Remember postindustrialism? Not long ago, this catchphrase was supposed to define America's future: no more grubby hard industries, just a clean bright world of services and high technology. Its most succinct formulation is as follows:
Manufacturing is old hat and America is moving on to better things.
This idea played a large role during the 1980s and 1990s in getting Americans to accept deindustrialization. It was promoted by writers as varied as futurist Alvin Toffler, capitalist romantic George Gilder, techno-libertarian Virginia Postrel, futurist John Naisbitt, and globalist Thomas Friedman. Newt Gingrich seized upon it as the supposed economic basis of his Republican Revolution of 1994.
Unfortunately, postindustrialism is now a blatantly dead letter, as the U.S. economy has ceased generating any net new jobs in internationally traded sectors of any kind: manufacturing or services, industrial or postindustrial.
The comforting myth still lingers that America is shifting from low-tech to high-tech employment, but we are not. We are losing jobs in both and shifting to non-tradable services, which are mostly low value-added, and thus ill-paid, jobs. According to the Commerce Department, all our net new jobs are in categories such as security guards, waitresses, and the like. The vaunted New Economy has not contributed a single net new job to America in this century.
Thanks-for-nothing.com.
Nevertheless, postindustrialism remains popular in some very important circles. In the 2006 words of the prestigious quasi-official Council on Competitiveness, a group of American business, labor, academic and government leaders:
Services are where the high value is today, not in manufacturing. Manufacturing stuff per se is relatively low value. That is why it is being done in China or Thailand. It's the service functions of manufacturing that are where the high value is today, and that is what America can excel in.
But the above paragraph is simply not true: manufacturing, which is vital to America's recovery, is not an obsolescent sector of the economy. Let's burrow into the details a bit to understand why.
"Screwdriver plant" final-assembly manufacturing can indeed increasingly be done anywhere in the world. This lays it open to labor arbitrage and thus low wages. But this doesn't mean that this one stage of the long supply chain from raw materials to the consumer has become unimportant. Every link in the chain still matters, albeit in different ways. Manufacturing involves continuous feedback loops where every stage--from the initial idea to the R&D to the prototype to full-scale production to marketing of the final product--is related to every other. Losing control of any one stage can easily lead to the loss of the whole industry, including skill sets needed for moving to the next product or level of industrial sophistication. As Stephen Cohen and John Zysman explain in their book Manufacturing Matters:
America must control the production of those high-tech products it invents and designs--and it must do so in a direct and hands-on way...First, production is where the lion's share of the value added is realized...This is where the returns needed to finance the next round of research and development are generated. Second and most important, unless [research and development] is tightly tied to manufacturing of the product...R&D will fall behind the cutting edge of incremental innovation...High tech gravitates to the state-of-the-art producers.
A small American company named Ampex in Redwood City, California, encapsulates everything that is wrong with postindustrialism. This leading audio tape firm invented the video cassette recorder in 1970 but bungled the transition to mass production and ended up licensing the technology to the Japanese. It collected millions in royalties all through the 1980s and 1990s and employed a few hundred people. Its licensee companies collected tens of billions in sales and employed hundreds of thousands of people. Thus an entire vast industry never existed in the U.S. All the jobs--and the industrial base and the profits to finance the next generation of products, like DVDs--ended up in the Far East.
That some individual companies like Apple Computer make a success out of keeping design functions at home and offshoring the manufacturing does not make this a viable strategy for the economy as a whole. Apple is a unique company; that is why it succeeds. And even fabled Apple is not quite the success story one might hope for, from a trade point-of-view. Due to its foreign components and assembly, every $300 iPod sold in the U.S. adds another $140 to our deficit with China. If sophisticated American design must be embodied in imported goods in order to be sold, it will not help our trade balance.
About the only thing postindustrialism gets right is that selling a product with a high value per embodied man-hour almost always means selling embodied know-how. But know-how must usually be embodied in a physical package before reaching the consumer, and manufactured goods are actually a rather good package for embodying it in. Exporting disembodied know-how like design services is definitely an inferior proposition, as indicated by the fact that since 2004, America's deficit in high-technology goods has exceeded our surplus in intellectual property, royalties, licenses, and fees.
So when someone like self-described "radical free trader" Thomas Friedman writes that, "there may be a limit to the number of good factory jobs in the world, but there is no limit to the number of good idea-generated jobs in the world," this is simply false. There is nothing about the fact that ideas are abstract and the products of factories concrete that causes there to be an infinite demand for ideas. The limit on the number of idea-generated jobs is set by the amount of money people are willing to pay for ideas (either in their pure form or embodied in goods) because this ultimately pays the salaries of idea-generated jobs.
The final killer of the postindustrial dream is, of course, offshoring, as this means that even if capturing primarily service industry jobs were a desirable strategy, America can't reliably capture and hold these jobs anyway. The complexity of the jobs being offshored, which started with jobs such as call centers, is relentlessly rising. According to a 2007 study by Duke University's Fuqua School of Business and the consulting firm Booz Allen Hamilton:
Relocating core business functions such as product design, engineering and R&D represents a new and growing trend. Although labor arbitrage strategies continue to be key drivers of offshoring, sourcing and accessing talent is the primary driver of next-generation offshoring...Until recently, offshoring was almost entirely associated with locating and setting up IT services, call centers and other business processes in lower-cost countries. But IT outsourcing is reaching maturity and now the growth is centered around product and process innovation.
Among complex business functions, product development, including software development, is now the second-largest corporate function being offshored. Offshoring of sophisticated white-collar tasks such as finance, accounting, sales, and personnel management is growing at 35 percent per year. Meanwhile, despite a few individual companies bringing offshored call centers back home, offshoring of call centers and help desks continues to grow at a double-digit pace.
Thankfully, some of America's corporate elite are now starting to question postindustrialism, about which they were utterly gung-ho only a few years ago. In the 2009 words of General Electric's CEO, Jeffrey Immelt:
I believe that a popular, 30-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering.
Immelt has since argued that the U.S. should aim for manufacturing jobs to comprise at least 20 percent of all jobs, roughly double their current percentage. Only a few years ago, this idea would have been dismissed as an ignorant and reactionary piece of central planning, especially if it had not been proposed by a respected Fortune 500 CEO. But despite his welcome public statements, Immelt is still closing US plants and offshoring jobs, a sign that the free market well may not solve this problem on its own.
Can deindustrialization be fought? The evidence suggests it can. Some high-wage foreign nations, the best examples being Germany and Japan, are already doing a much better job at defending manufacturing industry than we are. (GM went bankrupt; Toyota and BMW somehow didn't.) As a result, these nations now have higher factory wages than we do--a stunning reversal of America's 250-year status as the best country for ordinary workers. They are doing it by hanging tough in manufacturing and by having serious national industrial strategies. They are export powerhouses. They lack our naiveté about free trade and do not really embrace it, preferring various local varieties of mercantilism.
Manufacturing is essential to America's economy recovery. Unfortunately, the longer we dally about getting back to real industries as the basis of real wealth, the more our industries get hollowed out, so the harder it gets. There is probably still enough time to turn things around, but not much.
Ian Fletcher is the author of the Free Trade Doesn't Work: What Should Replace It and Why (USBIC, 2010, $24.95) An Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council, a Washington think tank founded in 1933, he was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at ian.fletcher@usbic.net.
What is the ultimate goal of process-driven innovation? Open a bottle of Coca-Cola, and read its performance reports to get a true taste of the answer.
The Waterloo for the outsourcing of IT for multinational corporations is the setting up of corporate datacenters, processing sensitive data in India, Russia, and China. The processing of Confidential Financial Services Data, for instance, being controlled by foreign computer operators in areas of the world where ethics isn't a strong suit. It is only a matter of time before a Too Big To Fail Bank finds it's data has been tampered with ... but then it will be too late for them to do anything about it. The race to the bottom in terms of cost has some inherent disadvantages.
Yes, he was a free trader prior to the War of 1812.
After Thomas Jefferson almost lost the War of 1812, he became a trade protectionist.
Thomas Jefferson is quoted from a letter written January 1816 to a Mr. Benjamin Austin from a book titled “The Jeffersonian Cyclopedia” printed in 1900 by Funk & Wagnells:
“Shall we make our own comforts, or go without them, at the will of a foreign nation?
He therefore, who is now against domestic manufacture, must be for reducing us either to dependence on that foreign nation, or to be clothed in skins, and to live, like wild beasts, in dens and caverns. I am not one of these; experience has taught me that manufactures are now as necessary to our independence at to our comfort; and if those who quote me as of a different opinion, will keep pace with me in purchasing nothing foreign where an equivalent of a domestic fabric can be obtained, without regard to difference of price, it will not be our fault if we soon do not have a supply equal to our demand, and wrest that weapon of distress from the hand which has wielded it”
Excerpt from (edited for length) - http://www.wfrnlive.com/labor-issues/buy-american
This is great -- love it! Both of us know who the legendary economist Paul Samuelson is (the Stolper and Samuelson theorem) and his impact on free trade. But then Samuelson saw the light, and began to question previous assumptions about free trade.
"Samuelson himself struck the heaviest new blow against the discipline's confidence on the issue. In 2004, aged 89, he roused himself to a burst of indignation, in the pages of the American Economic Association's Journal of Economic Perspectives, at conventional defenses of globalization. They were simplistic, he later told The New York Times. Under certain circumstances, he pointed out, the losses from trade could exceed the benefits, not just for particular industries but for the economy as a whole. BusinessWeek said Samuelson and others were "beginning to question the basic tenets of free-trade theory..." (a)
I dare say the data shows the theory of free trade is rubbish. It's time to junk the theory.
(a)http://www.wright.edu/~tdung/Free_trade_doubters_Atlantic.htm
It explains most of the cause for the disappointment, anger, and the difficulties experienced by the recently foreclosed and unemployed.
Conservatives like to blame these emotions and our problems on big gubmint socialism, mostly as a means of obfuscating the reality of the corporate take over of our government and the destruction of labor.
Yes, government has been complicit in this take-over, but it is more like a fascist oligarchy. We can only wish for a socialism that will remain non-existent but continue to be a straw man for the Right.
As the destruction of the middle class proceeds, we will be left to our own devices to survive the decline of quality jobs, cheap energy, food, and clean water. Before they are done with us, they will own it all.
Aside from lowering our expectations and our consumption, there is little we can do about this change except localize our food production in order to keep from starving.
In the last 30 years, it's as if the operation of the corporation were divorced from why it is supposed to exist in the first place. The sole focus of short-term profits and making the shareholders money is not only unhealthy for the American public, but also for the corporation itself in the long term. Corporate CEOs and managers have repeatedly failed to calculate the economic value of in-house manufacturing and operations.
There is no other country in the world with the resources that this country has. There is no other country in the world with the mindset that Americans have. If you think for one minute that you guys are going to win this war for the United States, you're crazy. No matter what you think of us (sheeple, the "small" people, the "useless eaters", the slack-jawed drooling bottom feeders), we fought for our freedom before and we'll do it again.
Nobody is going to bring us down, not the "terrorists", not the "elites", not the Rothschilds, not the government, not the military.
And not the media.
THEN piece together weapons to fight with since not even our own military planes and guns &
ammo are made without foreign parts from POTENTIAL enemies.
At least Henry Rifles are 100% made in the USA
Now, the citizenry has taken the past few years and done what anybody would do when faced with potential destruction from the money mob: armed themselves with real, working weapons.
When you plot and scheme to take everything for yourself, sometimes your greed and those injustices backfire on you.
Don't forget, the tortoise won the race.
the industrialized "Morlocks".
All of our (that we saved with US dollars) that could even loan the capital to reindustrialize our also on the menu:
"Sumitomo Mitsui is considering investing in and possibly acquiring major North American banks, according to a report Friday"
http://www.marketwatch.com/story/sumitomo-mitsui-looks-to-buy-american-bank-report-2010-07-22
Sumitomo Mitsui is one of the companies listed listed in Linda Goetz Holme's book (source: Official Japanese Government list of companies using POW forced labor in WWII)
"Unjust Enrichment: How Japan's Companies Built Postwar Fortunes Using American POWs"
OUR own bankers are evil enough...just wait until they are owned by our
so-called free trade partners!
Welcome to the new "United Eloi States of America"
Folks such as Immelt have no choice but to conform to the current model of outsourcing, so long as trade policies and tax laws encourage it. But in its purest light the matter is one of maximizing profits regardless of which nation(s) realizes the benefits as our current policy sits - pro-Capitalism and anti-American.
Political sentiment seems to be more oriented toward cannabalizing social security and exploiting any other remaining sectors of common wealth rather than addressing the fundamental structure of what ails us; resulting from the current status where big money talks and the electorate walks (& begs for a drink of unemployment coverage or an adjusrtment to the minimum (common) wage).
Dalliance seems to be one of the nation's most bountiful crops, with no time left to waste.
Just try to add a 100% tariff on the latest I-Phone since it is made in China.. You will have a Yuppie riot in front of the Apple stores.
You could not be more correct. The loss of manufacturing jobs is also the reason for the failure of the stimulus. Classic Keynesian economics was developed at a time when consumer demand resulted in the factories cranking up to fill demand. Now all we do is send the money overseas for more imports which can only add store clerks to sell the imported goods.
Since Clinton signed the agreement to let China in the WTO in 1998 we have lost 6,000,0000 manufacturing jobs in this country a full 1/3 of those jobs. We must level the currency field with China even, as Mr. Grove suggests, if we must have a tariff war. We should re-instate the investment tax credit with green incentives, also. And finally we must follow any and all opportunities to create American jobs...www.savingpontiac.org
Now, the politically connected who work in competition with foreign producers would like to force others to support them in their competition, but they neglect to point out that more workers work in conjunction with foreign producers than in competition. The factory walls have expanded across the globe and they aren't going to shrink back down. Attempting to protect domestic workers that compete with global producers will place the cost of the protection on the lowest members of society as the poor have benefited the most, and result in the net loss of jobs for people who work in conjunction with foreign producers. I didn't realize that this was a regressive rather than progressive website.
Even if a CEO knew for certain that a specific course of action would lead to the collapse of the middle class within 30 years it wouldn't matter it seems. Why should he care? Hes 60, he'll be dead by then and in the meantime he can collect billions in "well deserved" pay. While the bonus structure may not be the same in government work the overall mentality is. For example local governments selling the rights to their own buildings to private companies. In exchange for an upfront payment that can balance their budget for 1 year they in turn have to pay never ending rent which they cant afford after a year. Again, it doesn't matter because the person making that decision might get a promotion or switch jobs before it becomes an issue
Greed and a general lack of critical thinking have crippled our country