8 ms·

> A strong dollar made imports even cheaper by comparison I think that summarizes the article. It has been cheaper to import, so we do. The strong dollar pol

> A strong dollar made imports even cheaper by comparison I think that summarizes the article. It has been cheaper to import, so we do. The strong dollar policy supports some industries at the expense of others.

bluGill 3y ago
I'd say MBAs driving for quarterly numbers were unable to manage the business cycle is a better summary.
- edgyquant 3y ago
  That’s just corporate political shade throwing. Fiscal policy has, for a few generations now, incentivized trade deficits for foreign policy reasons. Overtime this results in offshoring of all industry.
- missedthecue 3y ago
  This is as empty as saying trade unions caused it. Does Japan not have MBAs? It's all about comparative advantage.
  - bluGill 3y ago
    Apparently Japan's MBAs can manage for longer term. At least in this one industry.
  - badpun 3y ago
    From what I've heard, Japan has very different corporate culture, more focused on loyalty and social stability, than on maximizing profit. They can even keep unprofitable divisions of the company, because they don't want to fire people who work in them. Would be nice if someone with first-hand knowledge of Japanese corporate world could confirm/deny it.
- maxglute 3y ago
  Article says machinist industry failed to lobby the same way as US steel. Not that US steel is doing healthy. But at some point it's the govs foresight / job to reign in MBAs via protectionism and industrial policy for strategic sectors. As other's have mentioned, JP has MBAs too. Maybe lesson is JP Gov listened to Zaibatsu/conglomerate lobbying power.
edgyquant 3y ago
This is the answer to all American manufacturing woes. The dollar as a reserve currency gives the US a ton of global leverage but requires a trade deficit thus it comes at the expense of domestic industries.
- specialist 3y ago
  I'd love to understand statements like this. Lemme try: Because trade deficits induce demand for dollars? Like how Japan and now China hold a bajillion US dollars? So if the US had (prolonged) trade surplus, no one would be holding dollars? But wouldn't trade partners still need US dollars to buy US goods? Like the situation post-WWII? So then we'd "loan" partners US dollars to buy our stuff? Aiugh. My brain just broke. How does a noob like me learn about these systems. I know it all probably makes sense to the learned. But with my folk (mis)understanding, these claims sound counterintuitive. Thanks.
  - maxglute 3y ago
    https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege
  - prettychill 3y ago
    I found this blog post to be quite interesting https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/
  - depereo 3y ago
    I think of it as another type of https://en.wikipedia.org/wiki/Resource_curse https://en.wikipedia.org/wiki/Resource_curse
  - fuzztester 3y ago
    "Aiugh. My brain just broke. How does a noob like me learn about these systems. I know it all probably makes sense to the learned. But with my folk (mis)understanding, these claims sound counterintuitive. Thanks. " don't worry, your intuition is right. you are on the right track when you say that your brain broke. you are more learned, or rather, more wise than those guys. because a lot of economics is BS, a hotchpotch of some art, craft, heuristics, observations and formulae, pretending to be a science. this is exactly why economics is known as "the dismal science", and why there is a saying that if you get 20 economists in a room and ask them the same question, you will get 20 different answers. (italics mine) I studied economics in high school for a whole year (11th grade). the course covered both microeconomics and macroeconomics. the Samuelson (MIT prof., IIRC) book was one of our text books. I did well in class, was among the top few students. I made some penetrating comments to which my teacher had no satisfactory answer. it was on a situation / question regarding OPEC (the oil cartel). from that time on, and also from subsequently reading economics articles and news now and then, I could intuit and piece together the opinions that I stated above. :) so, not to worry :)
ren_engineer 3y ago
cheaper when not including externalities(losing critical manufacturing capabilities), which is why a proper government would take action. But the problem is our government is heavily lobbied to not protect critical industries in the name of short term corporate profits. And in many cases our government is outright hostile to manufacturing by holding domestic producers to pollution/labor regulations but allowing imports from countries with no regulations
plagiarist 3y ago
Trade agreements have allowed importing from countries where human rights are (more of) an economic externality. Domestic manufacturers can really only compete on the ability to do small batches, higher tolerances, and quick turnaround; like for R&D projects or medical devices.
- loglog 3y ago
  The article specifically mentions that Japanese manufacturers could deliver tools much faster than US ones.
advisedwang 3y ago
Also that right after a drop in domestic machine tools demand due to recession American industry collapsed overall. It should be no surprise few machine tools are made when there's less domestic industry overall.
matthewdgreen 3y ago
To quote economist Brad Delong: "... tax cuts created a half decade of deficit, boosting need for government debt which attracted foreign capital and helping to send a false signal to Midwest manufacturers to shrink starting the hollowing out of what became Rust Belt." I think in the long term (and maybe short term) we will live to regret this error.
- psychlops 3y ago
  I don't understand this quote without more context. Five years of tax cut cycles does not seem abnormal, nor does it explain why only Midwest manufacturers received a (false) signal.
roenxi 3y ago
There are three aspects to this - cost of manufacturing in the US, cost of manufacturing + shipping in China and exchange rates. I do think the relative dollar strength is a factor, but Chinese labour was effectively free vs US labour. If someone is willing to do work for free, then the economy will give them work. The issue that the free marketeers have been railing about for approximately the last 50 years it seems like almost every major policy the US adopts increases the cost of manufacturing relative to a hypothetical entity that didn't do that. It has been a constant adjustment of labour law, environmental law, energy policy and financial regulation away from manufacturing. It is plain why US manufacturing isn't the global top dog. The real question is whether it is a bad outcome or not. Over the last 50 years China has improved their energy use by 1 UK economy per capita. IMO we should also ask more seriously if those regulations were worth it. A UK per capita energy is a lot of QoL improvements and it was linked to doing a lot of manufacturing. The US on the other hand is behaving politically like people are worse off than they were.
- chii 3y ago
  > It is plain why US manufacturing isn't the global top dog. i do believe the US still does high-end (but low volume) manufacturing. It's just mass manufacturing that went away.
- bmitc 3y ago
  > The real question is whether it is a bad outcome or not. It's definitely bad. The U.S. won't even have the world's biggest navy pretty soon because of that. And there are tons of scenarios where the U.S. is economically hosed because of some international conflict. Not only does the U.S. not make things, it doesn't know how to.
  - mikeyouse 3y ago
    We should absolutely increase our industrial capacity but who gives a shit about the biggest Navy? Outside of the problem countries like China and Russia, we have military alliances with nearly every country on earth.. US has somewhere around 450 Navy vessels.. China has closer to 350 but is rapidly adding new tonnage. Sounds ominous! Except Japan has another 150, Australia has 50 more, the UK has 70 more, Spain has 150, France 180, Korea has 160, if some war ever comes down to the sheer number of available ships -- it literally won't matter who has more since the nukes will have flown long before some Canadian frigate is exchanging fire with some Chinese gunboat.

bluGill 3y ago

I'd say MBAs driving for quarterly numbers were unable to manage the business cycle is a better summary.

edgyquant 3y ago
That’s just corporate political shade throwing. Fiscal policy has, for a few generations now, incentivized trade deficits for foreign policy reasons. Overtime this results in offshoring of all industry.
missedthecue 3y ago
This is as empty as saying trade unions caused it. Does Japan not have MBAs? It's all about comparative advantage.
- bluGill 3y ago
  Apparently Japan's MBAs can manage for longer term. At least in this one industry.
- badpun 3y ago
  From what I've heard, Japan has very different corporate culture, more focused on loyalty and social stability, than on maximizing profit. They can even keep unprofitable divisions of the company, because they don't want to fire people who work in them. Would be nice if someone with first-hand knowledge of Japanese corporate world could confirm/deny it.
maxglute 3y ago
Article says machinist industry failed to lobby the same way as US steel. Not that US steel is doing healthy. But at some point it's the govs foresight / job to reign in MBAs via protectionism and industrial policy for strategic sectors. As other's have mentioned, JP has MBAs too. Maybe lesson is JP Gov listened to Zaibatsu/conglomerate lobbying power.

edgyquant 3y ago

This is the answer to all American manufacturing woes. The dollar as a reserve currency gives the US a ton of global leverage but requires a trade deficit thus it comes at the expense of domestic industries.

specialist 3y ago
I'd love to understand statements like this. Lemme try: Because trade deficits induce demand for dollars? Like how Japan and now China hold a bajillion US dollars? So if the US had (prolonged) trade surplus, no one would be holding dollars? But wouldn't trade partners still need US dollars to buy US goods? Like the situation post-WWII? So then we'd "loan" partners US dollars to buy our stuff? Aiugh. My brain just broke. How does a noob like me learn about these systems. I know it all probably makes sense to the learned. But with my folk (mis)understanding, these claims sound counterintuitive. Thanks.
- maxglute 3y ago
  https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege
- prettychill 3y ago
  I found this blog post to be quite interesting https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/
- depereo 3y ago
  I think of it as another type of https://en.wikipedia.org/wiki/Resource_curse https://en.wikipedia.org/wiki/Resource_curse
- fuzztester 3y ago
  "Aiugh. My brain just broke. How does a noob like me learn about these systems. I know it all probably makes sense to the learned. But with my folk (mis)understanding, these claims sound counterintuitive. Thanks. " don't worry, your intuition is right. you are on the right track when you say that your brain broke. you are more learned, or rather, more wise than those guys. because a lot of economics is BS, a hotchpotch of some art, craft, heuristics, observations and formulae, pretending to be a science. this is exactly why economics is known as "the dismal science", and why there is a saying that if you get 20 economists in a room and ask them the same question, you will get 20 different answers. (italics mine) I studied economics in high school for a whole year (11th grade). the course covered both microeconomics and macroeconomics. the Samuelson (MIT prof., IIRC) book was one of our text books. I did well in class, was among the top few students. I made some penetrating comments to which my teacher had no satisfactory answer. it was on a situation / question regarding OPEC (the oil cartel). from that time on, and also from subsequently reading economics articles and news now and then, I could intuit and piece together the opinions that I stated above. :) so, not to worry :)

ren_engineer 3y ago

cheaper when not including externalities(losing critical manufacturing capabilities), which is why a proper government would take action. But the problem is our government is heavily lobbied to not protect critical industries in the name of short term corporate profits. And in many cases our government is outright hostile to manufacturing by holding domestic producers to pollution/labor regulations but allowing imports from countries with no regulations

plagiarist 3y ago

Trade agreements have allowed importing from countries where human rights are (more of) an economic externality. Domestic manufacturers can really only compete on the ability to do small batches, higher tolerances, and quick turnaround; like for R&D projects or medical devices.

loglog 3y ago
The article specifically mentions that Japanese manufacturers could deliver tools much faster than US ones.

advisedwang 3y ago

Also that right after a drop in domestic machine tools demand due to recession American industry collapsed overall. It should be no surprise few machine tools are made when there's less domestic industry overall.

matthewdgreen 3y ago

To quote economist Brad Delong: "... tax cuts created a half decade of deficit, boosting need for government debt which attracted foreign capital and helping to send a false signal to Midwest manufacturers to shrink starting the hollowing out of what became Rust Belt." I think in the long term (and maybe short term) we will live to regret this error.

psychlops 3y ago
I don't understand this quote without more context. Five years of tax cut cycles does not seem abnormal, nor does it explain why only Midwest manufacturers received a (false) signal.

roenxi 3y ago

There are three aspects to this - cost of manufacturing in the US, cost of manufacturing + shipping in China and exchange rates. I do think the relative dollar strength is a factor, but Chinese labour was effectively free vs US labour. If someone is willing to do work for free, then the economy will give them work. The issue that the free marketeers have been railing about for approximately the last 50 years it seems like almost every major policy the US adopts increases the cost of manufacturing relative to a hypothetical entity that didn't do that. It has been a constant adjustment of labour law, environmental law, energy policy and financial regulation away from manufacturing. It is plain why US manufacturing isn't the global top dog. The real question is whether it is a bad outcome or not. Over the last 50 years China has improved their energy use by 1 UK economy per capita. IMO we should also ask more seriously if those regulations were worth it. A UK per capita energy is a lot of QoL improvements and it was linked to doing a lot of manufacturing. The US on the other hand is behaving politically like people are worse off than they were.

chii 3y ago
> It is plain why US manufacturing isn't the global top dog. i do believe the US still does high-end (but low volume) manufacturing. It's just mass manufacturing that went away.
bmitc 3y ago
> The real question is whether it is a bad outcome or not. It's definitely bad. The U.S. won't even have the world's biggest navy pretty soon because of that. And there are tons of scenarios where the U.S. is economically hosed because of some international conflict. Not only does the U.S. not make things, it doesn't know how to.
- mikeyouse 3y ago
  We should absolutely increase our industrial capacity but who gives a shit about the biggest Navy? Outside of the problem countries like China and Russia, we have military alliances with nearly every country on earth.. US has somewhere around 450 Navy vessels.. China has closer to 350 but is rapidly adding new tonnage. Sounds ominous! Except Japan has another 150, Australia has 50 more, the UK has 70 more, Spain has 150, France 180, Korea has 160, if some war ever comes down to the sheer number of available ships -- it literally won't matter who has more since the nukes will have flown long before some Canadian frigate is exchanging fire with some Chinese gunboat.