Thread: China; Land of poisoned Milk and Honey

Originally Posted by Shek

But these aren't the average service jobs that are being created. The fact that median wages (pay & benefits) are increases proves that this is a mischaracterization. Also, the typical greeter at the Walmarts I've been to are older folks working a retirement job. I'd be willing to bet that they are looking for something to do and not all that concerned about pay. Read this post for a potential analogy to this situation.



Does the software engineer (not a programmer, since we outsource that with the result of creating more higher paying software engineering jobs) not have something to show people and how he/she makes other people's lives better? Does the consultant assisting small businesses formulate plans for growth not have something to show people?



See the above. I don't doubt that there's a good feeling. Of course, I don't forsee a future where homes are built in China and shipped to the USA. Also, you'd be hard pressed to find a lot of TVs built in the USA these days, and I'm happy that I was able to only spend $750 on a 42" Sharp LCD TV, something that wouldn't have been possible if it had been built in the USA.



We can still do this with an even increased manufacturing capability. American factories that still exist dwarf production capabilities of decades prior. Anyways, the technology required to build defense products is much different than years past, and those firms that exist are capable of meeting these needs, especially compared to a world where we tried to keep dying factories that couldn't even keep pace with competition in business.



A 2002 Department of Commerce study found otherwise. Besides, we don't use average steel that much anymore.



We should stop importing beef from the Democratic Republic of Kalifornia, afterall, we know better than to poison our own food supply.

Finally. Something we agree on. The republic of California is another country. I have been boycotting food from there for years.

2) The delays on my jobs were later than the study. 2004-2006. Until the building goes up I cant install the duct in it. There is a lot of steel in construction.
3) My aunt inherited my grandparents magnavox circa 1960's TV. Still has a good screen. The Tv was spendy at first but longevity has its rewards. We will see if ANY of the newer TVs will last 10 years before going **** up.

4) software engineers can also be outsourced at the drop of a hat, so can business consultants. Secondly, not everyone has the ability/money to attain the education to be one. There is not enough room in colleges if everyone had the ability to go that route. Additionally, there is no shame in working with your hands for a living. It was the combination of muscle and brain power that made this country strong.

5) The sector you speak of is not universal. There are many depressed areas were the factories /mills shut down and the high paying jobs are somewhere else. Even if these jobs did exist locally, few of the locals would ever qualify.

Originally Posted by bonehead

Finally. Something we agree on. The republic of California is another country. I have been boycotting food from there for years.

2) The delays on my jobs were later than the study. 2004-2006. Until the building goes up I cant install the duct in it. There is a lot of steel in construction.
3) My aunt inherited my grandparents magnavox circa 1960's TV. Still has a good screen. The Tv was spendy at first but longevity has its rewards. We will see if ANY of the newer TVs will last 10 years before going **** up.

4) software engineers can also be outsourced at the drop of a hat, so can business consultants. Secondly, not everyone has the ability/money to attain the education to be one. There is not enough room in colleges if everyone had the ability to go that route. Additionally, there is no shame in working with your hands for a living. It was the combination of muscle and brain power that made this country strong.

5) The sector you speak of is not universal. There are many depressed areas were the factories /mills shut down and the high paying jobs are somewhere else. Even if these jobs did exist locally, few of the locals would ever qualify.

Bonehead,

1. Creating jobs for blacksmiths. There is no shame in working with one's hands for a living. However, to fawn over lost factory jobs that have been replaced by higher paying jobs that tend to be in the service sector is dangerous. With this type of thinking, we should argue that we want to ban cars so that horse groomers and blacksmiths can be the high income occupations they were when we had a horse-driven economy.

2. What is seen and unseen. Another thing to think about when we look at the shifts in the sectoral economics is that which is unseen. When a factory shuts down because it is not competitive, it unleashes the creativity of the youth that are no longer destined to find a company job in the company town. Instead, these youth can now strike out on their own and find their own destiny. The death of a factory job can be the birth of another doctor, or an architect, or custom chopper builder, etc., etc. However, discussion of the shut down factory tends to be myopic, ignoring the benefits to consumers and the new opportunities opened up to the next generation. For example, Motorola no longer makes TVs, but was that bad for the American economy?

3. Steel. Steel shortages that you see reflect a non-prioritized, market based allocation. If there were a national defense emergency, then there would be a national security need based allocation, and given the following from my earlier link,

The investigation revealed that the United States produces approximately three times the maximum amounts of iron ore and semi-finished steel that might be required for national security purposes. The report also finds, based on the analysis of the Department of Defense, that national defense needs for iron ore and semi-finished steel have declined in recent years and are likely to remain flat for at least the next five years.

the US is in no danger. Anyways, if there were less slack, then the most efficient economic solution would be to create a stockpile, i.e., a national reserve a la the strategic petroleum reserve.

4. Job locations. This is a bit of a red herring. Why did "factory" towns grow? Because people moved to where the best opportunities were at the time. As opportunities changed, people moved away from dying or dead opportunities and where new ones existed. There is nothing different today, and so to bemoan that opportunities change locations is more akin to crying over spilt milk.

Here is a great article that looks at both sides of the coin when an industry dies when it is no longer competitive. There are losers, but there are winners, and the article doesn't even explore what is unseen, which are even more winners. I'm not against some forms of transition assistance, but I am against trade protectionism that would impose an implicit tax on me.

5. TVs. My 42" LCD HDTV costs $107 in 1960 dollars. At the time, the cheapest 21" color TV that could receive both UHF and VHF was $191. If you wanted a remote control to go with that, then you need to shell out $380 (prices based on 1960 Sears catalog). The LCD is rated at a lamp life of 60K hours (based on continuous use), which is nearly 7 years if it is never turned off. I doubt that many people watch TV 24/7, so we're really looking at decades of use. In other words, the actual lifespan will exceed the technology half-life of its usefulness.

6. The limitations of outsourcing. Outsourcing, and specifically, offshoring, continues to be the big bogeyman. Sure, software engineers can be outsourced, but there are diminishing marginal returns to levels of outsourcing that make this unlikely.

You can read the story of Boeing's Dreamliner to see the limitations of outsourcing and why the topic is more a political scare tactic over American jobs than one grounded in reality. You can also try a more intuitive approach in this article, "Bosses Don't Wear Bunny Slippers: If Markets Are So Great, Why Are There Firms?".

The bottomline is that a firm still needs to make sure that its core competency isn't outsourced, and for software firms, you need someone internal to the company determining the software modules and how to fit them together to make a workable product. If you start outsourcing more than just the programming of the modules, then you start ramping up your coordination costs to the point that they are greater than the benefit of reduced costs. Besides, there's also the technical detail that as Indian software programmers have seen higher demand (increasing their wages) and American software programmers have seen lower demand (decreasing their wages), the wages paid are equalizing. This factor price equalization has resulted in plans for WiPro to insource some software programmer to the United States.

7. DRK. My DRK example was tongue-in-cheek, albeit about a serious topic. The market will punish China in general over the failure of a few specific firms outside the direct supply chain, just as the California meat packing company will be sent packing. Increased safety inspections will reduce their profit margins or make them uncompetitive compared to other countries, and domestic firms who are the end product suppliers will make sure that they take action to repair their damaged reputations. We should react, but not in ways that harms ourselves. Protectionism (i.e., trade barriers against China) is essentially a self-induced trade embargo/blockade (if you're curious how greater self-sufficiency impacts an economy, see Cuba and/or North Korea as the poster children of this).