[CoffeeDregs]

"Instead of drawing down our gold reserves, however, we gradually draw down our domestic manufacturing base and it gets replaced piece-by-piece in foreign countries."

To me, this is the money shot. I hadn't seen this expressed before and it makes perfect sense. I'm baffled that we (the US) caused this to happen to the US. I'm (unhappily) registered Republican but I argued vociferously to a Dem friend in 2000 that our inability to manufacture critical components was going to kill us. Kind of literally: AFAIK, the last LCD panel manufacturer in the US closed around then and we could no longer manufacture LCD for our military vehicles... (Even if this anecdote is untrue, the point remains valid...) I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.

[lettergram]

My father was one of the last tool makers in the US working for Molex. They spent years teaching the Chinese, the Chinese would disassemble all molds sent over to China and often break them, so my fathers team would have to fix / rebuild them.

They spent years training the Chinese side-by-side in the US.

In the end they still haven’t exactly caught up to the quality we had in the US. However, they now have 5x the tool & die makers in China.

To compete, you really do have to cut minimum wage. You have to loosen regulations, and importantly, you have to do massive tariffs / sanctions on China for the next decade.

There are enough people still here to teach and expand the Industry. However, if you don’t start now. Like today. We won’t ever recover. Once enough manufacturing is gone, it’ll be impossible to come back - we are almost there.

You are competing against a foreign power who uses slaves. You either let free people work for what ever wage they can achieve or we risk becoming slaves ourselves.

[AnthonyMouse]

> To compete, you really do have to cut minimum wage. You have to loosen regulations, and importantly, you have to do massive tariffs / sanctions on China for the next decade.

Part of the problem here is that the existence of some kind of universal "more regulations / less regulations" slider is an illusion. It allows the problem to be cast in partisan terms when that isn't the problem at all, because the problem isn't more or less lines of regulatory code but rather higher or lower regulatory efficiency.

Some regulations save a thousand lives at a 0.02% increase in costs. Repealing those is bad. Enacting them is good. Some regulations save two lives at a 5000% increase in cost, which could equally be saved by some less expensive regulation. Enacting those is bad. Repealing them is good.

The real problem is that politicians lack the qualifications and incentives to do this well. If good rules don't exist, then someone gets hurt and there is a call for "more rules" rather than "better rules". Politicians who don't know what they're doing pass bad rules. The bad rules cause costs to exceed what they are in China, so manufacturing moves to China. Then the local lobby for improving the rules evaporates because there are no longer local manufacturers to propose or lobby for more efficient rules, and the continued existence of those rules on the books causes no more to form.

We clearly need to throw away the existing rules -- they're not working -- the question is, how do we actually get better ones?

[namdnay]

Without a very strong (and therefore expensive) social security net, “Letting people work for whatever wage they can achieve” is slavery. See 19th century Britain

Germany still has a strong industrial base, without a race to the bottom and with strong unions. So it is possible :)

[sgnelson]

I've got to add my two cents to this discussion...

You discuss tool and die makers, a very highly skilled profession; one that I would argue takes many years of training and labor to master. I would further argue that in the manufacturing world, when it comes to hands on work, tool and die guys are near the very top.

Yet at the same time, you talk about cutting the minimum wage. Tool and die makers (of any sort) aren't going to be working for minimum wage.

While I don't disagree with the importance of American manufacturing, I think your prescription is wrong. We don't need lower wages, we need better education, more apprenticeships, more buy in from industry to spend money on training their employees. Because sooner than people think, China will have labor cost parity with the US, and we'll find that labor cost isn't solely the reason they are a manufacturing power house.

[ralph84]

China treats workers like shit and the environment like shit. The US wouldn’t win a race to the bottom and shouldn’t try.

Instead companies who manufacture in China should be taxed at much higher rates to account for the negative externalities they benefit from otherwise.

[alex_anglin]

Competing in a race to the bottom ought to beg the question about what alternatives and options are. Focusing on efficiency and quality are two examples that would probably be a better long-term bet, with fewer negative secondary effects.

[simonh]

They aren’t slaves, they’re just people extremely happy to get a wage of $10k per year, which would be unobtainable for most of them any other way. The fact that this means they under cut US manufacturing wages by more than half isn’t really their fault.

As for bringing back manufacturing home, you need to find two things to make that work. First massive subsidies and tariffs to drive up the cost of foreign imports, imposing huge costs on tax payers and consumers; and tens of millions of people willing to work in factories. The US long term unemployment rate in 2019 was about a third of a percent. Where are you going to find the money, and where are you going to find the people?

[schemescape]

> To compete, you really do have to cut minimum wage

The article points out other ways to reduce the cost of domestic labor: namely, shifting away from high payroll taxes and severing the link between health insurance and employment.

[CraigJPerry]

>> To compete, you really do have to cut minimum wage. You have to loosen regulations

That’s not what Germany has done but there’s little doubt that Germany’s manufacturing ability is held in a higher regard globally.

So i challenge the “have to”. It’s the unproven talk of a particular tribe but i stress unproven since economics is a social science. That means there’s lots of science but is fundamentally stories we tell each other and not akin to, for example, the unassailable truth of gravitational pull.

[kevingadd]

How will cutting the minimum wage help in the long run? People earning the current minimum wage already struggle to afford rent and food. Can you really expect to get quality work from someone who has to work 4 jobs to be able to pay rent and is sleeping 4 hours a night?

You're not going to defeat China by cutting wages unless you address the societal issues that cause US wages to be high. We already haven't raised the federal minimum wage in decades.

[ClumsyPilot]

> "You either let free people work for what ever wage they can achieve or we risk becoming slaves ourselves."

We should work for slave-like wages voluntarily or have it forced upon us?

This is a poorly thought out argument. Cost of living, housing, etc. is obviously different in US, you might end up with less income than is necessary for survival. What makes you think you will be able to find any workers at all, let alone those trained to the necessary standard and skill?

It should be obvious that appropriate responce to a crime (slave labour) being committed is not to commit the same crime yourself.

Any products with stolen materials, stolen labour, or stolen taxes should not be allowed on the market at all.

[zhdc1]

In all fairness, the same is happening to China as well. Manufacturing as a percentage of GDP has been declining every year since 2010, and iirc manufacturing in total value has stagnated entirely in many provinces over the last couple of years.

Manufacturing is still moving to SE Asian countries (Viet Nam in particular), but even there producers are increasingly moving production in India and East Africa because of rising costs (e.g., wages).

[confidantlake]

I am not so sure about the loosen regulations thing. The US had periods of time with virtually no regulations. Rivers caught on fire, people were maimed and died of industrial accidents at much higher rates, water was unsafe to drink, ect. The countries now without much regulation are usually poor, dirty and dangerous. I want to live in a safe, clean, healthy environment.

I agree with you on the tariffs. China should not be able to outcompete us because they pollute and use slave labor. Force them to compete on fair terms.

[sanp]

This is missing the point of the article. The main reason for the current state of affairs is the petro-dollar system and the need for US to run deficits. Changing regulations for domestic manufacturing has very little to do with it.

There are quite a few European countries with very robust manufacturing bases who are far more regulated (both from a labor and capital perspective). So, minimum wages, labor unions etc have little to do with the US' manufacturing base. In fact, one could argue that weaker unions, if anything, have contributed to the decimation of the manufacturing base.

[Zenst]

>To compete, you really do have to cut minimum wage. You have to loosen regulations, and importantly, you have to do massive tariffs / sanctions on China for the next decade.

Not so, import taxes and one avenue that should be explored is true carbon costs/impact factored in. Why should something made locally be more expensive than something made the other side of the World and shipped all that distance. Clearly some impact costs not being factored and the whole carbon aspect should be utilised for many benefits - balancing out imports for one.

[momokoko]

Banning or taxing out of existence foreign investment on real estate and pegging the fed rate to zero will accomplish the same thing without needing to care about minimum wage. Shenzhen minimum wage currently provides workers in China with a higher standard of living than US minimum wage does in the US.

Only difference is that the wealthy in the US will carry more of the burden instead of the working class.

And that’s why we don’t have many advocates for it even though it will solve the manufacturing problem almost overnight

[pbourke]

I am surprised that no one has mentioned punitive taxation of companies that engage in offshoring/higher taxes on foreign direct investment as an alternative to tariffs.

[southeastern]

>You either let free people work for what ever wage they can achieve or we risk becoming slaves ourselves.

Minimum wage already isn't really a living wage in much of the country. Rolling back regulations is jumping headfirst into slavery, whereas.. I'm very critical of China but don't see the connection between their expanding industry and slavery. Businesses are diversifying their supply chain in the face of this pandemic.

[coolgod]

> In the end they still haven’t exactly caught up to the quality we had in the US.

Arrogance, this is one of the factors that killed US manufacturing.

[Guthur]

I'm not disagreeing on the spirit of your statement but I wonder if labour costs are really the prime driver of profitability with high tech manufacturing. It may be, but I'd love to see some of the figures, there could be other factors at play such as environment protection for example.

[etc-hosts]

> To compete, you really do have to cut minimum wage.

Minimum wage workers do not think they are making too much money, also there are a lot more of them then you.

[downrightmike]

This happened in part thanks to bain capital, those following the same business model of theivery, and the deregulation in the 80's. https://en.wikipedia.org/wiki/Bain_Capital Republican lawmakers and party members have been destroying America for generations. Goes back even further to 1971 when Nixon opened talks with the CCCP and then went there in 1972 cutting the ground out from beneath American workers. And now if we even wanted to rebuild our manufacturing base, we have to deal with the same problems the few remaining factories do, finding people not on some kind of illegal substance that can work. The bodies are there, but they aren't in any shape to bring back what we had.

[User23]

Trump was the first president in my lifetime to even admit gutting our manufacturing base is a problem. Neither Democrats nor establishment Republicans did anything but line up for their shockingly paltry share of the loot while mouthing platitudes about efficiency.

[beamatronic]

Not to mention these factories would pollute the environment again

[eggsmediumrare]

Confused about this illegal substances thing, can you elaborate?

[recursivedoubts]

There was a recent youtube of a Chinese professor discussing how china has gotten along so well with the US while the great migration of manufacturing occurred. It boiled down to wall street being fine with moving manufacturing abroad, as they don't identify with, and in fact despise, the American working class.

Pretty depressing.

[arminiusreturns]

"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." - Napolean Bonaparte

"I sincerely believe with you, that banking establishments are more dangerous than standing armies; & that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale" - Thomas Jefferson

"I have two great enemies, the southern army in front of me and the financial institutions in the rear. Of the two, the one in the rear is the greatest enemy" - Abraham Lincoln

[blix]

Do you have a link to this?

[eli_gottlieb]

Did we not expect capitalists to despise their class enemies, the workers?

[TruthHurts44]

If they despised the working class they would've pushed for removal of the useless rules the West has - health and safety, generous pensions for hard jobs(like miners), minimum wage, etc.

[mbesto]

> the last LCD panel manufacturer in the US closed around then and we could no longer manufacture LCD for our military vehicles

And funny enough our gov't (I'll let you guess which political party) struck a deal with Foxconn to produce LCDs in Wisconsin. It has failed miserably: https://www.theverge.com/2020/4/12/21217060/foxconn-wisconsi...

[southeastern]

Basically amounted to corporate handouts, with the way the money was mispent. I don't think the issue is that the labor class is getting too big a share, cases like this should make it clear that inequality that's at the root of these problems

[jtbayly]

So an attempt was made to bring back manufacturing, and that’s so terrible? Let’s all roll our eyes at the Republicans.

[vinniejames]

This is 100%, the fact the US can barely manufacturer face masks during a global pandemic is embarrassing.

On the other end, how do you compete with slave labor in the Chinese factories?

[kurthr]

It's not about slave labor, it's about manufacturing equipment. I suspect it was turned down, because helping the northeast survive a pandemic was not perceived as worth any political risk/capital.

https://www.washingtonpost.com/investigations/in-the-early-d...

[hungryhobo]

You are never gonna compete with chinese manufacturing if you believe their secret to success is slave labour.

There are plenty of countries with worse working conditions yet but people seem to stick with china.

[liquidify]

The consequences of that slave labor are far more on Chinese society than just the manufacturing dominance. There are a lot of things that are negative such as hatred of the CCP, that these policies are creating in China. The facade may look good, but there are cracks in China's foundation because of these decisions.

[vsskanth]

> how do you compete with slave labor in the Chinese factories?

Trading blocs that ensure minimum working conditions. Companies which pay the worker a decent wage should get favorable tax treatment and procurement.

[Thinkx220]

By lowering taxes and deregulating the economy.

[rjbwork]

Depends on the face mask you're talking about here. A friend of my brother works for a company that makes unrelated clothing, furniture, and other comfort type items. They make all of their products here in the USA. They started up mask production in march. They're high quality washable cloth masks. I bought a few and have been using them when I need to go out. They're about twice the price of similar ones on amazon but much higher quality.

As for mass produced surgical masks? Yeah we don't have the manufacturing base for that sort of thing anymore unfortunately.

[cactus2093]

This is somewhere near the very bottom of a ranked list of US problems in this pandemic. Manufacturing takes time to significantly ramp up regardless of where it is, it’s not clear there would have been a major difference between what we did in waiting until we could buy more masks overseas vs waiting for US production to ramp up. And we had supposedly already alleviated this problem anyway with national stockpiles, except that those had not been maintained. Fixing that mistake is much easier and probably even more effective than undoing the globalization of the past few decades.

And honestly, by about April this year when China started having the virus under control and reopened their manufacturing sector at full capacity, it’s a good thing they were equipped to manufacture so many essential items. The US started running into capacity problems with some of the industries we do have like meat processing plants, if we relied more heavily on domestic manufacturing we actually would have been worse off over that period.

[daniellarusso]

US prison labor?

[renewiltord]

Shenzhen factory labour is more expensive than America. The labour is higher quality, though.

[PKop]

>compete

Have as your "goal" less the desire to "win" the global competition for corporate profits & corporate headquartering of multinationals in your nation simply on grounds of labor/profit competitiveness, and take a more nationalist view of, where necessary, having state run enterprises or "free market" competition within your borders but not complete free trade in a global sense.

In other words, do no necessarily pursue as your goal to structure economy either to have most profitable companies that reduce costs by moving labor around the world to find cheapest workers, or those which try to export the most. Have as your goal at least to produce domestically as much as possible to satisfy domestic consumption demands, as well as having some minimal threshold of employed domestic workers.

As it stands, US has a massive trade deficit, and a decades long decline in working age male population, especially in "flyover" US regions where manufacturing has declined the most while not being replaced by equivalent jobs. These regions also have declining population, rising suicide & opiate death rates, declining family formation / birthrates.

The "telos" of our society should not put as its "end" an economy, especially one which pursues profit above all.

The economy should be a tool in service to outcomes we actually desire.

Like software built to do a job, not simply designed for the production of specific features.

This is where global financial capitalism (as the US has a giant capital surplus which balances its trade deficit) needs to be called into question.

Internal free markets is one thing. But not having a national industrial policy which prioritizes the well being of domestic workers and their families over well being of multinational corporations and banks makes our system quite degenerate over time.

People should really take a few minutes and watch these 2 videos explaining the current account[0] and capital account[1] relationship, and understand that how we operate now is a political choice, which has massive consequences on who benefits of this system accrue to, and who pays the costs of this system.

This system is maintained by having the reserve currency and the state using strong efforts over many years to not only maintain this GRC but strengthen it, not allowing the natural devaluation of the $ that would close these 2 imbalances and more closely balance capital and labor.

Also, it is not a requirement to have a well developed economy and run massive trade deficits or not have a thriving industrial sector. Germany and Japan are 2 examples that do not run giant trade deficits like the US [3]

https://youtu.be/dirBYVjDk7A [0]

https://youtu.be/AimYG1jYD0A [1]

https://www.conradbastable.com/essays/the-germany-shock-the-... [3]

[andy_ppp]

I think people are starting to realise that globalisation needs to be balanced with other kinds of security especially around tech, hence TSMC being given a stack of cash to build a fab in the US.

I wouldn’t say globalisation is dead more that it’s going to be more balanced going forward with local concerns.

[flatline]

So much of globalization up through the 2000s was exploitation of emerging markets for cheap labor and lax environmental and safety standards. This was not wholly without benefit to the people in these countries though: it has dragged a lot of the third world out of abject poverty despite some of the dystopian aspects. Hopefully the next three decades will be better on a number of fronts.

[ehvatum]

Consider Elon's move from California to Texas. His energy costs are vastly reduced, expenses generally are reduced, and he can continue to hire directly in the US and draw directly on US machine shop production capacity.

There should be more machining and making in the US; everyone would like to have solid US-made hardware, but success in small-business machining and manufacturing, and scaling to large scale without off-shoring, requires a discipline and commitment to self-improvement that is difficult to cultivate.

[hanuman]

This monetary policy, and the consequent industrial policy ("free trade"), is, more than any other factor, the cause of the so-called "Great Stagnation." Its persistence is why the Great Stagnation is not over, despite some recent noises to the contrary. US growth will not resume until energy production does. With shale seemingly spent, nuclear too scary for most, and fusion perpetually 10 years off, growth is unlikely. The US will continue to "print" oil by printing dollars (h/t to Luke Gromen), care of Saudi Arabia, until it can't. The US will do anything and everything to ensure this continues, history is proof of that. When the US finally fails there will be a war. Not like Vietnam or Iraq or Afghanistan. A very, very bad war. And the winner will determine monetary policy for the next century or so.

[paulpauper]

Had you shorted the US stock market in 2000 on that prediction/hunch, you would be down a lot. The economy has moved beyond manufacturing. Data, payment, and information processing and intellectual ropery have taken over manufacturing in importance.

[seibelj]

There is national security interest in being able to manufacture our own weapons, computers, and infrastructure components. Otherwise if a war happens we may be in trouble.

[CoffeeDregs]

I wouldn't have shorted the market based on that but I've not been sanguine about the US economy since then. Financial engineering, not productivity[1], has really been the driver of our economy...

[1] https://voxeu.org/article/industry-anatomy-transatlantic-pro...

[imtringued]

Shorting the stock market makes no sense because central banks prop up stocks. All that newly created money goes into your pocket if you go long.

[908B64B197]

It's a bi-partisan issue. Hell, I would agree it's not even a exclusively US issue but is pretty much generalized throughout the west.

Shifting manufacturing to China makes absolute sense when you look and care about the the quarterly/yearly performance. And if you decide not to do it well tough luck because your competitor is and will have better results than you.

If you look at it with a 20/30 years perspective then it becomes obvious that outsourcing is completely the wrong move. You basically get rid of your local expertise, train your replacements, slim down your middle class (the folks buying the products!). Then your manufacturing partner starts vertically integrating and designing it's own competing products and you are pretty much left out of the equation. It's almost as if, thanks to support from the party, Chinese businesses can plan for 20 years ahead but western companies can't because they HAVE to maximize the quarterly results!

> I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.

Tariffs and trade wars seem completely useless to me when done between G7 countries because we're all in the same situation regarding China. To achieve any sort of paradigm shift we'd need to stop each having a 1:1 relationship with China and start negotiating as a block.

[jaredklewis]

I agree with some part of what you are saying, but tariffs are a miserably blunt instrument.

Think of the supply chain of something immensely complex like the Boeing 787, which has, quite literally, millions of parts (including LCD screens). Many if not most of those parts are imported. If there are tariffs on imports, either:

1. Boeing will pay tariffs, increasing the cost of each plane. Great for Airbus, bad for Boeing.

2. The parts are sourced locally instead. These parts will invariably be more expensive, as if there were cheaper local options, they would have been sourced locally before. Again, Boeing planes get more expensive, great for airbus, bad for Boeing.

3. Boeing, to avoid raising prices and giving market share to airbus, decides to move manufacturing outside the US.

What applies here for Boeing, is also going to apply to Tesla, Caterpillar, and hundreds of other companies. Tariffs create incentives to source locally, but they simultaneously create incentives to manufacture abroad. It is a very thin tightrope to walk and I haven't seen any evidence that Washington can.

On the topic of national security: “When goods don’t cross borders, soldiers will.”

I'm far less concerned about a war breaking out between two countries with healthy trade relations and cultural exchange. Do we want China to be our enemy? Why?

[passerby1]

Correct me if I'm wrong, but it seems like the US does not need any factories, as it can print any amount of money and buy whatever it wants from any country has factories. Money talks. Or not?

It has enough military for safely making this again and again for tens of years at least.

[biggermike]

What happens when the other country isn't willing to sell? Consider a war or other disaster e.g. in the months before the pandemic, China stopped the export of face masks and other PPE, resulting in shortages in hospitals around the world.

[Reggi55]

It was done for 2 reasons and planned out by Paul Volcker, and there is a speech to go with it if someone can find it.

1) USD reserves allow us to import more value than we export so it offers a better standard of life for the consumer than otherwise.

2) It allows us to have a bigger consumer market than we would otherwise have and incentive for countries to partner with us to sell their stuff to. If you've lived outside the US you know every business wants to sell their stuff here either as #1 or just after their home market.

Under those purposes it seems to have worked very well. Of course theres the risks of crashes along with it too.

[throwanem]

I agree, but this seems to me to be something which unfortunately requires a generational strategy to repair, and I don't see how any government that's possible in this country could achieve it. The time horizons aren't long enough and the incentives aren't aligned enough to permit even a credible start.

[CryptoPunk]

The uncompetitiveness in manufacturing is due to two factors:

1. Regulations. Both the OSHA and EPA had a measurable negative impact on manufacturing productivity growth. [1] I suspect the most harmful regulations are those that constrain contract freedom by requiring employers to give unions a negotiating monopoly, aka collective bargaining, over any work unit where they emerge. This would devastate any of the bright spots in American industry today, whether it's Tesla, or Amazon, or Google. The threat of unionization also discourages these firms from expanding into areas that require employing high concentrations of less-skilled workers in immobile capital intensive projects, as these are the most susceptible to unionization.

2. The massive rise in social welfare spending [2], diverting capital from productive uses to unproductive ones.

[1] https://www.jstor.org/stable/1810223?seq=1

[2] https://fivethirtyeight.com/features/what-is-driving-growth-...

[jayd16]

Tariffs just cause US buyers to pay more without much help. Tariffs have no way to make a US manufacturer competitive globally. US made goods would just be that 25% more expensive. At its best its a regressive subsidy from one set of Americans to another.

Why not just a direct subsidy to US manufacturing under the usual tax code?

[stdbrouw]

> Even if this anecdote is untrue, the point remains valid...

I mean, I guess the point remains valid in that everyone can see that a lot of manufacturing has left the US in the past, I dunno, fifty years. But if you don't even know whether the anecdote you mention is true, why bring it up? Why comment at all?

[stjohnswarts]

This was actually one of the good things that I thought -might- happen with the Trump regime despite all the other negatives. Guess what, nothing happened :( . We're still losing the ability to make stuff which is very scary in a world that is becoming China vs. The USA . There is price that isn't easy to express in $ that goes with the national security lost through losing a manufacturing base.

[kopakabana]

> To me, this is the money shot.

In which sense?