Before I get going on the "death" of US Manufacturing, allow me to quote from The Rational Capitalist on this latest guvmint stag part--er, bailout -
It is immoral for the government to expropriate the money from the earnings of others and shower it upon bankrupt firms such as the automakers. If individuals believe it is truly in their self-interest to invest or provide alms for bankrupt firms they may do so – by purchasing their stock, bonds or by simply sending them money. The idea that the “need” of the automakers and their employees somehow justifies theft is the height of evil and is an argument that could be used to justify virtually anything. Since when does the “need” of anyone justify theft? If this argument is not valid in a criminal court, then why does it become valid when applied to firms?
Every business, whether big or small, must stand on its own merits. If it does not provide a product that individuals are willing to voluntarily purchase then it must restructure or fail and the faster the better. It is absolutely unconscionable that these CEO’s would plead for their Godfather’s in Washington to shake down taxpayers rather than focus on how to make their failing firms more profitable.
Plus some "housekeeping" - some folks can't seem to get Blogger to save comments, so I will post them. This one from my old pal Carl Sarrazolla, International Superstar:
"For some reason the blogger won't let me post my comments on the site, so here's my feedback.
I like where you're going with this. In additions to companies needing to change, we need to get some laws changed, especially the ones that define a job as 8 hour day, 40 hour week, etc. In addition, the laws that govern contractor/employer relationships also need to change as many are designed to force people into classic job roles once certain conditions are met."
Well put, buddy!
Now, let's get going- so far we have covered:
1. Root economic change
2. What is a job?
We need to cover:
3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.
The "death" of US manufacturing - like Mark Twain's death - is a little premature. It's not dead or dying, just changing. But since people don't recognize change while it's happening, let me help you all out.
Massive amounts of manufacturing have moved overseas in recent years, specifically to China, Malaysia and India . The pressure to turn a profit in manufacturing has prompted many companies to seek refuge in low-cost labor areas, putting onshore factories at a competitive disadvantage.
The problem with this logic is as follows: in many industries, labor accounts for less than 10 percent of total manufacturing costs. Factory automation, robotic inspection and process efficiencies have made labor less of a factor in the overall competitive picture. Savvy companies have learned to take advantage of these and other innovations to make their Americas-based business a success.
And now I will quote massively from the Washington Post's Gilbert B. Kaplan - He said it better than I:
No wonder this is an issue in the presidential campaign, especially in big manufacturing states. To get to the bottom of the problem, though, we have to cut through the many myths that have been fabricated about the industry over the years.
1. It's all about cheap wages. American workers are just paid too much.
For most manufacturing sectors, that's just wrong. Labor costs are already less than 10 percent of the cost of making many products (emphasis mine), including steel and semiconductors. Many of the real cost disadvantages the United States confronts are self-imposed. Our government doesn't rebate taxes to corporations when they export manufactured products, the way other countries do: A Brazilian steel company, for example, can get a 17 percent tax credit for every ton of steel it sends abroad. In addition, many foreign countries keep their currencies valued extremely low against the dollar. Most economists believe that China undervalues its currency by as much as 40 percent. That makes Chinese goods very cheap here and U.S. exports very expensive in China. This is a key driver of the $260 billion trade deficit with Beijing. We should deal with these issues in our international trade negotiations, but we haven't.
2. U.S. manufacturers can save themselves by investing in innovation.
Okay, but how much are you going to invest? U.S. private-sector companies can't put as much money into technology and research and development as foreign governments do to build up their sectors. As the chief executive of a technology firm with whom I've worked for many years says, "We're the best company in the world, but we can't compete with foreign governments." Consider Airbus. The European Union has put more than $15 billion into building this aircraft company from the ground up. Whatever you may think about the recent U.S. Air Force decision to buy tankers from Airbus rather than Boeing, one thing is clear: Through its subsidies, the E.U. has managed to build a highly competitive aircraft industry. South Korea has put more than $12 billion into its semiconductor industry to similar effect, severely harming the U.S. semiconductor manufacturing base. Business' are leveraging Guvmint resources for strategic advantage - this a sort of "reverse State Capitalism" (SC is MY deal BTW)
3. Trade laws and trade agreements level the playing field for U.S. manufacturers.
If only this were so. This should be the main goal of our trade negotiations. The manufacturing sector is hurting more than any other, but we're using our political capital -- in the Doha round, for example, the latest World Trade Organization negotiating round -- to help the service and agricultural sectors. Little is being done for basic manufacturing. There are international trade laws under which U.S. companies can file cases to offset unfair practices in China, Japan and other countries, but they're difficult to use, expensive and haven't solved the problem. In 2006, despite a manufacturing trade deficit of more than $600 billion, U.S. manufacturers filed only eight new trade cases. If these statutes were really working, we would see hundreds of new cases each year, instead of watching U.S. companies decide that it's better to give up and just move manufacturing plants abroad -- something I've recently heard executives in both the textile and electronics sectors say they're thinking about doing.
4. Good management can make U.S. manufacturers lean enough to fight in the international economy.
I wish it were that easy. Even the best management can't overcome some of the structural disadvantages we face. Take health-care costs. In Europe, these costs are absorbed by the government. In the United States, manufacturers have to pay for them. General Motors, for example, has estimated that the cost of health care adds about $1,600 to the price of each of its vehicles. How can you compete when you have to add that cost to all the other challenges a U.S. manufacturer faces? Then there are environmental-compliance costs. One recent study shows that these costs are about $77 billion a year for U.S. manufacturers. China, Taiwan and many other foreign jurisdictions have no environmental costs of any significance, because they either have no environmental laws or don't comply with them. The United States also has laws and regulations to keep our products and workplaces safe that we don't require our trading partners to comply with.
5. We make high-tech goods here, so we're okay. It's only schlock items that come from abroad.
Really? The truth is, very few high-tech companies are building new plants in the United States. The name on the box of the computer you just ordered may be Dell or HP, but the computer itself was probably made in Asia. The fancy light-up screens on your cellphone and iPod -- liquid crystal display screens, or LCDs -- are all made in China, South Korea, Singapore and Japan. Even our greatest semiconductor companies, such as Intel, are building new state-of-the-art facilities in China. And what about the most sophisticated high-tech product in the world -- microlithography machines used to make semiconductors? These machines are a true enabling technology -- a technology from which everything else follows. It's too bad that not a single one is made in the United States. We depend on Europe and Japan for them.
All true. But the real transformation may not be where things are made, but HOW and WHY. Now you may ask yourself "Russell, what in the name of God's holy creation are you jibber-jabbering about NOW". Well, just... think about it. It's actually some good news - remember, PROCESS is more important that MECHANICS.
There are powerful, unrecognized interactions between the nonmoney, or “prosumer,” (producing what you consume - eating your own dog food) economy and the money economy of our world. Rather than ignoring these interactions, we need to understand that these two economies are, in fact, parts of a unified “wealth system” in which the two parts pass value back and forth. If you really think about it, I mean REALLY think about it many of the linkages through which prosumer activities, from creating blogs and open source software to volunteering in a hospital, or Habitat For Humanity, or performing do-it-yourself projects, frequently add significant value to the money economy. There just isn't a "mechanism" to account for it! But, I assure you, it is very real.
Think about this - Many of us still think of the money economy as a closed system. But the growing importance of knowledge and prosuming in the wealth system makes the closed model obsolete.
There are all these channels between what people do without money and what goes on inside the money economy. I think these channels are going to multiply as the money economy creates more and more technologies that people can use to do things for themselves. For example, if you’re of a certain age, you probably remember that when you wanted to get photos developed and printed, you took them to a drugstore, they sent them to Kodak in Rochester, N.Y., Kodak sent them back, and then you paid the drugstore, and took your prints home. Now you do all that in the palm of your hand, because you have the digital camera technology that makes that possible. As a result, the market for printing and developing film is disappearing. It is moving from the money economy into the nonmoney economy.
This i s in the same tradition as the "seLf-sufficient" American, but on an immensely larger scale. What’s new these days is the cyberstructure that allows prosumers to create value and rapidly disseminate it across the globe, where others find ways to commercialize (monetize) it.
This transformation that we think of as the “new” economy actually started in the 1950s (the rise of consumerism - based on a RAND Corporation study) and is far deeper and more complex than most people suspect (as I have been saying ad nauseum). The underlying pattern is the breakdown of Industrial Age civilization, fed by the replacement of Industrial Age technologies and sweeping cultural changes, as well. The nature of the emergent wealth system is changing our civilization. But the reverse is also true, and to understand how these affect each other, you have to synthesize observations across all traditional academic borders, the boundaries that separate economics from sociology, from history, and so on. How do you lump finance, manufacturing, services, and countless other activities under the term economy? The link is that they are all monetized. The term prosumer (again, thanks to Alvin Toffler for that word!) deals with activities that are not monetized.
Although they are very different activities, they have a powerful aggregate impact on the money economy. In fact, their very disparity points to how widespread prosumerism is, and how important it is. Measuring things does not necessarily make them important, and unmeasured things are not necessarily unimportant. On the other hand, although I’m not a mathematician, I am an engineer, so I believe everything can, in principle, be measured, at least to some degree, by measuring a “surrogate” that is presumed to be analogous to the phenomenon at hand.
I'll leave it to you math geniuses, to figure out how....
So, I see the bifurcation of the manufacturing economy in the US - and it will be painful, but so was the Industrial Revolution. Split between highly mechanized production and the "prosumers". Here's an apocryphal story (and it has the added virtue of being true):
The Jacquard Loom is a mechanical loom, invented by Joseph Marie Jacquard in 1801, that simplifies the process of manufacturing textiles with complex patterns such as brocade and damask. The loom is controlled by pasteboard cards with punched holes, each row of which corresponds to one row of the design. Multiple rows of holes are punched on each card and the many cards that compose the design of the textile are strung together in order. It is based on earlier inventions by the Frenchmen Basile Bouchon (1725), Jean Falcon (1728) and Jacques Vaucanson (1740). This was part of my Econ History doctorate, so I know this story very well.
Each hole in the card corresponds to a "Bolus" hook, which can either be up or down. The hook raises or lowers the harness, which carries and guides the warp thread so that the weft will either lie above or below it. The sequence of raised and lowered threads is what creates the pattern. Each hook can be connected via the harness to a number of threads, allowing more than one repeat of a pattern. A loom with a 400 hook head might have four threads connected to each hook, resulting in a fabric that is 1600 warp ends wide with four repeats of the weave going across.
The Jacquard loom was the first machine to use punch cards to control a sequence of operations. Although it did no computation based on them, it is considered an important step in the history of computing hardware. The ability to change the pattern of the loom's weave by simply changing cards was an important conceptual precursor to the development of computer programming.
Now, this device, invented at the dawn of the Industrial Revolution, could be hooked up to dozens of looms, and produce beautiful, sophisticated textiles by the thousands of yards, very cheaply. Which, of course, put thousands of French weavers out of work. With no French Guvmint bailout to rescue them, the weavers treated like any good socialistic Luddite - they rioted. They took their wooden shoes (SABOT) and threw them into the infernal machines, thereby committing the act of sabot - age : sabotage.
The point is, the coming transformation will be painful, but we will get through it. We will have a money economy of highly intelligent machines (robots, if you will) manufacturing goods for sale here and abroad, designed built and maintained by American workers and a huge non-money economy of DYI types using the technology the money economy provides, to provide for themselves. - IF and only if, we have the guts to be flexible, agile and swallow our stupid pride and re-tool out skills to meet the paradigm shift. Or wallow in your "I'm a victim" status and become a ward of the state.
I'll leave the choice to you, because you own it ---->
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