As far as I can tell, the period of the big VC funded company like DEC or Intel lasted between the late '50s (there's a certain bit of legislation that pushed the concept over the top) to the early '00s, when SarBox was the last straw that ended the game.
Pretty much all of us who are here for the startup game are here for the small capital web/Internet/software type of companies. E.g. I don't see where the next FPGA like think is going to come from (well, in the US).
The question is though, is it smarter to use some form of tariffs to create more American jobs, lower the minimum wage, or as a third option accept that Asia can do manufacturing cheaper than anyone else and people will be unemployed, but tax the American companies benefiting most from the outsourcing and redistribute the wealth to the unemployed.
Maybe at this point in time you have to accept a high unemployment rate, the problem you have to be careful with I guess is you still want to provide incentive to the people currently in minimum wage positions.
It's sad that after a nice article he ends thinking in taxing, it sounds like a lost case when you need taxes to solve the problem!
My naive point of view sees lowering lifecost (cheaper real state, health insurance, etc) so people needs less money to live in a good way and costs can go down. That can't be done in Silicon Valley or NYC but thanks to the technology and good transportation can be done in other areas of the country with good planning.
Just thinking aloud : please humour me. Since technology is getting robotized, and even Chinese labour is at risk of losing jobs...Organ Farming. If and when the technology matures : You take my cells, convert them to stem cells, and workers help grow a perfect heart / liver / other organ, nudging it along it's growth to perfection. It's like working in an iPhone factory, except, it's really life-saving / preserving.
He ignores the fundamental problem- the American worker is overpaid. Why would anyone work at the wages of a Chinese laborer when you can make as much money as a Foxconn production line worker ($1.25/hr x 60hr week) in about 10 hours per week at minimum wage here, about 6 hours per week at factory job? We need to find a way to avoid the sticky wage problem, and it will likely involve inflation.
I find this line of thinking very disturbing. Mr. Grove follows others in believing a common fallacy, by ignoring secondary effects, and fails to see how issues in macroeconomics affect each other. Where to start...
The American standard of living is higher than China. In order for a worker in the US to continue to enjoy his standard of living and salary, she must contribute to creating something of value equal to what she consumes that is then exchanged at a market price(which determines it's value relative to goods/services created by others). When the US is a leader in technology and innovation, we create things that are very valuable, because rare and productive people make them, and trade them for other, largely commoditized goods, from poorer countries. The reason these commoditized goods are produced in poorer countries is because they can... The ability to produce them is well known so there is more competition, and therefor demand, and the price drops, along with the wages. If you work in a factory cheaply, you do so because replacing your skills in that factory is easy. There are many other people with that set of skills to replace you. The value you produce is cheaper, therefor you are paid less and have less to consume .
Now, back to Mr. Grove's statements. The factory jobs left the United States because wages were higher here than there. It's that simple, but where he goes wrong is say that "managers were happy", which is not quite as harsh, but very close to the usual line, which attributes the offshoring to "greed". Not quite. If an American company has to produce it's goods in a factory where people make 2x the salary of the same good in China, the goods will cost more to buy. If the American company, doesn't outsource, and a Chinese company is able to produce the same or similar good(think commodity again), then they will be undercut in the market and go out of business. Not only will management be un-"happy", but the US as a whole is worse off because the profits now go to a Chinese company instead of an American one. The US has now lost not only the manufacturing jobs, but the high value add jobs as well. Mr. Groves proposes the "solution" that we tax imports and use the proceeds promote American production. This merely shifts the money around. Those imported goods were cheaper than their American counterpart. Assuming current wages remain the same, it now cost more dollars to purchase that good because of the tariff and American's have less stuff because it is more expensive relative to their salary. The other option(without the tariff), is that the American factory worker cannot find other work that will pay him more, so he agrees to accept lower wages for performing that same job here and can therefor buy less stuff. I believe that these, as a whole, offset one another and are probably net a wash.
As for unemployment, I believe that it is caused by many different things, probably many reasons that are poorly understood, but I'll address a few of them that I think are important here. Unemployment can be caused by temporary mismatches between market demands for goods and supply of those goods. Demand changes, prices change, companies don't require as many employees to produce the goods(this can also be caused by changes in the efficiency of production), and people are fired. There may not be a job in their previous line of work. If there is some other skill set which is in demand, that person can learn a new skill and make whatever salary the market demand supports for that skill. It is also possible that the market will not support the workers previous salary. Labor costs go down, but here is where people usually go wrong. When labor costs drop, it becomes affordable to pay people to do things that you might have automated(for a high cost in machinery or software for example). Or, the market might now support the cost of producing a good which must be done with tedious manual labor. Or, if the American worker is more efficient than his Chinese counterpart, then it might be cheaper to start doing manufacturing in the US again. In other words, as wages drop, the unemployment rate will go down, and less will be outsourced. This is just the tradeoff. The fact that jobs are sent to China means that cheaper goods are available here in the US. Mr. Groves states that the trend is towards an economy where there are high value add jobs and high unemployment. This is true only if current wages hold. If wages drop, then outsourcing makes less sense and unemployment picks up. What we really want is lots of high value add jobs here. This comes through innovation, creativity, a highly skilled and motivated workforce and outsourcing production(if it makes sense) to cheaper markets.
"What we really want is lots of high value add jobs here. This comes through innovation, creativity, a highly skilled and motivated workforce...."
This is what most of the Western world wants, yet it is very difficult to achieve this - largely because of education. Most of the West, not just America, wants the bulk of it's jobs in high value-added positions because of labour costs arbitrage which many companies are forced to engage in because of intense competition. Where education is concerned, some people don't want to go to college, some aren't suited to it and well, funding education is damn expensive and the pressure on politicians to cut educational spending (which takes a long time to payoff) is huge. So you are never going to get all of the workforce in the country to work in high value-add roles, for various reasons.
I was fascinated by this interview with Andy Grove, because I had read an interview with Craig Barrett (current as chairman of Intel) who took a largely polar opposite view to what Grove has said in this article. Barrett was talking about how Ireland must change in order to move out of recession. I think he would be appalled at the notion of the US entering into a fully-blown trade war with China, as Grove advocates.
Barrett quote [on Ireland]: What I said is that [having] smart people (good education) is important, smart ideas (investment in research) is important, and then letting smart people get together with smart ideas to do something is the third thing (the environment). The very same could just as easily apply to the US.
He agrees with you. You both come to the same conclusion. What you fail to realize is that we've essentially paid the capital to educate people and build infrastructure in another country. Once their wages rise and our massive capital investments no longer make economic sense, they've gained these, and we are stuck without domestic manufacturing capacity. Essentially, we are mortgaging our future.
Although it is naive, at present, to discount (artificial) national borders (and the patriotic sense people might feel), I look forward to a day when countries no longer exist, similarly to how different regions were amalgamated to form countries and their "national identities".
I think the 'answer' insomuch as there is one, is not a quick fix, but to educate people in order let them compete for the 'higher level' jobs. 'Making education work better' is a big, long, ugly, hairy and very political topic though.
When I read your sentence, right before I got to the very end with the link to Wikipedia, I was thinking you were going to end it with something like "soylent green."
[+] [-] cageface|15 years ago|reply
To put it bluntly - the last decade was the beginning of a painful crash of the American economy back to earth. When we finally do reestablish equilibrium Americans will be back at work at assembly lines. A massive re-investment in hard science education, which seems extremely unlikely, might cushion the blow but there's only so much room for jobs in intellectual capital.
[+] [-] alf|15 years ago|reply
[+] [-] rbranson|15 years ago|reply
[+] [-] brg|15 years ago|reply
[+] [-] Aaronontheweb|15 years ago|reply
However, I disagree with Andy's recommendation that we should tax offshore labor - we should focus on making labor in the United States less expensive. Neuter the Department of Labor, get rid of labor regulations with heniously expensive and obnoxious unintended consequences like the mandatory 8-hour work day in California, eliminate the concept of wrongful termination, and put a muzzle on the EPA.
Negative incentives aren't the way to go to encourage job creation. Make the climate more hospitable for large businesses within the U.S. instead.
[+] [-] donw|15 years ago|reply
Go to Beijing, and enjoy the brown air, which is pretty unbreathable on the bad days, and just moderately smelly on the good ones. Whatever you do, don't drink the tapwater, because it'll make even local residents sick. Don't go for a swim in the river, either.
Be careful near construction sites; there are gaping holes with no signs, and if you fall into one and break your leg, tough. Also, if there's construction only on the higher floors of a building, slag from welding may rain down onto your head. Unless you're well-connected, don't even think about getting the construction firm to pay for your medical bills.
If you're a woman and your boss rapes you, and you're not connected, that's too bad. If you're a man and your boss rapes you, and you're not connected, that's even worse.
Californa's labor practices and tax laws aren't ideal, but I'd much rather work in California than China.
[+] [-] woodrow|15 years ago|reply
The problem is that places like China have low/non-existent standards that are politically acceptable there (or citizens can't say otherwise). This is their comparative advantage -- not accounting for the externalities of their industrial efforts. As Larry Summers said, some countries in Africa are vastly underpolluted. Not great in the long term perhaps, but harmful for western workers competing for the same contracts in the short term.
So what do you do? Tarrifs on imported goods to make US production more competitive? Limiting trade to countries that have similar standards regarding externalities? Or is it okay for countries to have low/no work and environmental standards because that's (at least in the beginning) the road to economic development?
[+] [-] sanderjd|15 years ago|reply
Yes, it raises costs to force industries to comply with environmental protection standards. Yes, this is bad for the short-term of our economy. But we will continue to suffer the consequences of the environmental harm we do, even at the current regulatory levels, and more so with "a muzzle on the EPA".
[+] [-] rbranson|15 years ago|reply
[+] [-] ovi256|15 years ago|reply
Enjoy your third world working conditions. But you are an executive and/or a shareholder, are you not ?
[+] [-] vessenes|15 years ago|reply
Tariffs on chinese goods would up the cost of those goods to slightly higher than what US-made goods could be sold for.
This will create jobs in America as companies create factories here.
There will be more jobs, and more money in the economy.
On the downside, everything just got a lot more expensive, maybe 50% more.
This is inflation. People don't notice it as much as they notice a 33% to 50% wage cut, especially since the most discontented members of society, the un and under-employed are no longer un(der)employed.
[+] [-] dcb|15 years ago|reply
[+] [-] drenkert|15 years ago|reply
We need to create and become the leaders of Manufacturing 2.0 which incorporates environmental and social externalities. Companies who don't operate along these principles should be taxed and those monies put toward continuously improving global standards.
[+] [-] drenkert|15 years ago|reply
[+] [-] Hubbert|15 years ago|reply
Seriously: How did we get from "life, liberty, and the pursuit of happiness" to "drive down everyone's quality life to match the world's most miserable and backward countries?"
Aside from technology that hadn't been invented yet, people in the West lived did very well in the late 20th century. Most people who bothered to show up for work had a balanced diet, adequate medical care, and usually a car. And they somehow managed to do it without rampant workplace death, child labor, or rendering the ecosystem uninhabitable for decades[1]. They even had fundamental civil rights like freedom of religion, freedom of speech, freedom of the press.
[1] Aside from notable exceptions like Love Canal, etc. But I see that as largely the result of ignorance; we now have a better understanding of the impacts of our behavior on the place we LIVE.
[+] [-] binaryfinery|15 years ago|reply
[+] [-] gojomo|15 years ago|reply
Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars -- fight to win.)
Everybody loses a trade war. And the ensuing impoverishment and desperation can trigger a shooting war.
[+] [-] SkyMarshal|15 years ago|reply
[+] [-] Hubbert|15 years ago|reply
[+] [-] mindblink|15 years ago|reply
"But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work -- and masses of unemployed?"
(Actually, my guess is the over-dependency of faith of individual meritocracy will cause us to miss the deeper structural problems that Grove is pointing to.)
EDIT: (Anedoctal single point of data with limited context), My friend worked in a Battery startup company in the Silicon Valley. After the initial design phase, the VCs and management decided not scale up into manufacturing, they rather lay most people off and sell the design.
[+] [-] BrandonM|15 years ago|reply
As more and more jobs require less and less work performed by humans, the obvious solution is to work less hours. Instead of family providers working a total of 60-90 hours per week, they should be working closer to 40-50 in the somewhat-near future, with that number continuing to drop over time.
We obviously have 3 possible paths:
Currently we are going with (3), and it just doesn't make that much sense. Either (1) or (2) would be acceptable to me, but (2) certainly seems more fair. I would love to get to a situation where families get to spend valuable time together and kids are raised by their parents.I think an average of 25 hours per week would hit a nice sweet spot. It would allow companies to have 10-hour work days, either alternating 3/2 10-hour days per week, or 5-hour shifts 5 days a week. Jobs like programming could be designed to have 2 8-hour shifts per week (to perform actual development) along with 3 3-hour shifts (to address meetings, squash bugs, perform customer service, etc.). What is keeping us from this?
Instead, we have something like 15-20% of the population overworking themselves while another 15-20% are under- or unemployed. Something's gotta give.
[+] [-] c1sc0|15 years ago|reply
[+] [-] vessenes|15 years ago|reply
My social history tells me that no other countries have been successful at creating such a system either.
Whether or not we have such a system, we may well be moving to a world in which the US can continue to increase GDP significantly while unemployment increases (efficiency increases, in other words). Successfully creating a Chinese middle class, and selling them our branded stuff only hastens that eventuality.
What happens to all these American unemployed people? In an ideal world, they would be artists and poets, inventors and writers, people who add to our cultural capital. The end-game here would (in my dreams) look a lot like Ian Banks' Culture books -- a utopian society which has moved past 'the age of scarcity'. Unfortunately, right now, places like Saudi are the closest we can look to for a society with, frankly, enough money for everyone.
In the interim, we are facing a sort of cultural crisis. America's PDI (Power Distance Index) is middling right now; the PDI describes out comfort with and exposure to, high levels of power differences in society, including wealth. Saudi has one of the highest PDIs in the world, meaning that they as a country haven't solved this problem of building an equitable society based on passive income production; in fact, their society is less equitable than many poorer countries. It is hard to imagine that we are aiming at anything else but a Saudi-ish social system if the GDP growth + unemployment growth trend continues.
I say this partly because Americans think of someone who is 'unemployed' as lazy, uneducated, etc. In fact, there's a significant undercurrent of that perspective in this thread. The reality is that if we are able to keep improving productivity while birth rates decline, there will eventually be less work. There might be more money, but there will be less work.
How do we deal with that? I don't have a good answer, but I still am part of the problem -- I would much rather spend capital on an automated solution for my business than hire someone.
[+] [-] starkfist|15 years ago|reply
[+] [-] _delirium|15 years ago|reply
[+] [-] juicebox|15 years ago|reply
I didn't read where Grove was proud of how Intel behaved during the '90s. In fact, I got the opposite impression from this article: Grove is writing from the pain and tragedy caused by competing with the Chinese on entirely Chinese terms. Where was the US during those years? Absent. Like a drunk staring into a Vegas slot machine in the wee hours of the morning going through the motions, but not really being there.
[+] [-] todayiamme|15 years ago|reply
Whenever, someone starts a debate like this, or whenever I see a human being slaving away for a pennies in despicable conditions. I have to ask this question.
If and only if companies are entities that exist to make more and more money (not wealth) then you will inevitably run into such problems. The companies in the USA outsource that labor to China, or India only for earning more money, but are they creating wealth? By destroying the long-term sustainability of human civilization on this planet (I live a few kms from a few of these factories in India. You have to see in order to believe what they get away with)? By ultimately harming the very source of their wealth through such measures?
I have absolutely no idea about the implications of these concepts to make any categorical statement on them, but I think that David Packard and Bill Hewlett may have gotten it right. (see: http://www.jimcollins.com/article_topics/articles/the-hp-way...)
*profits are a pre-requisite to its existence. I want to ask if they exist only to do that?
[+] [-] rbranson|15 years ago|reply
[+] [-] meric|15 years ago|reply
[+] [-] spinchange|15 years ago|reply
[+] [-] tylee78|15 years ago|reply
[+] [-] hga|15 years ago|reply
I.e. with the exception of sports (in the biological sense) like Tesla (also a big political factor there), what new Intel like startups are going to get the serious funding they require in today's political and economic environment.
As far as I can tell, the period of the big VC funded company like DEC or Intel lasted between the late '50s (there's a certain bit of legislation that pushed the concept over the top) to the early '00s, when SarBox was the last straw that ended the game.
Pretty much all of us who are here for the startup game are here for the small capital web/Internet/software type of companies. E.g. I don't see where the next FPGA like think is going to come from (well, in the US).
[+] [-] robryan|15 years ago|reply
Maybe at this point in time you have to accept a high unemployment rate, the problem you have to be careful with I guess is you still want to provide incentive to the people currently in minimum wage positions.
[+] [-] wslh|15 years ago|reply
My naive point of view sees lowering lifecost (cheaper real state, health insurance, etc) so people needs less money to live in a good way and costs can go down. That can't be done in Silicon Valley or NYC but thanks to the technology and good transportation can be done in other areas of the country with good planning.
[+] [-] _debug_|15 years ago|reply
[+] [-] mattmcknight|15 years ago|reply
[+] [-] aero142|15 years ago|reply
The American standard of living is higher than China. In order for a worker in the US to continue to enjoy his standard of living and salary, she must contribute to creating something of value equal to what she consumes that is then exchanged at a market price(which determines it's value relative to goods/services created by others). When the US is a leader in technology and innovation, we create things that are very valuable, because rare and productive people make them, and trade them for other, largely commoditized goods, from poorer countries. The reason these commoditized goods are produced in poorer countries is because they can... The ability to produce them is well known so there is more competition, and therefor demand, and the price drops, along with the wages. If you work in a factory cheaply, you do so because replacing your skills in that factory is easy. There are many other people with that set of skills to replace you. The value you produce is cheaper, therefor you are paid less and have less to consume .
Now, back to Mr. Grove's statements. The factory jobs left the United States because wages were higher here than there. It's that simple, but where he goes wrong is say that "managers were happy", which is not quite as harsh, but very close to the usual line, which attributes the offshoring to "greed". Not quite. If an American company has to produce it's goods in a factory where people make 2x the salary of the same good in China, the goods will cost more to buy. If the American company, doesn't outsource, and a Chinese company is able to produce the same or similar good(think commodity again), then they will be undercut in the market and go out of business. Not only will management be un-"happy", but the US as a whole is worse off because the profits now go to a Chinese company instead of an American one. The US has now lost not only the manufacturing jobs, but the high value add jobs as well. Mr. Groves proposes the "solution" that we tax imports and use the proceeds promote American production. This merely shifts the money around. Those imported goods were cheaper than their American counterpart. Assuming current wages remain the same, it now cost more dollars to purchase that good because of the tariff and American's have less stuff because it is more expensive relative to their salary. The other option(without the tariff), is that the American factory worker cannot find other work that will pay him more, so he agrees to accept lower wages for performing that same job here and can therefor buy less stuff. I believe that these, as a whole, offset one another and are probably net a wash.
As for unemployment, I believe that it is caused by many different things, probably many reasons that are poorly understood, but I'll address a few of them that I think are important here. Unemployment can be caused by temporary mismatches between market demands for goods and supply of those goods. Demand changes, prices change, companies don't require as many employees to produce the goods(this can also be caused by changes in the efficiency of production), and people are fired. There may not be a job in their previous line of work. If there is some other skill set which is in demand, that person can learn a new skill and make whatever salary the market demand supports for that skill. It is also possible that the market will not support the workers previous salary. Labor costs go down, but here is where people usually go wrong. When labor costs drop, it becomes affordable to pay people to do things that you might have automated(for a high cost in machinery or software for example). Or, the market might now support the cost of producing a good which must be done with tedious manual labor. Or, if the American worker is more efficient than his Chinese counterpart, then it might be cheaper to start doing manufacturing in the US again. In other words, as wages drop, the unemployment rate will go down, and less will be outsourced. This is just the tradeoff. The fact that jobs are sent to China means that cheaper goods are available here in the US. Mr. Groves states that the trend is towards an economy where there are high value add jobs and high unemployment. This is true only if current wages hold. If wages drop, then outsourcing makes less sense and unemployment picks up. What we really want is lots of high value add jobs here. This comes through innovation, creativity, a highly skilled and motivated workforce and outsourcing production(if it makes sense) to cheaper markets.
[+] [-] nl|15 years ago|reply
You make that sound so simple.
You left out the bit about that meaning falling standards of living, and the social dislocation that causes.
[+] [-] patrickk|15 years ago|reply
This is what most of the Western world wants, yet it is very difficult to achieve this - largely because of education. Most of the West, not just America, wants the bulk of it's jobs in high value-added positions because of labour costs arbitrage which many companies are forced to engage in because of intense competition. Where education is concerned, some people don't want to go to college, some aren't suited to it and well, funding education is damn expensive and the pressure on politicians to cut educational spending (which takes a long time to payoff) is huge. So you are never going to get all of the workforce in the country to work in high value-add roles, for various reasons.
I was fascinated by this interview with Andy Grove, because I had read an interview with Craig Barrett (current as chairman of Intel) who took a largely polar opposite view to what Grove has said in this article. Barrett was talking about how Ireland must change in order to move out of recession. I think he would be appalled at the notion of the US entering into a fully-blown trade war with China, as Grove advocates.
Barrett quote [on Ireland]: What I said is that [having] smart people (good education) is important, smart ideas (investment in research) is important, and then letting smart people get together with smart ideas to do something is the third thing (the environment). The very same could just as easily apply to the US.
Full article here (a very good read): http://www.irishtimes.com/newspaper/finance/2010/0212/122426...
[+] [-] rbranson|15 years ago|reply
[+] [-] joubert|15 years ago|reply
[+] [-] davidw|15 years ago|reply
[+] [-] known|15 years ago|reply
[+] [-] mkramlich|15 years ago|reply