by mjn on 9/16/23, 9:32 PM with 293 comments
by mensetmanusman on 9/16/23, 10:29 PM
My sense from talking to the previous generation is that financialization of the US has started (finally) failing the American people.
The previous generation cashed in on major profits by off shoring (Kodak), but we overdid it.
In a round about way our company is run by pension funds, and I work on projects that would get 8-9 figure investments if we were doing this in APEC, but we would rather have stock buybacks, so we end up getting 6 figures and puttering along.
Meanwhile the higher ups wonder ‘what happened to R&D?!’
by Animats on 9/16/23, 11:17 PM
* A tax on financial transactions. This is sometimes called a "Tobin tax". The US financial services sector has doubled in size as a fraction of the economy. It's currently around 12%. That's an overhead cost, and a big one. Could be half that.
* A tax on advertising. The tax deductiblity of advertising as a business expense should be limited. No more than a few percent of the cost of a good or service should be advertising. Domestic US advertising is almost zero sum, anyway, because Americans are spent out. All advertising does is move consumption around a bit.
* Standards for imports. If it plugs into AC power, it has to have UL certification. No more fires from power supplies, including small electric vehicles. Anything medical has to be sample tested after import. Criminalize willful violations. Hold resellers (i.e. Amazon) criminally responsible.
by mdorazio on 9/16/23, 10:47 PM
1) Improve the [government sponsored] Manufacturing Institutes
2) [federally] Back R&D for manufacturing technologies
3) Provide scale-up financing [by the government]
4) Use government procurement power to promote new manufacturing technologies
5) Direct production support [to sectors deemed critical]
6) Provide both “top-down” [gov picks a tech and supports development of it] and “bottom-up” [broad incentives like IRA] support
7) Build a manufacturing focus into existing industrial policy programs
8) Map and fill gaps in supply chains
9) Fix workforce education [by refocusing on legitimate vocational tracks]
10) Put someone in charge [of coordinating agencies, budgets, and efforts]
This is all effectively trying to copy large segments of the China playbook, but in my opinion it misses some rather important points. Namely, protectionism and implicit incentives. On the first point, you can't really compete with China when it is actively hostile to foreign companies and de facto encourages outright theft of knowledge and expertise in exchange for access to its market. As long as we have a significant portion of people yelling about "trade wars don't solve anything" any time someone proposes leveling the playing field, competition is a nonstarter.
On the second point, the elephant in the room is that smart people in the US can make 2-3X as much in software or finance as they can in manufacturing, so what do you think they're going to pick? Which company is private investment going to fund - the SaaS co. with 40% margins and rapid growth or the manufacturing co. scraping 10% margins and 5% CAGR? It's hard to see where the skilled labor and private investment side of the equation is supposed to come from when the incentives are so mismatched - you almost have to find a way to decrease incentives in the currently lucrative pools first.
by Roark66 on 9/17/23, 8:40 AM
Take this for example: >China dominates the production of full electric vehicles
And put it in context with the recent revelations of hectares of abandoned new EVs rotting in many locations in China. Why? The financial policy gave incentives to making more EVs, some enterprising individuals managed to manufacture very low quality cars while funding it with "shared car startup model". Then when these car sharing schemes went bankrupt (because many cars wouldn't complete a single trip without malfunction) they had enormous profits regardless. How? The cost of manufacturing was funded by investors in these startups(a third party, or a client from the manufacturer's point of view). After they went bankrupt there would be no warranty claims etc. While the per car gov subsidy was pure profit.
I cannot understand why anyone in the West would believe any economic statistic or number coming out of China. The country is known for fudging numbers at all levels. The corruption is endemic to the point one actually pays for government positions with cash (as a bribe to higher ups) and considers it an investment to recoup in own bribes in future.
It's Soviet Union all over again. Back then The West to the last moment had many prominent authors praising Soviet advancements in many fields until the very end and the collapse that was a complete surprise to many.
by justinclift on 9/17/23, 10:40 AM
Rent seeking behaviour is so deeply entrenched in US-led business culture, that any time potential advances are figured out they are viewed through the lens of "can we patent this?".
If the answer is "No", then funds for developing that potential advance - eg concept dev, prototyping, potential field testing - just don't exist.
It's not about being able to improve manufacturing. It's become "what's the greatest ROI on spending these dollars? Can we lock in a monopoly around it somehow too?".
While that short sighted foot gun approach remains prevalent, "fixing" the advanced manufacturing problem is going to proceed pretty damn slowly.
Outright abolishing all patents might get things going in the right direction, but the heart attacks that would cause in business circles makes that impractical. ;)
by hnthrowaway0315 on 9/17/23, 10:46 AM
I don't really see a way to reverse everything. It is not about investing more in education or patching up policies. We are talking about a whole generation, maybe two, of elites and (some of the) people who profit from globalization. You simply cannot rely on the hands to chop themselves off. This is going to be a violent, bloody process because changing tides in politics is always bloody, literally. This is also going to touch the cake of numerous upper-middle class interest groups: landlords, bankers, you name it, anyone who prosper from the last 40 or so years, especially last 10 years since the first QE. Why? Because you are basically saying, OK I'm going to create a new group of middle class people but hey the cake is just that big so I need to cut someone else's piece.
Of course, everything has a cheat. The cheat, which I believe was already chosen by the American elites, is to instill conflicts globally and create mass exodus of highly skilled workers from other countries to the United of States.
by dalbasal on 9/17/23, 7:58 AM
I think a big, poorly understood part of these stories is "advanced games" or "long term degeneration."
Take government procurement, like fighter jets or new hospitals. Post-war, the way this worked was "cost-plus." Companies accounted for their costs and were promised a fixed profit. The obvious flaw is that companies lose interest in efficiency. But... it did work during the war and resulted in more tanks, ships and jets than anyone thought possible. It also worked post war.
But, such games mature. Under "cost-plus" a company increases profits by spending. That's an incentive that will bite eventually. So... they move to competitive bidding. This degenerates into a lawyers-only game, etc.
That's the administrative layer, but game maturation also exists at the political layer. Rooseveltism was a thing for a while, and then anti-rooseveltism became it's competition. During the neoliberal era, industrial policy was the devil. Half the international institutions (trade deals, imf, wb) exist mostly to enforce bans and limits on industrial policy.
During this era, when governments' job was to "get out of the way," the alternative to (now evil) industrial policy was either big trade deals, or tax policies. Tax breaks and tax complexity counted as "getting out of the way" while trade deals structured markets (eg auto-manufacturing) with more detailed rules than a Soviet five year plan.
Anyway.... the statement about making economics a defence job... it feels like an attempt to declare bankruptcy on the "trade-deals and tax breaks" era, and move to an weirder and more awkward model. A bad idea that hasn't played out might be better than a better one that has.
by wonder_er on 9/16/23, 11:51 PM
Sorta a 'do not pass go, do not collect $200, until {x} is solved' situation.
If a city still has parking minimums on the books, I evaluate all involved parties as utterly unserious, pseudo-scientific religious zealots.
Do you think the American south, in the era of chattel slavery, could solve 'advanced manufacturing problems'? NO! of course not! So why does anyone think 'america' could solve an advanced problem?
Meh. I shouldn't be surprised by the article, though. The authors probably think the USA isn't a backwater country that is 'on top' only via a willingness to use economic and actual violence to achieve all aims.
by balderdash on 9/17/23, 3:45 AM
by simonblack on 9/17/23, 10:05 PM
In the 40 years that the US has offshored manufacturing, all of those guys that used to know what's what have retired or died. There's nobody left. It's going to take another 30-40 years to replace them. The US doesn't have the luxury of having those 30-40 years.
by lemonwaterlime on 9/16/23, 10:09 PM
They commonly keep employees using the simplest heuristics that someone at some point in the past developed which worked then, so why break it? And they push this mediocrity throughout the entire organization and industry. Then they swap out one failed CEO for the same person with a different name like a pair of gloves, wondering what ever happened as there was nothing more that could be done. Meanwhile their ageist management policies block out the insights of the young, all but ensuring that no new ideas are brought into the mix—all until it’s time for another bailout.
by onthecanposting on 9/17/23, 2:11 PM
by badrabbit on 9/17/23, 7:28 PM
The plains of nebraska for example are an excellent place (again, opinionated) for an assembly plant like foxconn but american. Mainly because a crapton of freight via railways passes through there and plenty of undeveloped cheap land. Such factories have high shipping/receiving volume and new towns with new cheap housing for potential workers is feasible.
Yuma is another great location because of it's stable (sunniest in US) climate, proximity to mexico boarder and like with TSMC and Tuscon it is very disaster safe, right on I10 and close to CA (the US might starve if Yuma was destroyed! A lot of food processing there for these reasons).
Manufacturing at old towns and factories will have minimal competitive advantage.
Lastly, the US does not have a "success at any cost" mindset towards manufacturing as the fuel for economic success. It is very much an afterthought. A lot of this and many other issues are a result of political divisions.
by vuln on 9/17/23, 11:23 AM
by 0xDEF on 9/17/23, 12:34 AM
by narrator on 9/17/23, 3:09 AM
Edit: He did have something interesting to say about the "idiot index" which is the price of a component over the cost of the raw materials. If that's very high, it means there are serious problems at that manufacturing organization.
https://officechai.com/stories/elon-musk-idiot-index/
There's so much inefficiency in American manufacturing. It cost SF $1 billion a mile to extend the subway for example.
by tim333 on 9/17/23, 5:25 PM
by csomar on 9/17/23, 7:41 AM
This ushered the era of Japan (where Japan almost "overtook" the US as the first economy). You can draw lots of parallels to what's happening with China now.
I am afraid, given the size of China, that it'll not "just" reach US GDP but will skyrocket beyond it to the stars. The era of Western/US dominance might be over and it's inevitable.
by willmadden on 9/17/23, 1:48 PM
DC politicians redistributing money to advanced manufacturing will generate wealth for transnational corporations that siphon wealth out of the source economy. It will serve as a grift for those with political connections more than it will repair our industries. The playing field is not level because of regulatory capture and inefficient regulation, and the talent pool that can fill the roles has both dwindled in number and chosen other career paths.
by bandrami on 9/17/23, 7:56 AM
by thewanderer1983 on 9/17/23, 6:39 AM
by g42gregory on 9/17/23, 8:47 AM
by Rooki on 9/17/23, 4:15 AM
by bell-cot on 9/16/23, 11:31 PM
