For decades many have been warning that if we kept sending American manufacturing jobs overseas, we'd eventully run out of work here. Mainstream economists have consistently mocked this concern....Free Trade will benefit us all, they've claimed. Just wait a little longer.
But now here we are. No jobs here, busy factories "over there."
We've heard the standard solutions...more training, more small business, more startups. Anything but looking at altering the Free Trade model itself.
Those who suggest such things are denigrated as "protectionists," and it's an article of faith that protection (tarriffs on imports) would kill the world economy.
Well now here's another view, from an insider who knows of what he speaks:
From a recent Business Week article "How America Can Create Jobs" by Andy Grove, former President, Chairman, & CEO of Intel:
Today, manufacturing employment in the U.S. computer industry is about 166,000, lower than it was before the first PC, the MITS Altair 2800, was assembled in 1975. Meanwhile, a very effective computer manufacturing industry has emerged in Asia, employing about 1.5 million workers—factory employees, engineers, and managers. The largest of these companies is Hon Hai Precision Industry, also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenues last year were $62 billion, larger than Apple, Microsoft, Dell, or Intel. Foxconn employs over 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard, Intel, and Sony.
Until a recent spate of suicides at Foxconn's giant factory complex in Shenzhen, China, few Americans had heard of the company. But most know the products it makes: computers for Dell and HP, Nokia (NOK) cell phones, Microsoft Xbox 360 consoles, Intel motherboards, and countless other familiar gadgets. Some 250,000 Foxconn employees in southern China produce Apple's products. Apple, meanwhile, has about 25,000 employees in the U.S. That means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods, and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology, and other U.S. tech companies.
10 to 1! All of our start-up creativity, drive, courage, and energy nets us only 1 out of 11 of the jobs we create! And that's called success! Grove continues:
Consider this passage by Princeton University economist Alan S. Blinder: "The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became 'just a commodity,' their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success."
Grove sees the problem as one of "scaling" - once the new product is created & ready to manufacture, we scale up to produce it. We hire the 10 manufacturing workers for each of us creators...in China.
How does he suggest we deal with this?
The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.)
I love that last line...fight to win!
Further, he suggests
Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.
What do youall think?
And please read the article. There's lots more there than I've quoted.
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Trade issues are complicated and - for such a dull-sounding topic - passions run high. Gigantic amounts of money and power are at stake. Many academic and corporate careers have been built by generating learned-sounding arguments to support the establishment point-of-view.
I'm not an economist (thank God) and I can't possibly debate all the fine points. I urge readers to remember though that whenever 100% of the establishment is on one side of an issue, it might be be worth looking behind the curtain.
And before we go off to pie fight land, no national politician could reasonably dream of being elected in the US if they came out against Free Trade....yet. Maybe in a few years, as the globalization chickens continue returning here to roost here, we'll be able to have rational conversations on this subject.
A brief note on the classic Smoot-Hawley trade argument:
Whenever anti-offshoring folks bring up the idea of tarriffs, the Free Trade priesthood responds with threats of trade wars. This is a valid concern, imo, but greatly exaggerated. Classically they'll bring up the famous Smoot-Hawley Tarriff of 1930, which, according to Wikipedia, "...imposed an effective tax rate of 60% on more than 3,200 products and materials imported into the United States, quadrupling previous tariff rates." Over the next few years trade did in fact decline significantly, as did everything else.
Well - obviously - that was too damn high! Not to mention that we were already in the Great Depression.