There has been an interesting ongoing blogosphere dialogue on the role of manufacturing in creating high-wage jobs in America, involving Paul Krugman, Reihan Salam, David Leonhardt, Karl Smith and Michael Mandel, among others.
This topic has been a fixation of mine for a very long time. Here is how I opened an article a couple of years ago in National Review:
I still remember the first time I walked into a working factory. In the foreground, innumerable machines whirred and clacked away in precise, interlocking dances. A massive vat shaped like a 50-foot-tall Campbell’s soup can loomed in the background. It was encased in a protective sheath of refractory bricks that glowed dusky pink with trapped heat. A crane arm dumped heavy sand continuously into the top at (literally) industrial volumes. Steaming, liquid glass gushed out of the business end at the bottom in a matching stream. I couldn’t see the heating element, but it was in there somewhere, and it was working. …
I was looking at concretized human ingenuity. In the auto industry, “car guy” is a slang term for an executive who doesn’t just view the business of a car company as making money, but loves the cars themselves. I’m a factory guy.
I spent the first few years of my career in the 1980s as one small part of a self-conscious movement to rescue American manufacturing from its projected obsolescence. I’ve worked in glass plants, assembly plants, oil refineries, and textile plants from Florida to Canada, and many points in between. I’ve carried a union card and walked a picket line.
I’ll put forward several propositions as being as being relevant to this discussion. (This would be a very long blog post, so I’ll break them up into several posts.)
Proposition 1: Competitiveness is productivity
Professional economists often pooh-pooh the importance of national competitiveness. To quote Krugman:
The growing obsession in most advanced nations with international competitiveness should be seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence.
They will point out that we all gain from trade, and as people in other places get richer, so can we. Countries, they say, are not like corporations.
Maybe so, but it’s still the case that some societies are populated by lots of people with high-wage jobs, nice houses and good schools, and other societies are populated by lots of people hustling for tips from vacationers from the first kind of society. Over time, people who spend their working hours generating goods or services that they can sell for a big margin versus the costs of the required inputs will tend to live in the first kind of society. Nothing is forever in this world, but I want America to remain in that camp for a very long time.
This doesn’t occur by immiserating other societies — international economic competition is not zero-sum in that sense. But there are many paths open to us for how we react to the rise of non-Western economies, some of which lead to us being much better off than others, both in an absolute sense, and also in a relative sense.
Relative productivity is likely to matter a lot, because it will materially influence future absolute wealth by affecting the flow of global technology and innovation. But relative productivity and wealth also matter in and of themselves. First, they will impact the global prestige and success of the Western idea of the open society which we value independently of its economic benefits. Second, maintenance of a very large GDP per capita gap between the West and the rest of the world will be essential to maintaining relative Western aggregate GDP, and therefore, long-run military power.
In sum, we want the rest of the world to get richer, but we want to stay much richer than they get.
This demands that we sustain rapid productivity growth over many decades. Unfortunately for us, this is much harder to do for an advanced economy than for those in catch-up mode, and is likely to continue to create very tough social strains in America. Perhaps we’re just not up to it. This, and not some lets-all-succeed-equally-together happy talk, is the real meaning of globalization for America in 2011.
Thanks, but in the name of efficiency may we agree in advance that Mr. Krugman's position on any subject will render him ever more ridiculous, and spare us the details of his incompetence?
Reply to this commentLinkReport Abuse"spare us the details of his incompetence" should be framed and hung on the wall.
Reply to this commentLinkReport AbuseJim, I think that you have made in previous writings the most important, overarching point to improving American competitiveness (and this applies to improving productivity as well, for those who say "productivity increases" are better semantics than "competitiveness"). That, of course, is having an immigration policy that actually benefits the country.
There have been countless articles written about the difficulties that many manufacturers are having in moving high-skilled processes to the US, or even filling positions to carry out their existing manufacturing processes in the US.
In short, although we've seen tens of millions of immigrants enter the country in the last decade or two, we have a dire skills shortage doing the high-value-add work that we will need to capture to remain an affluent economy generally speaking, and in particular to attract manufacturing jobs.
The best way to meet this skills gap (besides high-skilled manufacturing positions, professions such as IT workers, doctors, engineers and math teachers are also facing significant shortages) is of course to have an existing population able to fill the gaps. However, we have a large and growing number of unskilled workers (in large part due to immigration from south of the border), and the expenditures necessary to train them to do the skilled work needed to remain prosperous is seldom economically justifiable for companies or taxpayers.
Clearly, we need to ensure that qualified individuals from across the world are able to come to America. At present, and despite the empathetic, anecdotal sob stories the NYT is peddling of late (as it long has been), America has the largest amount of immigration of any country on earth. However, of roughly 1 million legal immigrants and 500,000 (? -- it's anyone's guess) illegal immigrants who enter the country each year, we distribute 50K H1-B visas to skilled immigrants. That means 3% of immigrants each year are skilled. And given abuse in the H1-B program, many of those visaholders aren't even immigrants but people based in other countries working on projects in the US.
Clearly, moving from an unskilled, largely illegal immigration flow to one of an objective, transparent and meritocratic skilled immigration flow is the best way we can ensure continued prosperity. This holds especially true for any would-be renaissance in American manufacturing. To the restrictionists, we clearly aren't going to eliminate immigration; the pragmatic thing is to shift it from unskilled welfare recipients to high-skilled workers able to maintain our income, education and living standards -- if we are going to have an immigration policy, it might as well be one that benefits existing citizens' interests, no?
Jim, you understand this better than almost anyone. Please keep up your good work. And when the NYT brings up its isolated, sob-story anecdotes arguing for terrible policies, those of us concerned about the future of this country ask that people like you counter with the statistics, data and philosophies that should be taken into account when legislating policy -- and ultimately move us toward a skilled immigration points system that benefits US citizens, allows us to retain and recapture skilled jobs in manufacturing, IT, engineering and medicine, and gives us a shot at staving off descending into Third World living standards!
Reply to this commentLinkReport Abuse>"In short, although we've seen tens of millions of immigrants enter the country in the last decade or two, we have a dire skills shortage doing the high-value-add work that we will need to capture to remain an affluent economy generally speaking, and in particular to attract manufacturing jobs ... besides high-skilled manufacturing positions, professions such as IT workers, doctors, engineers and math teachers are also facing significant shortages"
On what do you base these astounding assertions?
Reply to this commentLinkReport Abuse>"Unless you're making an indirect reference to the desire of many people to achieve that rapid productivity growth by outsourcing many American jobs overseas, and by bringing people from oversea to displace American workers."
I wrote those words before you kindly showed up to demonstrate what I meant. But it was always predictable that one of your sort would appear on the scene to make those particular claims.
Reply to this commentLinkReport AbuseLiberals have a visceral dislike of competitiveness. They don't like competing. (Likely because they are incapable of it themselves, which is why they went into academia instead of the private market.)
So it's natural that they would pooh-pooh the very idea of competitiveness, without actually bothering to understand what it really means.
Nations that are productive, are also competitive. The two concepts are linked. When a businessman says that he wants his company to be more competitive, what he is saying is that he wants his company to be more productive. Make more product for less money. When a politician talks about making a country more competitive, he usually has no idea what he is talking about, because he has no idea how to make a country more competitive. So instead they come up with screwball ideas like subsidizing products that can't compete on their own, out of misguided belief that if we can dominate that industry, we will become magically, "competitive". Or they do it because members of that industry paid a few million into his most recent re-election campaign. With politicians you never know.
Reply to this commentLinkReport Abuse>"But relative productivity and wealth also matter in and of themselves. First, they will impact the global prestige and success of the Western idea of the open society which we value independently of its economic benefits. Second, maintenance of a very large GDP per capita gap between the West and the rest of the world will be essential to maintaining relative Western aggregate GDP, and therefore, long-run military power."
The number of Americans who care about either of these things probably number in the thousands. Maybe the tens of thousands.
>"This demands that we sustain rapid productivity growth over many decades. Unfortunately for us, this is much harder to do for an advanced economy than for those in catch-up mode, and is likely to continue to create very tough social strains in America."
That's a curious conclusion, since one would expect that rapid productivity growth in America over many decades would translate into greatly increased prosperity for all Americans. Unless you're making an indirect reference to the desire of many people to achieve that rapid productivity growth by outsourcing many American jobs overseas, and by bringing people from oversea to displace American workers. In which case yeah, immense social turmoil ahead. And deservedly so. After all, who is the "us" you speak of in that case?
>"In sum, we want the rest of the world to get richer, but we want to stay much richer than they get."
I fail to see how that is achievable in practice (short of us using our military power which you mention above) or even desirable in theory.
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