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Revisiting my call for an industrial plan

June 27, 2010

I am catching a few hits from Megan McCardle (or more probably one of her guest bloggers). I can’t figure out where they are coming from but my guess is it is a link between this post of mine and the post “The Last Ironing Board to Die for a Mistake” by Katherine Mangu-Ward. Her premise backed by some calculations from XKCD and an econ textbook, is that any job lost to overseas manufacturing is a deadweight job that the country is better off without, and further that it is our moral responsibility to encourage those jobs to move overseas –

Econ 101 aside, though, there’s a more compelling moral reason to condemn this kind of tariff that should help break deadlocks like Matt’s: Jobs lost at home are usually jobs created elsewhere, typically in poorer countries. If anything, jobs are likely to be gained when an industry moves to China, where more aspects of the manufacturing and assembly process are done by hand. They just won’t be created here. If that’s your focus, you have to make the case that American jobs are intrinsically better or more valuable than Chinese jobs.

Actually I don’t. I am an American I have to make the moral case that the loss of jobs is a net plus for America, and that is usually a given. More jobs in country X means more American products and services being sold to them as their standard of living increases. Win / Win.

That isn’t the case in China. Nowhere in those calculations do I see any sort of accounting for China’s artificially low labor prices, it’s import restrictions, intellectual property theft (ask the makers of Viagra how much they lost due to state sponsored intellectual property theft), product dumping, and other trade practices that are in place solely to insure that China maintains the number one export economy in the world. Beyond that the idea that overseas manufacturing is cheaper is often a myth. The last manufacturing company I worked for encountered that. Manufacturing was shipped overseas based on labor costs without looking at all the other associated costs. In the end it turned out to be a wash as far as cost goes. (Here is a case study that goes to that point)

Miss Mangu-Ward’s final point seems to be that people that want America to remain a manufacturing power are somehow trying to live in the past with and that we are willing to sacrifice progress to freeze the status quo or to return to the status quo ante. Not true, I recognize that progress will always cause some jobs loss and disruptions as processes become more efficient. Believe me I have seen Chinese manufacturing that is not what we are competing against. Progress is just that however progress, not destruction, and calling for thought on how to preserve the manufacturing sector does not make me an anti-gloablist or a neo-luddite.

(I knew I recognized the name Katherine Mangu-Ward – she is the same person who wrote that asinine brownie recipe article last month)

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4 Comments leave one →
  1. xbradtc permalink
    June 27, 2010 10:05 am

    I guess the smart thing to do is outsource ALL manufacturing jobs.

    Isn’t her argument about being stuck in the past somewhat backwards, by the way?

    Let’s say an American company makes ceramic salt shakers as their product. Which is more progressive- sending production overseas where it will still be made by labor intensive methods, or developing an automated system here in the US? Let’s say we trim the US workforce in salt shaker production by 90%. Isn’t it better to keep that production here and keep that 10% employed rather than sending 100% of production (and production line jobs) overseas?

    Look, I am a huge fan of free and open trade, and not intrinsically opposed to a company outsourcing production overseas. But that doesn’t mean I’m blind to potential costs and opportunity costs.

  2. jenn1964 permalink*
    June 27, 2010 11:34 am

    Look, I am a huge fan of free and open trade, and not intrinsically opposed to a company outsourcing production overseas. But that doesn’t mean I’m blind to potential costs and opportunity costs.

    That’s the same way I feel, and that philosophy does not preclude building manufacturing capacity in the US. Even low end manufacturing.

  3. June 27, 2010 1:59 pm

    More jobs in country X means more American products and services being sold to them as their standard of living increases. Win / Win.

    That assumes, of course, that they buy those American products and services, rather than the less expensive locally produced versions. If there is a locally produced version of an American product, most people won’t buy the American version because it will cost more.

    • jenn1964 permalink*
      June 27, 2010 9:27 pm

      Well I was just stating the general theory and usually it works pretty well.

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