Andrew Sullivan’s blog has a post, “How to Create Jobs: Be Like China?”, which drew my attention to Andy Grove’s How to Make an American Job Before It’s Too Late. I am not an economist (frankly, I do not have a whole lot of respect for economics as a science, as opposed to a belief system), but Grove’s article seems worthy of discussion beyond the Finance Academies:
… Bay Area unemployment is even higher than the 9.7 percent national average. Clearly, the great Silicon Valley innovation machine hasn’t been creating many jobs of late — unless you are counting Asia, where American technology companies have been adding jobs like mad for years.
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The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called “Start-Ups, Not Bailouts.” His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups.
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Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.
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The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.
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[…] You could say, as many do, that shipping jobs overseas is no big deal because the high-value work — and much of the profits — remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work — and masses of unemployed?
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Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs. We may be less aware of this growing inefficiency, however, because our history of creating jobs over the past few decades has been spectacular — masking our greater and greater spending to create each position.
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[…] There’s more at stake than exported jobs. With some technologies, both scaling and innovation take place overseas. Such is the case with advanced batteries. It has taken years and many false starts, but finally we are about to witness mass- produced electric cars and trucks. They all rely on lithium-ion batteries. What microprocessors are to computing, batteries are to electric vehicles. Unlike with microprocessors, the U.S. share of lithium-ion battery production is tiny.
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That’s a problem. A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer-electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies didn’t participate in the first phase and consequently weren’t in the running for all that followed. I doubt they will ever catch up.
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[…] 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.) 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.
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I fled Hungary as a young man in 1956 to come to the U.S. Growing up in the Soviet bloc, I witnessed first-hand the perils of both government overreach and a stratified population. Most Americans probably aren’t aware that there was a time in this country when tanks and cavalry were massed on Pennsylvania Avenue to chase away the unemployed. It was 1932; thousands of jobless veterans were demonstrating outside the White House. Soldiers with fixed bayonets and live ammunition moved in on them, and herded them away from the White House. In America! Unemployment is corrosive. If what I’m suggesting sounds protectionist, so be it.
If, as the old maxim goes, you can judge the worth of an idea by the quality of its enemies, Grove’s article has all the right, and Right-Wing, enemies. “Friedman is wrong” will always be a good start. The Sullivan post links to Very Serious Economist Tyler Cowen, who sneers: “An innovation shortfall may well be a serious problem today… But what are Grove’s solutions? The government tries to pick winners, on a massive scale with public funds, and we start a big trade war against China?… Sorry, I’m not convinced. I heard that in the 1980s except China was Japan. We ignored that advice in the 80s and in the 90s the job market was fine…” Sure, if you define the “job market” as “Elaborate financial scams, propping up an unsustainable and destructive construction bubble”.
Sullivan’s post also quotes Reihan Salam, someone almost as predictably wrong as Tom Friedman:
The U.S. badly needs job and income growth. But it won’t come from the manufacturing sector. Rather, it will come from a wrenching series of labor market and entitlement and tax reforms designed to improve work incentives, most of which will prove far less popular than simply bashing China. While slight changes to marginal tax rates don’t have a huge impact on existing firms or currently employed workers, large cumulative increases in the tax burden lead to institutional and cultural shifts that are difficult to reverse: Firms become less likely to hire, workers take longer vacations and trade taxable income for leisure, overall spending levels grow slowly or flatten. Suffice it to say, this isn’t a recipe for rapid economic growth. This increased tax burden is necessary, however if we want the larger and more intrusive government we’d need to realize Andy Grove’s ambitions. Indeed, it seems entirely possible that Grove’s brand of industrial policy would destroy more American jobs than offshoring ever has or ever will.
In other words: American manufacturing jobs support a comfortable life for the working class and a functional political system, at the risk of marginally reducing the illusionary “overall spending levels” of uncontrolled financial-sector predation. And this would be a bad thing… why?
Seriously: I’d like to understand if there’s an argument against Grove’s proposals that goes beyond “Me and my class have done very nicely from the Forty Years’ War Against the Middle Class, and we don’t see the problem with turning America into a banana republic”.
demo woman
Our foreign policy protects American companies abroad. I have always been interested in the true cost of companies out sourcing. Of course the corporations get cheap labor with no benefit but how much of my taxes are going to protect that cheap labor. If Pakistan and India have a dispute, who are we protecting? I don’t think it is the citizens of those countries, I think it is our own corporations.
EDIT… I’m not sure that I am being succinct but the cost of companies doing business overseas is much higher than it appears.
Cacti
Switching from a manufacturing to a service based economy sure has worked out great for us.
TenguPhule
No. SATSQ.
Either the bastards start getting taxed into submission or its gonna get ugly.
John Bird
Just because economics is a science about as advanced as biology before Pasteur doesn’t mean it’s not a science, I think.
Martin
The main draw to China isn’t labor costs as many people think – rather, it’s time to market. If you want to build a new phone, you can probably get a production line up and running in a matter of a few weeks. The labor is there, the manufacturing equipment is there, the components (silicon, memory, plastic, batteries, screens) are all there – probably all within a few miles of each other. In the US it’d take months to do, and you’d have to import almost all of the components. It wasn’t always like this.
Sure, the cheap labor is attractive, but not as attractive as getting your product to market ahead of your competitors. Really, that’s the problem we need to face – how to build this economy back up again. Outsourcing US engineering design won’t last long – China’s higher education system is pretty weak, but they’re investing heavily in it. We’re going to have to put value in infrastructure and quality of life. But those are soçialist values, so I’m pretty sure the American people are going to continue to put gun ownership as a higher value than jobs.
Amanda in the South Bay
One with shitloads of class warfare.
Amanda the Class Warrior
nanute
@Martin: Martin, You are absolutely correct. Start hoarding ammo; you’re gonna need it.
Mike G
Grove would have more credibility if his own company, Intel, wasn’t leading the charge to outsourching and overseas R&D and chip manufacturing over the past few decades.
I remember an economic forum during the tech boom where the CEO of Intel (not Grove) was asked, with companies like yours moving design and research overseas, where does that leave American engineers? (Intel were supporting and encouraging college engineering programs at the time). He basically said tough shit in polite business-bullshit-speak. Reap what you sow, hypocrite.
anonymoose
Hrmmm…I sorta quit reading after “as technology goes from prototype to mass production.”
Stupid Grove…
Doesn’t he know how things usually go on in the US?
Startup builds prototype.
Startup waits around till big corporation sees shiny new thing.
Startup hopes that big corporation buys them and their new tech out.
Big corporation then produces prototype with their factories (which are already overseas)….or as it increasingly happens…
Big corporation totally buries new tech because it competes with their tech already on the market.
schrodinger's cat
@John Bird: It is not an science because it is more in love with its theories than it is in explaining the data.
demo woman
@nanute: Sad but true.
Jennifer
Here’s what I want to know: if these douchebags are correct, and the only answer is cutting out all social spending and telling the American working class to “suck it”…how is it possible that Germany manages to not only fund a much broader social safety net AND outpace us in actually making stuff? I mean, look at the relative position of Germany vs. the US in 1945…somehow, over the past 65 years, Germany not only rebuilt, it rebuilt with a much stronger social safety net AND now outperforms our manufacturing sector.
Gee, I don’t suppose it has anything to do with the fact that they aren’t pissing away half of all discretionary government spending on bombing the shit out of the third world. Or that their wealth gap is a fraction of ours.
I’ve had it up to here with this “oh, so sorry…you plebes are going to have to tough it out without social security so the rich folks can continue to buy Lear jets in every designer color” bullshit. It’s very near to time for torches and pitchforks.
mainsailset
My personal favorite solution would be to deny WalMart the ability to import from China.
Then again my other favorite is to see Jordan annex Palestine thus letting the King bring about peace…
Anne Laurie
@John Bird:
I see your argument. But, having grown up in a strongly Jesuit-influenced culture, today’s economists look like Jesuits to me. Yeah, Economica has provided good educations for a lot of bright, creative young men who would not otherwise have been able to pursue their interests in abstruse mathematics. But Economica is also an institution founded to support the status quo — specifically, the interests of a small ruling oligarchy faced with potential revolutions from below — and the vast majority of Economists are always going to be bureaucrats & authoritarians more interested in enforcing last year’s version of Righthink than in actual science. And, therefore, some of the best and most creative trainees from within the institution (Garry Wills, John Kenneth Galbraith, Paul Krugman) are going to end up leaving or being forced out of the seminary.
schrodinger's cat
@Anne Laurie: Plus, I think economists suffer from physics envy, unfortunately for them, economics resembles physics before Galileo and Copernicus and Kepler.
Roger Moore
@Cacti:
You think “servant” instead of “service” and you get a much more accurate picture of the plan. The ultra-rich will get more and more money, and the rest of us will become their servants.
Joe Buck
John Bird: the only part of economics that has any claim to scientific status is behavioral economics, because it is the only branch that uses the scientific method. The rest of economics is more akin to philosophy: Anne compares it to the Jesuits, but the Jesuits got it from Aristotle. Think deeply about a problem, formulate some ideas, and work out the consequences of those ideas. Ignore or explain away any deviance between reality and the models. Aristotle was a brilliant man, and so are some neoclassical economists. But they aren’t doing science.
General Stuck
@John Bird: Economics is not comparable to biology as science. Economics studies animals of an ecosystem entirely created by man under the laws of whim. Biology is science not created by man, but created under the laws of nature, that are immutable at their core. Economics has no core, other than what we assign as one at our pleasure. It has cause and effect, but with goal posts that can be moved whenever.
Phoenician in a time of Romans
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.)
Imagine you’re a rich Arab nation. You hire mercenaries from Britain with the connivance of the UK government to provide security while your own subjects party. Everything’s sweet – until some idiot comes up with the idea of going to war with the UK. Then you have problems.
The US depends on capital imported from elsewhere (which is why it runs a trade deficit). Talking about a trade war with the people you depend on to keep domestic investment going may cause you to have problems…
eco2geek
We’re going to have a society with huge differences in income, like this (I don’t know where C&L got their graphic from, but the Center on Budget and Policy Priorities report is here [pdf] ).
Maintaining the position that encouraging more startups will get us out of this period of high unemployment is just stupid. One wonders why people even listen to guys like Thomas Friedman, with his track record.
I’m not an economist, but over at Atrios’ blog (and he is), he’s been saying over and over again that the employment rate’s very, very high, unacceptably high (which begs the question, what’s an acceptable level of unemployment?) and that the government could take concrete steps to lower it, such as hiring people to fix public infrastructure, etc.
Moreover, in a most un-Obot-like way, he’s been pointing out that the current administration seems to be mostly saying the unemployment rate’s too high, but not actually doing much to change it.
Shalimar
@Roger Moore: That is the way it was for 99% of recorded history. Who are we to think we deserve what our parents had?
schrodinger's cat
@eco2geek: Acceptable level of unemployment is postulated to be around 5 percent, don’t ask me why, I am not an economist.
Mike
Full disclosure – I work for Intel:
I love how the masters of the universe are always right about everything unless they disagree with the party line. Look at the pundits’ track record vs. Grove’s. I think that should tell you who to listen to.
@Mike G. – Intel has to compete with other companies in it’s market. That’s why Grove is saying the government needs to intervene. Corporations make incredibly selfish decisions, which is why capitalism excels at making money. But this can (actually, ALWAYS does) yield a very savage environment for the majority of participants in the system. Hence the need for a countervailing force to ease the social negatives rezsutling from the system.
Kiril
I’m not really sure if this applies, but when I was a software engineering major, we were taught that, depending on the task, an outsourced job had to be 9 to 12 times cheaper than in the US for it to come out as profitable. This is because there were inevitable difficulties with communication over distance that would require a lot of backtracking and dead ends.
Ken Lovell
One principle of economics that seems to have empirical support is that in the long run, markets tend towards equilibrium … which means a situation in which one country of 300 million people is vastly more wealthy than countries with several billion is not sustainable.
MattR
@schrodinger’s cat: Because people are always moving around and leaving jobs before they have something lined up or they are joining/rejoining the workplace. Separatelty, an unemployment rate that is too low is not healthy since it means that companies will have have trouble finding quality employees when they try to expand.
Alex S.
Saying economics is not a science is stupid. Reducing it to a natural science is stupid, too, though.
Shalimar
@eco2geek:
I’m not an economist either, but my minor was in economics. I don’t remember the exact number, but a certain level of unemployment is necessary to a healthy economy. There has to be a pool of workers looking for jobs so wages don’t go through the roof and eliminate profit for businesses. Ideally, you want to hold unemployment down to a level where no one is looking for work for more than a few months because there are jobs available, but not too many.
Roger Moore
@Ken Lovell:
Then why do the rich keep getting richer and the poor keep getting poorer within that country with 300 million people?
mclaren
If economics is a science, why did it fail to predict the global economic collapse in 2008? The test of a science is prediction. If it can’t make accurate predictions, it’s not a science, it’s astrology.
Having debunked economics, time to debunk the objections to Grove’s article.
First, Adam Ozimek shrieks that Grove’s proposals would create a “trade war.” He’s ignorant and he’s lying — standard operating procedure for an economist.
Ozimek claims “With all do [sic] respect to Sethi and Thoma, `I am not convinced’ does not sufficiently convey the obvious wrongheadedness of Grove’s proposal, and they should call out this thoughtless defense of protectionism for what it is: a really terrible idea that is wrong and dangerous.”
This isn’t an argument. Ozimek tells us that protectionism is “a really terrible idea” and it’s “wrong and dangerous” but he doesn’t explain why.
Let’s look at some facts: for the first 100 years after the industrial revolution started in the 1700s in England, Britain engaged in massive protectionism. Britain used brutal tariffs to protect British industries while forcing captive markets overseas to accept British goods at extortionate prices. The result? Britain flourished, becoming the world’s economic powerhouse.
America learned from Britain’s lesson, and systematically used tariff barriers along with government subsidies to protect domestic industries against foreign competition. Once again, from the 19th century up to the 1970s, America flourished, becoming a global economic powerhouse.
The hard fact is that all countries use tariff barriers and regulations to protect domestic industries — this doesn’t set off a trade war unless the barriers are extreme. America has foolishly abandoned all its barriers and as a result its economy is getting gutted.
When we look at other countries, from Japan which requires foreign autos to be disassembled entirely in order to meet ridiculous pollution regulations that only apply to imported cars, to the Canadian film industry which requires a fixed number of Canadian actors in every foreign film or TV show produced in Canada, to China which locks foreign companies out of its internet market by refusing to grant licenses to non-Chinese internet startups (as in the recent tiff with google)… In every single case, other countries use tariffs and regulations to protect their own industries and prevent competition. It’s a fact of life in international trade and has been for 200 years. So when Ozimek hysterically howls that this universal practice will result in “a trade war,” he’s lying and the obvious facts show he’s lying. Ozimek just wants America to bring a pea shooter into an international trade gunfight because he’s shilling for the American super-wealthy top 0.1% who stand to gain fabulous riches from offshoring all our high-wage U.S. jobs.
Moving on to Reihan Salam, he advises the old canard, retraining. Once again he’s ignorant and a liar (he’s an economist, so this goes without saying) and once again the proof is obvious and overwhelming. Ignorant liars like Salam offered the same advice when millions of U.S. autoworkers got dumped out of their jobs — just retrain the auto workers to program the robots, and everything will work out fine! It was a lie. The skills and abilities required in an auto worker turned out to be completely incompatible with the skills and abilities required from programmers and robotics techs.
Now Salam enthuses “As construction jobs fade, the caring professions continue to grow.” So all those programmers and engineers and draftsmen and machinists who are getting thrown into unemployment because their jobs are getting offshored just need to be retrained as nurses, and the problem is solved –right?
Wrong. The skills and abilities required from caregivers are completely different from those required by engineers. Caregivers need people skills but engineers and programmersand machinists and draftsmen are precisely those workers who don’t well with people. So once again, it’s bullshit advice and it won’t work, and once again the statistics prove it. Despite massive efforts to lure men into nursing, men refuse to enter that field, so the huge shortage of nurses persists.
For the record, the usual horseshit “solutions” offered by charalatns like Salam and Ozimek are:
[1] Retrain the workers! As history shows, that never works. Most people are suited to their professions and an abstract machine-oriented person like an engineer can’t be put through a magic device that turns him into a people-oriented caregiver.
[2] Tell the workers to get more education! That’s too stupid for words. America already has far more PhDs than it needs — so we make the situation worse? It’s retarded. Statistics show that the vast majority of Americans who get PhDs never get tenure and wind up working in a different field for much lower pay.
[3] Let the invisible hand take care of everything! Germany tried this in the 1930s. Things got so bad the nazis took over because they promised to put everyone back to work, and Germany’s starving population figured that murdering all the jobs and trying to take over the world was bad, but not as bad as starving to death unemployed.
Each of these 3 failed and foolish nostrums has been tried in the past and each of them make things worse. These aren’t serious suggestions, they’re phony talking points spewed out by liars engaged in class war.
Now let’s move on to a more comprehensive debunking of the criticisms of Grove’s article. The fundamental criticisms are based on the presumption that globalization will continue — it’s just a variant of the old “communism will bury you argument” made by Nikita Kruschev when he took his shoe at the U.N. and beat it on the table and screamed that Russia would bury the capitalist economies because communism was historically inevitable and no one could prevent it from taking over the world.
That was horseshit, and we know, communism collapsed and disappeared. Not only was it not historically inevitable, it wasn’t even viable. Kurschev was lying to prop up a dying ideology that never worked.
Substitute “globalization” for “communism” and you’ve got the phony argument Ozimek and Salam are making. Globalization is historically inevitable, they assure us, so no one can prevent it. If we don’t go along with globalization it will bury us.
This is lie. It’s a stupid lie and obvious lie, because globalization is already falling apart. Globalization depends on cheap oil because if it costs a fortune to ship those goods from China to the U.S., there’s no point in manufacturing ’em in China in the first place. Globalization also depends on dirt cheap electricity to power all those internet server farms that are making it possible to outsource all America’s high-wage work like programming overseas. Currently 20% of U.S. electricity goes to power server farms, and it’s rising fast.
But once again electricity prices are rising rapidly as oil gets more expensive. Analysts at Deutsche Bank predict oil will hit$175 per barrel by 2016, which will shut globalization down.
See this:
Deutsche Bank analysts predict oil will hit $175 a barrel by 2016
combined with this:
High oil prices will end globalization
The logical conclusion? Skyrocketing oil prices caused by Peak Oil will shut globalization down whether we like it or not when manufactured goods get too expensive to make it profitable to manufacture ’em overseas and ship ’em back to the U.S.
Since this is obvious and self-evident, naturally these economists haven’t realized it. That’s as you would expect: these economists are just liars, they’re stupid liars. They probably went into economics because they were too stupid to cut it as engineers or programmers.
Since globalization is doomed and will shut down regardless of whether we like it not soon anyway, we only 2 choices: [1] continue acting as though globalization (like communism) isn’t an unworkable system doomed to collapse in the near future and keep going with the status quo until we get a catastrophic international collapse and out of the chaos some alternative to globalization appears (much as Russia collapsed and out of the chaos somealternative to the USSR appeared); or [2] we can shut down globalization in an orderly manner and manage the transition intelligently to a post-globization world economy.
Since we’ve used the word “intelligently,” it’s obvious that economists advocate other alternative.
Lastly, let’s strike at the root of the economists love affair with globalization, their worship of free trade. This is based David Ricardo’s advocacy of free trade in his pioneering economic theory texts from the early 19th century.
But the economists who today cheerlead for unrestricted free trade in the 21st century are too stupid and too ignorant to understand what Ricardo actually said about free trade. As Ricardo pointed out in the 18th century,
Free trade only works as long as resources remain immobile. But our primary resources today are brainpower, which is highly mobile. Once upon a time, factories were located where the resources were (Ford’s River Rouge plant) — today, factories are located wherever the cheap labor is, which wrecks Ricardo’s theories about free trade.
Globalization and free trade — wonders of a past era, now enemies of America
This concludes the comprehensive debunking of the arguments against Grove’s article. The economists are making old discredited arguments which have long since been debunked; the economists are stupid because they apparently can’t look at skyrocketing Peak OIl prices and recognize the obvious fact that it dooms globalization; and the economists who criticize Grove are ignorant of the actual details of the free trade theory their idol David Ricardo proposed, which turn out to contradict all their claims about globalization and free trade.
PurpleGirl
Science calls for the testing of hypotheses and for reproducibility of results. Part of our current problems with economics is that there are lot of mathematicians who went into it and think that their playing with numbers is reproducibility of results but they neglect the part that calls for the proper design of the test for the hypotheses.
They also neglect the consideration of human emotional needs and responses. Think Greenspan finally realizing that Wall Streeters did not think rationally about their companies’ real interests instead of thinking greed for themselves.
jnfr
Thanks very much for the pointer to that article. It is directly in line with the thoughts of a friend of mine who is writing a book on the subject for Harvard Business Review. I wish the subject was understood more clearly by our national pundits who continue to talk in nonsensical ways about job creation and innovation.
Keith G
If religion is the opiate of the people, then the belief that everyone in America should get a college education is the Oxycontin of our culture.
Not that advanced education is bad, but that there are only so many BAs, MAs, and PhDs needed in any society. Instead of figuring out a rational way to deal with post industrial (and post tech-leader-monopoly) America, we cling to a sinking capitalist ideology that is leaving ever increasing levels of our fellow citizens facing scary futures.
Phoenician in a time of Romans
Then why do the rich keep getting richer and the poor keep getting poorer within that country with 300 million people?
Because the rich are usually people who lay claim to a social illusion called “capital” from which they derive an income, as opposed to those who work for that income.
Said social illusion is enforced by layers of enforcement such as the media and schools, then banks and spreadsheets, then lawyers and courts, and ultimately nasty people with guns to prevent the workers from questioning the situation.
Actually, Cory Doctrow’s “For The Win” is well recommended here.
Ken Lovell
Roger @ 29 you are confusing wealth with income.
Wages (income) will vary according to the characteristics of the market for the class of labour in question. If one kind of labour is more or less interchangeable between countries (e.g. call centre operators), the price will tend to settle at the market clearing rate.
Here in the Philippines, where many people speak English, the minimum wage is about $5 a day. Hard for any American worker to compete with that.
Napoleon
Great piece from Grove. It has always been as obvious that an entire societies ultimate wealth depends on only 2 things, agricultural and industrial output. Anything else anyone does is parasitic.
This book which still has an honored place on my book shelf beat Grove to the punch by a quarter century.
http://www.amazon.com/Manufacturing-Matters-Myth-Post-Industrial-Economy/dp/0465043852
Alex S.
@mclaren:
No, the test of a science is not prediction. Many social sciences don’t engage in predictions at all. History and ethnology, for example. The test of a science is the methodology, and you could say that this is where economics fails at the moment. However, maybe it’s not the fault of the science, maybe it’s the fault of the scientists? In other words, many Very Serious economists are currently having a fixation on inflation, and while this fixation, in my opinion, is misguided right now, inflation is being kept in check, at the cost of employment. The methods work, but to the wrong ends.
CynDee
Well, duh; many of us have been writing that message to our congresscreatures for 8 years.
MikeJ
@mainsailset:
It would certainly be an interesting episode of I’m a Celebrity…Get Me Out of Here.
Tres Chouette
Any piece that contains the words “Friedman is wrong” wins me over pretty much automatically. Now I’ll actually read it, I guess.
Phoenician in a time of Romans
Great piece from Grove. It has always been as obvious that an entire societies ultimate wealth depends on only 2 things, agricultural and industrial output. Anything else anyone does is parasitic.
Really?
So if you fall sick, you don’t need a doctor, nurses, or a hospital administration – we can just stick you in a room and shovel supplies to you as you request (and pay for) them?
I’m a librarian. My job is adding to a database which helps people find information; my profession is about helping people find information. Neither my profession or the subject of that profession is about agricultural or industrial output – are you stating that libraries and librarians are parasitic to civilization?
Tony61
Options:
1. devalue the currency to provide Keynesian Stimulation
2. tax the wealthy
3. engage in trade protectionism to lower the trade gap
4. raise the living wages and standards of Chinese workers (teach the SEIU and AFL-CIO Cantonese).
What to do? Answer, all of the above.
Mark S.
From a thread the other day:
Which jl explained as meaning:
Taxes go up 1% and a quarter of the workforce goes Galt? Does any historical data support this? This is Creationist science level crazy.
General Stuck
Natural science or physical science are scientific in the way that given the same factors to be tested, they are reproduceable in a reliable way all else being equal. Other sciences cannot claim this scientific model because they have human behavior always as an element to contend with, that is inconsistent and betrays a true scientific method. Testing methods with human elements can sometimes come close to this standard, but can never be termed reliable, because they aren’t./ That said, loose use of the term science doesn’t bother me cause I’m a loose person.
mclaren
@Alex S.:
History is not a science. History is a branch of literature. As for “ethnology,” you probably mean “ethology,” which is not a science either, but a branch of psychology which itself is a branch of literature.
History isn’t a science because we can’t prove what actually happened in the past except in the most vague general terms. We have to rely on written reports from people who for the most part lived hundreds of years after the actual events. That’s not science and has nothing to do with science.
Ethology isn’t science because it deals with animal behavior, and the description of behavior is subjective. As proof, consider the classic Robsenhan experiment. In that experiment, psychiatrists got themselves committed to psychiatric facilities although they were sane and behaved and spoke like ordinary people. They were unable to convince the psychiatrists that they were sane, and were forced to take antispychotic medications.
If trained psychiatrists can’t the difference between sane and insane people from their overt behavior, how do ethologists claim they can tell anything meaningful from the overt behavior of animals?
Halteclere
I’m interested in seeing a study of the buisness arc of a typical start-up
I immagine most start-ups go through an arc – great idea that brings initial success, the company builds upon that success and grows quickly. Then the company grows beyond the initial start-up’s managerial ability, they don’t adjust for any change in the market, there are no new ideas that follow up the initial great idea, or the founders lose focus or have difficulty maintaining company discipline during the good times of expansion. For a while this isn’t apparent, for in my experience, most buisnesses rely on past results for future outlook.Then the business enters a downslide, or even a downward spiral as future business no longer pays for current costs.
Finally the company has to make drastic cuts to stay viable, the founders are replaced or take a back-seat roll, or the company ends up crashing and burning.
I’m seeing the second act of this play right now with my current company, and seeing the downsizing and the people with forsight already heading to the door (and which I plan on doing myself).
And I wonder how common this is in the typical life of a start-up.
Ken Lovell
Napoleon @ 36 also confuses wealth with income. There’s more than enough wealth in the US to make everybody comfortable; the problem is it’s unequally distributed. That’s not a bug but a feature of the capitalist system. It’s all about rewarding winners.
General Stuck
Another way of putting it, is economists are largely full of shit.
Chad N Freude
@mclaren: I thought that was brilliant! Thanks.
Lysana
@Halteclere: I’ve been through that cycle almost in its entirety once and through a chunk of it once. I was one of the cut at both places. It happens a hell of a lot from all I’ve seen. The ones that manage to stumble across a moneymaker can still wind up sitting ducks for the bigger names if they don’t get out of the startup mentality.
Keith G
@Alex S.:
In a formal sense McClaren is quite correct (Did I just type that?). I have a degree in political science, but it aint no science. We use methods resembling those of the “hard sciences”, but it ends there.
eco2geek
Rut roh. Anyone who’s listened to Garrison Keillor’s show would know better than to rile up a reference librarian.
General Stuck
@Chad N Freude:
I agree Dr. Freude, wholeheartedly.
Chad N Freude
@Alex S.: Wikipedia begs to differ.
But what do they know?
And what @mclaren (44) said. Although Dan Ariely has run some small controlled experiments in behavioral economics that point to predictable behaviors in making individual and small-group economic decisions. Which may be why he called his first book “Predictably Irrational”. (mclaren, please don’t tell me that Ariely is full of it. I really like his stuff.)
Alex S.
@mclaren:
You should have googled “ethnology”….
and what about literary science, cultural studies and the like?
You don’t know about the scientific method either. Any scientific theory only lasts as long as it isn’t refuted. Every scientific theory has to be falsifiable. Taken to the extreme, there is no absolute truth in science. For example, history will never know EXACTLY “how it was”. But it strives to come as close as possible. Or physics: we don’t have the Theory of Everything. We just have a standard model that works for the time being and that took a long time to develop. Yet, if new research falsifies this model, it will get thrown overboard. That’s the scientific method – an endless approach to the truth. The absolute knowledge you have in mind, is a rarity.
Chad N Freude
@General Stuck: You’ve got me confused with someone else :-). Think about the periodic revisions of the DSM. That’s Science! I know a psychologist who is quite dismissive of the sciency [not a typo] claims of psychotherapy.
ETA: You should have pointed out that the blockquote was mclaren’s, not mine.
Alex S.
@Chad N Freude:
That definition is true for natural sciences. The social sciences are a different beast. And I would say that economics is right on the line between those two areas. Yet, many treat economics as a purely natural science.
Forever Blueberries
I’m disappointed in the part of this post/thread that bashes economics. I can’t imagine how anybody could think it’s not a science–is this because there’s a disconnect between what academics and non-academics consider to be science?
An example: I conduct research using tools from microeconomics and econometrics. I start out with questions, build a model and collect data that can answer those questions, and then find out what the data and model have to say. All this gets written up, reviewed by other academics, and hopefully published. How is that not science?
I’m curious: do the econ haters in this thread feel the same way about psychology and political science?
MattR
@Chad N Freude: If Wikipedia is now an expert source, then the entry for science has this:
Chad N Freude
@Alex S.: You might want to take a look at this paper by Popper. Section II is a killer.
Keith G
They would be wrong. That’s why it’s laughingly called the dismal science by some.
General Stuck
@Alex S.: Things are certainly different in sub space, but here on planet earth you are wrong. There is scientific theory, that is that before it undergoes the scientific testing method, and if it passes, which means that is reproduceable/predictive in a consistent way then it becomes scientific fact. Of course, there are many scientific theories that so far have not passed that test, because we don’t yet have all the parameters or knowledge to test them successfully for reproduction. This is why scientists do what they do, keep looking for those parameters. It’s called scientific study. Or, those theories are just wrong and always were when we find out the right answer,
There may be other scientific methods out there, but in the dimension we exist, the one we have works pretty well
PurpleGirl
@General Stuck: LOL. Very good, General.
For the record, I started college as a chemistry major and ended college as a political science (American Government) major. I’ve also worked with mathematicians, typing their papers. I’ve see the differences in the different academic disciplines. I saw math graduate students looking at jobs in finance for the higher salaries they could get, and the finance sector liking to hire math people because the Ph.D.s made their offices look smarter.
Chad N Freude
@MattR: I just thought it was a pretty good discussion of what any endeavor that claims to be “science” has to be. See the Karl Popper paper i referred to @Chad N Freude above.
General Stuck
@Chad N Freude:
You are correct. My bad.
Napoleon
@Phoenician in a time of Romans:
Yeah, really. If all we had were subsistence farmers you would not even have organized religion, because there would be no one to organize it because they would all be subsistence farmers. Of course you would not even have doctors. The more wealth that is created, which, yes really, can only occur from agricultural and industrial output, you can then afford as a society to have people who do things other then create wealth (and I include in that people who “grease the skids” like finance, attorneys and insurance”).
If you could transport the entire US medical establishment back 100 years within weeks 95% of them would be unemployed or working as coal tenders on railroads because the economy at that point did not toss out enough excess wealth to support anything remotely similar to the current system.
That is just a fact.
Jake Nelson
I get annoyed when people dismiss economics because the economists who get quoted in the media and get a lot of attention are largely 1) ideological fanatics and 2) idiots.
There is some very good scientific work being done in economics. But the people you see and hear about aren’t doing it, usually aren’t aware of it, and wouldn’t understand it if they were. Just because someone’s got a degree in economics and has economist in their job title doesn’t mean they’re actually practicing economic science. There’s people with degrees in climatology with job titles of “lead climate scientist” who peddle anti-climate change BS because they’re getting paid to do so. Same deal.
Krugman’s basically the only actual economist with a decent amount of public profile, and not enough people with power pay attention to what he says.
Chad N Freude
@Keith G: @Alex S.: Homeopathy is apparently a science. The link is to a book at Amazon; some of the comments are priceless.
Alex S.
@General Stuck:
In what way am I wrong?
Litlebritdifrnt
Apropos of nothing. I was watching an Episode of “Selling New York” today. There were a couple of different stories, one was a lawyer looking at an apartment with a price tag of 9.25 million. Another was a fashion designer looking for a rental with a budget of $15,000.00 A MONTH rent. So you have a person looking for a rental costing more than alot of people will earn a year in this country. You have someone looking to buy a place that will cost probably ten times more than the majority of people in this country will earn in a LIFETIME, you wanna tell me about how there is no divide between the rich and the poor in this country? At the same time you are trying to say that there could ever be a manufacturing base in this country? Making what? The general populace does not make enough money to buy anything other than stuff made in China where people are willing to work for a dollar a day. You honestly think any person in this country could survive on $365.00 a year? You honestly think a person could survive making $365.00 a month or for that matter a week? The great divide has never been greater and the divide gets wider every single day. What the hell is the mortgage payment on 9.25 million dollars?
DBrown
@mclaren:Brilliant and to the point – I have seen detailed high level projections for peak oil and while no clear answer is available for exactly when, nine years ago the very best scientist in the field gave us (in a special government eyes only briefing) a maximum of twenty years but only because Canadian Oil/tar sands would supply the rising needs. Since twenty years was the max time we had left (unless there was an economic collapse), the most probable occurrence for peak oil was some where between ten to fifteen years… shit, not good for us. You are correct in that global trade depends on cheap oil and that will soon rapidly be a pass dream that will hit like a nightmare.
MattR
@Chad N Freude: Frankly, the whole discussion of whether or not social sciences should be called sciences is more pointless than “Mac vs PC” or “Is Pluto a planet”. I just hopped in to point out that Wikipedia actually thinks that social sciences are a subcategory of science since you seemed to be trying to use wikipedia to say it was not. But I realize now you were attempting to refute a narrower point that Alex S was trying to make about whether the test of science should be its methodology or its ability to make predictions. And now I am going to try and back away slowly from this thread.
@Jake Nelson: But before I go, I gotta say “this”.
Ruckus
@Phoenician in a time of Romans:
Can’t speak for the original commenter but I imagine that they are talking about without profit centers which should be about ag or industrial production. IOW many things like health care, libraries, financial services are support functions. They are vital but they allow the creation of food and stuff. When the support functions become the profit centers because there is little or no production left, the economy becomes one big circle jerk. Or a nicer way to put it, a service economy. As someone else pointed out, how well is that working out?
roshan
Well if you start manufacturing stuff in US, then forget your $300 iphones or $500 ipads. That stuff would easily cost about double the prices if manufactured here. I am not saying that that’s wrong but just that the walmart mentality has soaked into the American dream right now. To buy more expensive stuff, you would have to have decent pay for the American middle-class to buy it. If no one is going to afford to buy it then why manufacture it in the first place. It’s not by accident that none of Apple’s products are made here. The wages in US have been stagnant for so long that none of its products can be bought by ordinary folks if they are not manufactured elsewhere. Walmart itself causes huge trade imbalances since it sources so much of it’s stuff from China. If it starts being a little more patriotic and a lot less greedy then maybe things might change. BTW even Walmart’s sales are hurting in this economy! Folks don’t even have that much money to spend on it.
Brett
That’s entirely wrong. The British were actually the first among the European countries to push heavily for more liberalized trade, even if it meant asymmetrical terms at times (like, for example, when they abolished the Corn Laws, and more or less let agricultural imports destroy much of their agricultural sector). They went around throughout the 19th century negotiating bilateral trade treaties with Most Favored Nation requirements.
America also had the advantage of a large and increasingly integrated internal market while they industrialized, and at least some export earnings from agriculture for the reason I listed above.
More bullshit. Why do you think Toyota and the like have plants in the US? It’s not because there’s just something that awesome about assembling cars in the American South – it’s because the US has a shit-ton of Non-Tariff Barriers (NTBs), including things like “percentage of car components manufactured domestically” requirements, along with “voluntary” quotas.
As for Grove’s article, it’s a mash of good points with bad advice:
A society that is hopefully smart enough to lower the number of hours in the work-week again. That’s what happened the last time we had a situation like this, more than 80 years ago, and it resulted in the 40-hour work-week.
No, the US has become vastly more productive over that period.
Talk about misunderstanding the problem. US companies don’t just build plants offshore because the labor’s cheap – they also do it because those countries (like the US) frequently have all manner of trade barriers, and building plants there is a way to get into those markets while saving money on labor costs.
El Cid
Nations like South Korea, who actually want their native industries to develop, get full bore behind industrial policies which favor their manufacturers. Yes, they have clever start-ups, but none of them believe the bullshit we do here that you can just fucking create jobs and companies via telekinesis.
Bill Murray
@Alex S.: and many of those many are economists. I doubt economics can ever be a natural science, no matter how many models they write
Chad N Freude
@MattR:
Thank you. That was very gracious. Are you sure you belong on this blog?
General Stuck
@Alex S.:
If i am reading you correctly, you seem to be confusing and conflating Scientific theory with scientific fact. The scientific testing method is not a theory, it is simply running an experiment in the same way with all factors the same and coming up with consistent results. No more no less. And when a theory is put through this rigor and becomes reproduced consistently then it is deemed factual.
And always physical science uses parameters that are one thing or another and measurable consistently in nature. Social sciences cannot do this because of the complex and fleeting nature of human persons and their constructs as a parameter.
Napoleon
@Phoenician in a time of Romans:
PS, I didn’t focus on this originally, but yes. Better example though is what I do, which is an attorney. To the extent I create value (which is not the same as creating wealth) is to “grease the skids” so that it is easier to create wealth by avoiding disputes). For what you do though you still have to have a society that has enough spare stuff that even though you don’t create stuff (like me) someone is willing to give it to you anyways.
Seriously. The Chinese know this. We have forgotten it. At the end of the day the Chinese will not come to your library, and they will not hire me as an attorney. They will seek those things from their own.
Pug
Sullivan links to a typical right-wing “economist” and wingnut welfare recipient, Riehan Salam, of the New America Foundation. These are the kind of guys that have gotten us where we are over the last thirty years.
The U.S. badly needs job and income growth. But it won’t come from the manufacturing sector. Rather, it will come from a wrenching series of labor market and entitlement and tax reforms designed to improve work incentives, most of which will prove far less popular than simply bashing China.
Note the following: any criticism or anlaysis of offshoring jobs is “China bashing”; “a wrenching series of labor market and entitlement reforms” means get used to being unemployed and get used to lower wages when you are employed and no assistance when you are unemployed, or in other words, we need to be more like China; “tax reforms” means huge cuts in capital gains, estate taxes and marginal income tax rates at the top; and to “improve work incentives” means getting rid of any social programs to ease the pain of unemployment or poverty so taxes can be cut at the top.
Guys like this should be forced to work at Foxconn for five years and then laid off with no benefits. It would be a good lesson in real world economics and might help him get his head out of his ass.
PurpleGirl
I’m going to throw out an idea that is not often addressed: Reinvigorating manufacturing is important but that isn’t the only sector that is hurting. Because of office technology and productivity, the numbers of office workers that are needed has also been decreasing. A good number of the unemployed and underemployed are people who worked in offices. How can we restructure the work force so that they have continued participation?
Napoleon
@Ken Lovell:
Jesus, read what I said.
Chad N Freude
@roshan: I agree. With all the blathering about “entitlements” in the National Discourse(tm), no one (except maybe me) seems to think that buying expensive electronic toys has become an entitlement.
Alex S.
@Chad N Freude:
Thanks! As a (former) student of history, falsifiability was a very important aspect to me. Predictability is more important in natural sciences, of course, because of the ability to conduct experiments. But many social sciences don’t have this possibility, or the necessity.
Phoenician in a time of Romans
Yeah, really. If all we had were subsistence farmers you would not even have organized religion, because there would be no one to organize it because they would all be subsistence farmers. Of course you would not even have doctors. The more wealth that is created, which, yes really, can only occur from agricultural and industrial output, you can then afford as a society to have people who do things other then create wealth (and I include in that people who “grease the skids” like finance, attorneys and insurance”).
Dude, what you are claiming there is wealth is layered, with two of those layers being agriculture and industry.
That is a totally different statement from your original claim that “an entire societies ultimate wealth depends on only 2 things, agricultural and industrial output. Anything else anyone does is parasitic.”. You have either moved the goalposts (naughty) or haven’t considered your ideas and clarified them cogently.
Your original claim is incorrect. Wealth is not limited to just agricultural and industrial output. Rather, it is layered with different types of outputs – we need to eat, we need goods, but when we have these, we also need services, we need education, we need entertainment, we need organisation, we need information – and the provision of these is just as much wealth as food and manufactures.
I refer you to the idea of Maslow’s hierarchy of needs. He placed physiological needs at the bottom with everything else resting on them but that did not mean that everything else did not exist.
Keith G
@Chad N Freude:
For many years, I wondered what the connection was between free market – small business types and homeopathy (etc). Then I left my previous professional career began working for such a business person.
Then I realized the connection. It’s about bootleg health care. They can’t afford the real thing, so its off to GNC.
In fact, there is a lot of similarities between some social science and the health supplement market.
Phoenician in a time of Romans
Seriously. The Chinese know this. We have forgotten it. At the end of the day the Chinese will not come to your library, and they will not hire me as an attorney.
[Raises an eyebrow]
I don’t know about what you do, but I’m statistically confident that the Chinese have already used what I do.
Napoleon
@Ruckus:
This is another way to put it.
PurpleGirl
@Chad N Freude: Have you noticed the Sony ad for 3-D televisions….
Napoleon
@Phoenician in a time of Romans:
No I meant exactly that, those are the only 2 that create wealth. Period, end of story. Everyone else is just pushing around that wealth, but they create nothing.
Phoenician in a time of Romans
That’s entirely wrong. The British were actually the first among the European countries to push heavily for more liberalized trade, even if it meant asymmetrical terms at times (like, for example, when they abolished the Corn Laws, and more or less let agricultural imports destroy much of their agricultural sector). They went around throughout the 19th century negotiating bilateral trade treaties with Most Favored Nation requirements.
Brett, the 19th century came after the 17th century. The British were the first to push for liberalised trade after they developed a dominent position, and then they concentrated on “freeing” the trade that would help them. That same liberalisation didn’t apply to their colonies and dominions – the Indian textile industry was larger than that of Britain, but dismantled rather than allowed to compete with English exports.
General Stuck
I just noticed the World Soccer Cup is over. Dern, missed it again. Will someone please remind me in four years. Thanky you very much.
Alex S.
@General Stuck:
I’m not saying that the scientific testing method is a theory. I don’t see any point we disagree about. I was trying to refute mclaren’s notion that, “just” because economics couldn’t predict the economic crisis (although some economists did), economics isn’t a science at all. I was trying to imply that economics have to correct their theories now because the previous theories didn’t match with reality, i.e. they were falsified. Sadly, economists can only use reality (real economies) in their experiments.
Chad N Freude
@PurpleGirl: Yes. My employer has been deploying network tools for things like travel requests, expense reports, etc. with the unspoken goal of cutting the number of clerical employees to as close to zero as they can. They apparently think that very time of the professional staff who are expected to use these tools doesn’t cost much in terms of salaries and time taken away from actual productive work. If they’ve thought about it at all.
Phoenician in a time of Romans
Piator: Dude, what you are claiming there is wealth is layered, with two of those layers being agriculture and industry.
Napoleon: No I meant exactly that, those are the only 2 that create wealth.
Again, are you stating that if you fall sick, you don’t need a doctor, nurses, or a hospital administration – we can just stick you in a room and shovel supplies to you as you request (and pay for) them?
Napoleon
@Phoenician in a time of Romans:
Good for you, because the day this nation does not create wealth because our ag and ind sectors do not they will have Chinese provide such things “in house” with whatever you have supplied.
Bill Murray
@Brett: Britain was very protective until it became much better than other areas (it destroyed production in India and some of the reasons for the American Revolution were rooted in this), then it wanted lowered tariffs to keep the other countries from developing and challenging their economic hegemony. Ha Joon Chang did a good job explaining this in Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism
MattR
@Chad N Freude: Heh. Glad I checked back in to see that reply. I will be honest and admit that I don’t always studiously examine every comment that I write and that I reply to so I know I am gonna make a mistake or three and have no problem admitting it. And if I am “too nice” for this blog, what is left? Not FDL or GOS :)
General Stuck
@Alex S.: Maybe then I read you wrong.
Chad N Freude
@Alex S.: You’re welcome. The social sciences produce policies and actions that have significant impact on people’s lives. I think the ability to conduct experiments is a necessity (although probably often impractical).
Chad N Freude
@Keith G: Health supplements aren’t quite the same as homeopathy. I buy vitamin D and, on my doctor’s recommendation, Red Yeast Rice (lowers cholesterol). But there is a near-religious belief in the efficacy of some “health foods” and supplements with no supporting evidence.
El Cid
@Brett: It was actually quite complex. Like any powerful nation, Britain sought to liberalize trade in areas in which it was strong, and protect itself from competition in areas in which it was weak.
For example, the shutting down of importation of better made and less expensive Indian textiles.
The Calico Act of 1700 and 1721 banned the importation of some of the most popular products of the Indian textile manufacturers — then the largest textile manufacturers in the world — and high tariff duties throughout the period were imposed to Indian textile products in order to favor native development.
And, just coincidentally, the Indian dominance of world textile trade was broken, particularly in those areas which Britain controlled.
Having had this artificial, protectionist boost, it was also fortunate that the British had the time and market interest to develop much more efficient mechanized processes than the formerly dominant Indian weavers.
India then became a source of raw materials (a source of cotton, as would become Egypt, as became the American South) for British manufacturers to make a value-added final product of manufactured textiles.
Where would Britain’s industrial revolution have been, and where would Britain’s development had gone, had it not developed its famed textile manufacturing industry?
Chad N Freude
@Alex S.:
I’m waiting with bated breath.
Chad N Freude
@El Cid:
And what was the year of the Gingham God?
Phoenician in a time of Romans
@Napoleon – re #94, that’s a serious question. I believe if you attempt to answer it, you’ll discover the problem in your thinking.
Or put it another way, consider this thought experiment:
Let’s say we got rid of all the prescribing doctors in the world – no more GPs, no more specialists apart from varieties of surgeons, no more pharmacists. Instead we replaced them with a home fabricating machine that allowed everyone to get whatever pill they requested in whatever quantity they wanted.
Would people be worse off or better off? Would they be wealthier or poorer?
El Cid
@Chad N Freude: Early on in the expansion of the calicate by muslin fundamentalists.
Chad N Freude
@El Cid: I’m really happy that you got that.
schrodinger's cat
@El Cid: Boycotting British made goods, (Swadeshi movement) especially clothes was one of the corner stones of the Indian Independence struggle.
Wile E. Quixote
@mclaren:
Bravo! Here’s my main objection to the “science of economics”, namely how many filthy, dirty rich economists can you name? Seriously, if economics were a science and I were versed in said science which could make testable predictions about the behavior of the economic system I wouldn’t be fucking around in academia or wanking for Brookings, the Olin Foundation, AEI, CEI or any of the other
thinkwank tanks. I’d be out there using my knowledge of how the system works to make positively obscene amounts of money, so much money that I would roll around naked in a huge pile of it like Scrooge McDuck before going off to make more money so I could come back to my palatial mansion, roll around naked in my pile of money and then snort cocaine from between the breasts of high class prostitutes.Most economists are ass-kissing lackeys of the corporate system. They don’t have any more of a clue than anyone else, despite their education and their models and theories.
El Cid
A good book to introduce people to the notion that the rest of the world wasn’t just sitting around in caves and jungles and tents before and around the time of the European Renaissance, New World conquering, and subsequent development.
mclaren
@Brett:
Utterly false and a complete lie.
Mercantilism began in Britain. The British invented it. Mercantilism was the practice of forcing colonies to export raw materials dirt cheap, lower than the going market price, then turning those artificially cheap raw materials into manufactured goods and forcing the same colonies to buy those manufactured goods at artificially inflated prices.
Q: Why did the American colonies rebel against Britain?
A: Because the British were forcing Americans to buy extortionately expensive tea imported into the American colonies by the British East India company.
You’re not only lying about history, you’re ignorant of history.
Now let’s debunk your next lie:
In actual fact, Japanes car makers are leaving the country.
The reason why Japanese build factories in the U.S. is because of the massive 20-year-long deflationary collapse in their home country, which makes it cheaper for the Japanese to build cars overseas and import ’em into Japan.
Incidentally, the japanese economy collapsed because its government followed the failed and foolish policies recommended by “genius” economists like Milton Friedman and Alan Greenspan and Larry Summers. Now America’s economy has also collapsed and we’re heading into exactly the same deflationary collapse, which will probably also last another 20 years, like Japan’s.
Another lie, this time ridiculously easy to prove. Almost all of America’s current so-called “manufacturing capacity” is wasted in building weapons that don’t work. Proof that America makes almost nothing but weapons. Take a look at that chart. It’s eye-popping.
And proof that the weapons don’t work.
The rest of America’s so-called “production” is now what is euphemistically known as “knowledge work,” which is another word for worthless horseshit. The “product” of America’s magnificent “knowledge work” is crap like Microsoft Vista, garbage like the movie Transformers 2, and junk like lawyers’ billable hours. Oh, yes, and op-ed column by William Kristol and David Brooks and Larry Kudlow.
America’s elite decided 30 years ago that it would be a real smart move to dump all our manufacturing base and offshore it to the rest of the world and instead make tons of money off the low-cost high-value-added miracle of ™!
Unfortunately, America’s elites didn’t realize that the same technological miracle that let us make those information economy products of Knowledge Work™ also let everyone in the world copy all the products of our Knowledge Work™ for free by downloading it with bittorrent. And no possible DRM works.
So instead of becoming rich with a 21st century Information Economy, America wound up f♥cked ♥p the ♥ass©®.
DBrown
@Brett: Haven’t got time to read all your post but if it is as wrong as this, maybe I’m better off.
You claim “That’s entirely wrong. The British were actually the first among the European countries to push heavily for more liberalized trade,”
Really? So all the countries they enslaved and forced to buy the british and very expensive finished goods which these lib economic types then forced the slave countries to sell thier cheap raw materials to these same fair brits (who allowed massive deaths in these hell hole mines/labor fields). Lets not forget China which didn’t need or want the british goods – the brits imported drugs and hooked millions on them. Then, what of India? The brits made them buy salt and cloth from their people and made laws against the people of India doing these things.
Oh, you mean british that wanted low import tariffs world wide to sell their goods to other people but why would they then need tariffs? Their enslaved vast numbers of people and forced them to buy the british goods. Meanwhile, they did protect some key things like steel and other key areas for their military … .
Until you know history, you are doomed to repeat its terrible mistakes – the brits only adjusted tariffs to maximize their economic control as did most europian countries and japan is a great example of that in the 60’s when we protected them and wanted them not to go red … .
Lets not forget just after WWII when european industries were destroyed and we came on the scene and had the world at our feet – who needed tariffs then? The countries the brits and some europeans had enslaved (and were finally getting free) and a world broken by war with only one country fully protected during that conflict with a powerful, intact industrial base and so the greediest generation got the gold and later generations will get the shaft.
El Cid
@schrodinger’s cat: Yes, and Indians recalled the earlier protectionism against their products, while few Brits did then and very, very few Westerners now. When anyone in the 3rd world turns such classic Western protectionist policies back onto the former imposers, it’s discussed as if it’s all new, dangerous, never tried, radically, sui generis. Not that ‘it’ is always right or well-defined or well-carried out.
BTW, a Washington Post reporter calls out the bullshit rich West’s fraudulent nostrums about ‘free trade’ for anti-development much of the 3rd world. It’s not the first effort, but it is a current one. Needless to say, the Washington Post review of his book was damning by faint praise and patronizing, because in the billion dollar media, you do not question the mantra of the imaginary thing called ‘free trade’, which doesn’t exist, which never existed, and there are only trade agreements which benefit some parties and cost others.
A good quote from this was from, I think, Uganda, where one person quipped that in the old days, the stores were empty but people had enough money to live; now, the stores are all full, but people haven’t enough money to live.
Recalls Galeano’s quip about US-backed South American pro-market fascism: ‘People went to prison so that markets could be free.’
Francis
The basic rule about free trade, whether between two families, two tribes, two cities or two countries, is that the total increase in wealth is sufficient to allow the net winners to compensate the losers for their loss.
But the way to get really rich is to combine free trade with control of the political system, so the winners get the benefits of free trade and also don’t get around to compensating the losers.
Economists talk a fair bit about first-best and second-best rules. In trade, the first-best rule is free trade plus compensation. What’s the second-best rule? Free trade without compensation, or trade barriers that impoverish us all (a little) while enriching those who would otherwise be hosed (a lot). I know that I would prefer the second alternative.
But even the Democratic Party never lays out the costs and benefits of free trade in such stark terms (because the Party is so dependent financially on people who obtain the benefits of free trade without paying the costs — like lawyers and bankers [and journalists, too]).
The Republican party is even more blunt: the entire middle class and below needs to learn to live with less so that the very rich can get even richer. (Or, more bluntly, the economic system exists to service the rich; everyone else can get f*cked.) That’s essentially what Reihan was saying.
Annamal
@Mclaren, you’re either wrong or calling out a whole raft of other disciplines that are widely acknowleged as science (including but not limited to medicine, paleontology and parts of biology ).
An awful lot of sciences rely on evidence from the past and a lot of that evidence is created or recorded by potentially unreliable humans.
Historians can and have used scientific evidence ( e.g. carbon dating) to confirm or refute historical claims.
mclaren
@@Wile E. Quixote:
Scroll down to the this article, “Is Advice From the IMF Better Than Advice From a Drunk on the Street?” by Dean Baker.
For an excellent debunking of the giant scam misnamed globalization, see Nobel prize winner in economic’s Joseph Stiglitz’s “Globalization and Its Discontents.” The guy used to run the World Bank, so when he says globalization doesn’t work, he has some credentials.
monkeyboy
@mclaren:
Where do you get that figure from? Wikipedia cites an EPA report that estimates the consumption at 1.5% in 2006.
mclaren
@Annamal:
LOL.
I look forward to seeing your scholarly article using carbon dating to prove that Achilles slew Hector on the plains of Troy.
Paleontology is completely different from history. Paleontologists makes general claims about species over hundreds of millions of years…historians claim Beethoven died of lead poisoning.
We’re never going to know whether Woodrow Wilson was so brain-damaged after his stroke that his wife had to make all his decisions. We’re never going to know who actually wove the Shroud of Turin. History is guesswork and conjectures with no final answers. It’s not science.
mclaren
@DBrown: Yeah, I put up a post thoroughly debunking Brett’s claims but it got dumped into moderation for no reason I can see. Except I did use the phrase “Americans wound up f♥cked ♥p the ♥ss” with those special ASCII characters, so who knows…maybe that did it.
I also did a post citing the evidence debunking game theory, on which classical economics is heavily dependent, but that post just vanished into thin air. Dunno why.
That one linked to the Wikipedia article on the BBC documentary “The Trap,” which is just devastating.
Annamal
Actually I was thinking more recently, like that stupid “year china discovered the world” book by Gavin Menzies where at least some of the objects he claims as artifacts of Chinese exploration have been discredited by carbon dating.
Actually the article you point to is a perfect example of the scientific method in action when it comes to history, using evidence to change or alter a hypothesis
HyperIon
@Annamal: Historians can and have used scientific evidence ( e.g. carbon dating) to confirm or refute historical claims.
Using a scientific tool does not render a discipline scientific. An historical claim is not a scientific theory. Scientific evidence can be presented in a court of law also. So what?
Litlebritdifrnt
I suppose that American History does not include any reference that people in England starved to death as a result of the American Civil War? The cotton mills in the North of the UK were dependent upon a constant supply of cotton from the US, when that supply dried up cause of the war, whole families in the UK starved, there were no jobs, there was no help. When I was a child, I used to walk along the banks of the canal and the constant sound of the cotton mills in the factories beside the canal was my most abiding memory. Now those factories have been converted to apartments. The previously industrialised world has now been converted to a service economy, it cannot survive. A country that produces nothing and just consumes eventually has to fail.
DickSpudCouchPotatoDetective
Just for the record, WashingtonMonthly did an article on the loss of job creation earlier this year, which pretty much makes this featured article moot. Jobs have not been “shipped overseas,” they have just disappeared. Mainly, according to the article, because government policies have favored large corporations over small entrepreneurials and startups because old antitrust and other commerce regulation measures were rolled back by Republican administrations bent on reducing government “interference” with business.
Larger firms with no restraint on them were free to gobble up jobs and then eliminate them through economies of scale, not only getting rid of the jobs but also getting rid of the competition from smaller enterprises.
I have already posted links to this WaMo article more than once, and I am too lazy to seek it out and do it again, but you can probably easily find it on the WaMo site.
meepmeep09
@mclaren:
That was awesome. I particularly liked that you noted the factor of low cost shipping, and how future fuel cost increases are gonna bring that to an end. Even a non-economist like me can see that cheap transport is so deeply ingrained in how Wal-Mart and others do business, that many well meaning commenters generally don’t even see it.
Good discussion overall, depressing and scary though it has been. Can anyone translate it into Tea-Partyese?
racrecir
See here, too.
https://balloon-juice.com/2010/07/10/working-as-intended-3/#comment-1880019
DickSpudCouchPotatoDetective
@racrecir:
Yes, some of that material appears to have come from the WaMo article I mentioned above, or have shared a common origin.
The article was entitled “Who Broke America’s Job Machine” and it can be located with an easy 15 second Google search.
It pretty much puts the lie to the idea that jobs have been “shipped overeas” … sort of like the like that the Mexican border down here is littered with headless bodies. It’s a xenophobic myth. American mismanagement of its commerce environment (in other words, Republicans) basically turned off the engine of job creation in order to favor big corporations and consolidation … fewer and fewer corporations with more and more of the market share. In whatever market you want to talk about.
This is the perfect win-win storm for Republicans. They curry the favor of big business, and then blame the job losses on unseen foreigners and, somehow, liberals, or something. A truly great scam, perpetrated on the American middle class.
Annamal
Not by itself no, but it does suggest that historians are making, testing and disproving theories about previous events in the same way as scientific disciplines whose only evidence consists of artifacts.
Chad N Freude
@mclaren: “The Trap” can be found at freedocumentaries.org. Scroll down to the list of titles in the bottom half of the page and look for “The Trap”.
This is probably a dead thread by now, so I’ll post this on another thread tomorrow.
b-psycho
Even IF this kind of industrial planning strategy actually worked, answer one question: who the fuck would bother implementing it?
Seriously. The entire problem is that the people that run this country look at everything as “us > you”. I’m not seeing a path to anything else that wouldn’t better be described as anarcho-soshulism.
El Cid
@b-psycho: Oh, now, here you come, spoiling our rollout of the new Five Year Plan, with your ‘realism’ and ‘analysis’. Pffft.
b-psycho
@El Cid: What? I can’t ask a question? Really, what is the incentive?
I suppose someone could argue long-term that if the current economic collapse continues eventually there’d be a revolution. That overlaps with my preference to an extent though.
Cain
@Mike G:
Craig Barrett was a fool. Basically now we have financial folks in charge of Intel not people with engineering background. Paaul Ottellini isn’t bad, but Barrett bought a crapload of companies which diluted the engineering environment of Intel IMHO.
cain
Leisureguy
Given your condemnation of the entire field of economics, could you perhaps give a better idea of the extent and depth of your knowledge of the field?
On the Internet, we regularly have the spectacle of strong criticisms emanating from ignorant sources (e.g., the ubiquitous criticisms of climate change from people whose education in science seems to have ended remarkably early). I am just looking for some information to reassure me that your criticism is not of that type. Thanks.
El Cid
@b-psycho: snark
Flugelhorn
@mclaren:
Like Meteorology? Colorado State University’s Dept. of Atmospheric Science habitually refers to each new year as “a very active season for hurricanes” and are routinely incorrect. In fact, I cannot remember the last time they got it correct. This does little to temper the excitement in the media each year the Colorado State University’s Dept. of Atmospheric Science makes their predictions. Broken clocks and blind squirrels, right?
Climate Science?
Geology?
Archaeology?
Anthropology?
Computer Science?
Medicine?
Wow… I guess you are correct. If these sciences (not an exhaustive list) cannot manage an accurate prediction, then they are not science at all.