Bickering about Biden and Buy American

I’m curious as to what Dopers think of this Atlantic article. It basically says America has woken to two problems over the last decade: making stuff overseas leads to loss of manufacturing jobs, and supply chains can be flimsy in the event of crises. “Made in America” is only a partial solution which will bring back the problems that made offshoring attractive: lower costs, etc.

I’ve also been reading a book that blames business schools and finance companies for focusing too much on stockholders. It claims big companies are too much like financiers themselves and that this is making them less innovative and overly concentrated on short-term goals instead of more meaningful ones.

It seems to me the two problems have been concerns for decades. The Rust Belt acquired that name many years ago. Concerns about the policy of several countries are not new, nor have these policies been closely guarded secrets.

Given that, possible avenues for discussion:

  1. Is the article right?
  2. What do you think of free trade?
  3. Is the book right about too much emphasis on short-term financial goals?
  4. Is Biden on the right track?

I’d go further than than the article. I agree that buy american raises costs and isn’t a real fix to problems that can happen when JIT and highly specialized supply chains go to far.

Not only is it expensive and largely ineffective, the other effect is that what ever we decide to give the “buy American” subsidy isn’t going to work the way most of the market economy does. Generally, the innovations made to supply chains by the private market are good, and if the government is trying to fund certain things in a way that resists that, what companies will do is run their production that isn’t related to the buy american money the way modern markets work, and run a separate government subsidy machine that wont always get the benefits of new innovations.

And the kicker is electric cars, infrastructure projects, clean energy etc are things we should be trying to make easier. The government is funding these things because the market incentive isn’t naturally building the economic capacity as fast as we would like.

Of course there are perverse incentives with our extremely thin and complex supply chains - probably the biggest problem is that when the supply chain breaks, the government isn’t going to be willing to allow the economy to fail and as a result bails out the companies that made mistakes and didn’t have enough redundancy.

I’m reminded of a story that came up during the annual IT security training a while back: an employee brought an imported e-cigarette to work and hooked it to one of his computer’s USB ports to charge. It promptly installed spyware.

There’s also the problem with importing from countries that have poor quality control. China’s lead paint, for example. A balance between cost (economic) and cost (tech/personal health) needs to be found.

What are Americans supposed to do for work? We cannot make the US a massive Silicon Valley where everyone works in a well-compensated tech job that only requires brainpower. I think there is definitely discussion to be had regarding the ills of protectionism, but there should also be some room for finding the sweet spot between that and a race to the bottom of costs.

Any President would be foolish not to support consumption of American-made goods - they all do it. I think infrastructure investment is a good way to “Buy American”: clean power generation and grids, freight rail and ports, bridges and roads, utilities, etc. Our manufacturing core has been hollowed-out for the most part but there is still plenty of work to be done by skilled people.

Manufacturing jobs are largely automatable and US workers are expensive so, moving things back to the US, is probably going to see a large investment in roboticization rather than trying to get lots of people into a large room, riveting things together.

Not to mention that businesses abhor a vacuum. To stay alive, your business has to try and grow when it can. Growing means hiring on more workers. And if you’re an entrepreneur, looking at a buyer’s paradise work market, he’s going to try and start a new business. China doesn’t have excess work force because their population is 5x ours, they just have more businesses total and businesses with more workers.

Workers don’t care whether they’re working in manufacturing or not, they just want to put food on the table. If they can do that by driving for DoorDash, then they’ll do that. It’s probably better work than working in a factory.

Manufacturing jobs aren’t relevant to anything. Supply chains are important and total employment rate is important, but having physical people in that specific occupation is not important.

In general, it’s always been open knowledge for anyone who cared that the US has two large cost reducers impacting our economy. First, we use a lot of immigrant labor who come temporarily and then leave - adding to our tax base for a time but barely withdrawing anything since they don’t retire here. And, secondly, we follow macroeconomic theory and (historically) have had low tariffs, allowing a lot of production to be done in cheaper nations, then imported.

Changing any of this will be costly. Our labor is already locked up in the industries that we have. Trying to add manufacturing back into the mix is going to take a long time and it’s going to be hard to do without importing people to kickstart it. We don’t have mountains of people just waiting to go work in a factory or go harvesting food out of the farms.

Trying to do all this stuff in the US is going to raise prices. If you try to subsidize it then you’re going to need to raise taxes. Either way, voters are going to take a hit and they’re going to get pissed off at the man in charge. (Trump got in and got out fast enough to leave most of the mess on his successor.)

But, likewise, a long supply chain that crosses many borders is going to be weak, if it’s not built like the internet with a lot of distribution, so that you’re resistant to single points of failure. And that’s especially true if a lot of your external suppliers are operated by low-morality authoritarians.

A better solution for the supply chains is:

  1. Remove any arbitrary, “realpolitik” style tariffs.
  2. Have the G20 or some international group set up an independent, ranked-choice-vote appointed department that simply rates the economic reliability (likely to stay peaceful, likely to abide by the rule of law, etc.) of each nation on the planet, and publishes a number.
  3. Form a compact - with the EU nations, Australia, and anyone else willing - to peg tariffs to those ratings.
  4. Offer subsidies and incentives to businesses to diversify their suppliers.
  5. Identify national security risks (base food supply, arms manufacture, etc.) that need to be fully self-sufficient, and subsidize those.

That is to say, find a reasonable compromise that’s more long-term viable and with fewer short-term demerits.

I have heard CEOs of public companies say and bemoan this.

In general, I would recommend an overhaul to how the stock markets work. Dividends should be a component of more stocks, the impact of problems in one industry should have less impact on other industries than it does, and the value of stock valuation should better match fundamentals / be affected less by individual buyers.

Concrete methods for doing that would probably be better left for another thread.

Unemployment is like 3.5%, Americans can do whatever they’re currently doing, which seems to provide plentiful jobs for people who want them. Yes, many of those jobs suck, but let’s be honest, factory jobs also suck.

Yes, while there are a lot of people who already have jobs, a lot of those people are in crappy jobs that don’t even pay the bills. I suspect there’s a lot of minimum wage earners who would jump at the chance to move up into a factory job.

Of course, this is going to have an impact on the businesses that rely on that cheap pool of labor, and as we’ve seen with the “No one wants to work anymore!” crowd the last two years, they’re not going to adapt well to this new reality. Expect more whining and more business closures from people who will refuse to adapt to the new reality.

The book blames Taylorism for businesses treating workers as untrustworthy and unskilled, and making jobs overspecific. It blames McNamara and the diffusion (to other big companies) of Ford financial whiz kids for bean counting fractions of a penny, offshoring jobs with Street approval, and mimimizing industry specific knowledge while not taking into account socioeconomic costs or communicating well with workers. It blames the Chicago School for overemphasizing stockholders as stakeholders. It is only a matter of time before it discusses taxation.

So any manufacturing concerns are over five decades old. The article implies loss of manufacturing is a newish concern and it ain’t.

Who’s going to make the robots?

I say that slightly facetiously, but not entirely so. We may not go back to the days of thousands of auto workers bolting a car together as it rolls down an assembly line. Those things may be automated, but that still means jobs for the people who design, build, install, and maintain the automation; and jobs for the people who build the tools used to design, build, etc.

I had an idea a while ago that I’ve never heard discussed anywhere. It’s often said that things like environmental and safety regulations in the U.S. drive costs up, and make it more attractive to move manufacturing jobs to other countries. We are, in a sense, exporting pollution and workplace injuries to other countries that have lower protections against such things. Rather than impose tariffs, would it be possible to require that all goods imported into the U.S. be manufactured in factories that meet U.S. standards? If foreign factories can absorb those costs and still be cheaper than manufacturing in the U.S., good luck to them. In marginal cases, it seems like that might tip the scales toward building things in the U.S. I don’t know if that sort of thing is covered by any of our current trade agreements.

Well, good luck building all that infrastructure without Canadian lumber. Heavy machinery is our fourth largest export to the US. I guess you won’t need any of that for those government projects. I guess you won’t be using the $9-10 billion in iron and steel we send you each year, or the iron and steel you outsourced to China. Good luck ramping up new steel foundries in this environment - those high speed trains don’t run on gravel. Good luck using those American computer chips.

Biden’s demands for government projects to use strictly American-sourced materials is unworkable and the worst kind of populist protectionism. They work against the ‘stimulus’ and make inflation worse while lowering productivity. The requirement to use only union labor will drive up costs and make it much harder to staff projects.

The USDA has something like this for food imports. Basically we certify that the foreign equivalents of the USDA are up to snuff for inspecting various foods, and trust them to inspect their own.

Can we do the same with foreign equivalents of EPA and OSHA? Should be theoretically possible, but the political leverage would have to be enormous.

A friend of mine used to inspect fish processing plants for the FDA, including a couple of foreign trips. That might be what gave me the idea.

As for the political leverage, it seems like it ought to appeal to all sides. It’s not a direct import tariff, so the free-trade folks should be on board. It helps to level the playing between U.S. companies and foreign, so the “bring jobs back to America” crowd should like it. And it decreases pollution everywhere, so environmentalists should be happy.

There would be costs with inspecting foreign factories to insure compliance, so maybe the small government types would complain.

Is that a move up? To be competitive against companies who do their manufacturing abroad, either the American worker needs to work for peanuts or - as said - everything needs to be highly roboticized. And if roboticized then the human part of the work is likely to be fairly technical and out of the reach of most workers.

If, for some reason, we evade both of those situations, then you’re still looking at sitting in a car, listening to music, while delivering food around town vs. working in a hot, insanely loud room with dangerous equipment that will gladly tear your arm off. I don’t know that it’s a clear winner.

3D printers.

Where are you getting that “strictly” qualifier, which is what appears to be causing all your knicker-twisting about US government projects somehow having to entirely do without Canadian lumber and Chinese steel and so forth?

Because it seems to be quite different from the Administration’s own description of the proposal:

I don’t think anybody believes that the route to better American jobs and more robust supply chains is an easy or short one. And certainly the Administration is not pretending that it can or should be achieved by just refusing to let the government buy any more foreign-made goods for its projects.

Nevermind. Brain fart.

You’re probably right that it’s unworkable, but as a Canadian I worry that even the attempt at this kind of protectionism will be economically damaging, at least in the short term. I’d like to think that this was, at least partially, simplistic political rhetoric, parts of which will fall by the wayside when it’s “clarified” that Biden didn’t mean to exclude Canadian imports, perhaps using the free trade agreement as a justification.

Is it your position that federal projects should make ample use of exploited underpaid workers who work insecure jobs in possibly unsafe conditions? Because it isn’t my position, nor Biden’s.

I think the supply chain problems we’re still experiencing should be a wake up call. During the height of the pandemic, it was difficult to get necessarily medical supplies that were manufactured overseas. It may be cheaper to produce those goods in China, but if those items become critical then China’s going to keep it (as would any nation).

I few months ago I was listening to a Freakanomics podcast, and they a study of corporations with CEOs who have their MBAs. And they noted these companies tended to increase their profits without actually growing the business. i.e. They find ways to cut cost but don’t necessary improve the business in any tangible way.

Are you kidding? A DoorDash worker is an independent contractor and don’t get any benefits from the company they deliver for, they are responsible for wear & tear on their vehicles, and the amount of money they make is unpredictible. The gig economy sucks. I’d much rather have a job in a factory where I get benefits, decent and predictible pay, and my hours are set.

This and peer pressure might explain some Silicon Valley companies cutting jobs though flush with cash. I wonder if Tesla and its previous high valuations make more sense as financial speculation than its innovative products. (Both these statements likely oversimplify more nuanced complexity.)