I think the grocery store analogy is true on a micro level, but glosses over important differences when this is happening on a national scale which Buffet does a good job of explaining in his thriftville vs. squanderville analogy. https://fortune.com/2016/04/29/warren-buffett-foreign-trade/
Also in terms of the Economy being strong, I think it definitely has been for certain parts of the economy. But I think it's hard to argue that the average middle class person is better off today than they were when I was a kid (I'm 46). Back then the average person in my small town could own a house and a car and live a decent life working at the steel mill. Main street was vibrant with family owned stores where we worked after school and summers. My parents were doing better than their parents and I was optimistic that I would do better than mine. That's all gone now in my town, and I think this has played out in small towns across the country. I think this is what people in big cities miss, it's been great there so what is everyone complaining about?
So while I agree that the methods we are currently using to rectify these issues make me nervous, I disagree that the premise for the tradewar is bassackwards.
Thanks, Dave! Very much agree with you on the middle class. It's a huge issue, and we need to address it. But a global trade war isn't the way to do it. (I don't even think "manufacturing" is the solution. I think it's for huge global corporations to share more of the wealth they create with the people who create it -- their employees.)
Thanks for the reply. I think opening up trade is a big reason why US Corporations aren't sharing more of the wealth they create with US employees. Once we opened up, their supply of workers increased dramatically, and they did the rational thing, offshore. On a human basis this was very positive for the world. Opening the US up basically lifted the rest of the world out of poverty which is a great thing. The problem is it came at the expense of the American worker. Free trade from our side lifted them out of poverty, and we got super walmart and a pretty closed market that we can't sell much of our output into in return. At the same time we built up what is now seen by most as our greatest adversary that we are now reliant on for mission critical supplies. I don't have a strong opinion on what the solution is to that, and definitely see the potential downsides of current tactics. I'm only arguing that I think saying that net net we haven't been the loser over the last 30 years is wrong. But appreciate the discourse either way. On another note since you are experimenting with AI I think this would be a great example where you have a "just the facts" AI chime in as a neutral 3rd party and give it's take. I think this may be a way that we can bring back the civil discourse that we lost with the internet.
Agreed on global trade resulting in manufacturing moving offshore. But the real issue is pay, not manufacturing vs. service. Manufacturing jobs once paid poorly, too. Then manufacturers decided to pay living pages and/or were forced to by unions. We need major retail and other "low-skill" jobs to do the same. There's no law of capitalism that says companies have to pay employees as little as possible.
Yea I agree that the main issue is pay. If we can get back to a place where the average person can buy a decent house, raise a family, and have a decent life without killing themselves we'd be in a great spot and I don't think anyone would care if those well paying jobs were manufacturing or not. I'm less sure on how to get back to that place. I am not arguing that tariffs are the correct answer. I do believe however that if we are not going to let supply and demand set the price of wages, then we are talking about intervening in the free market. Tariffs are one way to do that, the way that unions are handled in the US with state backing is another, regulations are another. Arguing for an intervention of any type is in my opinion a concession that trade (in this case wages for work) is not always "win-win" by default.
I disagree that is been great for people in big cities. but the trade deficit didnt result in those jobs moving away. and if you were more protective of trade you would handicap economic growth.
even bringing back the steel mill now would still be at a lower wage. trying to protect trade like you want us trying to put the genie back in the bottle dude
Thanks! Agree that bringing back more steel mills isn't the best way to address the decline of the middle class. I think we should develop a broad, long-term industrial policy that includes investing in strategically important future industries like semiconductors, EVs, etc. This will be more effective. And also big global companies need to share more of the value they create with the folks who create it -- by paying better.
Thanks. Unfortunately, most of the comments were not "wondering" or "asking" anything. And there are plenty of other places for anonymous drive-bys.
And, yes, the original article was poorly edited. My mistake and my fault. I've worked with great editors for years, and they have often saved me from my crappy and embarrassing first drafts. This reminded me that, now that I'm on my own, I need to put the same energy and care into editing as I do writing. (Fortunately, I have since learned that Tess (AI) can help with that!)
Thanks. Jobs moved because technology advanced and the global economy became further integrated and specialized.
Within a country, different regions and cities have different specialties — things they're good at and do better than other regions/cities. And it's the same globally. China is exceptional at high-skill manufacturing and can do it at far lower cost. So US (and other) companies began making their products there and shipping them here. And (some) Americans benefitted with lower prices and high-quality stuff.
Academics would call it "comparative advantage."
The US has plenty of advantages, too. And we need to have a long-term investment plan that will help build industries of the future, just like China does. Attacking the rest of the world (including our allies) with a sudden and uncertain trade war isn't an effective way to do that.
Thanks. If comparative advantage is win win, it would not result in large and persistent trade deficits. When there is a large and persistent trade deficit you are not in a win win, you are in a thriftville vs. sqaunderville situation, which is what Buffet was and I think still is saying. I'm not arguing that a trade war is the solution, just that the way things have played out with global trade has not been win win for the US (as the comparative advantage advocates were arguing it would when I was a kid). China and other countries have gained far more than the US, and especially the American worker. Also we did not start outsourcing to china because they were better than us at manufacturing. It was totally lower labor costs, and then they became better at us at manufacturing as a result.
Thanks. Have read the Buffett article yet (thanks for the link), but sounds right. According to Jeffrey Sachs, trade deficits are function of relative spending (if we cut our spending, deficit would disappear). I can't remember what the predictions were when I was a kid (good for you that you can), but the decline of the middle class and resulting disruption of our society clearly are not positives. As Bill Gurley points out on this week's BG2pod, I don't know that things would have worked out differently if we had erected huge trade barriers 30 years ago. But we do need policies that help the situation. And yes on why jobs moved.
I think the grocery store analogy is true on a micro level, but glosses over important differences when this is happening on a national scale which Buffet does a good job of explaining in his thriftville vs. squanderville analogy. https://fortune.com/2016/04/29/warren-buffett-foreign-trade/
Also in terms of the Economy being strong, I think it definitely has been for certain parts of the economy. But I think it's hard to argue that the average middle class person is better off today than they were when I was a kid (I'm 46). Back then the average person in my small town could own a house and a car and live a decent life working at the steel mill. Main street was vibrant with family owned stores where we worked after school and summers. My parents were doing better than their parents and I was optimistic that I would do better than mine. That's all gone now in my town, and I think this has played out in small towns across the country. I think this is what people in big cities miss, it's been great there so what is everyone complaining about?
So while I agree that the methods we are currently using to rectify these issues make me nervous, I disagree that the premise for the tradewar is bassackwards.
Thanks for writing these I am enjoying reading.
Dave
Thanks, Dave! Very much agree with you on the middle class. It's a huge issue, and we need to address it. But a global trade war isn't the way to do it. (I don't even think "manufacturing" is the solution. I think it's for huge global corporations to share more of the wealth they create with the people who create it -- their employees.)
Thanks for the reply. I think opening up trade is a big reason why US Corporations aren't sharing more of the wealth they create with US employees. Once we opened up, their supply of workers increased dramatically, and they did the rational thing, offshore. On a human basis this was very positive for the world. Opening the US up basically lifted the rest of the world out of poverty which is a great thing. The problem is it came at the expense of the American worker. Free trade from our side lifted them out of poverty, and we got super walmart and a pretty closed market that we can't sell much of our output into in return. At the same time we built up what is now seen by most as our greatest adversary that we are now reliant on for mission critical supplies. I don't have a strong opinion on what the solution is to that, and definitely see the potential downsides of current tactics. I'm only arguing that I think saying that net net we haven't been the loser over the last 30 years is wrong. But appreciate the discourse either way. On another note since you are experimenting with AI I think this would be a great example where you have a "just the facts" AI chime in as a neutral 3rd party and give it's take. I think this may be a way that we can bring back the civil discourse that we lost with the internet.
Agreed on global trade resulting in manufacturing moving offshore. But the real issue is pay, not manufacturing vs. service. Manufacturing jobs once paid poorly, too. Then manufacturers decided to pay living pages and/or were forced to by unions. We need major retail and other "low-skill" jobs to do the same. There's no law of capitalism that says companies have to pay employees as little as possible.
Yea I agree that the main issue is pay. If we can get back to a place where the average person can buy a decent house, raise a family, and have a decent life without killing themselves we'd be in a great spot and I don't think anyone would care if those well paying jobs were manufacturing or not. I'm less sure on how to get back to that place. I am not arguing that tariffs are the correct answer. I do believe however that if we are not going to let supply and demand set the price of wages, then we are talking about intervening in the free market. Tariffs are one way to do that, the way that unions are handled in the US with state backing is another, regulations are another. Arguing for an intervention of any type is in my opinion a concession that trade (in this case wages for work) is not always "win-win" by default.
I disagree that is been great for people in big cities. but the trade deficit didnt result in those jobs moving away. and if you were more protective of trade you would handicap economic growth.
even bringing back the steel mill now would still be at a lower wage. trying to protect trade like you want us trying to put the genie back in the bottle dude
Thanks! Agree that bringing back more steel mills isn't the best way to address the decline of the middle class. I think we should develop a broad, long-term industrial policy that includes investing in strategically important future industries like semiconductors, EVs, etc. This will be more effective. And also big global companies need to share more of the value they create with the folks who create it -- by paying better.
are you deleting comments from your blog dude lol
Ones that are anonymous drive-by shootings or off-topic, yes. Plenty of other places for folks to do that.
is it off topic to wonder why you sexually harassed your AI and edited your article? i think its a fair question to the CEO of this blog
Thanks. Unfortunately, most of the comments were not "wondering" or "asking" anything. And there are plenty of other places for anonymous drive-bys.
And, yes, the original article was poorly edited. My mistake and my fault. I've worked with great editors for years, and they have often saved me from my crappy and embarrassing first drafts. This reminded me that, now that I'm on my own, I need to put the same energy and care into editing as I do writing. (Fortunately, I have since learned that Tess (AI) can help with that!)
and i dont think its off topic to ask that you pay for a human to make the art and not AI you are rich enough bro
Thanks for the reply. What did cause the jobs to move away?
Thanks. Jobs moved because technology advanced and the global economy became further integrated and specialized.
Within a country, different regions and cities have different specialties — things they're good at and do better than other regions/cities. And it's the same globally. China is exceptional at high-skill manufacturing and can do it at far lower cost. So US (and other) companies began making their products there and shipping them here. And (some) Americans benefitted with lower prices and high-quality stuff.
Academics would call it "comparative advantage."
The US has plenty of advantages, too. And we need to have a long-term investment plan that will help build industries of the future, just like China does. Attacking the rest of the world (including our allies) with a sudden and uncertain trade war isn't an effective way to do that.
Thanks. If comparative advantage is win win, it would not result in large and persistent trade deficits. When there is a large and persistent trade deficit you are not in a win win, you are in a thriftville vs. sqaunderville situation, which is what Buffet was and I think still is saying. I'm not arguing that a trade war is the solution, just that the way things have played out with global trade has not been win win for the US (as the comparative advantage advocates were arguing it would when I was a kid). China and other countries have gained far more than the US, and especially the American worker. Also we did not start outsourcing to china because they were better than us at manufacturing. It was totally lower labor costs, and then they became better at us at manufacturing as a result.
Thanks. Have read the Buffett article yet (thanks for the link), but sounds right. According to Jeffrey Sachs, trade deficits are function of relative spending (if we cut our spending, deficit would disappear). I can't remember what the predictions were when I was a kid (good for you that you can), but the decline of the middle class and resulting disruption of our society clearly are not positives. As Bill Gurley points out on this week's BG2pod, I don't know that things would have worked out differently if we had erected huge trade barriers 30 years ago. But we do need policies that help the situation. And yes on why jobs moved.