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One important cause of comparative advantage is cheap labor. Or perhaps I should say comparative "advantage" because cheap labor is actually bad from society's

by csense 2y ago

One important cause of comparative advantage is cheap labor. Or perhaps I should say comparative "advantage" because cheap labor is actually bad from society's point of view! It used to be that a person in the US could graduate from high school and get a factory job that provided enough income to have a house with a yard, a non-working spouse, and children. Then the factories moved overseas to exploit the comparative advantage of cheap labor. If you have a tariff, it undoes the advantage that cheap labor used to provide. Operating in a society that pays its workers well is ultimately to business's advantage. Workers who have more money spend more money, they generally buy more products at higher prices and higher margins. Social and political stability happens when most people feel the system is working for them, they have a stake in the status quo, and they have something to lose. I don't dispute the OP article's thesis, that tariffs cause some loss of economic inefficiency. The question is whether the gain is worth the cost.

acdha 2y ago
> It used to be that a person in the US could graduate from high school and get a factory job that provided enough income to have a house with a yard, a non-working spouse, and children. This is more mythology than reality. The areas where it came the closest to being true excluded over half the population (women, non-white men) and were in industries and times where the U.S. had an enormous advantage over bombed out, financially precarious European competitors while our high upper-bracket tax rates and large numbers of government jobs provided strong support for the economy. Tariffs can’t get us back there, and alone they can’t even get close because what you really need are investments in a support web of infrastructure, education, and policy over time. That looks more like what Biden did with the CHIPS act where they invested in the factories, employees, committed to doing so long enough to make a multibillion dollar investment safe, and there was no talk of tariffs before alternatives existed. In the cases where tariffs make sense, they’re a limited part of a larger strategy.
- briHass 2y ago
  I'm a fan of CHIPS, but let's not pretend that doesn't have some geo-political externalities as well. We're going to be paying a steep price for trying to shove the (outsourcing real manufacturing) genie back in the bottle. Either we put it all on the National Debt IoU or we cold turkey our cheap good addiction.
- csense 2y ago
  > what Biden did with the CHIPS act where they invested in the factories, employees, committed to doing so long enough to make a multibillion dollar investment safe Don't get me started on the CHIPS act. I was a true believer in it when it passed. Finally -- finally! -- people outside MAGA were recognizing the problem and trying to do something about it. I made a medium-sized bet on INTC when Gelsinger, an engineering prodigy, took the helm after decades of business leaders who only cared about the money let the company's technical capabilities rot. The stock had a pretty attractive dividend yield, the new CEO was energetically reversing that trend. I was extremely enthusiastic when I heard the company was building a factory right in the Rust Belt (Columbus, Ohio), with a massive infusion of capital from the CHIPS act. We now know how things turned out. Intel continues to erode desktop market share to AMD, completely missed the AI boom, and doesn't seem to have a chance at the mobile or Apple ecosystems. That factory is now on pause. As a taxpayer, I'm not sure whether my tax dollars were wasted or not. As a shareholder, I just have to look up the ticker to know my bet lost a significant amount of money. In fact, /r/wallstreetbets was making fun of somebody who made a similar bet when he inherited his Grandma's life savings. I am absolutely livid that in Intel's 2024 annual report, Intel's leadership couldn't even put the location of their multi-billion-dollar chip factory in the correct country [1]. I wanted the CHIPS Act to work. Right now, it's very much looking like it didn't. Is more such investment really going to help us, or would it just be throwing away more money chasing a bad bet? [1] It sounds unbelievable, but it's right there on Page 14: the dot labeled "Ohio Future Sight (Wafer Fab)" is clearly in Canada. https://www.intc.com/filings-reports/annual-reports/content/0000050863-24-000010/0000050863-24-000010.pdf https://www.intc.com/filings-reports/annual-reports/content/...
  - acdha 1y ago
    Sure, I’m not saying it’s perfect by any means - only that bringing an industry back on shore is not something you can do quickly or without a careful plan.

by csense 2y ago

acdha 2y ago

> It used to be that a person in the US could graduate from high school and get a factory job that provided enough income to have a house with a yard, a non-working spouse, and children. This is more mythology than reality. The areas where it came the closest to being true excluded over half the population (women, non-white men) and were in industries and times where the U.S. had an enormous advantage over bombed out, financially precarious European competitors while our high upper-bracket tax rates and large numbers of government jobs provided strong support for the economy. Tariffs can’t get us back there, and alone they can’t even get close because what you really need are investments in a support web of infrastructure, education, and policy over time. That looks more like what Biden did with the CHIPS act where they invested in the factories, employees, committed to doing so long enough to make a multibillion dollar investment safe, and there was no talk of tariffs before alternatives existed. In the cases where tariffs make sense, they’re a limited part of a larger strategy.

briHass 2y ago
I'm a fan of CHIPS, but let's not pretend that doesn't have some geo-political externalities as well. We're going to be paying a steep price for trying to shove the (outsourcing real manufacturing) genie back in the bottle. Either we put it all on the National Debt IoU or we cold turkey our cheap good addiction.
csense 2y ago
> what Biden did with the CHIPS act where they invested in the factories, employees, committed to doing so long enough to make a multibillion dollar investment safe Don't get me started on the CHIPS act. I was a true believer in it when it passed. Finally -- finally! -- people outside MAGA were recognizing the problem and trying to do something about it. I made a medium-sized bet on INTC when Gelsinger, an engineering prodigy, took the helm after decades of business leaders who only cared about the money let the company's technical capabilities rot. The stock had a pretty attractive dividend yield, the new CEO was energetically reversing that trend. I was extremely enthusiastic when I heard the company was building a factory right in the Rust Belt (Columbus, Ohio), with a massive infusion of capital from the CHIPS act. We now know how things turned out. Intel continues to erode desktop market share to AMD, completely missed the AI boom, and doesn't seem to have a chance at the mobile or Apple ecosystems. That factory is now on pause. As a taxpayer, I'm not sure whether my tax dollars were wasted or not. As a shareholder, I just have to look up the ticker to know my bet lost a significant amount of money. In fact, /r/wallstreetbets was making fun of somebody who made a similar bet when he inherited his Grandma's life savings. I am absolutely livid that in Intel's 2024 annual report, Intel's leadership couldn't even put the location of their multi-billion-dollar chip factory in the correct country [1]. I wanted the CHIPS Act to work. Right now, it's very much looking like it didn't. Is more such investment really going to help us, or would it just be throwing away more money chasing a bad bet? [1] It sounds unbelievable, but it's right there on Page 14: the dot labeled "Ohio Future Sight (Wafer Fab)" is clearly in Canada. https://www.intc.com/filings-reports/annual-reports/content/0000050863-24-000010/0000050863-24-000010.pdf https://www.intc.com/filings-reports/annual-reports/content/...
- acdha 1y ago
  Sure, I’m not saying it’s perfect by any means - only that bringing an industry back on shore is not something you can do quickly or without a careful plan.