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I work in one of the last remaining large industrial manufacturing labs in the US. Some of my colleagues worked at Bell before that was shuttered. My sense fro

I work in one of the last remaining large industrial manufacturing labs in the US. Some of my colleagues worked at Bell before that was shuttered. 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?!’

version_five 3y ago
I work on projects that would get 8-9 figure investments if we were doing this in APEC Are the apac equivalents of those projects generating returns commensurate with the extra investment? Or is it a strategic choice that they typically focus more on advanced manufacturing while the US focuses more on software? I'm just wondering what the right way to think about this is.
- flybrand 3y ago
  Both. They get high returns and there is high social benefit. Because the US thinks of industry as ‘dirty’ we’ve lost touch with how valuable these jobs can be. In the US the returns would have longer duration and would not be viewed as ‘important’ bc the business isn’t suitable for a FANG exit.
joe_the_user 3y ago
Yeah, "financialization" is absolutely the answer and the articles' claim of lack institutional integration (or whatever) seems wrong. You can look at how Boeing gutted it's highly skilled Pacific North West operations to move lower skilled, lower paid areas elsewhere and generalize this to a multitude of similar industries.
- sanxiyn 3y ago
  2001 Boeing paper, Out-Sourced Profits: The Cornerstone of Successful Subcontracting, is a required reading. This article gives a good introduction. https://berthub.eu/articles/posts/how-tech-loses-out/ https://berthub.eu/articles/posts/how-tech-loses-out/
- liquidpele 3y ago
  I think that’s only half right… the financialization is driven via a priority of short term profits that are incentivized by the market to executives. They play the BS game to just get rich and then dip, company be damned in the long run.
  - CPLX 3y ago
    This is the closest thing to an answer. The economy has essentially been ruined by looting. People finding ways to strip out assets from companies. Variations on this include private equity racking up debt and bankrupting companies. Executives doing stock buybacks to boost their options while hollowing out the company's resources. Hedge fund management fees. It's everywhere.
    - lumost 3y ago
      Is the looting behavior just a response to US industrial policy? US policy has made US manufacturing tenuous for decades. Meanwhile US policy has also provided the means and mechanisms to ship manufacturing abroad. Given the above, isn’t the optimal strategy to maximize profit extraction in order to invest in new industries?
      - TheOtherHobbes 3y ago
        It's a response to a planetary economy incentivised to reward resource extraction, rent seeking, and individual greed over collective intelligence and creative strategy. The US corporate right evangelised this culture as "freedom", and now it's being eaten from the inside out by it.
      - 3y ago
kranke155 3y ago
The production of physical goods - physical capitalism - no longer had anywhere to go really when most people employed started having a decent standard of living, so we looked for ways to continue infinite GDP growth and we found it in financialisation. It worked but only by destroying/rotting away everything else.
- pphysch 3y ago
  This explanation doesn't quite convince me, because if this really were the primary issue, USA could have globalized its consumer base not just for low quality products and pop culture, but high quality development. I think the root problem is political: recognizing that USA's extraordinarily successful mid-century economic model was the result of a compromise by the ruling capitalists to avoid facing a European-style revolution (e.g. Bolshevism) at home. As the Cold War reached its heights in the early 60s, that delicate equilibrium was destroyed, and the capitalists had a new mandate. State regulation, labor unions went from "necessary evil to avoid revolution" to "evil", and the robber barons could return to their early 20th century form. Thus we got the 70s and endless financialization.
  - kranke155 3y ago
    I think that’s also fairly accurate. I always had a weird feeling on how the Scandinavian countries were in close contact with the Soviet Union and that might have influenced them to follow a more hybrid societal model than other Western countries. I haven’t done enough research to explain it either way. I do think physical capitalism exhausted itself, but it was more in the 90s and 00s that we see more psychological capitalism arriving with the first internet products that have no physicality associated with them - social media and networks. Then we have a real (or apparent) exhaustion of physical capitalism.
    - SyzygistSix 3y ago
      It is fairly typical for poor, undeveloped countries to use a more centrally planned economy. The sheer lack of capital, as well as business and industrial know-how dictates that. Socialism and Communist parties were relevant in the 70s and 80s in Western Europe but later on were rejected as they were no longer relevant to their developed economies. It makes me recall one of my favorite cars that was never built, the Norwegian Troll. The government decided not to expend their limited capital to the company as they could trade fish for Ladas to get cars.
fastball 3y ago
Yes, I think the correlation between MBA popularity as a degree and failing of US industry is fairly causal. It's the same in universities, where more and more time and money is spent on "management" (extracting value) and less and less is spent on actually teaching stuff (creating value). Unsurprisingly, when a (somewhat large) portion of the population in a high productivity society realizes they can just skim off the top without doing any actually useful work, bad things happen.
0xDEAFBEAD 3y ago
An important point is that the recent wave of globalization has been very good for poor people in developing countries outside of the US. From the perspective of US workers, outsourcing looks greedy. From the perspective of foreign workers, outsourcing looks altruistic. https://ourworldindata.org/extreme-poverty-in-brief https://ourworldindata.org/extreme-poverty-in-brief Even with recent globalization, Americans are still far richer than most people in other countries. I believe those people matter just as much as Americans do.
- rizwank 3y ago
  An incredibly important point that gets missed very often
  - barry-cotter 3y ago
    That people don’t care about those in developing countries does not mean they missed it.
  - h0l0cube 3y ago
    The other point that’s often forgotten is that labor costs have risen, and shipping has gotten cheaper. This is just how economics plays out. Protectionism can be great for national security and employment, but people would have to stop expecting things to be cheap.
- no_wizard 3y ago
  that being said, there are ways this could be beneficial both ways instead of one way. I’d also argue that it’s perfectly fine for the US and any other nation to think in terms of putting their domestic economy first, regardless of anything else
  - 0xDEAFBEAD 3y ago
    As I stated elsewhere, America's median income, adjusted for cost of living, is one of the world's highest. Americans benefit from cheap goods from other countries. It might be socially acceptable to put the domestic economy first, but that doesn't mean it is right. Ultimately, it's basically the same as the "looking out for #1" philosophy that rich people allegedly have, which is being condemned in this thread -- but at the rich country level rather than the rich individual level. Try this calculator: https://howrichami.givingwhatwecan.org/how-rich-am-i https://howrichami.givingwhatwecan.org/how-rich-am-i
supportengineer 3y ago
The answer is always greed from the top. The concentration of wealth.
di4na 3y ago
All I will add is... You are close to realising the problem. Financialization is a consequence not a cause. The cause is demographic. Why and how did pension funds grew so much need to own everything and get money? Spoiler: this happened in steps with Boomers investing in their retirement. Because they were so numerous it flooded everything. Second Spoiler: they also had (and still have) the political power by sheer number, which warped the regulatory environment.
aa_is_op 3y ago
Correct. The problem with "America's manufacturating problem" is it's oligarchic class rise. The rich control the US through favorable laws and protection. You need to remove the scabs at the top to have a healthy economic comeback.
gWPVhyxPHqvk 3y ago
This is an anecdote. R&D as a percent of US GDP has never been higher than it has been in the 2020s. Even more than back in the 60s. The source of the R&D has changed (less federal government) but it’s not financialization. https://ncses.nsf.gov/pubs/nsf23339#:~:text=The%20ratio%20of%20U.S.%20research,funding%20sources%20for%20domestic%20R%26D https://ncses.nsf.gov/pubs/nsf23339#:~:text=The%20ratio%20of....
- mensetmanusman 3y ago
  https://blog.redpathcpas.com/research-and-development-tax-credit?hs_amp=true https://blog.redpathcpas.com/research-and-development-tax-cr... It would be interesting if there was a breakdown by technology sector. Ie manufacturing R&D vs. software development R&D.

version_five 3y ago

I work on projects that would get 8-9 figure investments if we were doing this in APEC Are the apac equivalents of those projects generating returns commensurate with the extra investment? Or is it a strategic choice that they typically focus more on advanced manufacturing while the US focuses more on software? I'm just wondering what the right way to think about this is.

flybrand 3y ago
Both. They get high returns and there is high social benefit. Because the US thinks of industry as ‘dirty’ we’ve lost touch with how valuable these jobs can be. In the US the returns would have longer duration and would not be viewed as ‘important’ bc the business isn’t suitable for a FANG exit.

joe_the_user 3y ago

Yeah, "financialization" is absolutely the answer and the articles' claim of lack institutional integration (or whatever) seems wrong. You can look at how Boeing gutted it's highly skilled Pacific North West operations to move lower skilled, lower paid areas elsewhere and generalize this to a multitude of similar industries.

sanxiyn 3y ago
2001 Boeing paper, Out-Sourced Profits: The Cornerstone of Successful Subcontracting, is a required reading. This article gives a good introduction. https://berthub.eu/articles/posts/how-tech-loses-out/ https://berthub.eu/articles/posts/how-tech-loses-out/
liquidpele 3y ago
I think that’s only half right… the financialization is driven via a priority of short term profits that are incentivized by the market to executives. They play the BS game to just get rich and then dip, company be damned in the long run.
- CPLX 3y ago
  This is the closest thing to an answer. The economy has essentially been ruined by looting. People finding ways to strip out assets from companies. Variations on this include private equity racking up debt and bankrupting companies. Executives doing stock buybacks to boost their options while hollowing out the company's resources. Hedge fund management fees. It's everywhere.
  - lumost 3y ago
    Is the looting behavior just a response to US industrial policy? US policy has made US manufacturing tenuous for decades. Meanwhile US policy has also provided the means and mechanisms to ship manufacturing abroad. Given the above, isn’t the optimal strategy to maximize profit extraction in order to invest in new industries?
    - TheOtherHobbes 3y ago
      It's a response to a planetary economy incentivised to reward resource extraction, rent seeking, and individual greed over collective intelligence and creative strategy. The US corporate right evangelised this culture as "freedom", and now it's being eaten from the inside out by it.
    - 3y ago

kranke155 3y ago

The production of physical goods - physical capitalism - no longer had anywhere to go really when most people employed started having a decent standard of living, so we looked for ways to continue infinite GDP growth and we found it in financialisation. It worked but only by destroying/rotting away everything else.

pphysch 3y ago
This explanation doesn't quite convince me, because if this really were the primary issue, USA could have globalized its consumer base not just for low quality products and pop culture, but high quality development. I think the root problem is political: recognizing that USA's extraordinarily successful mid-century economic model was the result of a compromise by the ruling capitalists to avoid facing a European-style revolution (e.g. Bolshevism) at home. As the Cold War reached its heights in the early 60s, that delicate equilibrium was destroyed, and the capitalists had a new mandate. State regulation, labor unions went from "necessary evil to avoid revolution" to "evil", and the robber barons could return to their early 20th century form. Thus we got the 70s and endless financialization.
- kranke155 3y ago
  I think that’s also fairly accurate. I always had a weird feeling on how the Scandinavian countries were in close contact with the Soviet Union and that might have influenced them to follow a more hybrid societal model than other Western countries. I haven’t done enough research to explain it either way. I do think physical capitalism exhausted itself, but it was more in the 90s and 00s that we see more psychological capitalism arriving with the first internet products that have no physicality associated with them - social media and networks. Then we have a real (or apparent) exhaustion of physical capitalism.
  - SyzygistSix 3y ago
    It is fairly typical for poor, undeveloped countries to use a more centrally planned economy. The sheer lack of capital, as well as business and industrial know-how dictates that. Socialism and Communist parties were relevant in the 70s and 80s in Western Europe but later on were rejected as they were no longer relevant to their developed economies. It makes me recall one of my favorite cars that was never built, the Norwegian Troll. The government decided not to expend their limited capital to the company as they could trade fish for Ladas to get cars.

fastball 3y ago

Yes, I think the correlation between MBA popularity as a degree and failing of US industry is fairly causal. It's the same in universities, where more and more time and money is spent on "management" (extracting value) and less and less is spent on actually teaching stuff (creating value). Unsurprisingly, when a (somewhat large) portion of the population in a high productivity society realizes they can just skim off the top without doing any actually useful work, bad things happen.

0xDEAFBEAD 3y ago

An important point is that the recent wave of globalization has been very good for poor people in developing countries outside of the US. From the perspective of US workers, outsourcing looks greedy. From the perspective of foreign workers, outsourcing looks altruistic. https://ourworldindata.org/extreme-poverty-in-brief https://ourworldindata.org/extreme-poverty-in-brief Even with recent globalization, Americans are still far richer than most people in other countries. I believe those people matter just as much as Americans do.

rizwank 3y ago
An incredibly important point that gets missed very often
- barry-cotter 3y ago
  That people don’t care about those in developing countries does not mean they missed it.
- h0l0cube 3y ago
  The other point that’s often forgotten is that labor costs have risen, and shipping has gotten cheaper. This is just how economics plays out. Protectionism can be great for national security and employment, but people would have to stop expecting things to be cheap.
no_wizard 3y ago
that being said, there are ways this could be beneficial both ways instead of one way. I’d also argue that it’s perfectly fine for the US and any other nation to think in terms of putting their domestic economy first, regardless of anything else
- 0xDEAFBEAD 3y ago
  As I stated elsewhere, America's median income, adjusted for cost of living, is one of the world's highest. Americans benefit from cheap goods from other countries. It might be socially acceptable to put the domestic economy first, but that doesn't mean it is right. Ultimately, it's basically the same as the "looking out for #1" philosophy that rich people allegedly have, which is being condemned in this thread -- but at the rich country level rather than the rich individual level. Try this calculator: https://howrichami.givingwhatwecan.org/how-rich-am-i https://howrichami.givingwhatwecan.org/how-rich-am-i

supportengineer 3y ago

The answer is always greed from the top. The concentration of wealth.

di4na 3y ago

All I will add is... You are close to realising the problem. Financialization is a consequence not a cause. The cause is demographic. Why and how did pension funds grew so much need to own everything and get money? Spoiler: this happened in steps with Boomers investing in their retirement. Because they were so numerous it flooded everything. Second Spoiler: they also had (and still have) the political power by sheer number, which warped the regulatory environment.

aa_is_op 3y ago

Correct. The problem with "America's manufacturating problem" is it's oligarchic class rise. The rich control the US through favorable laws and protection. You need to remove the scabs at the top to have a healthy economic comeback.

gWPVhyxPHqvk 3y ago

This is an anecdote. R&D as a percent of US GDP has never been higher than it has been in the 2020s. Even more than back in the 60s. The source of the R&D has changed (less federal government) but it’s not financialization. https://ncses.nsf.gov/pubs/nsf23339#:~:text=The%20ratio%20of%20U.S.%20research,funding%20sources%20for%20domestic%20R%26D https://ncses.nsf.gov/pubs/nsf23339#:~:text=The%20ratio%20of....

mensetmanusman 3y ago
https://blog.redpathcpas.com/research-and-development-tax-credit?hs_amp=true https://blog.redpathcpas.com/research-and-development-tax-cr... It would be interesting if there was a breakdown by technology sector. Ie manufacturing R&D vs. software development R&D.