5 ms·

> There was a general claim from the late 80s to 90s that the invisible hand of the market would eventually move Americans to higher paying fields while allowin

• free_rms 6y ago
  > It boggles the mind that anyone could have believed that replacing many of the core productive bits of the economy with fluff like management (and ownership), finance, and hospitality would lead to anything but weakness. When the decision is largely made by the managerial and financier classes... All of the "smartest people in the room" come through economics educations based on pat 2-line graphs and ricardian tables that make extremely grand claims about the world, and they all come out thinking the same way. They're not trying to be crooked, they're repeating what they were taught.
  • onepointsixC 6y ago
    It's mind-blowing how wrong they have been and yet continue to be turned to for major policy decisions and thought.
    • free_rms 6y ago
      Who else you going to turn to? Someone who was drummed out of the club for questioning things that everyone knows?
    • whimsicalism 6y ago
      They haven't been universally "wrong" - just wrong for large segments of the population. Equities in America (which are majority owned by the wealthiest top 1%) have done great and the wealth of those at the top has multiplied several times over. Given that a quarter of all political contributions are donated by the wealthiest top 0.01% (no, not a typo - and 84% of politicians take more from the top 0.01% than all donors giving less than $200), it is entirely unsurprising to me that our policy reflects their priorities.
• fallingfrog 6y ago
  I think crushing organized labor was higher on their priority list than maintaining America’s industrial capacity.
• infinite_beam 6y ago
  The recommended way to “rise” has been to get a higher education. Or, as the Blair mantra had it: “Education, education, education.” Sandel homes in on a 2013 speech by Obama in which the president told students: “We live in a 21st-century global economy. And in a global economy jobs can go anywhere. Companies, they’re looking for the best-educated people wherever they live. If you don’t have a good education, then it’s going to be hard for you to find a job that pays the living wage.” For those willing to make the requisite effort, there was the promise that: “This country will always be a place where you can make it if you try.” https://www.theguardian.com/books/2020/sep/06/michael-sandel-the-populist-backlash-has-been-a-revolt-against-the-tyranny-of-merit https://www.theguardian.com/books/2020/sep/06/michael-sandel...
  • lumost 6y ago
    This manifested in an industrial policy which pushed millions of motivated citizens to mortgage their 20s in favor of english, philosophy, and psychology degrees. Education does not directly translate to remunerative employment. Working on an automotive line still pays ~2-4x higher than being a manager at a Starbucks, with added benefits like a regular work week and weekends.
    • pydry 6y ago
      Once the job market for graduates started to saturate they told people they should go into STEM. Once the STEM job market saturated they said people should become programmers.
  • KittenInABox 6y ago
    Looking at college applications now and the struggles of students I'm talking to about it, plus the college admissions scandal, I really don't know if education is the silver bullet claimed. Graduating even with a STEM PhD from a mediocre state school means less than graduating from an Ivy league with a bachelors in literature. In order to get into a prestigious school you have to play an incredibly bullshit game- apparently one significantly influential university this year wanted to know how students would eat a raw potato. To me, the relationship between education and class is a bit more insidious and doesn't necessarily flow the way that benefits society.
• valuearb 6y ago
  Manufacturing requires capital. We’ve had some of the highest effective tax rates on capital in the world for a while, and the Trump tax cuts didn’t help that much. A California corporation has to pay roughly 30% of its profits to the state and federal government to start. Then it’s shareholders have to pay 25-30% of what’s left to their state and federal government. In practice that’s over a 50% rate, even if the shareholder is a low income retiree. There is little progressivity in taxing investment profits. No wonder multinational US companies rarely bring profits from foreign subsidiaries back to the US.
  • lumost 6y ago
    The US is literally printing capital right now, and local governments are willing to hand Billions to corporations which promise to create manufacturing campuses. Why is lowering interest rates not resulting in increased manufacturing capacity as it did prior to recent years?
    • valuearb 6y ago
      Dollars aren’t capital. The fed can double the dollars in circulation tomorrow, but that doesn’t change the amount of manufacturing machinery in the country.
    • mensetmanusman 6y ago
      Because China can simply point and say ‘whatever the price is there, it will be cheaper here’ because their population is willing to take huge hits to their purchasing power (because they were recently so poor).
  • whimsicalism 6y ago
    > We’ve had some of the highest effective tax rates on capital in the world for a while, and the Trump tax cuts didn’t help that much. Source on any of this? I don't think this is true - both effective and statutory corporate tax is lower. When factoring in things like the estate tax on capital, capital gains tax, etc. - all is much lower than during the 20th century. > In practice that’s over a 50% rate, even if the shareholder is a low income retiree. Among equity held by American households, the richest 1% own more than 50% of that equity - and the top 5% owns the lion's share (upwards of 3/4s). The "low income retiree" narrative is overstated. Moreover, that retiree could count paid dividends as ordinary income, which is taxed progressively (10% or less effective tax rate) if they are low-income. Meanwhile, the estate tax is much lower than it was during the majority of the 20th century, despite the fact that more than half of all wealth is not earned but inherited by the wealthiest 5% of all American households (ie. the median dollar in the economy is inherited, not paid as a wage or from capital gains)
• rualca 6y ago
  > Yeah, that was super short sighted. It boggles the mind that anyone could have believed that replacing many of the core productive bits of the economy with fluff like management (and ownership), finance, and hospitality would lead to anything but weakness. I would add that the US's apogee was due to it's role on WW2, whose success was due to the US's preexisting industrial infrastructure, not only manufacturing capability but technical and scientific infrastructure that supported it. Since then the US not only gave up on its main strategic asset but also handed it over on a silver platter to the next world power.
  • DelightOne 6y ago
    Was it even avoidable with global competition putting pressure on price and cost? Americans just don't want to work for the same wages some in China may accept.
    • lumost 6y ago
      The US chooses to allow unlimited competition from China. China allows limited competition from US companies with their nascent industries. Switzerland is a fascinating example of a country which almost entirely bans foreign competition in anything they can reasonably produce domestically. Costs are high, but wages are higher.
      • polskibus 6y ago
        Do you have some references on how the bans work in Switzerland? I live in EU and have never heard about Swiss having some parasitic relationship with EU (meaning export to EU is ok, but import is not).
      • xiphias2 6y ago
        This was probably working while the Swiss people were working and buying their products, but in Zurich Swiss people do banking and non-Swiss people engineering (and the number of non-Swiss people grow exponentially, now maybe 1% of people in Zurich is a Googler). They usually go to the German border for weekend shopping instead of buying the expensive Swiss products.
• testfoobar 6y ago
  Turns out following exactly that line of orthodox (Comparative Advantage) is how you get a PhD in economics. The theory makes perfect sense and can be observed to be true in evidence across the world. Where it fails is that governments, politicians and central banks understand the theory as well and can use it to their advantage. Namely this: you can bankrupt your competition by undercutting them - this is capitalism 101. Turns out you can do this at country-scale too! It is obvious but PhD economists cannot see it happen. They will hold onto their comparative advantage theory all the way to the poorhouse. One supposed limiting factor to country-level jungle of capitalism is the Impossible Trinity. Quoting wikipedia: "It is impossible to have all three of the following at the same time: 1. a fixed foreign exchange rate 2. free capital movement (absence of capital controls) 3. an independent monetary policy" Like an undying belief in Comparative Advantage, you cannot move up to the upper echelons of PhD Economist work without a bedrock belief in the Impossible Trinity. In reality, turns out a dual currency structure is a great way to blow through the limitations of the Impossible Trinity. China is a spectacular success in lifting hundreds of millions of people out poverty. The Chinese people are hard working and innovative. One of their genius moves has been to create a dual-currency structure: the onshore and offshore yuan. This dual currency structure is an absolutely brilliant solution - it affords the Chinese leadership tremendous opportunity to manage their own growth while circumventing the Impossible Trinity. What is hard for me understand is why Econ PhDs with obvious evidence in front of them continue to disregard reality. https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Impossible_trinity https://en.wikipedia.org/wiki/Impossible_trinity https://en.wikipedia.org/wiki/Internationalization_of_the_renminbi https://en.wikipedia.org/wiki/Internationalization_of_the_re...
  • LargoLasskhyfv 6y ago
    Because of https://en.wikipedia.org/wiki/Sunk_cost#Loss_aversion_and_the_sunk_cost_fallacy https://en.wikipedia.org/wiki/Sunk_cost#Loss_aversion_and_th... & https://en.wikipedia.org/wiki/Face_(sociological_concept) https://en.wikipedia.org/wiki/Face_(sociological_concept)
• hintymad 6y ago
  Exactly. With supply chain gone, so is the pipeline of training and producing world-class engineers, and of course the ecosystem of innovating in multiple industries. Looking back 100 years, we can see that the British thought that Americans were manufacturing low-end and low-quality stuff, and the glory of their British empire could last forever if their elites could control finance and politics. Well, it turns out what matters is productivity and innovation, and why on earth would the smart people in a country who owns end-to-end supply chains would ask for innovation another country who owns merely "management"? Building a plane is hard, but possible. With large enough a market, a nation will be able to afford, and more importantly will have every reason to, conducting millions of rigorous experiments to figure out all the key technologies, be it manufacturing process, optimal parameters for air dynamics, or materials. BTW, in case someone forgets, manufacturing at low cost is the hallmark of industrialization. It makes no sense for Americans to snort that Chinese could make things at a fraction of the cost, just as it makes no sense for the British to despise what American could mass produce 100 years ago.
• Gibbon1 6y ago
  > economy who's main advantage is people there will be desperate enough to work for low wages That was Thacher's cunning plan. Break the unions and heavy industry. And then out compete Germany and France in the common market based on lower wages. Did not work at all.
• billfruit 6y ago
  But didn't other developed countries like the UK make a transition from manufacturing to meta industries like finance/technology licencing/intellectual property?.
  • lumost 6y ago
    I'm not very familiar with the current economy of the UK, but a glance at the gini coefficient shows a similar trend.
• sangnoir 6y ago
  > It boggles the mind that anyone could have believed that replacing many of the core productive bits of the economy with fluff like management (and ownership), finance, and hospitality would lead to anything but weakness. It works well in the micro, but not the macro. Apple is a excellent example of this being ridiculously profitable: management, finance, R&D, engineering and all "high value" work is in the US, and the "boring" manufacturing stuff is handled offshore. This works very well for shareholders, management and skilled employees. The American machinists and die-makers (who don't get a say) lose out, and over time, their skills will be lost as the experienced workers retire without passing on their knowledge - then the whole industry suffers.
  • pydry 6y ago
    China's strategy was always to try to dominate the "boring" work on the low end of the value chain and then ratchet their way up the value chain, cutting out foreign competitors at every stage - first in the domestic market and then in foreign markets. They've now almost reached the top of the value chain after about 30-35 years of diligently following this strategy. They can manufacture phones every bit as good as Apple's without help. China used to need Apple more than Apple needs China. Now, Apple needs China more than Apple. Apple can't move its supply chain home without eye watering costs. It won't be long before Apple phones start to lag Chinese phones technologically and it won't be long before China can start threatening sanctions that hurt the US more than they'd hurt China.
    • sangnoir 6y ago
      This has been apparent for a long time, but decision-makers in the US have greatly reduced the horizons of time-periods they care about (very little long-term strategic thinking both politically, especially the executive branch, and for company executives & wall street). So if a tactic works now and brings in results now to ensure the bonus or re-election, then it's implemented regardless of long-term harm, since someone else will deal with that at some point in the future. China took advantage of America's growing individual greed and short-termism. American companies know this, but they can't help themselves.