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Via Greg Sargent, Harold Meyerson discusses “a win for the middle class“:
The news that our trade with China has been bad for the American middle class has finally reached the U.S. Senate. On Monday, the Senate will take up legislation that would impose tariffs on Chinese goods so long as China depresses the value of its currency. Despite the partisan polarization that grinds lawmaking to a halt these days, the bill’s support is thoroughly bipartisan, with sponsors ranging from such conservative Republicans as South Carolina’s Lindsey Graham to liberal Ohio Democrat Sherrod Brown. The legislation is expected to clear the Senate’s 60-vote hurdle for a floor vote and move on to the House…
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… Between 2001 and 2010, the U.S. trade deficit with China cost Americans 2.8 million jobs, according to a report by economist Robert Scott, issued last week by the liberal Economic Policy Institute. Most of those jobs — 1.9 million — were in manufacturing, and of those, almost half were in computers and electronics.
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This wasn’t simply the consequence of China’s cheaper labor or more generous corporate subsidies. As China’s productivity soared during the past decade, the value of its currency should have risen correspondingly. Instead, China purchased dollars, which had the effect of depressing the yuan and making Chinese exports about 28 percent cheaper than they would be if the yuan had been allowed to appreciate, William Cline and John Williamson found in a study for the centrist Peterson Institute for International Economics.
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Data like these have been floating around for years, of course. Until now, however, the Senate has remained largely impervious to the evidence of Chinese cheating and American decay. But elite opinion, which the Senate does heed, is finally catching up with mass opinion on whether losing our manufacturing base is a bad thing. An influential July 2009 article in the Harvard Business Review by economists Gary Pisano and Willy Shih argued that losing manufacturing meant losing our edge in innovation, that the relationship between research and production was reciprocal. This would not have come as news to Thomas Edison, but few on Wall Street or in corporate boardrooms the past two decades believed that America’s prosperity and dynamism required the retention and renewal of manufacturing…
Read the whole thing. Taking action is going to anger some very powerful people in both countries, but the ‘Walmart War’ has been just as bad for China’s middle class as it has for ours.
Cat Lady
I’m going to take a wild guess that Mark Pryor isn’t one of the supporters.
Phoenician in a time of Romans
The news that our trade with China has been bad for the American middle class has finally reached the U.S. Senate.
[…] Instead, China purchased dollars, which had the effect of depressing the yuan and making Chinese exports about 28 percent cheaper than they would be if the yuan had been allowed to appreciate,
Gee, so presumably the American middle class never ever actually, you know, bought anything from China and thus got the benefit of these 28% lower prices?
Let’s take that line of thought to its logical extreme to illustrate the point – imagine a fairy came down and gave everybody a magic plate that would produce a delicious home cooked meal whenever you wanted it. Everyone everywhere would get free food forever – but since this means farmers would be out of a jobm it would have to be considered a bad thing overall, right.
Mino
I actually saw this coming back in Sainted Ronnie’s day– oh, not that China would be the particular beneficiary of our idiocy, but that we were destroying producing jobs for third party financial gain. Corporate raiders were glamorous heroes. And multi-generational American manufacturing companies were being cashed out, having their machines auctioned off the floor of their shops. I heard of cases where the entire shops were packaged and shipped overseas, leaving just the dust to remember. I kept waiting for our government to do something to put an end to this destruction, idiot me.
Instead, our Congress listened to bottom-liners who wanted foreign-made items to compete on a level field with American-manufactured items. They even managed to get tax subsidies for doing it.
I remember a particular lawn mower company who packed up and destroyed umpteen good-paying jobs in their area. I said at the time…who the hell will be able to buy their shit? Or want to, for that matter. Guess they’ll sell to their foreign market, oh, wait, Americans are the primary ones with lawns.
Mino
@Phoenician in a time of Romans: The ones who got the benefit in large measure were executives with bloated salaries in reward for their profiteering off essentially slave labor.
And it didn’t destroy the job, it just rewards most of the productivity to the masters, now.
amk
So instead of taxing the parked funds of mnc’s (thus nullifying their move the jobs where there is slave labor strategy) and stopping the stealing ways of wallstreet banksta ponzi schemes, the corrupt corporatists from both the parties take the easy way out of china bashing.
cleek
@Phoenician in a time of Romans:
yes, we got our cheap TVs. and while we were watching the Chinese TVs, from the comfort of our Vietnamese-made furniture, while wearing our Honduran-made clothes, our neighbors were losing their jobs. and now those jobs are gone for good. and so many people have lost jobs that overall demand is down, and even our cushy non-manufacturing jobs are a little precarious.
cyd
Sorry, not much sympathy for the first world nation on this issue. The Chinese need the jobs more; they are a poor country. Americans as a whole are rich; it should be up to their government to distribute the wealth equitably, instead of scapegoating a poorer nation.
PeakVT
Good news. So good, I hardly believe its happening. Too bad about the House, but it gives Democratic House candidates the ability to run on it.
Mino
And you know what, a funny thing happened. All those cheap goods didn’t help us maintain our lifestyle. Our wages stagnated and our wives had to get jobs just for us to stay even. Inflation was low but steady and, just like compound interest, it began to become noticable. Food, utilities, health insurance, for dog’s sake, are bigger bottom-line items than a damn toaster.
Mino
@cyd: Does this distribute downward? You wouldn’t mind a poor person stealing your items while the cop watched.
RossInDetroit
@cyd:
Currency devaluation has hurt the Chinese people as well. They have price inflation but wages are flat. Profits go into growth and development of business as first priority.
The Chinese government knows it needs to cool off inflation but resists doing it because it would slow business growth.
It’s inevitable that less industrially developed nations grow and expand, becoming competitors to the traditional industrial producers. Wait long enough and those people will begin demanding a decent standard of living for their work and the labor cost imbalance will level out. But that’s probably generations away, with so many people in China poor or underemployed.
kdaug
And let’s remember, kids, that once upon a time there was a man named Sam Walton whose motto was “Made In The USA”. Tagline for every damn commercial. Slogan for his two big wholesale and retail outfits.
Then he died.
Kids took over, and it became “Cheapest crap we can get away with.”
Ah, well.
WereBear
What benefit? I get ripped off when the piece of crap falls apart a month later. Which is why I haven’t bought cheap crap in years; I can’t afford it.
RossInDetroit
@kdaug:
Can you blame them? Businesses now put quarterly profit above every other goal. The stockholders don’t care if their customer base’s standard of living is slowly eroded as long as the dividend is good.
patrick II
@cyd:
We won’t stay rich if we don’t produce wealth. We have been selling appreciating assets to buy depreciating commodities. Our human and physical manufacturing infrastructure is decaying.
We have to manage our balance of trade in a more sophisticated, granular manner than the tit-for-tat we seem be doing with China. Sudden lurches caused by such crude mechanisms are good for neither them or us.
The first thing we have to do is acknowledge there is a national economic interest — not just the interest of individuals or corporations. We have not been able to take that simple step largely because of the power of the ideas of “free market” and “free trade”, for both ideological and selfish reasons. Ideologues and corporations don’t like the idea of a nation with economic objectives and the power to enforce them.
RossInDetroit
I actually have a net trade surplus with Asia, or close to it. I export restored audio equipment made in the US in the ’60s, and the bulk of my customers are in Korea, Japan and China. There might be a lesson there but I’m not sure what it is.
Belafon (formerly anonevent)
@Phoenician in a time of Romans: If we had the replicator from Star Trek, yes, it would destroy the entire manufacturing and food industry. But that wouldn’t matter because you wouldn’t need to earn a living to feed or house you and your family.
China is making stuff 28% cheaper when it shouldn’t cost that little. What that means is that we’re paying 28% less than we should to cover the cost of manufacturing these items, which means the workers are being underpaid, which hurts the workers.
Belafon (formerly anonevent)
@cyd: As I said in #17, we’re underpaying the cost to make these things by 28%. And since the cost of materials doesn’t change, and bosses have to get paid at their requested rate, the difference comes out of employees’ salaries, no matter where those employees are.
Mino
And wearing my tin-foil hat for a moment, China is a worrying example of 21th century government, maintaining an authoritarian head that exploits its poor to enrich a tiny % of the population. Why does that sound familiar?
The prison industry in this country is showing the way.
Anyone wonder what our true literacy rate will be in a decade?
Tokyokie
@kdaug: Never mind that old Sam’s lucrative business model was gutting the downtown business districts of small towns across the heartland. And of course, taxing his undeserving heirs on either their inheritances or their capital gains would just be wrong.
Mino
@RossInDetroit: Maybe because the quality is bullet-proof.
cyd
These arguments that the Chinese currency policies are actually hurting the Chinese poor are self-serving. China has lifted hundreds of millions of its citizens out of poverty in the last three decades. They still have a lot of ground to cover, and they clearly have their own timetable for switching to a less export driven economy. The idea that they should do what American politicians tell them to because it’s for the good of their poor seems laughable.
Judas Escargot
@Mino:
It’s even worse than that: Because that 42″ flat panel HDTV is “better” than the 19″ color tv you had 30 years ago, economists get to play tricks like hedonic adjustment to make it look as though your quality-of-life has decreased less than it actually has.
In other words, the goods got cheaper, but are considered to be worth more because of hedonic adjustment. Which then is used to “massage” the CPI to make the your situation look less bad than it would with an apples-to-apples comparison between then and now.
Mino
@Judas Escargot: The whole CPI is a fuxking joke. Borderline destitute people don’t buy a damned thing on that list but their COLAs are predicated on it. Social programs should use a CPI basics to calculate COLAs.
Judas Escargot
@Belafon (formerly anonevent):
Replicators are fiction, but 3D printing is coming along faster than I had ever anticipated. There are already services like this available to anyone who can afford them. And a quality 3D printer can be had for $15K or so. This is NOW. So, while there won’t be any tea/earl grey/hot coming out of the wall anytime soon, IMO manufacturing is about to swing to a more on-demand, on-site model… sooner than anyone (myself included) seems to have anticipated.
In some ways, there’s a cruel joke about to be played on China: The combination of increased oil (shipping) costs, along with these revolutionary changes in manufacturing, will undermine their collective, export-oriented business model. That is what will force them them revalue their currency: They’ll need to build up their own middle class, to replace those overseas customers, and currency revaluation (ie domestic wage inflation) would accomplish that.
Corner Stone
@cyd:
They’ve poisoned millions of their citizens in the process.
The matter is we haven’t actually been paying less for these imported goods, we’ve simply been deferring the costs.
Mino
@Judas Escargot: Is this an application of CAD technology? Have to admit, I don’t know the program, but I see it linked to machining and fabricating as a possibility and probably a necessity, as the generation that knew how to do those things is disappearing in the US.
Judas Escargot
@Mino:
Companies like Shapeways (or any 3D printer, for that matter) will accept any of the standard CAD output formats: Autodesk (pay) and Blender (free) are probably the most common. We still do have a lot of CAD expertise in this country, not only from manufacturing but also from the computer graphics world (XBOX game developers use those very same output formats to generate their object models, for example).
If you’d asked me two years ago, I would have told you that on-site/on-demand manufacturing would be the norm by 2035 or so. Then I found out recently that we already live in a world where stuff like this is possible.
What does this do, long term, to China’s export-based economy? Or to ours, for that matter? Who makes things? Who gets paid when something is made? The printer owner? The IP owner? Hell, maybe the customer should get paid, since with this model s/he’s the one who performed the creative act.
Just one more hint that our current social arrangements are unlikely to survive the 21st century.
cyd
@Corner Stone:
Heavy industries are heavily polluting, sure. That’s the standard route for moving to first world status, previously followed by the East Asian Tigers, and Japan, and all the Western advanced economies. For an advanced economy to put up barriers to the import of manufactures from an industrializing country is like pulling up a ladder after you’ve already climbed it—and then moralizing about how it’s for the good of the people stuck below.
Jennifer
Consider also: while the cost of frivolous consumer goods declined after they all began being produced overseas, the cost of anything that couldn’t be off-shored went through the roof: housing, medical insurance/care, etc. Then consider the quality of those cheaper goods – it’s fairly non-existent. I’ll give an example: when I left for college in 1981 I had to go buy a bunch of stuff – one of the items was a blow-dryer. It cost $25, which was a lot in 1981 dollars. Of course, it lasted until 1997. Since then, I’ve bought 4 – count ’em, 4 – Chinese-made hair dryers for around $12 each. So, not really “cheaper” at all. You can say the same for just about ANY consumer electronics. My first VCR was heavy as a brick and cost $250 for the 2-head version…when it finally died after years of heavy use, it was replaced with a plastic model that cost about $150 for a 4-head version…which died after 3 or 4 years, to be replaced by a plastic DVD/VCR combo at about the same cost.
Meanwhile, the “value” on my house went from $60K in 1994 to over $200K today. My health insurance went from $75 per month – with actual coverage – to over $250 a month, with no real coverage unless I get hit by a bus or something else catastrophic.
At the same time, I go into Kroger and see that they’re importing frozen green beans – frickin’ GREEN BEANS – from China. Yeah, just what I want to eat! Food grown in a vast toxic waste dump. And pray tell, HOW could it possibly be CHEAPER to grow a green bean in China and ship it 5,000 miles or more than it is to grow it down the road? It isn’t, that’s how. There’s market manipulation going on, and if we’re ok with settling for being a country with a huge underemployed lower-class who can afford “luxuries” like TVs and iPods but not housing and medical care, then sure, there’s no reason to do anything about it. Otherwise, we need some policies to bring some fairness to the trade equation.
Mino
@Judas Escargot: I can see how CAD would make the pattern, but is the manufacturing(casting) outsourced to a foundry? And who’s to say where the foundry is.
Or perhaps Shapeway is the foundry. It seems to be heavy in the jewelry, small items department. And does the computer create the pattern in the wax, thus skipping the pattern step, which is a costly one.
Baby steps in a new technology or a vanity niche, who can say?
Corner Stone
@cyd:
No, it’s like taking stock of reality and understanding the true cost of that imported $999 big screen HDTV.
Or dry wall in FL, or pet food, or…or…
Don’t start moralizing about the results of toxic pollution and dislocation for millions is an unalloyed “good” for them we should turn our heads from.
Mino
@cyd: I sure wonder how Europe has maintained an industrial base without poisoning its citizens.
Mino
And perhaps in China it’s the government directly trading pollution for dollars, but in other 2nd/3rd world countries multi-nationals come in, buy the politicians and pollute away. Much of this is courtesy of World Bank pressures, too, the bastards.
Belafon (formerly anonevent)
@Mino: As he talked about, what is going to be interesting to see how the 3D printers change the manufacturing landscape. I think an FPer posted about a bicycle entirely made in a 3D printer. What happens when more and more stuff can be made locally, outside of a factory?
Chris
@Mino:
China = capitalist economy, authoritarian government. It’s the future, or at least there are a ton of Important People who want it to be.
(It was also – Godwin alert – the formula that powered fascism).
Mino
@Belafon (formerly anonevent): In my profession, I worked with pattern makers and I’ve got to tell you, good ones are disappearing and around here the trade schools are not turning them out. So it’s vital that computers be able to take over that element of manufacturing. Really vital. Any application of CAD in that process is very important to our future.
Mino
@Jennifer: At least a Kroger customer is savvy enough to look. How many poor people buy odd-brand canned goods in all the dollar stores. You know where that produce came from, don’t you?
BruceFromOhio
Had some fun with conservatroid Bro-in-law. Went something like this (after much booze and wine)
BFH: I refuse to shop at Wal-Mart, that company is evil.
BroIL: How can a company be evil? Its a company.
BFH: Sam Walton started it out with “Made In America” products, but his survivors took it on a binge that destroys local economies and supports moving jobs overseas.
BroIL: Whaaat? They just sell stuff cheaper than everyone else! How’s that evil? Look at the all the poor people they are helping!
BFH: Poor people who can’t get work, because all the manufacturing jobs went to China, where cheap products get made that Wal-Mart buys and sells to the poor people … with NO JOBS!
Rinse, repeat.
Person of Choler
Mr. Smoot, please pick up a white courtesy phone for a message from Mr. Hawley.
wrb
Yes, disposable crap that brought little happiness, Distractions to addle American minds, idle American bodies and pile in American dumps
We would have been better off without it.
Phoenician in a time of Romans
@Judas Escargot:
Replicators are fiction, but 3D printing is coming along faster than I had ever anticipated. There are already services like this available to anyone who can afford them. And a quality 3D printer can be had for $15K or so. This is NOW. So, while there won’t be any tea/earl grey/hot coming out of the wall anytime soon, IMO manufacturing is about to swing to a more on-demand, on-site model… sooner than anyone (myself included) seems to have anticipated.
Yes, but I’m certain American liberals can stop 3D printing in order to save the jobs it threatens.
Phoenician in a time of Romans
Yes, disposable crap that brought little happiness, Distractions to addle American minds, idle American bodies and pile in American dumps
We would have been better off without it.
Then why do Americans still buy it?
You know, it looks an awful lot like as if the Chinese Communists, with all their theories and thinking on capitalism and the march of history, managed to identify the prime weakness of a consumer capitalist country – and implemented a long-term plan to exploit that, weakening an otherwise unbeatable superpower. And without firing a shot.
You gotta admire that.
MacKenna
I have never shopped at a dollar store, nor have I ever shopped at Walmart or any of its copycat giant cheap ass retailers.
I’m none the worse for wear either.
Ironically, while North Americans get a thrill that they can buy cheap sundries at superstores, whose employees are treated like crap, they can’t afford housing, rent or food. In other words, the necessities of life are overinflated while all this shit – most of which we don’t need – is perpetually “on sale”.