Myth of China’s Manufacturing Prowess

http://helenhwang.net/2010/03/myth-of-manufacturing/

Contrary to the conventional view, manufacturing in the U. S. has been growing in the past two decades despite the decline in manufacturing jobs. The latest data show that the United States is still the largest manufacturer in the world. In 2008, U.S. manufacturing output was $1.8 trillion, compared to $1.4 trillion in China. This means that the United States is producing goods with higher value, such as airplanes and medical equipment.

In addition, most jobs the United States lost to China are low-skilled jobs. By outsourcing those low-skilled jobs to China, Americans have actually become more competitive in high-skilled jobs such as management, innovation, and marketing. The low-skilled jobs also serve China well as Chinese rural migrants have opportunities to move up in life and gain some skills.

I love it: “manufacturing in the U. S. has been growing in the past two decades despite the decline in manufacturing jobs”. What she means is ” productivity has grown as jobs have decreased. Which is a silly metric when the reason people are talking about manufacturing jobs, not productivity.

Secondly, what is hidden in those numbers is the vast difference between small plastics firms for example, that are struggling to survive, and vast, highly efficient manufacturing and engineering organizations that ship goods around the world. (I need to get my hands on this data and mine it a bit. I think that it’s far worse than we see. Productivity can jump simply by consuming capital stock, or temporarily slashing wages.)

It is a logical fallacy, and perhaps, a socially destructive one, to compare productivity to unemployment. The question is what is the highest productivity available without redistribution of productivity gains? We have a lot of unemployed people due to government’s misallocation of capital over decades if not a century. We need more manufacturing jobs that are also more productive than elsewhere. Manufacturing job != manual labor. It means ‘PRODUCING GOODS FOR EXPORT”. And yes, we need more of them, and the people clamoring for them are right to do so.

It’s as if ‘it’s good enough to win numerically, is the same as actually reaching maximum productivity”. I mean, what kind of over-intellectualizing nut makes these kind of comparisons?

The problem is that MONETARY POLICY is NOT ENOUGH of a lever. We need policy that intentionally uses the private sector to create productivity enhancing exports that require the creation of jobs. But our ethic of non-involvement, our unsophisticated politicians who are far more skilled at redistribution and regulation are not skilled at, nor capable of, producing long-term investment. And they are very unlikely to ask the top 1000 business people in the country, exclusive of the multinationals, how to accomplish it. Even though we all know The top seven:

  1. A new power grid

  2. 200 Nuclear Power Plants

  3. Electronic Automation and Manufacturing

  4. Battery Technology

  5. Medical technology and Medical Research

  6. Heavy industry and Specialty Metals

  7. Migrating manufacturing (people and jobs) from the great lakes to the coastal region or the river delta.

Some Simple Rules Of Thumb:

  1. it takes 122 IQ to design something.

  2. IQ (or talent) follows highest opportunity.

  3. The top 20 percent of the population align all capital for the rest.

  4. Exploitable opportunity attracts entrepreneurs

  5. Entrepreneurs attract capital

  6. Capital attracts jobs

  7. Jobs reduce unemployment

  8. Reduced unemployment increases wages.

  9. The private sector is not able to concentrate capital in capital-intensive industries that create exports without both removal of state disincentives, and the assistance of the state in creating a market in which people will risk time and capital.

A polity does not always need leadership except in time of crisis. Crisis in this case, created by a government too foolishly dancing with the devil of socialism, dressed up in Keynesian costume, with a joyful following of clerks of the church of positivism chanting from tomes whose authors pretend wisdom.

THEREFORE

General Liquidity Is An Insufficient Lever For Altering A Distorted Economy. People need opportunities to flock together and exploit together. Opportunities to create exports. Not consumption but exports.