Industrial Economy vs. Knowledge Economy

money-toilet-paperThis is going to stray a little bit from the regular focus on pure politics for us. But I was sitting around thinking about this tonight and I wanted to get some of you smart folks to add your thoughts on where my head is at. As many of you know I am a full time student as well as the fabulous author of this blog, which means that I split a lot of my time between here and work and schoolwork (but only for 11 more days… another degree almost finished!!!). So my head is in the world of business for school a lot. In a lot of the writing I have been doing for school I have put forth the premise that we have begun the switch away from the industrial economy that made us a world power in terms of economies…

Let me say up front that, for this article at least, I want to stay away from the arguments or debates about whether it is right for the government to tax us, or to use taxes to control business. I know that we all have differing views there and I don’t want to get bogged down getting past them to get to the points. So for the purpose of this debate, let’s assume a few things here: The government system is what it is right now. The tax code is complicated and can be used to manipulate the free market (I know many of us hate that but it is the reality of the market today, so let’s just say we deal with it for this debate). What I want to discuss here is economically what is the best course forward for our country on the most basic level.

old-factoryA little history here. In the late 1700’s and early 1800’s, the world saw the events we now call the industrial revolution. We transitioned from an agricultural economy to an industrial economy. During this time, technological and economic progress gained momentum with the development of steam-powered ships, railways, and later in the 19th century with the internal combustion engine an electrical power generation. GDP per capita was broadly stable before the Industrial Revolution in and the emergence of the modern capitalist economy. The Industrial Revolution began an era of per-capita economic growth in capitalist economies. And we saw the American economy begin to flourish over time as the US became a major force in manufacturing. 

Over time we have seen this force of manufacturing leaving the US. This has happened for many reasons, but the results are obvious. We began to be out-manufactured by countries such as Japan; the auto industry is a prime example of this. Textile industries largely saw the same things happening. Manufacturing began to move overseas, for many reasons. The point is that manufacturing became a secondary part of the US economy. And agriculture is long gone as a factor, constituting only about 1% of the GDP. 

auto-industry-uncle-samThe shift has been evident. The US is the largest importer in the world, however even with the largest economy in the world, we are only the third highest exporter in the world. Basically this means that we are importing more goods manufactured abroad than we are exporting. That is the definition of moving away from being the world manufacturing giant. The US is now what is termed a post-industrial economy.We are now far more service based, with the service sector representing 67.8% of the GDP in America. 

QuotesThe leading business fields by net income it is finance and insurance industries. In 2005, 155 million persons were employed with earnings. The majority, 79%, were employed in the service sector. With about 15.5 million people, health care and social assistance is the leading field of employment. This shift to service is what I term the knowledge economy. Knowledge and service based on that knowledge are what is for sale in America these days. 

So enough history, just take a look around you to understand what I mean by all of this. Look at how much of our economy is in the financial sectors, the insurance sectors, IT fields, pharmaceutical fields, Retail industry, Food Service industry, Repair services, health services; I think you get the point. How many people do you know that are somehow involved in actually manufacturing anything anymore? Look at the state of the traditional manufacturing towns: Pittsburgh, Cleveland, Buffalo, Worcester, Cincinnati, Baltimore, and Detroit. 

coneyislandsignA quick side note here… Worcester, Massachusetts is the home of my people. It saddens me to see that town go downhill. It was once the largest inland port in the United States. But if you ever find yourself in Worcester, do yourself a favor and head on over to Southbridge Street and get some hot dogs from George’s Coney Island Hot Dogs. They are the best in the world. The place has been there since 1918. My grandmother and grandfather used to go there for dates. So did my father, and so did I. The atmosphere is amazing as the original wooden booths are still there, with four generations of my family’s initials carved into them (U have to see the booths to understand, they are all covered in carvings and writing). I know there are some Worcester readers of the blog, and you all know what I am talking about. George’s Coney Island is an American Institution. I miss it terribly. 

Couple this move away from manufacturing and towards this knowledge based economy with the fact that our schools systems are not focused on giving children knowledge. They are focused on giving them propaganda and indoctrinating them into the system. What we are finding is that in terms of knowledge we are being outperformed by many different countries in Asia and Europe. 

CITIGROUP RESTRUCTURESo it makes me wonder if we are making a giant mistake here in moving towards this knowledge economy. Let’s just look at the two industries that were noted above as the highest net income fields, financial and insurance. These are two of the most corrupt industries in the country, as we are seeing with today’s financial mess involving… you guessed it the financial and insurance industries. Insurance giant AIG and financial giants such as Bear Stearns, JP Morgan, Citi, Bank of America, and Leahman Brothers. 

Since the financial and insurance industries are the two leading economic industries in America, is it any wonder that their failures and manipulations are at the root of the flagging economy? With 10% of the people employed in the health services industry and the social services industry, is it any wonder that these broken systems (oddly enough broken, at least in part, because of the insurance industry) are major parts of the equation as well?

wef-bill-gatesAs another quick side note, I have found that I don’t seem to have nearly as much of an issue with those bazillionaires that make their money in manufacturing. At least they are providing a tangible product in exchange for the Billions the earn. In direct contrast to that are the financial folks who are becoming Billionaires by manipulating the markets and leveraging my money 40:1 for lending. In my head manufacturing just seems like a far more honest way to make a fortune. Hate Bill Gates all you want for having a “monopoly”, but you all got computers in exchange for your money. What did you get from your bank?

I guess the point to all of this in my thinking process is that I have to question whether it is healthy for the US economy to be so service based? Look at the convoluted answers we get as to how to fix the economic problems. No one seems to know because you cannot just say lower the interest rate and give the banks $700 Billion and everything will be fixed. There is not a tangible fix here. It isn’t like manufacturing, where increasing quality and product rates is a tangible thing to do. 

So as I think about what we need to be doing in order to get things fixed, the question becomes for me whether the focus should instead be on reviving American manufacturing? I know this is not an easy thing to do. We would have to fix quality in Detroit, lower wage expectations for manufacturers, gain some control over certain out of control unions, and provide a reason for companies to manufacture here, where costs will be higher. We would have to decrease the amount of costly regulation, the amount of costly tax burdens on companies. 

So now I will turn it over to all of you. Should we be focused on returning to manufacturing as the way to getting our economy back on track? It would probably take 10-15 years to make it work. If we did decide that this was the best way forward for America, could it even be done in today’s global environment?

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Comments

  1. Good Morning, US Weapon.

    I don’t see how we can bring manufacturing back here, unless we become a cheap labor, third world country (which is seeming all too likely).

    We cannot possibly compete with foreign wages. In Mexico, the going wage is about $1.00 US / hour for manufacturing. I can’t live on that, can you? That would barely pay our utilities!

    I happened to talk to someone just today that lost his job to Mexico. The product he helped make had an excellent reputation in consumers eyes, now is falling apart. It is carried by a major home improvement chain. The store called the manufacturer to drop the contract, due to fact that the item is just plain junk now. Wanting to keep the contract, the manufacturer offered a rock bottom price. The home improvement store will continue to sell the product after all….and the consumer will get ripped off.

    I work for a company that hires independent contractors to work from home for US companies. As independent contractors, we provide all our own equipment, pay our own taxes and social security, medicare, etc. (no SS kicked in like employees get)we get no benefits…and our hourly wage is probably 50% to 75% of an official “on site employee”.

    We provide inbound sales, customer service and tech support types of services.

    So you have companies getting the same (or better) quality worker, with no overhead (buildings, equipment, etc), no unemployment insurance to pay, no workman’s comp to pay, no benefits to pay. Think of how much they are saving…this is about as cheap of labor as they can get in the USA.

    But it’s not cheap enough. Company after company is exporting even these jobs.

    As for manufacturing, well that wouldn’t be very feasible on a independent contractor “work from home basis”…so even more “unaffordable” as far as labor is concerned.

    Somehow these companies can hire expensive US workers to build a thriving successful business, but when the business hits the big time, making untold MILLIONS in profits….all the sudden they just can’t afford the very people that helped make them successful.

    The only way manufacturing jobs will come back is if consumers boycott companies that move jobs to other countries…and that is getting harder to do, once one company in a sector moves out…the others follow in order to compete.

    As far as my line of work, I have talked to many a pissed off customer that has redialed 5-10 times to get someone that speaks English. If they purchase a service or product in the USA, they expect to be able to reach someone they can understand when they dial Customer Service. They did not spend their money to find out they have to overcome obnoxious language barriers to deal with any issue they may have.

    For those determined to “buy American”…

    http://stillmadeinusa.com/

    http://www.americansworking.com/

    • Businesses aren’t leaving for cheap labor. The savings is not enough to offset the costs for just labor alone. Businesses are leaving for more freedom, less taxes, and cheaper access to materials, in addition to cheaper labor.

      Of course, some businesses are leaving for cheap labor alone, because it looks good on paper. Too many businesses are run by accountants. When you only look at the bottom line, the health of the company fails and the company goes downhill. Also, the ramifications of moving overseas kick in and even the accountant balance sheet fails to show the increased profits.

      Our businesses are victims of a greedy government and a crap education system where MBAs are awarded to those who actually know nothing about good business.

  2. NYC Fiscal Conservative says:

    While I would strongly question that agriculture represents only 1% of GDP, and presently have not the time to research it, that probably depends on what of the agriculture industry is included. That aside, while agriculture has decreased as a percentage of GDP, agricultural production in the US continues to expand – it has never declined long term. Short term production declines have often been at the hands of various government manipulations of production to control export markets, particularly grain exports.

    In contrast, as industrial output continues to decline as a % of GDP, actual industrial output continues to decline. For some years the growth in dependence on financial services sector has been of great concern even to colleagues in that industry. While some of these “products” are useful and even necessary, it seems a great many of them are not (or at the least have been substantially overvalued by the market – until recently!). That would seem to make this an unstable sector and perhaps a dangerous basis for an economy. That’s as much a question as an observation.

    USW, great website. Keep it up.

  3. You touched on the reason I believe is the issue with manufacturing…unions. There was a time and place when unions were absolutely needed. Working conditions were poor and the companies had little or no concern for the workers. Unionizing made great strides in correcting that issue, but they have now gone overboard. The wage and benefit demands have made companies struggle to make a profit…and when they can’t and there are overseas opportunities, they move. This is not the only reason, but it is a major contributor.

    I have worked in the manufacturing field…for about 9 years when I was younger. The facility I worked at employed over 7800 hourly workers at the height of production. That building which covers around 17 acres of ground, now stands empty employing virtually nobody. The bulk of the manufacturing that was performed there went overseas, partly due to the fact that labor costs in the USA had grown to levels which made the company profit line dip…the union was directly responsible for the labor costs.

  4. Returning to manufacturing IS the right way to go. A country that is self-reliant, one that can maintain its daily needs using resources & the ingenuity of its own people will be successful & no longer beholden to any other country. Self-reliance will need to come from a return to the past – mostly of our principles, morals & commitment to success…but also family, farming, energy etc. Then there are the children. I think we have done a disservice to this country by not allowing our children to discover & explore on their own. We schedule their every minute, we don’t allow them the opportunities we had to go outside on a Saturday morning & scour the woods (not without a GPS on their cell phone), lift rocks to discover salamanders (use the internet you won’t get dirty), build tree forts (dad no longer has tools), make a go-cart (not without a helmet!)… Kids no longer tinker, or have the opportunity to create situations and then solve the problems that arise. Why think on your own when you can just google the answer – and no need to remember what you found out, because you can just google it again when you need to.

  5. If president hussein, would stop thanking himself in his speeches, stop berating special olympic children on national t.v. and stop disrespecting and stiffing the president of England on Rose garden and joint press conferences and stiffing him with a gift. maybe he wouold see that his strong union position is bad for America, say no to card check is the first step in bringing back our industrial manufacturing base, but they just dont get it

  6. I have been working on a long letter to my elected officials in response to the upcoming debate about “Cap and Trade”. I beleive you have made some great points that can be used in my efforts to kill the “Cap and Trade” crap. Let me explain, our industrial infrastructure has been declining for years and years, and if “Cap and Trade” were enacted, it would basically kill the remaining U.S. industrial businesses, as they could not afford to remain in business here. The big problem with this ties directly to our national security. Without a strong industrial infrastructure, the U.S. could not sustain a long term conflict with countries like China and Russia, who have maintained their infrastructure systems, by “NOT” signing on with the Kyoto protocal. Japan has suffered greatly for that mistake, and are concerned about their national security, and their ability to defend themselves long term. The knowledge economy, in my opinion is also a threat to our nations security, because the knowledge sectors can’t build the defense equipment needed to sustain a long term conflict with another superpower. Hopefully, everyone understands that China and Russia have long waited for an opportunity at world domination, and if they act in unison, we don’t have the industrial infrastructure as of now to hold out long term. If “cap and Trade” gets passed, we are in big trouble, and they know it. In conclusion, it’s the industrial economy that gets my vote!

  7. cap and trade would be the deathknoll of the remaining industry here in America…why are they pushing it so hard. hmmm

    • Illinois, Michigan, Ohio and several of our industrial states get most of their power from coal. The cap & tax bill will tax them and redistribute their money to the rest of the country, to those people not paying in income tax. I agree it would be the final blow to Chrysler, GM & Ford.
      And when those industries fail, so to will the power companies, which the government will then bail out for a ownership percentage. I am sure executive bonuses will be prohibited. Some people might want to think about re-locating.

  8. okay i am done being negative and having a pity party here at my house, the obama administration doesnt want us crumbling to our knees and begging russia and china to incorporate us into a global communist union. they are trying what they think is best, they have things under control, they are implementing ways to get us out of this deflationary depression,they are creating jobs,yeah they are occupying their time with the census and going to bulls games , going on espn, going on more date nights in two months than most in a yr,going on late night shows etc etc, but this is to charge their batteries so they can someday get a team around geitner and work on Americas problems.. its all good, i just need to relax and go bowling or something

  9. Andrew Gabriel says:

    Our movement as a country from being Industrial base to “knowledge” base in my humble opinion has made us vulnerable. Eventhough an Indutrial economies evolution seems to be into a “knowledge” base economy, if we continue this trend all we will become is the “middle man”. What will happen when the world decides to cut out the middle man? Without a real infrastructue based on manufacturing and actually building something tangible where we can control, what do we have? We are at the will and mercy of the rest of the world. Our military might and financial prowess is no longer alone and it is under constant threat daily. America is no longer the worlds “guiding star”, we have become the crippled giant. The world is watching for us to fall slightly more so they can tear us apart piece by piece.
    A knowledge base economy would be perfect in a perfectly “peaceful” planet. Realistically America needs to boost its industrial economy, not because it is better for our economy, but our survival as a nation and as a people depend on it.

  10. On the loss of the manufacturing industry, I did a piece on the reasons, and the reversal of those things will be the only way to get industry back.

    The thing is, we didn’t become powerful just because our economy was based on manufacturing. We have been losing manufacturing for a long time and not seeing our economy fail as quickly as it would had the real basis of our economic strength not remained, at least for a while. Our economy became powerful because of innovation. THAT is what we have lost.

    I watched Circuit City (the fate of which was close to home, it being based in my city) slowly self-destruct over about a decade. The reason it failed? It stopped innovating. It began copying its competitors, thinking that they were doing something right. Well, maybe the competition was doing something right, but you don’t beat them by following their footsteps. You can’t win a race and play follow the leader at the same time. You have to be the leader.

    America cannot just try to make their environment friendly again to industry, we can’t just try to copy China and Japan and hope to get our mojo back. Our mojo is being the first to do something. To take the risk, to initiate the idea and implementation. We will have a recovery if we focus on a new field. Communication or energy or manufacturing of something no one else is making. It is the creative side of us that will get us back on top. The entrepreneurial spirit and risk taking attitude.

    The problem is, we spend too much time being scared and teaching fear to take risks. We worry about health care when we are healthy and theft when we are around those we trust. We pine for the days when we were taken care of by our mommies and daddies and didn’t have to think. We have lousy education that indoctrinates and imparts “knowledge” but doesn’t teach us to think. We make it difficult for entrepreneurs and innovators, we regulate new products so that it takes months for them to be “approved” for the market. Our government acts like a caring guardian and squashes our ideas, focusing instead on making us feel safe and cared for.

    To that end, we need to foster innovation. Tax breaks for R & D and entrepreneurial efforts(if you are still going to use taxes to manipulate the economy), education that focuses on thought rather than memorization, removal of restrictions on new products so that they can come to market sooner and at less cost. When an inventor develops something, he can’t wait for months for approval to sell it, he needs to recoup his costs as soon as possible. Also, remove restrictions on exports, open the ports up to ship overseas. Make a world that encourages thinking and innovation, not copying and coddling. Quit rewriting history, quit focusing on the evils of the past and start talking about what really made the country great. Start talking about the courage of the innovators and explorers and show that, despite those people’s flaws, those aspects of them were good and necessary and the root of our success.

    • I agree with this statement. Also US weapon says he doesn’t want to bring into it things like taxes and Govt control, but I find I have a very hard time doing that. The problem is that lack of those things created an environment where innovation and risk taking were less risky. Global competition and paying the lowest price possible globally is the best thing that could happen to America. If the steel industry goes out of business because somebody can produce it cheaper (which only can happen in an environment of inordinate controls, becaue we have the best technology) then we should buy it cheaper and move onto something we can do cheaper or better. As for the threat of not being able to sustain our defenses during a prolonged conflict. If we’re not producing steel we should stock pile it and make sure our sources are many and varied, thus lessening any risk of not being able to obtain it. To tell the truth though if there were a market for steel that was no longer being met because our enemies now held the means of production, it would take US entreprenuers very little time to get factories up and running. Money is a powerfully motivating force. To expect our government to maintain factories or enforce the maintenance of factories is only to suggest they take control of more of our freedom and our money, not a good move.

      It is absolutely essential for a strong economy that the market be allowed to tell people what goods or services to produce or provide. You cannot go wrong that way. Central control is always wrong and inefficient. So the only possible solution given our current state is to lobby for deregulation. No other solution has EVER worked for any economy in any county on earth.

      • USWeapon says:

        Michelle,

        It isn’t that I don’t want to bring them in, I just don’t want to get bogged down on those items early in the discussion. There will be ample time for arguing about whether government should be involved in business and the tax implications that we see these days and all of that. Here I just want to focus on a single question:

        Is the US better off furthering this knowledge economy or should we move to increase manufacturing in America? It isn’t an either/or question. Perhaps we need to follow the knowledge path but still increase some manufacturing or eliminate manufacturing in America all the way. That is the issue I wanted to discuss. So not involving the other things is only to allow us to develop the best way forward.

        I see it in this analogy: Me, BF, G.A., and Jon are in Michigan. Winter is coming and with it the cold. What do we do? We have two choices, stay in Michigan or leave Michigan for Florida (industrial economy or knowledge economy). Whichever decision we make will then open up many more decisions. If we decide to leave do we fly, drive or walk? If we stay do we build a better insulated house or get a bigger fireplace? Before we start making these decisions we first have to decide whether we are staying or leaving.

        Before we start talking about all the other things, we have to decide whether it is better to have an industrial economy or a knowledge economy or a hybrid of the two. THEN we can talk about government getting the eff out of the way and all the other things. Does that make sense as to why I tried to keep the other aspects out of just this part of the discussion?

        And beyond that can you see that those four people having to come to a consensus about a decision means all four of us would freeze to death while we stood outside arguing our positions, LOL.

  11. esomhillholler says:

    I really am not an expert on what economic system would work best for America. BUT. It doesn’t take much of a brain to figure out that the one we have is faltering worse every day. If we switched back to an industrial economy, we sure as hell are going have to do something about the Unions. I don’t belittle Union employees, just their all-powerful unions who are so busy destroying what little industry we have left with their inflexible wage policies and ridiculous employee rights systems. Card Check would be an absolute disaster for industry. Cap and Trade would be an even bigger disaster. Makes you wonder about the Administrations motives, don’t it? It has been said 100’s of times on this blog but i’m a gonna say it again. Socialism has never worked in the history of the world and IT AIN’T GONNA WORK NOW! The Socialist Democratic Workers Party needs to get a clue before it’s too late for them. (warning)

  12. Calf Roper says:

    I’m going to sound a little like BF here, but okay. The problem is the notion that “we can fix our economy”. No one in the world is smart enough to even begin to understand the complexity of our economy so what makes you think that any one entity could begin to know how to “fix” it.

    The only way to “fix” it is to leave it the hell alone. Free markets work people because the free market is simply a general term for motivated individuals to interact with one another for their own personal interests.

    The problem to date has been our attempts – and I say “our” because this has been the fault of Republicans, Liberals, Independents, etc., etc. – to try to “control” the economy. The very first farm subsidy that came out ruined the agricultural industry. Farmers are now government employees because every decision they make is to try to maximize the government payments to them, which in turn forces them to comply with government mandates.

    To so-call “fix” our economy, the government needs to get their damned hands off of it. Currently, the government manages exports, manages imports, manages agricultural production, manages industrial output, manages industrial productivity levels, regulates trade both internationally and domestically, regulates emissions, taxes earnings, subsidizes certain sectors, etc., etc., etc.

    Just imagine what we could do as free people without all of this government management. People that disagree with me will say that government has to be involved to maximize the effectiveness of our nation’s economy for the good of the whole. What a crock of bull! There is no possible way that an economy can be efficiently managed. It simply has to be left alone. Get rid of regulation, get rid of subsidies for certain sectors, quit managing imports and exports for political purposes, and get rid of taxing people for being successful. The income tax is the single most communistic-type tax system I can think of. Tax the individual for doing well. That was a great idea!

    So US Weapon, I have to disagree with you a little here. While I understand your premise for discussing the path our economy should or should not be on, I disagree with you in that simply discussing the path of the economy contributes to trying to control it in a small way. Just think how much better off we would be if the news media would not say one word about the economy for a period of time. People could possibly stop thinking about the “economy” and simply start living their lives which would jump start the “economy” immediately. Because that is all the economy is, individuals motivated to interact with other individuals for personal gain.

  13. Black Flag says:

    Well, if I ever retire from this blog, Calf Roper is will fill my shoes rather well!

    Additionally, let me introduce DIKW concept.

    Data, Information, Knowledge, Wisdom.

    – Data: think about the ‘alphabet’. Very important, but practically useless.

    A higher order:
    – Information: think ‘words’. Obviously more tangible ‘stuff’ here – but, still practically useless.

    Even higher order:
    – Knowledge: think ‘books’. AH! Now we are cooking with wood – here usefulness takes an order of magnitude leap.

    But the highest order:
    – Wisdom: application of knowledge. I can read a book, and you can read a book. I will make a million from applying what I read, whereas you just put the book back into the shelf.

    If we rate the ‘power’ of each level –
    Data:1
    Information:3
    Knowledge:30
    Wisdom: 300,000

    I consulted for an junior oil company and during my tenure there, they made it big….not because of oil, but because of wisdom. Essentially nothing changed in the company, except how they dealt with their knowledge.

    A mid-level accountant was dealing with all the oil contracts and leases and royalty payments. They are a mishmash of if-then-else “if you pump this much oil, you pay a lease of x, and royalty of y, but pump that much oil, you pay a lease x-z, a royalty of 2y/x but if you pump 2 times that, you pay a lease of 1/2x and a royalty of 2y+x/x2….”

    They had thousands of these lease, all different and equally confusing. This accountant figured if he could write a program that created a series of linear equations that maximized the return on each oil field, by minimizing the lease and royalties payments, and he figured he could save the company $10 million a year.

    It took him 150 hrs to write the program – about a month of after hour work.

    It saved the company….$150 million in the first year.

    And even more in the second, because the company completely changed its focus and started acquiring more small oil fields that were too trivial for the majors to manage (so they sold them off cheaply) – but yielded a very nice profit if you could manage the contracts.

    The accountant made $40,000/hour for his program in a bonus – about equal to his annual salary at that time – per hour working just after hours!

    That is the power of wisdom.

    The Western economies are moving up the DIKW scale too. The global economy is no different than a local economy – the division of labor is what allows the free market economy to be wealthy. Each entity is able to specialize – and with that, achieve optimum efficiency and effectiveness.

    I do not worry about my lack of ability to make bread. The breadmaker far out produces me a hundred-fold – and cheaper by a factor of 100. I can buy 100 loaves of bread for the same amount of time it takes me to make 1 (about an hour) ….by doing my specialization.

    The breadmaker could not do what I do – he would spend days trying to understand technology, and probably still not succeed – and miss making literally 1000’s of bread sales.

    This lesson applies globally. Let the manufacturing go – move up the scale – get into the “wisdom” business where the highest leverage exists.

    Yes, it does mean we will always have some level of unemployment as the sectors of the economy shift.

    To maximize the benefit, and minimize the pain – we should be teaching our children how to learn – so that they can equally transition themselves up the mobility chain.

    Watch this video – it will highlight a number of my points.

    Shift happens…

    There are two choices: accept and move with it or be run over by it.

    • BF,

      Not the answer that I was expecting from you, but then again maybe it was, lol. Thanks for your thoughts on this. As always, I enjoy being challenged to think on the subject from a different perspective. So I understand completely the value of wisdom as you lay it out. It makes complete sense to me and I don’t disagree with your premise. The question for me then, points back to my original question: Should we move away from manufacturing? It seems your answer is yes and I am good with that. Do you think it makes our economy in the US less stable? Do you think in the long run, we falter because we don’t do any manufacturing?

    • Black Flag says:

      No more than I falter by not making my own bread. Indeed, I am richer by buying my bread – and allowing me to pursue better activities (like playing Poker 😉 ) than making bread (badly).

      But what are the other implications (I think that is what you’re asking)?

      1) I better not make the bread maker my enemy.

      2) He better not make me his enemy.

      So, global trade entanglement. However, just like a local economy, there will many providers of the same thing at the same time.

      3) Governments will interfere with this process as much as possible – but futility. We see it all ready; by subsidizing dying businesses at the expense of new businesses. It slows the transition – that is unstoppable – and extends the difficulty of the transition.

      4) Will strain the education system. Today, the education system is organized into building human robots – however, the future requires people adept in re-learning – and this is not taught at all in school.

      • Flag,
        I think you are only looking at the higher end of our labor force. As you said, your bread maker could not learn or do your job well. There are a lot more ” bread makers” and the like in our work force and schools. Unless McDonald’s switches to total automation, we still need burger flippers. Our school system is a big part of the problem. First, they are require to “raise ” a fair percentage of their pupils (moma didn’t teach them how to wipe their butt). They are required to leave no child behind, which is doomed with the home environment many of these children are being raised. Only 40% of the graduates in my local school go on to college, 20% of them earn a degree. So 60 % of those students who did not drop out are looking for blue collar jobs. Many schools have phased out shop classes due to lack of interest.
        They are raise without a work ethic and with the expectation that someone will take care of them, that they have a right to be fed, clothed and given shelter.
        I can agree with your shift, but that cannot be a total replacement for manufacturing jobs lost. We need a work” base ” that is close to our populations skill level.

        • Black Flag says:

          I think that is using the consequences of a bad policies as an excuse to continue to hobble ourselves.

          True, the government is working to enfeeble our children. SO let’s fix that, and not demand ‘robotic’ jobs because our kids are feeble.

          There is no way and no how the American people will suffer the massive lowering of lifestyle to enable them to compete with industrial nations – where they see a rise in life style by becoming industrialized.

          We cannot win that exchange.

    • Wisdom, can be a save all, or a kill all. It seems that wisdom (or some variation of it) is what came up with all these complicated financial schemes that currently have our country in the mess that it is in. To try an at least answer the question at hand, the knowledge economy is the toilet bowl of curruption, because greed will overcome wisdom everyday if the wise are in a position to exploit the wisdom that they possess. While there is certainly some curruption in an industrial economy, it does not present the kinds of financial crisis that would (and did) occur in the knowledge economy, as far as the two economies are compared for this discussion.

      • Black Flag says:

        Fair point.

        Wisdom is leverage – massive leverage.

        As in a previous post about the economy, comparing Zimbabwe and the USA – their economic failure knocked them down to a “Data” level – economic barter – but they were essentially not much higher economically than that, so they are more adept at struggling as they’ve been struggling already.

        USA, however, will fall far worse when we fall to the Data level. Leverage up is leverage down. The bigger they are, the harder they fall.

        Of course, I wouldn’t have defined “wisdom” as a virtue of the Fed – but they believed they were wise (when they were not) and the effect of the leverage was the same.

        • I am to gather that you are in favor of the industrial economy, which has a less likelyhood of failure.

          • Black Flag says:

            No, I’m in favor of wisdom economy – because it is far more wealthy.

            We need to think better on what we call wise, though.

  14. Sticking my neck out here, as I am the guy that calculators were invented for 😉

    Had a conversation with my barber yesterday, his shop is about forty miles from where I live out here in the Mojave Desert. We were discussing the difference between his Ford and my Dodge, both pickups. What it all came down to was this; We both are old enough to remember the vehicles of the 1950’s which only lasted about three to four years – the end result of planned obsolescence, a practice that almost killed the American auto industry in the mid-1970’s. We both came to the conclusion of not knowing why a pickup that we bought eight or nine years ago for one amount (and is essentially unchanged) now costs almost three times as much. An example that we discussed was that this same model way back in 1960 cost three to four thousand dollars, now costs the purchaser almost sixty thousand dollars. Why? We both could not find the justification for such an enormous increase in such a short period of time.

    We both, along with some other customers in the shop, came to the conclusion that it was mainly the corrupt UAW demanding that these workers still get “boom” wages in a “bust” economy. That and OSHA. But I am getting away from the crux of your post. To get back on track here, we all decided that if we wanted our favorite vehicles to survive three things must happen; 1) Union wages in the auto industry must come down, 2) Manufacturing managers must start treating their employees like they would like to be treated if they were the employee, and 3) The Federal Government needs to let the free market economy run itself (in other words, quit rewarding bad businesses with taxpayer bailout money).

    Out here in the desert four wheel drive pickup trucks are a way of life, with fuel stations as far away as 40 to 60 miles and shopping for essentials almost farther. We all came to the conclusion that our old workhorses are going to have to last, because none of us can afford to replace them at today’s inflated prices. If we want to bring manufacturing back into the U.S., then we have to start with ourselves. We have to bite the bullet and tighten our belts and accept lower wages, more modern manufacturing techniques (automated assembly lines like the Japanese do), and put out a high quality product at a very reasonable price. We have to accept that sixty thousand dollars is just way too much money to pay for something that we are going to fill with horse manure, barbed wire, dirt and rocks and then traipse across forty miles of range land and back. Luxury cars are for the idle rich. Let them pay the big bucks, because that is what I would do if I won the Power Ball Lottery! I know . . . . . Dream on! 😉

    • Also emissions & fuel economy are a big part of increasing cost. To my knowledge all 2008 diesel trucks inject fuel into the exhaust to raise the temp. high enough to pass congresses required standards. Future models are supposed to filter the exhaust through a ” uric tank”. ( As in urine )

    • Ah, you touch on one of my favorite analogies. The 1987 cost of my first 2 head, wired remote VCR was $ 659.00. Today, I can get a better one with DVD player for less than $ 89.00 bucks. The cost of the 1970 Nova, was I believe $ 2,300. Today, maybe $ 19,000 for the equivalent. Why?

      The Government! As of this date, the government does not mandate fuel economy, emissions, air-bags (front, side, top), seat belts, third rear lights, anti-lock brakes etc. on VCR/DVD Players. If they did, we would be looking at $ 5,000 VCR/DVD machines.

      It’s not that the ideas for these items are so bad it’s that the way they have been mandated is ridiculous. My old WW 2 airplane mechanic father pointed out in 1966 that is the government wanted better emissions control and safety, they should establish a date by system. “You will improve emissions to X extent by Y number of years down the pike”. I believe his comment was, “It has to be revolutionary, not evolutionary”, Not bad for a guy who didn’t finish 10th grade eh?

  15. Wow, what a great column and responses again today. I have to agree with several of you that mentioned unions and the possibility of cap and trade as two deterents to us getting back to any substantial industrial growth. This administration has very strong stances on both of these.

    Calf, you probably said it best – Government get out of the way! Again, not with this administration.

    I do believe this could be one of the best starts for a successful platform for the change that we need desparately starting in 2010. And then not just campaign for it, but do it. Give the country back to the people and get out of our way.

    • Kathy,

      If it is the basis of a new platform, the first step is to get people to stop looking for the government to intervene and fix things. Too many people at this point are looking for the handout, and furthermore want to shed responsibility for anything, so they put it all on government. Getting government out of the way would be a great platform, the question is just how many people really don’t want government to get out of the way. I just don’t know the answer to that yet.

      • Education, education, education! I cannot believe how much I have learned (and have to learn) as I’ve stepped up my efforts in this area. I’ve also realized being a fringe player just won’t cut it and have stepped up my efforts to encourage others to get educated too. Thanks for your help in this area USW et al.

  16. Black Flag says:

    Another concept we need to roll into all of this is:

    Decrease of Marginal Utility

    I’m sure everyone has asked themselves – why does a company discount selling 10 of an item over selling one at a time?

    The first glass of water to a thirsty man is highly desired – and very valuable. But, the next glass, slightly less so, and so on – until the 10th glass is near worthless to him – his thirst is gone.

    Each increment of a good has less value – the “margin” of its “utility” – that is, how much more effective each increment – of the utility decreases.

    1 item = 100%
    2 item = 90% more utility, thus 2 items offers on 1.9 times the benefit
    3 items = 80%, thus 3 items offers only 2.7 times the benefit.

    A company producing this items understands that to sell you this item 3 times over, it cannot charge 3x the one item price – because you are not getting 3x the utility nor value. Therefore, they start to discount the price for every item you purchase over the margin of that utility of that item.

    So, the company would sell you 3 items at a discount of 10%. Buy 1 for $10, but buy 3 for $27.

    This works for entire industries – how much is the 2nd (or 3rd) car in your family worth? Not as much as the first car – every car after that is a luxury above mere transportation.

    This Marginal Utility is a key driver to why prices fall on goods as more ability to make the goods increase. Computers is a good example – they become more powerful and cheaper as we move to the future – or they couldn’t sell them. It has to be cheaper and better for you to buy a new computer because, essentially, the one you have now does the job pretty much well enough.

    So we want specialization and mass production – it increases the Marginal Utility of that good – and makes it cheaper to buy for everyone.

    • Hello BF;

      Your explanation can be boiled down to this = The more a product is sold, the less expensive it becomes. If that is the case, then why did the pickup truck I bought in FY2000 cost $30,000.00 and that same model truck today costs over $60,000.00? Nothing has changed in that model truck, nothing but the price!

      • Because the dollar buys less. Look at the price of bread in 2000 versus today. There is a far greater inflation rate than is being admitted by the government. Also, I am betting there is stuff on that truck that is different. More money spent on safety and emmissions, different fuel economy, and features you haven’t noticed because you don’t care about them.

      • Black Flag says:

        That is the challenge we have with our currency=money. We have very poor ability to see the relative price of products over time.

        In 1860, $300 bought a nice home.

        Today it is a couple of tickets to a sporting event.

        Jon is right about the other “stuff” too.

        For pollution “control”, there is about 1/10th oz. of platinum in every catalytic converter – @ $1,000 an oz…. so a hundred bucks right there, and so on….

  17. Keith Jackson says:

    I question the need to try and somehow “force” the economy to remain industrial. Our manufacturing is failing because we do not do it well, and others can provide better value. The specialization example up there is perfect. Diversify your suppliers, sure, but outsourced manufacturing is actually a good thing, since it allows us to specialize in those things that only we can do and makes the end products cheaper for consumers.

    The original post feels like something I could imaging someone arguing back during the Industrial Revolution, lamenting the move away from an agricultural economy, claiming that the government needed to step in to save the farmers so that we’d always be able to feed ourselves (look how well that turned out!) and just abandon this whole industrial fad.

    I’ve agreed with most of what you’ve posted in the past but this one is a bit backwards-looking.

    • USWeapon says:

      Keith,

      I disagree. I don’t think it is backwards looking at all. I am watching the collapse of the US economy and attempting to find a cause or reason as a means for understanding what the best path forward in the future should be. And I am not proposing that the industrial economy is the way to go or everything fails. What I am doing is asking whether the move away from the production of tangible goods is a smart move for the world’s largest economy. I don’t know the answer to that. Some folks seem to think it is bad while others think it is good. But we are all learning some different thought patterns, and isn’t that the point?

      More important, I have in NO WAY suggested that the government should step in and bail out the manufacturing industry in any way. In fact, I am always very clear that I am a believer in the free market, not government intervention. I made it very clear that I wanted this discussion to stay away from the arguments of what government should or should not do in terms of bailing out or taxes. The question is merely whether it is better to have an industrial economy, which has been proven strong in the past, or a knowledge economy, which seems to have the potential for success that is greater than the industrial economy, but may also be a far more precarious economy, as this economic situation seems to imply.

      • For USW & BF;

        Our country has some 300 Million people, our biggest rival has a population numbering in the BILLIONS – The Peoples Republic of China.

        In the year 2000 there were so many bicycles on China’s roads that you couldn’t get a car on them. Today, it is just the opposite.

        According to NBC, which did a special about China and its growing economy after the Olympics, China is emerging into the largest and most powerful economy that mankind has ever seen.

        Does anyone believe that it is inevitable that the Chinese economy will eventually rule the economic world? I mean THREE BILLION consumers have to mean something . . . Right?

    • Jackson,
      Does this not say more about our workers than the American ability? I can grow corn as good as any other farmer, I can make jeans or funiture as good as any other manufacture so to say that a product is made cheaper does it mean that another country should hold us hostage for all our food? How about our clothes should we be held hostage for clothing? If you mean out sourcing manufacturing for unnecessary items that probably would not hurt anything but being dependent on another country for our necessary items is very foolish. I think we have seen the out come of other countries holding us hostage over oil.
      My guess is I am way to independent…..I have no desire to be held hostage by my government or any one elses. Who is going to dig the ditches when everyone becomes educated into higher wisdom? Who is going to serve your food? Who is going to log the trees? Drive the trucks? A 100% techno America would never work at least not for long.
      Our government needs to get out of the way and we will show them what Americans are truly made of!

  18. NYC Fiscal Conservative says:

    How quickly so many of these posts have devolved into predictable partisan comments. As posted previously, US agriculture has only expanded for 232 years. Other sectors have arisen and grown larger.

    As the son of a Kansas farmer still involved in the biz from afar, I can assure you that the best thing that could happen to agriculture is to shut down all gov’t programs and let a truly free market dictate prices (sorry to the New England dairy farmers living off subsidies). And, keep the gov’t out of export markets. The popular sentiment than all US farmers live off gov’t handouts is rubbish.

    USW’s original premise/question was an industrial vs service sector economy. Many above call for a return to an industrial economy yet are they willing to actually endure the two-three decade hardship this would create? They want that washing machine as cheap as they can get it. A return to an industrial economy requires some very stiff steps: a/ close the borders to shut off underpriced labor (a topic for another day); b/ questionable tariff’s on all imported industrial products (unless the foreign brand costs more, the average US consumer will buy the cheaper foreign brand); c/ the majority of union contracts will have to be broken.

    With the current Congress, step c/ above will place the entire burden of paying off union employees and carrying their pensions on us, the tax payer. It is likely to wind up on our dime anyway. No one has yet mentioned the millions of private company pensioners shifted to the public system in the last decade. Yes, you are paying both their private pensions and Social Security. You may expect the same for all adjustments to UAW/Detroit auto makers when all is said and done. The not so back door deals are already being made.

    • USWeapon says:

      NYC,

      Good thoughts and I think you are probably accurate in the ideas for what might have to happen. I just didn’t want to get into all the other stuff just yet. I really just wanted to figure out whether people thought one direction was better than the other. I don’t want any hardships, but then again I think that there are hardships coming whether we like it or not. Given the choice of a depression with no path forward and a depression with the wheels already in motion to make things better, I would take the latter.

      • USWeapon says:

        And I would further say that if a true depression ever hits this country and people no longer have much to lose, they will far more likely to engage in active revolt. If that happens and we are all financially screwed anyway, I will LEAD the revolution to remove all government involvement and get to a truly free market.

  19. USW, I think you have hit the nail on the head. I have said for years that the US is probably the ony nation in the world that could be 100% self sufficient. Yes the union drove manufacturing out of the US market place by being extreme in their demands. The steel and car industries are prime examples of this. But can we go back to being an industrialized nation? I think we will have to. The readon being is that America is very rapidly falling behind in the techno fields and once again we have priced our selves right out of jobs. The thing is….is American willing to do manual labor? Are we will to use both our brains and brawn to make it work? Americans have become a very lazy society as a whole. Lots of people would rather strave or let the government support than to dig a ditch, drive a tractor or stand around using a machine all day. We hire shovel hands at 12 per hour and you would be suprised how many of them think the shovel is for proping up on. They have no idea even how to use one…..it is crazy.
    I believe in order for our economy to grow and continue to grow that we will have to go back to the times when we were basically self sufficient. Meaning we do our own agri, manufacturing, techno and service spectors…..we really need to do the full range instead of just part because where are we going to go when our techno and service jobs go down the drain?

    • I Like your approach to what America “should” be. Your words ring true that without industry, we are done as a superpower. Good post!

  20. It is a privilege to be among this audience! I suppose when one asks what appears to be a simple question, and then everyone lends a hand or thought predicated upon their unique knowledge, experience, and wisdom. As for me, I believe that many of you folks are far more capable to be in Washington D.C. than the ‘alleged elected officials’ that are there now. Kudos.

    Again an interesting question based on an interesting premise. However, until we are able to see ourselves for who and what we really are then debating the issue is really a moot point.

    I refer to this notion as the “human condition.” Just how much can you trust anyone? How about this one…how much can you trust yourself? Theoretical here: Say your wife, mother, daughter, son, family member or best friend came up to you and said: “Hey USW, could you hold on to this $5,000,000.00 for me? I definitely don’t trust the banks around here; I sure don’t trust the investment advisors; in fact, I don’t really trust anyone but you. I am going on the television show ‘Survivor’ and I’ll be gone for somewhere between 6 weeks and 2 months.”

    All I ask is that you don’t spend the money. That’s all. A year goes by and I haven’t returned; 5 years goes by and even my family has filed for “death status” to collect on my life insurance; 10 years goes by and my relatives have new cars, homes, clothes, and all the toys to get by on.

    Is there anyone here reading this right now that could say that after 10 years of not seeing me or hearing from me that the wouldn’t have spent at least the interest gained on the five million dollars?

    A short theoretical story that went long, but I think you get my picture. Until we address the greed, (and no! it’s not good!) lying, stealing, get rich quick schemes, “The American Dream” complex, and literally yearning after wealth…unless we are able to peruse the human condition, including ourselves, then nothing will ever clean it up.

    Just one last little issue: Competition; the notion of competition involved in anything from grades to making money is perhaps the biggest deterrent to any quasi-global economy. Cheers!

    • Sure, give me the money 🙂

      In most states after seven years absence and all efforts to find you are exhausted, a person is legally declared dead. Since you gave me the cash, your family is out.

      Possession is, after all, nine tenths of the law 😉

    • Black Flag says:

      However, there are companies that would – indefinitely, honor your wish – even beyond your life time.

      But a catch … no one would do this service for you for free… and this is where I think your analogy missed.

      If you gave me your cash, and I said “Sure, but for that service, I’m going to charge you 1.5% of the principle per year…” you bet I wouldn’t touch that cash even if the devil himself demanded it.

      There are trust companies that have held cash for individuals, waiting for the rightful heir to claim it, for a century or longer sitting in their account – without that trust company “spending” the cash as if it was theirs (minus the fee).

      And you know what? They will hold on to that cash “forever” – until the trust company is liquidated, or the fees exhaust the account….because that is what “TRUST” means…if they violated that for this case, do you think I would put my money with them??? Not on your life!

  21. I am a 65 year old woman. I was raised by parents who lived through the great depression and explosive economic booms that followed. They both were strong, intelligent, generous and loving people. They believed there was nothing more important for their children than to be instilled with love, education, common sense and motivation to explore everything that interested them.

    I have had a very full and exciting life. I have traveled the world and I have witnessed much. If I had to bring all my life lessons about societies down to simple terms I would have to say that the human race thrives on curiosity, love and need to live among one another.

    Curiosity is a basic thread in the human spirit. It gives us the motivation to want to learn. The problem with it is that it can be stymied. When I was only about 2 years old I was fascinated by honey bees. I would catch them with my bare hands, much to my mother’s horror, which didn’t deter me. What did deter me was the last time I picked one up – it stung me. From that point on I was angry at honey bees and my curiosity was stymied.

    Despite the example of how curiosity can be stymied, I truly believe that it is the innate motivator of humans. Curiosity has been the seed of all great inventions throughout the world. If we didn’t have curiosity, we wouldn’t survive.

    I believe the problems we have now, throughout our country and the world is that we have very few good motivators to intice us to explore curiosity. All humans can be motivated. It is just a matter of whether they are motivated in directions that bring positive outcomes in their lives and others. When they are motivated to produce great things – they do. When they are motivated to be lazy – they are.

    Our country came to be because people were motivated to find ways to deal with their basic needs of freedom from repression and hunger. Because they needed, their motivations were very high. They never expected and easy outcome. When they boarded those ships to sail for months in such hardship they, had no idea what was to come. They just knew that they believed something better “might” await them and that was motivation enough!

    The founders of our country had no idea the ups and downs that would follow their steps to the “new world”. The beginning of our formalized government came from people who knew what it was like to be repressed by governments.

    As timed has passed, people have grown, societies have advanced and great things have been invented. But, over that time governments have also grown. Because the U. S. has become such a great empire of motivations, we have encouraged and produced the most innovative changes in the world since the beginning of mankind. One of our greatest motivators in the last few centuries has been to make life “easier”. We have done this and along with our inventions and growth we have accumulated wealth far exceeding any country in the world. We have made life “easier” for ourselves and wealth has become our “need”. Because it is a need now – it has become a demand and many think a “right”. Our needs for “easy and wealth” have made us lazy. We now, like children, look to government to provide our needs and wants. We want government to “make” businesses hire us, give us good wages, protect us with insurance and provide into our retirement until death. As a nation we believe that is the “right” of the employee. That very thinking keeps us from “inventing” new things.

    Therefore, the question is not whether we should be a nation who produces but whether we are even capable anymore of doing that very thing. I am neither an optimist or a pessimist. I am much more a pragmatist. I believe we are our own destiny and we will thrive or not depending on how motivated we are to keep our freedoms and how willing we are to struggle for our beliefs. Our founding fathers had strong beliefs. They wrote them down in the Bill of Rights and the Constitution. The basis was “life, liberty and the “PURSUIT” of happiness. “PURSUIT” is the key word. If, as individuals, we are not willing to go after what we want in this life but look to others to be motivated enough to “give” us what we want, the question of what we should become is moot.

  22. Let’s see, in the late ’80’s, there was a unionized I believe “Manhattan” shirt manufacturing company out here by me in New Jersey. They moved offshore at the end of the decade. I used to pay $ 16.99 for a unionized shirt made in the USA. After the move I paid $ 16.99.

    Farberware employed well over 700 people in it’s Bronx plant in the early ’90’s. The company was bought and all manufacturing equipment was shipped to China. The gauge and quality of the stainless steel was lowered and the new prices, 10-15% higher than before. Also in the early ’90’s Swingline Staplers went from Long Island City NY to Mexico. Does anyone remember the price getting lower? Ten years later, the equipment was moved from Mexico to China. Still didn’t see the price come down.

    Folks, there are many reasons. Some of you have touched on the Unions. Right but. There are times and places where unions are important (disclaimer: I am the grandson of two hard coal miners who died at 42 and 55 respectively from black lung disease). On the other hand I remember my uncle, another miner who told me where he would have stood to shoot John L. Lewis had he been able, after the bastard sold them out. When the Japanese started the quaint custom of dumping their cars, electronics and motorcycles on us in the 1960’s we went for them in a big way, why? because they were good quality and cheap! In retrospect it was part of the Japanese plan. The quality is still good but so are American manufactured goods (Disclaimer: I and my Dad before me are Chrysler guys) but they sure as hell aren’t cheap anymore. Could that have been part of the plan, after you eliminate the competition? .

    I have a real problem with people who produce nothing tangible and make lot’s of money throwing other Americans out of work. All the above companies I mentioned were bought to be broken up and sold. Neither the welfare of the worker nor of the consumer was ever considered. The return to the investor and the ancillary profit to the the arbitrage guys was all that counted. Now, we are seeing that these profits were unsustainable. This was obvious to anybody who was not lost in the greed.

    Go South of Bethlehem PA. There are five miles worth of abandoned steelworks. Anybody believe that it is cheaper to import steel from across the ocean? Think about what is involved in the manufacturing process, think about the fact that most imported steel is composed of scrap we have shipped across the ocean. Think of how much energy costs here and how cheap it is there. Thy don’t care about pollution after all, only market share.

    I leave you with a final statistic I garnered from “Army Times” and perhaps appropriate to USW and Worcester Mass. 75% of the boots on the feet of American soldiers are foreign made. Not the “as issue” variety but the “choice” variety. In a big run up to a larger military in a war scenario, it’s going to be 1861 all over again.

  23. Sorry I missed this discussion this week. I have little time right now so I offer this one little snipit.

    IT IS NOT THE UNIONS. IT IS NOT CORPORATIONS. IT IS NOT THE GOV’T.

    IT IS US!!!!!

    One little example that I am very familiar with. The Canadian lumber company’s share of the US market has more than doubled since Clinton took office. The US timber industry for years claimed unfair trade practices due to differences in the way the Canadians and US price their stumpage (that is the standing tree). Who was right isn’t the point here. The point is this:

    The US owned railroads were shipping Canadian lumber at lower prices than they charged US lumber companies, because they use the US market to recover fixed costs. The Canadians were only charged for variable costs.

    The largest and loudest lobbyists arguing against tariffs or any reduction in Canadian lumber imports was……….drum role please…….the US Home Manufacturers and Real Estate Brokers. Seems home builders and home owners wanted the cheaper products to help keep costs down and profits up.

    To the point of the post: We still have and will continue to have a significant manufacturing sector of our economy. We may not make steel but we make other goods. Knowledge is not an economy, it is the key to improving productivity, which is the key to expanded wealth. BF’s point put a little differently.

    One point made here could show us the future. Manufacturing may actually be decentralized, ie. done at home. There are technologies being developed today that could allow this to happen in ways that would make the “plant” equal to the dinosaurs. That would be where the “knowledge” meets the “manufacturing” if you will. Why do we need to make steel when steel could be obsolete in 20 years?

    Hasta la Vista
    JAC

  24. Any industry that does not produce a sellable product does not contribute to the national wealth.
    Industries like insurance, banking, etc. just redistrubute the money. Software companies, for example, are not industrial but export their producs, thus you can say they are a good replacement for labor intensive industries, where we can’t compete with offshore low wages.

    • USWeapon says:

      BumaWalt,

      I don’t know that it is fair to say they don’t contribute to the national wealth. They do help to fund, finance, and make possible a lot of the manufacturing that happens in the US. I think this is the first time I have seen you post. Welcome to the site!

  25. knowledge based = good

    bullshit based = bad

    the problem many of you will have with knowledge-based is that in order to stop poisoning people with the products of research (science, marketing, etc.), it needs to be public, as in yep…tax funded.

    here me out here. we have industrialized knowledge, and not in a good way.

    lets like science. youre basic sciences…chemistry, biology, physics…. the rub is that the free-market hires them to do research, but warps its findings drastically, or ignores them. so if you’re a scientist, not producing a landfill-bound, plastic piece of crap, you will probably end up contributing the sale of something even worse.

    and then if the government hires you, you’ll find yourself not doing any real research at all with all the constraints and politics.

    And before you grab your wallets and hide any tax-ables in the name of freedom….

    This research is important. It helps us make CHOICES. Informed ones. Choices that could drive a free market.

    Example- agriculture. You don’t want to be forced to not use potential poisons? I don’t want to be forced to sign over a country’s (or several) food source to a single company. Then again, I couldn’t trust the government to help stop that either…

  26. Peter in Indianapolis says:

    This country began to die a long time ago, when the steel industry started shutting down American facilities back in the 1970s. It has just taken some of us that long to realize what is going on. America has been a great country because of our ability to produce “things”. Now our ability to produce things has been severely curtailed. Our televisions, our computers, our cars (even if they are “American Made”) our appliances, our clothing, virtually EVERYTHING that we depend on for our every day lives is now imported to this country from somewhere else.

    You would think that the large labor unions would be interested in finding ways to bring manufacturing and jobs back to this country, but sadly, the leaders of the unions are in bed with the current Demosocialist government and the environmentalists, and their only interested in destroying capitalism, not in saving it.

    How many working-class Americans have been duped by their own unions into supporting the demise of their way of life, and how long will this continue?

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