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I can't say that I'm a fan of Friedman but it would also seem like Gomory's concerns are overwrought. While I'm far from an impartial observer, it seems that G

by cwan 16y ago

I can't say that I'm a fan of Friedman but it would also seem like Gomory's concerns are overwrought. While I'm far from an impartial observer, it seems that Gomory simply echoes the same concerns and fears that many Americans (and the world) had of Japan. I did a quick search for the 'myth of balanced trade' and came up with this article (written with an ideological perspective but it was written in 1986 but it could have been written today in direct response to Gomory): http://www.thefreemanonline.org/columns/protectionism-the-myths/ http://www.thefreemanonline.org/columns/protectionism-the-my... Further this concern that the US manufacturing industry is dying or dead is a myth (and quite handily, type in 'myths of US manufacturing' and you come up with the following article among many) - an excerpt "U.S. workers produce 21% of all factory goods made globally, or about $1.7 trillion worth per year. That's significantly lower than the peak of 28% in 1985 but only slightly below the long-term average of 23% for 1970 through 2006.": http://articles.moneycentral.msn.com/Investing/CompanyFocus/the-myth-of-us-industrys-demise.aspx http://articles.moneycentral.msn.com/Investing/CompanyFocus/... What Gomory doesn't seem to address and why innovation factors so importantly (if Friedman, overstates his case, Gomory understates the value of innovation), ideas have far higher margins than their underlying component and fixed goods. A contract manufacturer in China might make 5% or less (that Gomory argues are already subidized by the Chinese government which implies that the Chinese government is losing money in this process) while Apple makes 30+ on the overall products it sells (and these products presumably aren't subsidized by the US government). So for that same dollar of trade that an American consumer is buying from China, more profit is retained in in the US as those same products are sold globally. This is why it's not necessary for there to be "balanced trade" and why countries like the UK had been able to run trade deficits for large periods of modern history. If history is instructive, it's useful to also consider what's happened to Japan over the past few decades. The ascent of China, who Gomory targets, is very very far from trouble free or certain. Further, he seems to have this assumption if the US aims for balance of trade with China, those same deficits won't simply go to other developing nations. Ultimately it is consumers who bear the costs of imposing protectionist policies.

jkic47 16y ago
While I agree his concerns may be a little overwrought, he does have a point. The ability to innovate, like most abilities, is probably a bell curve, and the fraction of people capable of coming up with valuable innovations is probably small. Since these innovations need to be able to provide jobs for "average" people who are less innovative, relying on innovation alone to "feed" a country this size is unlikely to work.
gamble 16y ago
> this concern that the US manufacturing industry is dying or dead is a myth The counter-meme that US manufacturing is still strong is also something of a myth. The biggest components of the manufacturing sector are things that most people probably don't immediately associate with manufacturing. For example, agricultural products are a huge component. As are primary industries like logging. Processed chemicals represent another big chunk. Most of the factory goods that fit the traditional definition of manufacturing are industrial equipment like earth-movers or electrical transformers. Note that these are all capital-intensive industries that are either protected by tariffs and subsides, or bulky, cost-sensitive goods that aren't as easy to build at a profit overseas. On the other hand, the mass-market consumer product industries that most people think of as synonymous with manufacturing have been wiped out in the US.

by cwan 16y ago

jkic47 16y ago

While I agree his concerns may be a little overwrought, he does have a point. The ability to innovate, like most abilities, is probably a bell curve, and the fraction of people capable of coming up with valuable innovations is probably small. Since these innovations need to be able to provide jobs for "average" people who are less innovative, relying on innovation alone to "feed" a country this size is unlikely to work.

gamble 16y ago

> this concern that the US manufacturing industry is dying or dead is a myth The counter-meme that US manufacturing is still strong is also something of a myth. The biggest components of the manufacturing sector are things that most people probably don't immediately associate with manufacturing. For example, agricultural products are a huge component. As are primary industries like logging. Processed chemicals represent another big chunk. Most of the factory goods that fit the traditional definition of manufacturing are industrial equipment like earth-movers or electrical transformers. Note that these are all capital-intensive industries that are either protected by tariffs and subsides, or bulky, cost-sensitive goods that aren't as easy to build at a profit overseas. On the other hand, the mass-market consumer product industries that most people think of as synonymous with manufacturing have been wiped out in the US.