Deindustrialisation in United States
Deindustrialisation in United States
(OP)
Deindustrialisation---the shrinkage of industrial jobs
I would like to open a discussion because I read an article today. It is said that America has a huge trade deficit not because it is not exporting enough, but because American consumers are spending too much.
Developed economies' comparative advantage is in knowledge-intensive activities, because thet have so much skilled labour. In developed economues today, telecoms, software, banking and so on can create more wealth than making jeans or trainers in "world factory".
It is also said that under proper training, lay-off people can find a high tech job easily. All developed country, like Japan, German and UK, all manufacturing jobs are declining.
I would like to open a discussion because I read an article today. It is said that America has a huge trade deficit not because it is not exporting enough, but because American consumers are spending too much.
Developed economies' comparative advantage is in knowledge-intensive activities, because thet have so much skilled labour. In developed economues today, telecoms, software, banking and so on can create more wealth than making jeans or trainers in "world factory".
It is also said that under proper training, lay-off people can find a high tech job easily. All developed country, like Japan, German and UK, all manufacturing jobs are declining.





RE: Deindustrialisation in United States
http:
An earlier report mentioned that the company expects to cut wages by more than half to about $10 to $12 an hour. A UAW news release pointed out that any person working at the new wage rate would not be able to buy most models which GM sells.
This reminded me of the famous $5 a day wage which Henry Ford began to pay in 1914. He was credited with expanding the American middle class by paying his workers enough to allow them to buy the cars which they built.
http
It appears that the process which Ford began is about to be reversed. Perhaps future historians will note October 8, 2005, as the day that the decline of the middle class in the USA became irreversible.
"Here lies the American middle class, RIP, 1914-2005"
RE: Deindustrialisation in United States
That is going to take a huge bite out of our margin, further accelerating the flow of capital investment overseas where more attrative feedstock is.
Even when all the Gulf production comes back online, it won't be enough to catch up and lower prices. Get ready for some tough times ahead (for some of us) as the global standard of living equalizes.
RE: Deindustrialisation in United States
My father worked for General Electric in the US (GE) and he owned a small amount of stock in the company. Every year the annual report was mailed to our house, and I usually skimmed through it to see how things were going.
One very odd fact became apparent as the years passed. Almost every year, the rate of growth of the value of the stock exceeded the growth in the US economy by a wide margin. There were many years when the nation grew at 4% or 5% and the stock value went up by over 20%.
I couldn't figure out how this could continue. It seemed logical to me that if any part of the economy (such as GE) grew at a much faster rate than the entire economy, it would eventually run out of new sources of revenue. It would be like a shark in a fish tank in an aquarium - eventually all of the other fish end up in the belly of the shark, and after that the shark has nothing to eat.
I asked my father about this and he said that GE was moving into finance and out of manufacturing. GE started as an industrial company with a finance branch, but today it is more correct to describe it as a financial company that happens to still own a few industrial branches. The tail is wagging the dog.
I wonder now if the entire national economy is going through the same thing. The percentage of the total workforce employed in manufacturing has declined to about 11%. We have a $700 billion trade deficit. The best cars aren't made in America anymore, and the best cars made in America are not manufactured by Ford or GM.
Technical engineering skills are devalued at the same time that financial engineering skills are overvalued. GM is the perfect example of this. They spun off the car parts division six years ago because all of their profits came from their finance division. Why bother making car parts when all of the profit is made by collecting interest on the car loans? If you have a MBA instead of a MS degree, it makes perfect sense.
Now the chickens have come home to roost. GM will be forced to pay billions to save Delphi and keep their auto factories from shutting down. Their financial re-engineering created a structure which was about as sound as the Tacoma Narrows Bridge. Even the MBAs can't make car loans without selling cars, and they can't build cars without car parts.
How long can we continue to use the profits from financial transactions to pay for goods from other countries? If our major corporations all become banks, will the next banking crisis wipe out the Fortune 500? If all of the smart kids go to work as "rocket scientists" on Wall Street, what happens to NASA when all of the actual rocket scientists retire and nobody is left to replace them?
Half a century ago, it was an axiom that what was good for GM was good for America. The truth today is that what is bad for GM is bad for America. If we place too little value on the people who actually build stuff and too much value on the people who shuffle money around, we may wake up one day and realize that America is bankrupt.
Today is Delphi's day of reckoning. When will America's arrive?
RE: Deindustrialisation in United States
The end of upward mobility
In the small community where I grew up, Tommy Goodwin was the town drunk. When he would stagger past our house, my mother would direct my attention to him and say: "Look at Tommy Goodwin. He is a bum. You'll end up being a bum just like Tommy Goodwin if you don't get good grades in school and learn a trade. You don't want to be a bum, do you?"
My mother really knew how to motivate people. I didn't want to be a bum. I didn't want to stagger around town like Tommy Goodwin. So I got good grades in school, learned a trade, and ended up in a societal niche, which, although not exactly exalted, ranks me a bit higher than a bum.
With that as prologue, we will now turn our attention to the standard of living which people enjoy and, specifically, as to whether or not your children will end up being bums. Recently, societal observers have noticed that today's youth, as well as many middle-aged people and even those nearing retirement, do not have the high standard of living their parents enjoyed. That brings to mind another sage observation, this one made by a friend and neighbor. He once said: "The story of my family is a tragedy. I was born into a financially comfortable household, but my children weren't."
His story hit home because it pretty much summed up my own situation. While my three kids were growing up, I had a real struggle even coming close to giving them the same financial advantages I enjoyed through high school and college. Today, this phenomenon is even more widespread than ever. And when stories about it appear in newspapers, there is always an undercurrent of blame that ultimately settles on our economic system, tax structure, or avaricious corporations. However, no part of the blame ever settles where some of it belongs, namely, on permissive parents.
When my wife and I were struggling to manage a financially strapped household, we never told our kids that their sole purpose in life was to be happy. Instead, we were disciplinarians. We told our kids they had to be good students, graduate from college, get decent jobs, and be financially responsible. My wife and I knew that if our kids did that, they would probably end up being happy. By the same token, if they didn't do that, nothing would make them happy. While we were preaching the mantra of delayed gratification and personal responsibility, many of the young parents in our social circle weren't. Their line to their children was: "Do whatever you want, dear. Just so it makes you happy."
I would cringe when I heard that. Just as my wife and I thought, the advice turned out be bad. Being happy for these kids meant instant gratification and flipflopping through life without much focus or effort. They took soft courses in college, they dropped out, or often they didn't even enroll. A lot of them ended up with no skills, floated from job to job, or had extended periods of unemployment. And surprise of surprises, they also ended up not having the standard of living their parents enjoyed.
Today, when journalists notice that the offspring of middle-class parents don't necessarily do well, they write columns that focus on causes outside the family. They bemoan the end of an economy that once provided relentless upward mobility. But the blame is never within the individual. The articles ignore the fact that much of the fault lies with the "be happy" thing. It is the wrong thing to tell kids when they are supposed to be charting a course into adulthood. My advice to young people is that it is not important whether or not you are happy when you are 15. It is important that you are happy when you are 30.
-- Ronald Khol, Editor
Wes C.
------------------------------
There are no engineers in the hottest parts of hell, because the existence of a 'hottest part' implies a temperature difference, and any marginally competent engineer would immediately use this to run a heat engine and make some other part of hell comfortably cool. This is obviously impossible.
RE: Deindustrialisation in United States
We live on a finite planet with finite resources, and the scales can only tip so far in one direction before swinging back towards even. The US side of the coin is decreased prosperity, but the money has to go somewhere. Every job outsourced is a job created somewhere else. Who is to say that the foreigners who "took our jobs" don't deserve them equally?
I see the global standard of living equalizing eventually, even if that means we're all universally "poor."
RE: Deindustrialisation in United States
This has happened many times throughout history. When it does happen, the extremely rich has started wars among themselves to elliminate the excess population. For the most part, the rich enjoyed the same amount of power after the war as before with a much happier and smaller population.
I hope history doesn't repeat this for many years.
RE: Deindustrialisation in United States
It was very interesting.
Wes C.
------------------------------
There are no engineers in the hottest parts of hell, because the existence of a 'hottest part' implies a temperature difference, and any marginally competent engineer would immediately use this to run a heat engine and make some other part of hell comfortably cool. This is obviously impossible.
RE: Deindustrialisation in United States
So what has happened is manufacturing which was 22% of the economy is now 12% or less. Government has grown to be the largest part of the economy, and the service industy has grown, but the manufacturing nations such as China are discovering this banking investing thing isn't so hard are developing there own support services.
Basically we have become a nation of consumers propelled by the dwindling momentum of a previous generation and a huge mountain of debt to foriegn investment. The foriegn investment provides a market for foriegn products. At some point the inerest rates will rise and what follows will not be pretty. The best way out will be to reidustrialize. Although American manufacturing is dwindling, it is not because of the American worker. Although highly paid, they are still among the most productive in the world. It is corperate and government cultures limit the growth of manufacturing. This trend needs to be reversed. The economy is not just about job growth, but what type of growth. We need to reindustrialize now.
RE: Deindustrialisation in United States
RE: Deindustrialisation in United States
Jim Treglio
Molecular Metallurgy, Inc.
RE: Deindustrialisation in United States
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Deindustrialisation in United States
Wes C.
------------------------------
Make a dent in the Universe... do something great...
RE: Deindustrialisation in United States
Cheers
Greg Locock
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.
RE: Deindustrialisation in United States
Wes C.
------------------------------
Make a dent in the Universe... do something great...
RE: Deindustrialisation in United States
Anyway. I don't know much about economics but I don't believe that global equalisation theory saying as poor countries get richer, rich countries necessarily get poorer. If richness is expressed as the price of a fixed item (say a cup of rice or a big mac if you insist) as a percentage of one's total income, people will get richer as the added value of their work or status increases in ratio of the added value of a cup of rice produced. (By the way this means that the only way for a rice producer to get richer is to produce more and more efficiently/cheaply than he used to do). This happens if their income increases or the price of the item decreases. I bought a table model circular saw the other day for 99 Euro. I don't remember ever having seen one so cheap even taking inflation into account. Made in China, obviously. Am I now poor since the Chinese have started producing these things at a price of a couple 25 kg bags of rice? Heck no, I am becoming rich! I can very easily afford a circular saw now, I can buy 5 or 10 if I feel like within a month and still have dinner and pay the rent.
Even the french circular saw makers who are now unemployed can buy them. As soon as they found a new job even if it pays a bit less than the circular saw factory, a chinese circular saw will cost them much less in ratio of their income than a french saw.
RE: Deindustrialisation in United States
RE: Deindustrialisation in United States
So for those of you who don't live in the US, to give you an idea... I currently make just shy of the 1 person poverty mark per month... (and it would be a stretch for me to by a modest 2 bedroom home in the neighborhood I live in, where 2 bedroom 1 bath homes are selling for between 500,000 and 650,000)
Wes C.
------------------------------
Make a dent in the Universe... do something great...
RE: Deindustrialisation in United States
I don't know - I just refuse to get all pessimist. These doom scenarios remind me the millennium bug that turned out to be no issue. France is in the same difficulties if not much worse than the US, but hell I have a good job and if I lose it I will find another one even if I have to go to China.
RE: Deindustrialisation in United States
Move. You must live in Calee-fornee-uhh (say it like Ahhnold). I watched a show the other night and these folks were selling a dump in CA for 700K. The old adage of "they pay you more there so it makes up for it" is hogwash too.
RE: Deindustrialisation in United States
RE: Deindustrialisation in United States
Newfella - I do. Los Angeles. But not for long. Saturday at 5 am, I am getting in my car and driving to Texas and not comming back (for a while atleast)
Slugger - My wife and I are looking at (hobby) farm properties out in a suburb of Dallas called Waxahache. 50 acres and a farmhouse for 200K. Plus we are looking for a "fixerupper" casue she's an architect and wants something in HER MIND, that we'd never find anywhere... but want something old (exterior) like from pre 1940.
Wes C.
------------------------------
Make a dent in the Universe... do something great...
RE: Deindustrialisation in United States
destruction in the job market goes something like this.
When good paying manufacturing jobs go away people are
made available for new and supposedly more advanced work.
Most people not involved in manufacturing get the benefit
of cheaper goods. But how can people find jobs that pay
as well as the manufacturing ones??
High pay comes with either undesirable work or highly
skilled work. We as engineers try to fit in the highly
skilled work catagory. Some engineering disciplines are
not very affected by outsourcing due to the scale of what
can be transported by ship.
The issue comes down to the complexity of the replacement
jobs that are created. Those with brain want to find
challenging work not necesarilly for self satisfaction but
because the probability of standing out above the rest
and therefore higher salary depend on complex difficult
work. What kind of jobs can be created that will offer
opportunity for this complexity that are not related to
manufacturing or designing a product ??
It will result in equilization of the skilled and
unskilled worker classes in the developed world.
RE: Deindustrialisation in United States
In terms of personal standards of living, it doesn't matter if the US completely de-industrializes or not, provided the country participates in a global economy and is not disadvantaged in international trade due to politcal or military issues. The fact that someone, somewhere, will manufacture the product and trade it for whatever goods or services the US has to offer is sufficient ( in times of peace) to keep the whole pyramid scheme going indefinetly.
Just like, the retired senior citizens of Ormond Beach, Florida don't expect to have a loss in standard of living because Ormond Beach has zero industrial capacity and most residents are retired ( as the USA is to be in 2020 ); what it doesn't manufacture for its residents, it buys from other cities, and exchanges some other service or goods in return.
The scheme falls to pieces, of course, if the trade routes falter due to war , or a shock occurs, such as a disruption of the oil supply needed to transport the goods from a manufacturing State to a sit-on-your butt-and consume State.
RE: Deindustrialisation in United States
RE: Deindustrialisation in United States
However the US expects to keep on going for many years; past the lifetime of any individual now alive, let alone now retired. The country is not living within the investment income that it generates. High government deficits, massive trade deficits and massive borrowing n a personal and corporate level will eventually erode the US capabilities to sustain its lifestyle, that is as long as the de-industrialization trend continues to occur or lifestyles continue to be much higher than world average.
Since I believe that world wide freer trade is now a fact of life, I do not see there being many other options other than to either re-industrialize or accept lower standards of living.
Factor into the equation that the US needs some domestic industrial capacity for military and security purposes, the present trend must change
Rick Kitson MBA P.Eng
Construction Project Management
From conception to completion
www.kitsonengineering.com