But one of the reasons China is so good at manufacturing is because everything is in one place (or at least clusters)... need 10,000 of an Integrated Circuit? The company that makes it is literally down the street. Need some raw materials? That's down the other street.
I can't think of a place in the US that is like that. If we need parts we have to wait for them to ship. (often from China)
It's not just a labor problem. It is my understanding to be competitive in manufacturing you need to be vertically integrated. And I think that is harder to do in the US.
Although I hope it is true. I live in the US but I don't believe in inherit United States exceptionalism but I do feel like shipping goods by container ship is bad for the environment and bad for consumers. I'd much rather see things made locally.
What's a "problem" for the rest of the U.S. is creative destruction here. I worry we may have learned the wrong lessons because of current politics and inequalities. And it's worth remembering that automation is going to result in that manufacturing resulting in less jobs. What's going to happen when people expect the jobs to come back but then they don't?
I know this has all been said, but I'm not sure everyone's connected all the dots.
On a side note, unemployment rates are at a low, so we relly don't need to worry too much. If you look at the charts: https://www.google.ca/publicdata/explore?ds=z1ebjpgk2654c1_&... you see that it really was all due to the recession. Now that the economy has recovered, jobs are back.
All the talk of outsourcing, automation, and all that doesn't seem to show in numbers. Even full time employment is up: http://www.tradingeconomics.com/united-states/full-time-empl...
I wish our society valued data driven decisions a little more. Successful businesses do it all the time, why not politics?
/u/Brightball posted this on HN and I felt it was a good response to your concern.
"One of the big perks to manufacturing is that it draws the entire supply chain around it naturally. Even if the manufacturing job itself isn't as abundant, the peripheral jobs that comes with it from shipping materials, producing materials, distribution, sales agreements, logistics, building construction and maintenance...they all provide benefits."
That's what wiped out local parts stores. You never knew what they had in stock, and the markups were huge.
Also, Digi-Key doesn't have a counterfeit parts problem. Digi-Key deals directly with manufacturers. The supply chain is simple and has no anonymous resellers. If someone finds a bad part and reports it to Digi-Key, their systems can trace it back to the manufacturer lot. So not many duds get through.
It's really a shame because it was great to have that "I can get this part in ten minutes" feeling when I was in the middle of a project and I ran out of something I needed, or realized I was missing a part.
I live in Canada, shipping is $8 flat rate, and all the taxes and shipping are totalled on the "preview" screen.
I've never paid customs fees in all the years of ordering, so for my situation I know the full price upfront before ordering
Is the order cost variable with digikey because the shipping weight is not known or is there another reason?
I don't know if being a manufacturing powerhouse is actually all that exciting anymore. There aren't really that many jobs in manufacturing anymore. Some of Toyota's modern car plants employ a meager 1500 people which is about and order of magnitude decrease from what car plants used to employ.
This las election was frustrating for this very reason everybody assumes getting manufacturing back is going to be great. It's not. Sorry, it just won't be.
Manufacturing is moving back to the US because distributed supply chains are becoming worth the cost increase in labor.
With the manufacturing hub overseas all of that's overseas too, which is why China is more vertically integrated.
If I recall, one of the major reasons that Dell took off years ago was that they consolidated the entire supply chain for production and significantly increased profit margins.
Given China's $3.x trillion in manufacturing is heavily tilted toward low cost, low value manufacturing, it's not going to be surprising to see their global share of manufacturing shrink in the next decade as other low cost competitors continue to take share from them (whether in Vietnam or Mexico).
Edited to add that I'm speaking in very broad terms, I know that Africa as a whole is enormous, but I don't think of any particular African nation as being stable enough to be able to support the infrastructure needed.
like, say, New York City? Sure!
No, the rooftop garden on the Park Slope Whole Foods does not count.
While its highly unlikely, its slightly more believable that in the event of another world war or some kind of global food epidemic, a country that doesn't produce its own food might be completely screwed.
Trade is necessary for the wealth of modern economies. Self-sufficiency is North Korea's approach.
Net imports is a different question.
My expectation is that it would far more expensive, raising food prices and doing significant harm to the economy. Also imagine the massive costs of shifting production and the gap in food availability during the shift. But I agree that the U.S. wouldn't starve.
I think what would harm us more in total isolation would be the lack of more scarce resources (those used in electronics, batteries etc). We have a lot of materials here, but there are others where China and Africa trade are needed.
"It's natural to look at the phenomenon of declining manufacturing employment as a political failure that can be rectified. But the fact that China has lost more manufacturing jobs than the U.S. over the past 20 years is a strong indication that playing hardball with the Chinese isn't going to do anything to increase employment in the United States.
Rather than a political failure, the decline of manufacturing employment is a natural economic process that many industries, like agriculture, have gone through in past eras. As sectors become better at what they do, they often require fewer people to get the work done."
Additionally, manufacturing is often an environmentally unfriendly process, so there are going to be some big added costs for the government and an increase in the importance of adequate regulation and enforcement. Given that the majority of the added revenue these manufacturers will generate is going to go into companies and individuals that are, on average, very good at hiding profits, the IRS is going to have to be very sharp indeed if the U.S. is to actually benefit from this. It's not going to be like it was in the seventies when a much higher share of gross revenue went to unionized workers who dutifully paid their taxes in full.
On the bright side, more Americans are going to find out what living next to a modern chip fab plant is like. This may cause them to actually reduce the frequency with which they buy new phones.
A modern chip fab plant is one of the cleanest industries we have EVER produced.
Everything is really sealed, and even the "waste" gases are purer than what you get directly from most industrial suppliers. It used to be that most of these plants immediately dump industrial gases into their waste stream and purify them to the level they need.
This is different from a PCB manufacturing plant which creates lots of liquid waste that is contaminated with all manner of nasty metals.
1500 jobs + the peripheral jobs (as a another commentator pointed out) could be a boon for many of the small counties* in which these plants are located.
And a lot of those peripheral jobs being talked about are also in line to be automated away.
As we move towards automation, wherever the means of production are located is going to dictate who rules the world a hundred years from now. If you don't have a manufacturing base in your country in time it will be a losing battle to try to afford buying other countries unlimited goods with your limited human resources.
It is much harder to do development and understand the real manufacturing bottle necks when you don't see them first hand... even harder when you can't easily get the raw materials.
I was struck with this the first time I tried to order in the US a PCB to the tolerances available in China. The yield was so bad, they basically weren't available. It was cheaper and faster to have the parts built in China and shipped back than to order from a proto house in the US.
Why? They used similar equipment in China (I saw it myself), but they ran it 2-3 shifts every day and it was completely dialed in. In the US they turned it on once a week and tried to make enough prototypes to pay for it.
My take is there are no shortcuts for doing the actual work. Just like there is no replacement for lifting the actual weight and eating a clean diet instead of reading yourself into expertise on fitness.
Washington state has an airplane factory in the woods and a car fiber (BMW) plant out in the desert. In the city you can find businesses to build anything.
That said, Boeing's defense contracts might keep is secure regardless of what happens in civil aviation. United Airlines might buy a plane from China (in a decade), but the US Navy certainly wouldn't.
I am late to this discussion, but James Fallows wrote China Airborn, a book about precisely this topic! The answer is complicated—if it weren't, he'd not bother writing a whole book about it—but the short answer is that so far China's not succeeded.
China does lots of stuff well and deserves credit for it but is not the indomitable powerhouse sometimes suggested in the media (e.g. http://www.marketplace.org/2015/12/10/world/why-cant-china-m..., although I don't know if this piece or others like it are for real).
Everything I've heard about them is that they're unreliable and unsafe to an extreme degree. You're apparently better off buying a 3 year old Toyota Hilux or Nissan Navara for the same price as a brand new Chinese truck.
Also, mitsubishi can build rockets similar to anything spacex can put up.
China would have very little reason to enter the broken US car market.
Especially when there is an island sitting right there that is close enough for them to buy their own Mitsubishi 787s
Both are Japanese companies in the American version of ownership.
In the proximity version of ownership, both are pirate flags.
> The second stage of the project will involve the complete transfer of technology, including the 23 ton thrust Progress D-18T turbofan engines, to China, for licensed production of a modernized version in Sichuan Province.
How is it bad for consumers (beyond the environment)?
Shipping goods does include an environmental cost which is not incorporated into the price of things - an unfortunate externality. We should have a carbon tax to properly reflect the true cost of items made and shipped so the market can choose between a locally made good and one made elsewhere.
There seems to be a popular opinion that even if the environmental cost were accounted for (carbon neutral) that it is still somehow inherently superior to make things nearby rather then trade for them from another city, state or country (especially food).
I agree, but the results may be a bit surprising. Shipping by container ship is extremely efficient . On the West coast, for example, it might be cheaper (possibly far cheaper) to buy goods from Asia than from the Midwest. And wine drinkers in New York who care about energy consumption might be better of with French wine than "local" California wine.
 http://business.tenntom.org/why-use-the-waterway/shipping-co... for example
Not so much these days, but it used to be fairly common to just run sheep up a mountain valley and then twice a year muster them down the valley (often with only horses and dogs) for shearing and slaughter. Any sheep that fall ill would either recover or die.
That's still the case usually, a lamb is worth a lot less than the vet costs.
raising sheep requires land, remember? it's livestock, grass/feed, water, veterinarians, medication, sheepdogs, abattoir, compliance, inspection, processing, packing, refrigeration, shipping.
if you're producing wool, let's substitute/add shearing, washing, drying, processing, packing, etc.
not to mention sales, marketing, client relations, accounting, human resources, payroll taxes, corporate taxes, property taxes, sales taxes, value added taxes, etc. because a ranch is a business that turns over probably millions a year.
how much does all that cost in the UK? how much does it cost in NZ? find the difference, and compared to the shipping costs, which are trivial, probably a couple of thousand dollars to get a refrigerated 30 foot container from Auckland to Amsterdam, then another few hundred pounds to get it across the channel and into a distribution center in the south of england.
i don't know a damn thing about farming or logistics, but all it takes is about 2 minutes of thought to see how the economics would work.
Doing electronics here in the states is a pain in the ass. Maybe a little less so in some parts of CA, but for the rest of us it sucks. Pretty much everything has to be shipped to get anything done. You spend more days waiting on UPS then actually moving forward. Unless of course you can foot same day / next day shipping all the time.
I think it's unrealistic to return to that with current production needs, but perhaps it's possible with select future industries.
We need to figure out how to expand this to other regions and industries.
Contrast that with Americans who have been told from birth that they are special and their life is exceptional, a philosophy that doesn't gel very well with tedious work at factories.
Suffice to say, I no longer believe that ceteris is paribus.
Let's say that there's a $3.50 product that costs $1.50 to produce, and a company can save 10% of production costs by producing it in China (even with lower wages you don't tend to have huge savings when things like transportation, lower quality, distance from quality inspectors, etc. are added in). So that's a 15 cents saving - now some of that the company is going to keep (let's say 5 cents), some will go to the businesses buying wholesale (let's say another 5 cents), and some will go to the consumer (let's say the remaining 5 cents). So in the end it might be the difference between paying $3.45 and $3.50 for the consumer - something most people wouldn't notice.
Of course, for a company it's a much bigger difference - if everything costs them $2.25, and they're selling it for $2.75, then an extra 5 cents per unit means their profit margins go up 10%.
Of course this is going to vary a great deal depending on a number of factors (what kind of product, if you're buying generic, etc.). But I think for a lot of products the average American wouldn't notice much of a price difference if they were being made in the U.S.
They haven't always been able to make it in the UK, but as the computer became more popular, the economics have worked out. But the driver for this has been the fact that the organization behind Raspberry PI wants to develop hi-tech engineering education and manufacturing in the UK.
There is an embedded computer called PICaxe that was launched in the UK for similar reasons, boosting engineering education in the country. It roughly competes with Arduino as a platform.
For instance just walking through an electronics store, there are fridges, air conditioners, washing machines, room heaters etc with large "Made In Japan" logos.
When looking at developing countries that are actually developing (instead of stuck in the middle income trap) what we see is a picture of a more developed country decades ago, except with access to modern tech. While the modern tech makes them move faster, you should expect them to be more like the US or the EU every year. Look at pollution: China has a huge pollution problem, but that's not unlike LA in the 70s and 80s. People are getting wealthy enough to demand environmental regulations, and in a decade their government will care about environmentalism.
So instead of thinking about how China or India have things that we've lost and try to turn back the clock, it's more productive to think that we have to deal with our own problems today, as China will also have them in 20 years.
Go take a look at what labor pulled in per hour in 1890.
We have economic indicators that do that, such as median income and various distributional measures. They don't tend to get covered as much in the news because most of the people with power and influence don't like people paying attention to the stories they tell.
But the same government agencies that publish the headline figures publish my more useful ones for assessing how most people are experiencing the economy.
Can you take a look and help me pick which of those 421,000 pieces of time-series data are the conspiracy ones so that I know not to look at them any more?
The idea of buying a house with the promise of selling it later to make a profit is very modern. My great-grandparents and grandparents all owned one house and lived it in for the majority/entirety of their lives, so the value of he house was inconsequential to them.
My parents and their siblings have mostly owned multiple houses. They never moved for pragmatic reasons, like relocating for a job. Instead, they took to the modern notion of "starter homes", where a family continues to move up to a better house by "using the profits" from the sale of their previous home.
Yes, because the idea was established when the leading edge of the Boomer generation was young adults and became dominant fairly quickly.
So, it's been a common belief for three generations that have reached adulthold. Hence, my statement in GP.
I'd be better off renting from someone else losing money.
I'm not necessarily saying that prices should have significant downward trajectory. Of course desirable locations will command a premium over time and so on. But as a society we probably shouldn't be excited that housing sometimes goes up substantially, even as the stock deteriorates.
Most housing suffers from use and age.
(Note where I conceded the point about some land having value due to location or such)
No, you wouldn't, because if the rental market wouldn't support recovering the full costs to the owner, no one would bother owning land and renting it. Whatever costs fall on land owners will, inevitably, be fully (and then some, usually) distributed to renters of the land.
This is what's happening in Toronto right now. You can rent a condo for less than the mortgage interest + property tax + condo fees + maintenance.
Certainly, if houses stop appreciating rent prices will increase to cover some of the difference.
The problem with these thought experiments is you have to assume some reason why housing prices have stopped increasing, but also that nothing else about the economy has changed. Otherwise the thing that stopped housing prices increasing has probably also had some other pretty serious effects on the economy.
It's like asking "what if World War 2 never happened"? Well, why didn't it happen? The same forces would have pushed us in the same directions. If it didn't happen, well, that world doesn't look very much like the one we live in, so who can really say what would have happened?
In general, making as tiny a change as possible, housing still would be priced the same as it is now - i.e. based on what the market will bear, rather than some weird idea that landlords would get vindictive and crank rents just because their asset is no longer appreciating. To the extent possible that's what they already do, and they would price themselves out of the market with further increases.
But if landlording is still a revenue-positive activity, then people will do it, and housing prices would continue to increase in anticipation of future gains. People would still want to move to desirable locations like big cities, and that increases housing prices too.
So I don't see how exactly this happens without a major, major shift in the housing market - something like "landlording is a revenue-negative activity" or "there is a significant chance of losing your asset value in a fashion that it will definitely never recover within the span of several generations". i.e. nothing like the world we live in.
Reducing the lucrativity of owning a house will put pressure into less housing stock and higher rent prices. If it is a fast change the rent price will almost certainly not keep up with it, because the housing stock is kind of fixed at the short term. And yes, some unrelated action may overwhelm that factor. Some unforeseen consequence may also do that, but this one is much less likely.
Now, the fact that it is a policy goal with that kind of support may be a failure on a more fundamental level, but that's a different issue.
"We should also start"...
Obviously I didn't go on and on about it, but it is implied there that attitudes would need to change.
My point was directly that it is, in fact, not a policy failure in the usual sense since it is working both as policy makers and voters intend, and, on a deeper level, that --given that people who, in fact, benefit from housing price appreciation are overrepresented among those who actually vote -- changing this is likely to require either changing who actually votes or getting people to vote against their own financial interests.
I said We should also start treating rising housing prices as a policy failure.
It's a prescription for what society should do, not an assessment of whether current policy aligns with voter wishes.
In the comment I replied to initially, rising prices are treated as a measure of economic success. Treating them as a policy failure would contrast with that current attitude...
Full data, cut off 1% at each end, 5% at each end, and 10% at each end.
I think we'd get much more out of the A-1 or A-5 than the raw average.
(Of course, the real answer -- like with the weather -- is that you need to use distribution information, not a single value.)
Outcomes from competition are hard to predict. It's interesting that Deloitte predicts Germany "holds strong and steady at the number three position" in 2020 when their own survey has them jumping between 2nd and 8th within a couple of years.
I can't find hard data on this, but anecdotally it's very hard to find things made in the US unless it's a high end store. Chinese manufacturing filled the burst in consumer demand for budget-level products...
manufacturing output is measured in dollars, not 'amount of stuff' except in very specific cases. producing fewer but more expensive high end goods (like what the US makes) can still result in more output.
The US manufactures a lot more high value items where as China dominates the cheap junk category. Same way that Apple has all the smart phone profits even though they don't dominate the smart phone market on a number of units sold basis.
Competitiveness is the thing that has (for example) Apple making things in China.
- What exactly do they mean by 'Competitiveness'?
- Why so much focus on labour costs, when manufacturing cost is increasingly driven by large capital investments (especially in China, where low interest rates and government encouragement have expanded capital investments for years)
- Why all the talk about R&D expenditure. Is that really a driver of manufacturing competitiveness (whatever that means) or manufacturing output?
- How do they expect (on page 46) China's consumption to rise to 46% of GDP by 2025, if GDP will rise at 6.5% per year during the period? Such a shift would require consumption to go up by ~10% per year.
1) Less GDP growth than the 6.5% prediction.
2) Less consumption growth as a fraction of GDP (hence deepening imbalances and higher corporate debt levels).
3) Massive wealth/income transfers to the household sector to allow for a rise in consumption.
You're right that without #3 it's pretty unlikely that consumption will rise as much as that article claims.
Perhaps a relative reduction in exports? When costs go up in China the goods that can be profitably produced elsewhere tend to increase.
Because the other things you mentioned - i.e. 'capital investments' - China does not have a huge advantage in. Yes, they have 'government participation' but US companies have access to capital, low interest rates, yada yada.
China's currency is facing pressure to depreciate nowadays, and the Chinese government is having a hard choice between propping the value of CNY and preserving its reserves of dollars.
Science fiction from the 60's painted a world where people would lounge around in their airships hopping between beaches, and mountains and parties while robots took care of everything and the lord scientists and engineers that gifted the wold with such plenty smiled benevolently down on the citizens of the Age of Plenty. Yea that did not happen, nobody thought about who would own those automatons, and lo, it was not us.
This argument, which I've read before, only works with a really, really narrow definition of 'rich' and 'poor', maybe what you mean is upper-middle-class and lower-middle-class?
Just because you or someone else never got used to living without these, it doesn't mean everyone else needs it, not at all. From my point of view, autonomy is the greatest thing ever, it is freedom, and dependence is weakness and slavishness, subjulgation. IMHO Only a fool would think in terms of "if I enslave myself I'll get to play with this!"(plus, isn't it a bit like the deal with the devil?), to me it's just an example of how little some people can see what is actually beautiful and good in life to raise stuff to this level. Sincerely, I think people who think like this don't have a clue of what freedom feels like(and gladly, I think I've enjoyed plenty and been introduced to it early on). My life is not made of stuff, it is made of time, living, thinking, appreciation, growing, caring.
As another personal example, my father is also deurbanizing and moving back to the farm(which is not an industrial farm as in a business, but actually a place to live, think straight, work on living things which do need upkeep but not artificially). There's no AC, the only thing he watches is F1 races. He's busy most of the time anyway, usually having a beer and working on the farm, he loves it.
hard to argue with your statement, one way or another, if those aren't clearly defined.
Relativity, quantum mechanics, crystal growth, there is just so much they didn't know. In any field, really.
You'd be less screwed than you would have been 100 years ago in that situation, for sure.
If you wanted to have an impact, be conscious about your actions, pay that extra cost and buy local if you care so much, and don't buy at all if there's no local options.
Manufacturing are not the jobs of the future. They are too easy to automate and will far too easily flow to cheaper countries with lots of young, skilled people e.g. China, India.
What should be happening is a massive skills and education investment in the US combined with some sort of basic income.
Since almost everything is designed in CAD and manufactured by CNC these days, the real distinction between US and metric units has practically vanished. A dimension is a floating point number.
My fave quote from the article:
> So while it's understandable the state of manufacturing is of concern to presidential candidates, those who say they can bring back lost jobs in the sector either don't know what they are talking about, or are being disingenuous.
Or both, in case of the current president-elect.
None. It's based on a survey of CEOs sponsored by a nonprofit thinktank made up entirely of CEOs. This article is a barely rewritten press release, and the content of the survey is worthless.
> How will this help Joe Six-pack?
Its purpose was to advocate for Clinton and anyone-but-Trump. I suppose that it told Joe Six-pack who America's CEOs wanted him to vote for?
Since when (post-Renaissance) did Anglo-Saxons not prosper?
Is it a "year-end round-up" of stories or something?
Because if so, this story is kind of dry. Aside from the tiny hyperlink to the Deloitte study, there's NO data in this at all.
What's the deal?