As the United States has outsourced its industrial base to China over the last two decades, millions of manufacturing jobs have disappeared. But the trend has also allowed us to shed a lot of unpleasantness: industrial waste, air pollution, etc.
The move also eased the burden on our electrical grid. The energy needed to produce clothes, electrical gadgets, industrial equipment, etc. no longer comes from our power generators.
But greenhouse gases are a fungible substance; coal emissions in China trap just as much heat as emissions in Youngstown, Ohio. And the hazards and environmental devastation of coal mining merely shift. We should think about the shelves groaning with stuff at our superstores every time we hear stories like this one:
Nine miners were killed and another five were missing after an explosion in an illegally operating Chinese coal mine brought down an estimated 100 tonnes of coal ... China, the world's largest producer and consumer of coal, has the world's deadliest mining industry. It has been battling to improve standards in its mines, but accidents are common as owners push production beyond safety limits to meet robust demand to fuel the country's economic boom.
Obama will go to Copenhagen—if he can seal a deal
Lawsuit accuses Virginia power company of poisoning Dominican community with toxic coal ash
While scientists fight over BPA studies, Congress could just act
Comments
View as Flat
John Dewey Posted 1:04 am
01 Apr 2008
The last figures I've seen, from 2006, showed that the U.S. still leads the world in production of aircraft, motor vehicles, medical equipment, semiconductors, chemicals, gasoline, and much more.
Michigan did not lose blue collar automobile jobs to Japan or China. It lost them to Tennessee, Mississippi, Alabama, Texas, and other business-friendly, right-to-work states.
About the dangers of industrialization to Chinese workers: the standard of living in China has skyrocketed as it modernizes. We should applaud the economic growth in formerly impoverished Asia.
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amazingdrx Posted 1:16 am
01 Apr 2008
Everyone else knows what I mean, right? You aren't going to get it though. Hehey.
It's basically the same reason the nut wing is doomed. Limboob blinders on.
http://amazngdrx.blogharbor.com/blog
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Tom Philpott Posted 1:25 am
01 Apr 2008
The manufacturing sector of the U.S. economy has experienced substantial job losses over the past several years. In January 2004, the number of such jobs stood at 14.3 million, down by 3.0 million jobs, or 17.5 percent, since July 2000 and about 5.2 million since the historical peak in 1979. Employment in manufacturing was its lowest since July 1950.
Note that these are absolute job numbers; as a percentage of overall working population, manufacturing losses have been even steeper. I doubt the sluggish growth of the past few years has dome much to add substantially to manufacturing jobs. Meanwhile, imports from China have exploded. Our old manufacturing base has been hollowed out. Yes, the Rust Belt originally lost manufacturing jobs to the non-union south; but those jobs eventually leaked out to Mexico and points south, and later to China.
Victual Reality
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LGT Posted 1:39 am
01 Apr 2008
How very true! The sacrifice is well worth the end result. The clean air, healthy soil and freshwater can always wait, as someone in the Wired Magazine once suggested, the Chinese should concentrate on making money first and fixing the environment later!
When the dust from previously fertile land in China reaches the US, However, you begin to wonder if the problem is much worse than . . .
A fourth of the country is now desert. More than three-fourths of its forests have disappeared. Each year, uncontrollable underground fires, sometimes triggered by lightning or mining accidents, consume 200 million tons of coal, contributing massively to global warming. A miasma of lead, mercury, sulfur dioxide, and other elements of coal-burning and car exhaust hovers over most Chinese cities.
http://www.csmonitor.com/2008/0319/p09s01-coop.html
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John Dewey Posted 1:49 am
01 Apr 2008
My disagreement with your post is not about the decline in manufacturing jobs. Rather, I disagree with your conclusion that "the United States has outsourced its industrial base to China", which is just not true.
Manufacturing jobs have been lost constantly for as long as factories have existed in the U.S. The portion of U.S. workers in the manufacturing sector was declining long before we were importing goods from China. Automation and creative destruction are the primary reasons for manufacturing job losses.
As I said before, automobile manufacturing jobs have been moved to the Sun Belt. Companies such as BMW, Toyota, Hyundai, and Nissan have invested many billions in automobile plants here in the U.S. Most of those plants are more automated than the GM, Ford, and Chryslet plants they replaced. The union work rules that prevented many efficiencies have been eliminated as well. the net result is this: though vehicle manufacturing output in the U.S. has grown, vehicle manufacturing jobs have declined.
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Jon Rynn Posted 1:59 am
01 Apr 2008
Now, for manufacturing stats, I'm not sure which of the tables you referenced you were referring to -- goods production is not quite the same thing as manufacturing. The best source on that is usually the "Survey of Current Business" from the BEA, and this annual industry accounts article is the best source right now. Now look at "Table 2. Value Added by Industry as a Percentage of Gross Domestic Product, 2003-2006" (page 19 on the paper, the pdf viewer thinks it's page 8), the percentage of manufacturing has actually declined from 2003 to 2006, from 12.4 to 12.1 percent.
However, if you skip a few pages to "Table 4. Real Value Added by Industry, 2003-2006", you'll see that manufacturing has indeed increased in "value-added", the important number, from 1400 billion to 1573 billion. Most of that came from electronics, vehicles actually went down. Also, I'm not sure what happened to imports, but I believe they went up.
So in terms of raw output, it's a mixed picture, although there are certainly strengths. As in most of this "expansion", the workers did not get most, if any, of the growth in their paychecks.
As for employment, the "normal" process has been for manufacturing to expand to such a degree that, even with automation -- which has always been a force -- employment could increase. That is no longer happening, and we are depending more and more for what manufacturing growth does occur on foreign companies, which means that the engineering is more and more done oversees, also a bad harbinger of the future.
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archigeek Posted 2:03 am
01 Apr 2008
The mellotron is your friend.
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John Dewey Posted 2:04 am
01 Apr 2008
If you ask the formerly impoverished Chinese workers, I am sure they will tell you that the gains from industrialization are well worth the increases in GHG. It was their choice to make.
I am alarmed by the loss of forest land everywhere. The solution to loss of forestland is the same as the solution to loss of American Bison. Make it profitable for landowners to grow or preserve trees, just as it is now profitable for ranchers to raise American Bison.
As for the GHG increases, I have stated in another post that I am not alarmed by increase in CO2. I am unconvinced anthropogenic global warming represents a significant threat to this planet. I'm not denying AGW, just skeptical about the magnitude and the danger.
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John Dewey Posted 2:22 am
01 Apr 2008
Oh, that's funny.
Actually, I thought this blog might be a forum for a free exchange of ideas, and I still do. That my disagreement with your ideas would cause you to feel hatred is a little surprising. I doubt that "everyone else" feels hatred, amazingdrx.
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John Dewey Posted 4:49 am
01 Apr 2008
My response to one of your comments:
the percentage of manufacturing has actually declined from 2003 to 2006, from 12.4 to 12.1 percent.
Manufacturing as a percentage of GDP has been declining for at least 50 years:
1960 - 25.3%
1970 - 22.7%
1980 - 19.9%
1990 - 16.3%
2000 - 14.5%
2005 - 11.9%
2006 - 11.7%
Source: BEA: Industry Economic Accounts
That decline should not be alarming. Computers enabled automation of numerous manufacturing tasks. As that happened, the cost to manufacture numerous items continued to drop, and manufacturing's share of GDP thus also dropped.
What has happened to the U.S. economy the past 50 years is an explosion of the service sector. Though some try to demean service jobs as McJobs, the service sector actually includes the highly skilled professions: physicians, nurses, lawyers, accountants, architects, dental hygienists, computer systems analysts, management consultants, investment analysts, and many more. It also includes such blue collar jobs as truck drivers and cable television installers. And yes, it includes retail workers, but also retail supervisors, retail marketers, and retail buyers.
The highly paid government sector has also grown sharply since 1960.
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John Dewey Posted 5:05 am
01 Apr 2008
Imports of goods did increase from 2003 to 2006. In fact, the only time imports have not increased during the past thirty years were during the last three recessions: 1982, 1991, and 2001. Imports are a sign of a growing U.S. economy. When incomes are rising, consumers spend more, and some of that "more" is for imported goods.
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Jon Rynn Posted 5:17 am
01 Apr 2008
it's not the imports that are a problem, it's that the exports don't keep up, thus an unsustainable trade deficit. Part of the reason for this shortfall in exports is that the dollar has been too "strong", probably since the 1980s, because the dollar has become a de facto world currency, much of that because oil is traded in dollars. This helps lead to the big problem, in my opinion: the quality of our exports has not been keeping up with other countries. Half of our trade deficit is with Japan and Europe, not China, and that's a quality problem. However, this line of argument is not well-trodden, so it would be hard for me to give you good references.
There's nothing wrong with growth of services, but as I tried to show here, services are dependent on manufactured goods. If we can't manufacture, but must import, goods that are then used in the services sector (e.g., chinese goods in Walmart), and the dollar does drop and the imported manufactured goods become very expensive, then the services will suffer too.
So what this all points to is this: a well-functioning economy needs everything, it needs exports, imports, a currency at a reasonable level, manufacturing, and services. So concretely that means that China should revise its currency, the US should embark on a plan to bring its manufacturing level up to world-class (ideally by creating a green economy), and then the world economy will be much more stable because at the rate we're going the U.S. market is going to disappear under debt and loss of production capability.
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Colin Wright Posted 6:18 am
01 Apr 2008
I think there is some tortured logic here. Yes, manufacturing jobs are subject to creative destruction. But the important factor is net job loss. Look at the CBO article Tom linked to. In Figure 1, we see manufacturing employment rose from 14 to 19.5 million between 1950 and 1979. It would be a quite a stretch to attribute all the subsequent job loss to automation and not the fact that Reagan and the union-busting, neoliberal free-traders came in. Maybe Jon has more insights here.
It is true that the manufacturing sector was losing jobs long before trade with China. But during the Eighties it was losing jobs to Asia in general, then China as they reformed their economy.
Further down, the CBO does acknowledge a link between low-skill manufacturing job loss and overseas trade.
A portion of the long-term decline in employment in some manufacturing industries can be linked to the expansion of trade. The gains from trade arise as nations specialize in the goods and services that they can produce efficiently relative to other countries. Thus, the expansion of trade necessarily involves changes in the mix of products. The United States has specialized in products requiring a highly skilled labor force even as lesser jobs have shifted to countries where labor is less skilled.
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John Dewey Posted 6:54 am
01 Apr 2008
And I didn't attribute ALL the manufacturing job loss to automation. In fact, I pointed out how movement of the automobile industry out of the rust belt and into right-to-work states enabled productivity gains that union rules had prevented.
Another cause for the "elimination" of manufacturing jobs is the outsourcing within the U.S. When a manufacturing company outsources any service function - such as janitorial or cafeteria staffing - the service sector immediately gains workers and the manufacturing sector immediately loses workers. Anyone who has worked for large corporations the past 25 years should be well aware that whole departments have been outsourced to smaller service firms.
Certainly many factories have been offshored, and all U.S. consumers have realized lower costs of purchases as a result.
You can blame globalization or Reagan or anyone else you wish for the elimination of factory jobs in the U.S. Those who believed that very low skilled factory workers would continue to be paid as much as engineers or accountants were fooling themselves. Those wages were doomed as soon as:
air conditioning enabled southern states to compete with the Midwest
Japan reindustrialized after World War II
political climates in low cost nations were stabilized enough to protect multinational investments
Still, my main objection to Tom Philpott's post remains: his incorrect claim that United States has outsourced its industrial base to China.
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John Dewey Posted 7:08 am
01 Apr 2008
Sorry, Jon, but I do not see anything unsustainable about a trade deficit - AKA, a current account deficit, which is also known as a capital account surplus. If foreigners prefer to continue investing in the U.S. - continue the capital account surplus - rather than purchasing goods, I think that's great.
FYI, U.S. exports in 2006 were at an all time high level. Our exports have never been stronger. That's the magic of globalization which many ill-informed protectionists would kill.
If we can't manufacture, but must import, goods that are then used in the services sector
As I pointed out earlier, U.S. manufacturing is also at an all time high. To the extent that services are dependent on U.S. manufacturing, we should be dancing in the streets.
But, of course, services are not all dependent on U.S. manufacturing. Health care services are certainly not. Services to U.S. muiltinationals are dependent on the global profits of those multinationals, not just on the U.S. profits. The transportation sector - and all its service jobs - has boomed as a result of globalization.
The US should embark on a plan to bring its manufacturing level up to world-class
As I pointed out earlier, the U.S. leads the world in the production of aircraft, vehicles, medical equipment, pharmaceuticals, chemicals, semiconductors and gasoline. It's number 2 behind Germany in industrial machinery. U.S. manufacturing output is greater than that of any other nation. I don't know how you would describe world-class, Jon, but that looks pretty good to me.
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Jon Rynn Posted 7:13 am
01 Apr 2008
Much of the original impetus for outsourcing was what used to be called "runaway shops", that is, the corporation was running away from its unions. In documenting scores of factory shutdowns and moves to China and elsewhere, Melman never found one example where the factory was actually losing money; it was just the case that they could make a bigger profit abroad. Had those factories been employee-owned-and-operated, those shutdowns would not have occurred. They would have continued to be profitable, and I would bet that, over the long-term, because of the care and feeding of the employees, the factories would have been a net plus for the American economy (another place to look for discussions of these issues, by the way, is economyincrisis.org)
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Jon Rynn Posted 7:25 am
01 Apr 2008
Until the 1980s, the fear around the world was the opposite -- that because of America's manufacturing strength, we were going to take over the economies of the rest of the world. Now, we could survive if all of our assets were foreign-owned -- something similar is occurring in the UK -- but we would be a rung below the most developed countries, because they would be doing the engineering, etc.
As far as industries being world-class, the US just about created the main forms of industrial machinery during the 20th century, and was tops in steel, electronics, etc. I haven't taken a close look at our relative standing, and we don't need to be number one in everything, but we should at least be able to compete with the other developed countries, instead of having a huge -- that word again -- trade deficit.
I'm not arguing that we need to have millions of low-skill jobs. The problem is not to compete with China, but with Europe and Japan, who compete with China by putting out higher quality goods, using more highly skilled people and better machinery. The US used to blanket the world with inexpensive goods, even with the highest wages in the world, because our machinery and people were so productive that the output was inexpensive. Now, CEOs want to do the same thing by using cheap labor, which is a few steps down in terms of managerial expertise. They are the ones who are incompetent.
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John Dewey Posted 8:36 am
01 Apr 2008
Ben Bernanke is not the only economist, just the best known. Don Boudreaux of George Mason University, John Tamny of H.C. Wainwright Economics, Dan Griswold of CATO, and Robert Murphy of the Pacific Research Institute have all recently argued that the trade deficits are meaningless and represent no danger. If I had the inclination, I could a number of other free market economists who agree.
Other economists have been claiming for 20 years that trade deficits were unsustainable. Yet those trade deficits keep growing at the same time that U.S. exports keep growing, that U.S. manufacturing has reached all time highs, that the GDP of the U.S. continues to grow, and that the net worth of U.S. households has reached all time highs.
Even if you don't mind that foreigners will own basically the entire country after a while
That could only happen if the U.S. possessed a fixed amount of wealth. But the wealth in the U.S. is increasing all the time. In fact, when foreign corporations invest in the U.S., they generally increase not only their own wealth but also that of Americans. Consider the BMW plant that was built in Spartenburg, SC, 15 years ago. It sparked an economic transformation in that state that made thousands of Americans much wealthier. Nearly 200 smaller firms in the Carolinas supply goods and services to the South Carolina BMW complex.
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Jon Rynn Posted 9:11 am
01 Apr 2008
Seymour Melman, my intellectual mentor, was warning in 1965, with a book called "The depleted economy", that the manufacturing sector was in trouble. Taken a while, eh? I think it's important to understand how a society works, and think about the long-term processes. These processes take decades to play out. The only way to try to get a grip on these processes is to construct a theory of how the economy works, and according to my model, the economy eventually follows manufacturing, either up or down (assuming the environment isn't being destroyed -- which may put a big damper, eventually, on China's growth).
England's rise and decline also took decades, centuries even. Because the economy is such a complex systems, it is particularly difficult to tell when a threshold (tipping point) will be reached -- it was very difficult to tell when the dot com or real estate bubbles would pop.
I know you are not convinced by the climate change models, but at least they have the "luxury" of what it seems to me are serious attempts to take a realistic look at the climate, and it is still very difficult to predict (I actually always thought they were too conservative, which in fact they were).
But the models we have for economics I consider much cruder than what the climate modelers are using, partly because the neoclassical economists are blinded by their own theory, to some extent. Particularly concerning the importance of manufacturing.
I doubt that the foreign investment has been as much of a positive feedback loop as you imply -- although since it is manufacturing, the benefits are greater. At some point, the extra dollars coming from the trade deficit -- whether they are just accounting, from a savings glut, or whatever -- will not be as highly valued (indeed, they have been less and less valued recently), and then we will be dependent on the charity of strangers -- we already are. I'm not sure why conservatives are not worried about this -- although at least libertarians are more consistent about the "liberal" tradition of free markets and globalization.
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LGT Posted 11:00 am
01 Apr 2008
If you ask the formerly impoverished Chinese workers, I am sure they will tell you that the gains from industrialization are well worth the increases in GHG. It was their choice to make.
Not true!
Grinding poverty defies China's boom
"We eat somehow, but it's never enough," Li said. "At least we're not starving."
In this region of southern Henan Province, in village after village, people are too poor to heat their homes in the winter and many lack basic comforts like running water.
http://www.iht.com/articles/2008/01/13/asia/poverty.php
This isn't just about GHG; it's about choking smog that kills.
Chinese Air Pollution Deadliest in World, Report Says
http://news.nationalgeographic.com/news/2007/07/070709-ch ...
Pollution kills 750,000 in China every year
http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/20 ...
DSS (dust and sandstorms) are assaulting citizens. Encroaching deserts that are covering China's sinking cities.
photo and map:
http://www.treehugger.com/files/2007/08/china_losing_the_ ...
And many others abound.
Please do a little research, or at least google a bit, before making blanket statements.
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John Dewey Posted 10:24 pm
01 Apr 2008
I certainly do not accept your model if it says that our economic health is dependent on only goods and not services. But even if I did, I don't see how such a model would show anything ill for the U.S. economy. As I pointed out before, U.S. manufacturing output is currently at an all time high. Should I repeat that again?
Let's try another point. The U.S. manufacturing output is greater than that of any other nation. How is that an indicator of anything ill for our economy?
The claim that manufacturing is in trouble because manufacturing employment has declined is just wrong. The U.S. agriculture industry produces more food than at any time in its history. Yet employment in agriculture is a tiny fraction of what it was 75 years ago or 100 years ago. Automation reduced the manpower requirements for agriculture decades ago just as it has done for manufacturing the past 40 years.
and then we will be dependent on the charity of strangers -- we already are.
Sorry, but I have no idea what you mean. The U.S. has the strongest economy in the world, by a fairly wide margin. Foreign producers depend on our strong economy for their livelihood. Foreign investors depend on our strong economy for long term returns on their investments and for the safety that our political and economic climate provides.
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Jon Rynn Posted 1:57 pm
02 Apr 2008
The EU is the unit that should be taken for comparison, not just Germany. The US is a continental economy, which is one of its strengths, and so now is Europe, which has made it stronger. In fact, last I looked, the EU - and possibly even the combination of Germany, France, Italy, and Britain -- have larger machinery and even manufacturing sectors than the US. Then the other problem with comparisons is that the US dollar is still artificially high; as it goes down, the Europeans become even stronger, relative to the US.
The rest of the world sells their products to us because they are still accepting dollars, not so much because they are accepting our goods and services in return. Before the 80s, the US had a trade surplus with the rest of the world.
Since there is almost no likelihood that a surplus is going to return any time soon, then the dollar will inevitably fall, and foreigners will more and more decide that they don't like the idea of accepting dollars and not goods for their goods. This is what happens to any country that continuously runs a big trade deficit.
I've already heard talking heads claim that Americans will have to tighten their belts if that happens, because they have been "spending beyond their means". No, the US has not been manufacturing the goods that the consumers in the US want. We have not been producing enough, and so in order to buy what we want, we have to go into debt to foreigners, instead of exchanging goods for goods. Therefore, manufacturing needs to be rebuilt in order to maintain our standard of living (and ecologically sustainably).
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Colin Wright Posted 4:21 pm
02 Apr 2008
However, the increased economic efficiencies have so far not translated into more free time or higher incomes. Here is a (dated) excerpt from Juliet Schor's The Overworked American:In the last twenty years the amount of time Americans have spent at their jobs has risen steadily. Each year the change is small, amounting to about nine hours, or slightly more than one additional day of work. In any given year, such a small increment has probably been imperceptible. But the accumulated increase over two decades is substantial. When surveyed, Americans re port that they have only sixteen and a half hours of leisure a week, after the obligations of job and household are taken care of. Working hours are already longer than they were forty years ago
The problem as I see it is the neoliberal economic model that has dominated these past 30 years has favored elites, while hollowing out the American middle-class. (Here is one way to illustrate that. The Gini coeficient, which is a measure of income inequality has increased for the U.S. since 1980 (while holding steady for Europe and Japan).)
Mamy of us are not as sanguine about the U.S. economy as you.( Alan Greenspan: "The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war". For instance, here is the Economist on the spreading rot of the mortgage crisis in an article entitled Waiting for ArmageddonA look at the firms with distressed debt shows that problems are rapidly moving beyond the long-term sick (airlines, cars) and the industries immediately affected by the crisis (home builders, mortgage lenders, monoline insurers). Craig Dean of AEG Partners, a restructuring-advisory firm, says he is now seeing troubled companies in retailing, restaurants, manufacturing and food processing.
Now it is possible that the G7 may bail out the dollar at its next meeting. That may indeed prolong foreign investment in the U.S. (and reduce our exports). But I'm with Jon on this one: we need a healthy, balanced economy that serves the middle-class. And that means new economic models.
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