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#MakeAmericaCompetitiveAgain
Donald Trump hit a nerve on tariffs, American manufacturing, and competition from China. A lot of people find the arguments for free trade unpersuasive and feel they’ve been on the receiving end of a bi-partisan policy that that imposes rules on costs on Americans that lets the rest of the world (literally) profit at our expense. I don’t quite buy that narrative but — as I’d wager some of you are thinking — of course you wouldn’t, Meyer. That doesn’t mean it’s totally wrong, though, and of course I want of my fellow countrymen to have every opportunity to find remunerative, useful employment.
My problem with Trump on this matter isn’t so much his calling attention to problems, but that his solutions are bunk. More specifically, I think the kinds of tariffs he’s suggesting are going to hurt people by raising prices, will spark retaliation against our own manufacturing, and will suffer from all the pitfalls that happen when one person thinks he’s smarter than the combined wisdom of hundreds of millions. Trump may have an economics degree, but his reading seems to have stopped before Adam Smith.
Even if Trump’s ideas worked as promised, they still strike me as misinformed. First, most of the manufacturing jobs in China aren’t particularly attractive and don’t make economic sense when you factor for Americans’ productivity and education. As Kevin Williamson and others have said, if you want to build cars, airplanes, firearms, or other high-end manufactured goods, Americans are the people to go to; if you want to make flip-flops, cheap electronics, or things that should be labeled as disposables, you’ll go broke hiring people as expensive as us. Second, the 1950s were an aberration: there were far fewer industrialized nations 60 years ago, and those that existed were still digging out of the Second World War. Third — whether it’s a good thing or a bad thing — we’re living through an emergence of a service economy much like the emergence of an industrial economy that started 200 years ago.
So if tariffs aren’t the answer, what is? My sense is that — while American manufacturing will and should be more expensive than its competitors’ (because it’s higher-quality) — there’s a lot we’ve done to artificially jack that price up. For starters, there’s our absurdly expensive and mandatory healthcare system and the political uncertainty that’s likely added a lot of hidden cost to our jobs. Who wants to hire expensive Americans when you don’t know how much extra their labor will cost?
That’s likely just one part of the puzzle. What else can we do to make sure we aren’t needlessly hurting our own workforce? Over-burdensome regulation? Right-to-Work laws? As much as possible, be specific. And yes, immigration is a totally game answer.
Published in Domestic Policy, Economics
If it does need labor, it cannot remain here, thanks to free trade and the US dollar’s present position as reserve currency.
That last is yet another problem sinking the United States, like we need another.
You are not wrong.
But.
One of the most successful political strategies turns out to be: create/exacerbate a problem with a mandated program, then decry the effects and offer another program to address those effects, creating more adverse effects. Repeat as required.
Except that it is not endless, nor is it all leaving. Some is leaving, some is staying here and growing, some is coming over here. It all depends on what you are looking at and what you are looking for. If US manufacturing were naught but a steady erosion of capacity, our economy would be far more grim.
I own a manufacturing firm. What I keep encountering when I try to hire, and what I keep hearing from my suppliers is this: good help is hard to find, especially in the younger workers. They show up for a week or two, decide the work is too hard or too dirty, and skive off. $18 an hour gets you a gross salary of almost $37k a year, but lots of shops can’t keep people even at that wage.
Completely and utterly untrue – the US economy is massively bigger than it was in the 1980s even adjusted for inflation. You’re complaining that specific jobs that you believe have more value are no longer as prevalent. What you have never done in any thread on this subject is offer an argument why we should favor on job or type of job over the needs of all American consumers. You just like to throw bombs at “free traders” as if we’re supposed to accept your premises.
More like the high cost of employment. Example from above:
I hire person X at $18 an hour, for roughly $37k a year. With taxes and mandated benefits (obamacare), that person can be really costing me well north of $45k a year.
It’s fascinating how there’s always a lava-flow of excuses to bury the problems of free trade under something else. Look, a flip-flop!
Free trade can do no wrong, because it’s free trade.
Obviously, I disagree. I think foreign nations, noticing that industries like shipbuilding and consumer electronic were important generators of wealth, set out to win those prizes for themselves.
Thanks in part to the complete lack of response from the globalists ruling the United States, they generally succeeded.
I have a testable prediction for you folks, although it has already become partially true and will otherwise take years to proceed to finality.
Boeing still builds commercial airliners in the US. Thanks to the political issues that the US government ignores, that company has already had to outsource significant portions of its production to other countries. Certainly this has reduced employment inside the US, which of course troubles free traders and the US government not at all.
My prediction is this: Eventually, Boeing will be driven out of the US. China very much wants the wealth-producing industry aviation provides, and the US government doesn’t care.
Free traders will see nothing wrong with this– and will blame Americans workers as too uncompetitive and too expensive– as has already happened myriad times previously.
I actually find the same thing with software developers in my particular niche although I pay them a lot more. The millennials seem to think that software development jobs are all like Facebook or Google. We make compliance software for financial institutions – its not glamorous or cutting edge in any way – banks are boring. Still the work pays well, the hours are better than most agile scrum environments with their sprints, and its relatively stable (we don’t cut 1/2 our programming department once the product ships). Yet the younger programmers all up and leave when they realize life as a programmer isn’t like an episode of Silicon Valley.
Which has been said precisely by who here?
True- but doing better requires a political solution. That is, the people with the right answers need to be able to get enough support to win elections, enact their program, and make it succeed.
I’m not seeing that potential from the usual suspects in DC, or their usual solutions.
I am sure there are people who do this; many of them are in DC, although I have heard it used in business to justify an outsourcing decision that was likely made for entirely different reasons.
On this site, I don’t find complacency. The difference is not in recognizing the problem but in identifying the source and therefore the remedy. If the cause of American under-competitiveness is government interference, more interference in terms of tariffs (for example) is unlikely to solve the problem.
Unfortunately, the political solution would be to undo previous political solutions, which I agree is unlikely to get enough support to win elections.
Was what I and Richard Finlay said factually untrue?
Let me school you a bit on electronics manufacturing, since that is my industry. You try opening a wafer fab or large scale Printed Circuit Board (etched circuit board) factory here (these are the very building blocks of electronics). These are very high tech facilities, but with very high usage of chemicals and processes that the EPA scrutinizes heavily. You will spend years just lining up the permits to do so and finding a site where the state and the feds will let you operate, and then will have the EPA breathing down your back the entire time you are in operation. Then you are subject to the whims of changing EPA regs – what you put in today may be illegal to operate tomorrow. Lord help you if your business grows and needs to expand, because then your facility expansion has to start at ground zero as far as the EPA is concerned.
In this case labor has nothing to do with it as the process today requires very little labor at all.
Exactly. And tariffs are dangerous weapon as they both reduce imports AND exports, and almost always are slapped in place for the politically connected industries – protecting a few high profile sectors while harming many more low profile ones.
I get that sense from essentially every free trade thread I’ve ever been involved with here, except perhaps yours above.
I invariably detected no comprehension of the tradeoffs and lost opportunities involved in the free trade policies of the present government, no recognition of the political costs, sometimes even no knowledge that the ever US had tariffs other than Smoot-Hawley.
That’s my evaluation, as the one guy who was raving about this issue here before Trump made it cool.
But its foreign owned Skipsul! All the money is going back to whatever foreign nation Kia is from, it needs to be one of the Big 3 American car companies opening up these new factories here in the USA… (protectionists will say)
I see this endlessly.
I say the cause of American under-competitiveness is the globalist policies of the American government, and the ruinous government meddling is an effect of that.
It can’t be fixed, because both parties are essentially globalist in outlook, with thin differences in actual domestic policies.
Hence, again, Trump and Sanders. Their success springs from the failures of the present regime.
Boeing sells airplanes all over the world, so it’s not startling that they build planes and parts all over the world, is it? They’re a pretty big exporter and when they opened a new factory in South Carolina, Barack Obama should have sent them a Thank You card. Instead, his Department of Labor tried to prevent the factory from opening because South Carolina is a Right To Work State. Before we talk about tariffs, we need to stop treating industry with hostility.
Look at the Keystone Pipeline. It’s bad enough that Obama’s State Department denied permission for it to be built, it made Keystone wait several years just to find out they would be denied permission.
I actually heard this argument from (of all people) the UAW back in the eighties, when the conflict was about the non-union Toyota/Honda plants in the US. The foreign car companies were providing jobs in the US, but profits were what was important. The exact opposite of their line when they were ‘negotiating’ with GM/Ford/Chrysler. A clearer presentation of how jobs don’t count unless they pay union dues could not be made.
Here’s where I’m having my doubts. Yes, for sure that was probably true once but at some point the rest of the world catches up. What is so hard about buying the latest manufacturing technology (it’s widely available) and setting up facilities in lower cost countries? We even have American engineers who go over seas to set up the equipment and train the workers. The only thing then that would give an advantage to an American worker would be education. But the education levels across the world are catching up. Educated people in India are as educated and skilled as the American worker, but yet still have a significantly lower cost.
Thank you. Not what I was talking about, but OK.
What did George Bush- the last GOP president- do about any of that? Did he make a political case against regulations? Stop the EPA bureaucrats from issuing them? Anything?
Not in my industry, although Barry is worse.
There’s the rub. The gop has failed to make a case for the alternative to endless meddling from the government, because it’s the stupid party.
Too late now.
True
I can be just as pessimistic as anyone about this. Furthermore, if the government/parties flipped from globalism to being mercantilist, they would just implement even more ruinous meddling. Good intentions in the hands of government bureaucrats only travel one road.
Come to think of it, that might make me more pessimistic than you.
You say it, but you don’t argue it, describe the mechanisms, or the remedies (save for tariffs), or the trade-offs for your proposed remedies.
Wait, are you saying that Canada and Germany have less regulations and labor laws? They are out performing us. My hunch is that they have more regulations and labor laws. So it can’t just be regulations. That’s too simple an answer. And most of the regulations that raise our costs here are environmental regulations, and there is no electoral support to make our environment less healthy, even if the change might not be significant.
Actually, he did issue a clampdown on new regs, only for the EPA to be sued to force it regulate things like CO2 (upheld 9-4 by the Supreme Court). His labor department also halted new labor regulations and really put the screws to union corruption. So yes, he did do quite a lot.
In what sense?
I believe in full employment and GDP. Someone will have to look it up. I don’t have the time right now.
Germany is always a bad example here because of the close cooperation (often veering into mild government control) between government and industry. Germany does not politically demonize businesses or attempt to soak them. Germany, though, is not making its own consumer goods (computers, phones) any more than we are. The Germans are also personally far more frugal, and the German government itself is also far more frugal. It’s a very different economy, and a very different culture.
Canada, under Harper, deregulated a vast number of things, and has not tried to meddle in its financial sector the way we have.
Overall, too much is leaving. This is a problem the American people want solved, but the government doesn’t even see it as a problem. That’s a problem.
I saw the exact same thing many years ago, when I was stocking shelves for a living. Most new hires didn’t last, for one reason or another.
But I also know that the job I had paid significantly less than it had a few years previously. The top rate was $12.50 in the 80s, $10.50 for me, $8.50 for people hired under the contract passed while I worked there. Union job, in case that wasn’t obvious.
Hence, my cynical conclusion is that the marketplace is telling you that you need to pay more. But you can’t, because you only have so much money to spend on that sort of thing.
I have nothing to say about that if your competitors are in the US and are able to out-compete you for one reason or another. Sad Panda.
But if not, then it’s the business of the US government whether you succeed or fail, because if the US can’t compete in the global marketplace- including American labor- then the United States will fail as well.
Alas, the globalists ruling the US simply don’t care.
I may have been unclear. The skill, education, and equipment comparisons are meaningless to the equation in the broad view of things. They add to the value of the employee, yes, but the most important thing is productivity: How much product is produced which Americans have by most measures vastly outperformed other countries.
The other factors can make an overseas move more attractive, but the output and profit drive the process the most.
There’s a flip side here nobody wants to talk about: devaluing currency decreases the standard of living in the country doing the devaluing, by reducing its citizens’ purchasing power.
Indeed, almost every proposal by Trump or other free trade skeptics would have a similar result: reducing American consumers’ purchasing power – either through a weaker dollar, or more likely through higher prices resulting from the higher costs of production in America.
Even the alternative most libertarian leaners could get behind – getting rid of minimum wage, benefits, entitlements, etc. – results in a lower standard of living for a great number of Americans.
Perhaps America needs a reset in its standard of living – we certainly consume a lot, relatively speaking. But any decrease in our purchasing power is going to hit low-income workers – those we’re trying to help most here – the hardest.