Supply chains

"Having lots of well-paid manufacturing workers isn't the way one grows rich; replacing lots of those workers with massively productivity enhancing machines is"

Does R.A. imagine that manufacturers in China overwhelmingly make things with their bare hands using basic tools. Creating computers by twisting wires together and hand-chiselling out panels from solid blocks of Aluminium. No! Manufacturing workers are overwhelmingly machine operators.

A century ago armed Pinkertons would break strikes in America. American workers would stand up against Carnegie and beat Pinkerton guys. In China, the master employer doesn’t hesitate to use even tanks to break strikes and maintain the approximation to the first postulate of the classical economics.

“The data are a bit dicey, and some of the decline can be accounted for by the closure of lots of large, highly inefficient state-owned plants.”

That could be related to Keynes’ original assumption on the first postulate of the classical economics. That is, the wage is equal to the marginal product of labour. The postulate is about the workers’ demand for labour. It assumes malleability. In other words, the postulate assumes both the fill variability of employment and the full variability of the other production factors. The full variability of employment means no supplementary cost or time delay to fire and hire workers. The full variability of the other production factors means no supplementary cost or time delay to any change in production. Hence, the data in question shows that the case of the recent structural transition in China materialised a first approximation to the situation in which the first postulate held. (Viva despotism!)

“In the end, however, this workshop of the world has less workers employed in manufacturing than it used to, and it employs just under 10% of its workforce in manufacturing, which isn't meaningfully different than the share of manufacturing employment in America.”

The quantitative and qualitative conditions of the manufacturing-related non-manufacturing sectors vary, depending on its real side which involves various forms of so called roundabout production in a broad sense to compare economies. We should have a much closer look into externality before we conclude. Usually, when the total product curve keeps improving so much that the present real wages level is of little significance, the increasing real wages improves the workers’ quality of life albeit under despotism and thus the economy grows fast. That is China. On the contrary, it is reasonable to assume that the present US is of an opposite example, in which the total product curve wouldn’t improve sufficiently, hence the present real wages level is considered too high. The schedule of the marginal efficiency of capital must be improved to improve the total product curve as a matter of course.

Atlantic Monthly has a really good story on manufacturing, “Making it in America” at http://www.theatlantic.com/magazine/print/2012/01/making-it-in-america/8...

However, I was waiting for his conclusions and he disappointed with this:

“Other proposals have been self-serving and unlikely to have much impact, like subsidies and tax cuts for manufacturers (the benefits of which go disproportionately to the owners of factories, not to the workers, who still must compete with legions of ever-cheaper robots).”

The engineer said that he needs a 40% savings on a part to send it to China. Lower taxes reduce the cost of doing business, improve the profit margin (which the author says are razor thin) and increase the % savings he would need before he sent it to China. Maybe after a tax reduction he would need a 50% savings to justify sending the part to China.

Corporate taxes in the US are the highest in the industrial world. The author really fudged on that one. Saving on taxes would not necessarily all go to the owners of the factories, either. That’s a stupid socialist assumption.

I also waited to read where the Gildenmeisters machine is made. I googled it and found it is made in Germany. What we need to know is why the US doesn’t make such high tech equipment.

http://blogmichaelray.blogspot.com/

I haven't been follownig the discussion about apple but they just had a long and depressing article in the New York Times discussing the apple's choice of a Chinese factory over a US one. One of the major issues was time and flexibility. Very depressing that our best companies have written off american manufacturing. While R.A. comments that there might be an upper limit on desirable manufacturing employment, there may be a lower limit at which there just aren't enough skilled workers to maintain any manufacturing. The NY times article seemed to indicate that the US is heading towards that lower bound.

Remember that Apple bought up all the air cargo space they could when the iPod was new and Xmas was coming. They were able to service demand.

I like to think of Roman roads: they bound together the Empire and allowed swiftish communication and transport. The modern roads are shipping and that has two basic channels, one very old. The old is the ship but it takes a new form in huge container ships that can be loaded and unloaded efficiently. The other is air. As everyone knows, you order something and it is made in China and arrives on your doorstep a few days later. That pays for relatively expensive things and the traffic has meant all sorts of things tag along.

I had this brought home to me some years back when my child needed medicine. She was living in Xian, China, very far from the eastern US and not a main port of any sorts. Xian is mostly known as the first imperial capital, where the terra cotta warriors were discovered. It is a good 700+ miles SW of Beijing. I was able to go to FedEx on Friday, stick some pills in an envelope and it was at her door early on Monday morning - for a very reasonable cost. That meant Xian was as close as anywhere in the US. Not for everything of course but for anything small enough that had sufficient value.

A refrigerator comes by boat. A computer comes by plane. Different roads.

Speaking of time.

After watching many a commercial during yesterday's
AFC & NFC Championship game....

The NBER paper is soooo 43 seconds ago.

IBM can find stockmarket fraud in under 1 minute.

Regards