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That’s a little naive. No political entity in history has been able to reverse economic decline by looking at what it did best in an earlier age and try to do t

by pm90 5y ago

That’s a little naive. No political entity in history has been able to reverse economic decline by looking at what it did best in an earlier age and try to do that again. There are other countries that are simply better than the US at doing certain things. I don’t understand why Americans can’t just accept that. Embrace the things we’re really good at, work with others to get from them the things they’re good at.

TeMPOraL 5y ago
There's arguably a strategic need to keep at least some expertise and a minimal operational capacity even for things that are cheaper to import[0]. COVID-19 demonstrated how fragile supply chains are, and that was just a global emergency, and not purposeful economic warfare. America is good at things at the edge of the value chain. High-end goods. Services. Demand manufacturing[1]. Things that have value during good times, where the earlier links in the chain are healthy, and consumers have plenty of money to spend. In times of crisis, all this can evaporate quickly. Also, I feel it might be that the kind of jobs America is good at are different from the lower-level jobs in ways that are not conductive to having a healthy middle class. I've read some convincingly-sounding arguments going in this direction, but I can't recall any right now, and I haven't thought about this topic hard enough to come up with one myself. -- [0] - This is not an unprecedented idea. See Boeing as a point of comparison. From what I read, the company would've been dead long ago if not for government spending. This spending looks wasteful if you look at what gets produced, but not when you realize it's really a way to ensure that manufacturing plants and people knowing how to use them are available in case they're needed for war production. [1] - Without being too bitter about it in this thread, I feel quite a lot of ways US brings in money are fads and artificial scarcities, created using marketing and intellectual property laws.
- pm90 5y ago
  I agree with your assessment but I don’t think the solution is to try and artificially shore up domestic manufacturing capacity to the extent that it was before. There also isn’t any reason to believe that those that supply us with what we want desire the kind of economic warfare you’re describing. As for the middle class: I do agree here, we made a huge mistake gutting the manufacturing sector too quickly. But I suspect where we failed was in providing assistance to the affected communities rather than artificially trying to prop up manufacturing. The increased savings from manufacturing abroad could have been used to fund better healthcare and educational opportunities. Provide some kind of unemployment assistance. Instead all the rewards disproportionately went to a small minority of the owner/shareholder class.
  - TeMPOraL 5y ago
    > I don’t think the solution is to try and artificially shore up domestic manufacturing capacity to the extent that it was before. I agree that fully internalizing this kind of manufacturing is counterproductive. I feel that the optimum level is a limited capacity that could be scaled up quickly in an emergency. It's less efficient short-term, but resiliency always has some costs. > Instead all the rewards disproportionately went to a small minority of the owner/shareholder class. I feel there's some confusion in the way offshoring savings were, and are, being talked about. Possibly a purposeful confusion. The way I see it, one can't say "we're saving money by offshoring", where "we" means "our country/our economy". It's the private owners/shareholders that are saving money. The country only saves if they get to appropriate those savings, e.g. through a tax. If companies start to offshore and the government doesn't adapt taxation, then the country is actually losing on this.
pydry 5y ago
>There are other countries that are simply better than the US at doing certain things. I don’t understand why Americans can’t just accept that. This is essentially a reworded version of the "ricardian law of comparative advantage" which was treated as gospel as an economic theory in the 1990s-early 2000s. It's almost dead today. The widely believed built in presumption that comparative advantage was static and unchangrable essentially led to American manufacturing being siphoned off overseas to countries that did not share this view. Almost all policymakers are now starting to treat this as a geopolitical threat.
- thow-58d4e8b 5y ago
  To expand a bit - Ricardian comparative advantage argument relies on the following assumptions: - no transportation costs - no unemployment - barter economy - 100% fungible labor - farmer, teacher, chemical engineer, doctor - they're all the same and can switch between jobs instantly, and immediately attain the level of productivity within that sector - prices are 100% determined by labor costs - demand for various types of items is static, and never changes - the demand structure is the same across all countries - i.e. if British prefer tea to coffee, we assume all countries prefer tea to coffee It's not just a "spherical cow" theory, it's more akin to "if a spherical cow rolls frictionlessly down a valley described by a parabola, then it will oscillate forever". True, but useless. Keynes, as usual, is ahead of the pack - calling out the theory's unrealistic assumptions, and predicting (in 1930s) that not the production, but the interest rates will do the adjustments - leading to persistent trade imbalances and move the economy further from full employment. Which is exactly what happened
  - germandiago 5y ago
    I recommend a read of the Austrian School of economy. Not as influential as Keynes since he is at the top. But for me, the most correct theories (without being an expert in the matter) come from there.
    - pydry 5y ago
      Comparative advantage (or rather, the fallacious notion that it is inevitable/static) is still weirdly treated as gospel by the Austrian school. E.g. https://mises.org/library/ricardian-law-comparative-advantage https://mises.org/library/ricardian-law-comparative-advantag... Austrians are a crotchety bunch and a bit stuck in their ways. They never really tried to explain the rise of China and are still somewhat in denial about it.

by pm90 5y ago

TeMPOraL 5y ago

There's arguably a strategic need to keep at least some expertise and a minimal operational capacity even for things that are cheaper to import[0]. COVID-19 demonstrated how fragile supply chains are, and that was just a global emergency, and not purposeful economic warfare. America is good at things at the edge of the value chain. High-end goods. Services. Demand manufacturing[1]. Things that have value during good times, where the earlier links in the chain are healthy, and consumers have plenty of money to spend. In times of crisis, all this can evaporate quickly. Also, I feel it might be that the kind of jobs America is good at are different from the lower-level jobs in ways that are not conductive to having a healthy middle class. I've read some convincingly-sounding arguments going in this direction, but I can't recall any right now, and I haven't thought about this topic hard enough to come up with one myself. -- [0] - This is not an unprecedented idea. See Boeing as a point of comparison. From what I read, the company would've been dead long ago if not for government spending. This spending looks wasteful if you look at what gets produced, but not when you realize it's really a way to ensure that manufacturing plants and people knowing how to use them are available in case they're needed for war production. [1] - Without being too bitter about it in this thread, I feel quite a lot of ways US brings in money are fads and artificial scarcities, created using marketing and intellectual property laws.

pm90 5y ago
I agree with your assessment but I don’t think the solution is to try and artificially shore up domestic manufacturing capacity to the extent that it was before. There also isn’t any reason to believe that those that supply us with what we want desire the kind of economic warfare you’re describing. As for the middle class: I do agree here, we made a huge mistake gutting the manufacturing sector too quickly. But I suspect where we failed was in providing assistance to the affected communities rather than artificially trying to prop up manufacturing. The increased savings from manufacturing abroad could have been used to fund better healthcare and educational opportunities. Provide some kind of unemployment assistance. Instead all the rewards disproportionately went to a small minority of the owner/shareholder class.
- TeMPOraL 5y ago
  > I don’t think the solution is to try and artificially shore up domestic manufacturing capacity to the extent that it was before. I agree that fully internalizing this kind of manufacturing is counterproductive. I feel that the optimum level is a limited capacity that could be scaled up quickly in an emergency. It's less efficient short-term, but resiliency always has some costs. > Instead all the rewards disproportionately went to a small minority of the owner/shareholder class. I feel there's some confusion in the way offshoring savings were, and are, being talked about. Possibly a purposeful confusion. The way I see it, one can't say "we're saving money by offshoring", where "we" means "our country/our economy". It's the private owners/shareholders that are saving money. The country only saves if they get to appropriate those savings, e.g. through a tax. If companies start to offshore and the government doesn't adapt taxation, then the country is actually losing on this.

pydry 5y ago

>There are other countries that are simply better than the US at doing certain things. I don’t understand why Americans can’t just accept that. This is essentially a reworded version of the "ricardian law of comparative advantage" which was treated as gospel as an economic theory in the 1990s-early 2000s. It's almost dead today. The widely believed built in presumption that comparative advantage was static and unchangrable essentially led to American manufacturing being siphoned off overseas to countries that did not share this view. Almost all policymakers are now starting to treat this as a geopolitical threat.

thow-58d4e8b 5y ago
To expand a bit - Ricardian comparative advantage argument relies on the following assumptions: - no transportation costs - no unemployment - barter economy - 100% fungible labor - farmer, teacher, chemical engineer, doctor - they're all the same and can switch between jobs instantly, and immediately attain the level of productivity within that sector - prices are 100% determined by labor costs - demand for various types of items is static, and never changes - the demand structure is the same across all countries - i.e. if British prefer tea to coffee, we assume all countries prefer tea to coffee It's not just a "spherical cow" theory, it's more akin to "if a spherical cow rolls frictionlessly down a valley described by a parabola, then it will oscillate forever". True, but useless. Keynes, as usual, is ahead of the pack - calling out the theory's unrealistic assumptions, and predicting (in 1930s) that not the production, but the interest rates will do the adjustments - leading to persistent trade imbalances and move the economy further from full employment. Which is exactly what happened
- germandiago 5y ago
  I recommend a read of the Austrian School of economy. Not as influential as Keynes since he is at the top. But for me, the most correct theories (without being an expert in the matter) come from there.
  - pydry 5y ago
    Comparative advantage (or rather, the fallacious notion that it is inevitable/static) is still weirdly treated as gospel by the Austrian school. E.g. https://mises.org/library/ricardian-law-comparative-advantage https://mises.org/library/ricardian-law-comparative-advantag... Austrians are a crotchety bunch and a bit stuck in their ways. They never really tried to explain the rise of China and are still somewhat in denial about it.