Exactly. The trade/offshoring thingy is a red herring used by the uninformed to try and go forth to chop down the biggest tree in the forest with. But it keeps getting dragged out, curiously by both left and right wingers…it seems to be one of the few things that both sides clueless can really get behind and push on, albeit for different reasons.
-XT
Yup, I have a friend who is a mfg’s rep in SV-all he does now is supply samples for design ins. The orders are all written in Asia, and supplied by plants in Asia.
He’s thinking seriously of early retirement-he doesn’t see any future for him in this line of work.
The point is: for every fab that used to be in the USA, there were 10+ people in industries supporting the fabs-and now hat they are gone, we have massive unemployment.
Ermm, that ALWAYS happens with trade deficits. People don’t take foreign currency and stash it under the couch. It ends up getting invested somewhere.
Yeah I get that. It doesn’t make the effects of the Chinese currency manipulation any less harmful to the recovery.
You could have fucking fooled me. Every post seems to be, “go ahead and let China keep amnipulating currency without doing a goddam thing to stop it because free trade is good”
You think that the day of reckoning will come when China is finally forced to let their currency float in some sort of catalclysmic event? ROFLMAO. China doesn’t intend to become a superpower from its currency manipulation, China intends to develop competitive (not comparative) advantages in other areas to counteract the effect of rising costs when they slowly and incrementally let their currency rise.
By the time China lets their currency float, they will have a mature economy that makes all the world’s electronics, half the world’s cars, much of the world’s innovation. China’s labor force will go from being one eight as productive as our to one quarter or one half. THEN they will slowly let their currency rise, by this point their labor will be very productive and as long as their labor productivity rises faster than their currency, they can continue to increase industrial employment.
You think that if a floating currency caused our currency value to decrease and China’s to increase, the ONLY effect would be more expensive shit at Walmart? The effect would be more demand from China for American goods (yeah we do export stuff there, some of it is consumer goods). For example, the Chinese like buicks. Let the currency float and Buicks are suddenly 25-30% cheaper, we sell more Buicks at the margins we will import less and export more. For someone who keep pounding the drums about economic theory, you seem to be missing a few of the basics beyond “FREE TRADE IS ALWAYS GOOD!!!”
No, I think isolationism is a great way to end up with North Korea’s economy. We’d do better than most and in a global trade war we would be the last country to end up that way but that’s where we’d end up eventually.
Tariffs are just retaliation. I don’t think we’ll really be much better off for it, the Chinese will just be MORE worse off then we would be. But if we are afraid to bite that bullet then the pain in unidirectional.
You honestly don’t think that you can manipulate your way out of a currency peg without hurting yourself more than you have helped yourself?
Yes but outsourcing is slowing down the recovery. The Chinese are enjoying double digit growth at the expense of our recovery. Sure its only a percent or two a year but when you are near flat, that makes all the difference int he world.
Correction: we should be camped out at the bankers’ homes.
In your opinion.
Incorrect.
We had what practically every economist recognized as anemic job growth during all of the Bush years, coupled with stagnating wages that did not keep up with inflation. Offshoring, automation and aggressive drives for increased productivity (fewer workers doing more work) were three of the four horsemen of this apocalypse. This amounted to a severe hollowing out of the economy which should have led to reduced consumer spending but for one, and only one thing: consumer access to ever-expanding consumer debt. Once the subprime collapse knocked that pillar over, the fourth horseman of the apocalypse showed up to energize the other three: a sudden and now prolonged collapse in consumer spending.
Edited to add: I’m not the only one who sees this.
The correct statement is that offshoring was ONE of the issues that led us to this problem. There were jobs lost to offshoring. These jobs were replaced by lower paying jobs that did not keep up with inflation. That is not a benefit to the economy.
You guys keep saying this but you can’t substantiate it. I already posted a report that shows that offshoring to low wage countries does cause a negative effect on jobs, while offshoring to higher wage nations has a positive effect.
http://www.voxeu.org/index.php?q=node/3920
Bloomberg Businessweek also disagrees with you:
http://www.businessweek.com/magazine/content/07_25/b4039001.htm
Funny, how none of the offshoring proponents have dared to explain why these two sources are wrong. Everyone else, take note of that.
The transition to what? That’s what I and others are asking of you here.
What new job boom is going to deal with the millions of additional people who are now unemployed and the hundreds of thousands of additional workers constantly entering the competition for existing jobs? How many decades does America have to wait for your free market miracle to appear out of nowhere?
Why isn’t anyone on the pro-offshoring side even daring to talk about the string of jobless recoveries we’ve been having since the 1990s? And don’t say offshoring has nothing to do with that; I just posted for you… again… :rolleyes: two big sources that say it does.
I guess we don’t know what is around the corner but you seem to think that innovation is inevitably going to create enough jobs to replace the jobs that leave us.
I thought I’d explained this several times. We punish the Chinese until they let their currency float. Then the rate of job gain might exceed the rate of job loss by enough to absorb new entrants into the workforce. As things stand, there aren’t enough jobs to absorb all the college grads.
You are premature.
Economics today is no more science than medicine was a science when they were using leeches to balance the humors.
Where is the repeatable experimental verification of falsifiable hypotheses?
Economics may be a science some day but right now its a lot of theories applied to idealized settings with a host of unrealistic assumptions.
I think your definition of science is overly broad.
Like I said, you could have fucking fooled me.
Prove for a fact? No. But our balance of trade with other countries reflects among other things our relative currency values. So when China’s currency floats our exports will rise and our imports will fall. I thought that was econ 102.
WTF are you talking about? Show me (as you put it) a peer reviewed paper that backs up that statement. You can’t eliminate some of the assumptions underlying the free trade models and then assume you get the same result. Every free trade theory I can think of includes floating currencies.
Show me that peer reviewed paper that says that you can expect similar results from free trade with and without floating currencies.
Sure pegging your currency MIGHT not be bad for your trading partners but it can be and in this case I think it is or do you have a peer reviewed paper that states that currency manipulation never hurts your trading partner?
And that is our disagreement. I think we should do what we can to stop it.
Wait, so you would be perfectly fine if China never released their peg?
OK so what is the real problem and how do we solve it when we are already at ZIRP and have no apetite for more stimulus?
Just because its not the primary problem doesn’t mean its not a problem.
The Rio Ranchos fab was built before the boom. I know it well, since I have a piece of land there, which probably my great grandchildren can make money off of. 3 bedroom houses aren’t nearly as expensive as they used to be, but still more than they did 15 years ago when I bought mine. And my real estate taxes are absurdly low for as expensive as my house is.
Intel clearly does not want too much capacity in one place. The fab in Santa
Clara was pretty small. I think it got shut down (it was running when I worked there) and they needed the space for offices.
I’m not sure about that. Andy may not be CEO any more, but they are still a bit paranoid, and espionage could be a real problem in China. Why run the risk? Labor costs are a tiny, tiny part of the cost of a processor, so the advantage of low cost labor is gone. Plus, the cost of one yield excursion would pay the higher salaries of skilled labor for a year, easily.
Then why is so much of it moving offshore?
They originally turned into an R&D only fab (process development). They may have turned into office space, since, but I’d be surprised if they did.
Well, obviously you didn’t get the size of your cube shrunk because of lack of space. I did. That was back before they build the second tower. That fab had been too small for production for a while.
The fab in Israel goes with the design center there. And there are a lot of political reasons to build stuff overseas.
The biggest fabs are in Taiwan, TSMC and UMC, and Taiwan is not a low cost labor supplier anymore. I think it is a case of scale and of good execution, especially since the US companies dropped out of the business when they saw the cost of a new fab to handle a new process node. Intel has the volume to keep a fab busy (but they stopped the one in Austin) - no one else does. And I’m talking about high end stuff here - chips for greeting cards are cheap because you can get a zillion on a wafer, and because they are made with old technology the yields are really high. Anyone can do that.
My guess is 2014. I’ll put a hundred bucks on it, and invite you to come up with the first definition of how we’ll determine if the condition is met or not. Now put up or shut up; when is the U.S. going to collapse?
Both, in all likelihood. But let’s get past all the zero-sum stuff to the real howler that, really, underpins everything:
Because of course scientists in other field never make laughable mistakes.
Scientists, for instance, never believed in luminiferous ether, or that the world could not possibly be older than 50 million years or so because the Sun couldn’t burn any longer than that, or that continental drift was impossible and ridiculous, or that… no wait, in fact, they believed all those things. Not cranks, mind you, but legitimate scientists.
If you’re going to just invent stupid shit and attribute to me positions I don’t hold, such as that I’m a believer in “Laissez-faire economics” - I can’t even begin to guess how you’d define that but it’s probably bullshit - or that I think the free market is “god,” which is kind of like saying the ocean is “god” and I’m worshipping the Pacific by pointing out the fact that it is wet, then by all means go ahead and do so, but don’t expect it to impress anyone. I might as well say I “would be be surprised” if you believed in Scientology. I’m going by as much evidence.
In every decent economics school in the world, I’d think. You’ve never heard of economics experimentation?
Are you getting all your economics information out of the newspapers? You do understand that policy claims and political arguments are not “economics,” right?
I read what you said perfectly, by the way.
People who have “exhausted their UI benefits” are still counted in U3. U3 has nothing to do with whether or not someone is collecting UI benefits. You were wrong. Accept it.
On review I note Hellestal has also explained how unemployment is calculated, and why you were wrong. Perhaps his explanation will make more headway than mine.
IANAE but I minored in economics and I am familiar with the basics. I understand every argument you have made so far and i understand that every argument you have made so far depends on assumptions that do not apply to the real world.
That doesn’t mean there is no value to economic theories but I am having trouble with that little bit where you think that a currency peg by the country has teh largest trade surplus with us doesn’t harm our economyand cause higher unemployement and lower jobreplacement rates.
Why do economists still argue whether economics is a social science or a hard science? Or you intend to include social science in your definition of science? If so then you’re right but the 2+2=4 sort of finality you seem to attribute to your theories doesn’t really apply like it would with physics now does it?
Uh huh.
Like, um… hmmm. What “assumptions” have I made that “do not apply to the real world”?
I didn’t say that, though. You need to get your posters straight. You will notice I am not attributring Le Jacquelope’s positions to you, so please do not attribute other people’s positions to me.
Science is science. You can call some “Hard” (the accepted term is “natural science,” by the way) and some “Social” but they’re all science; for that matter, the delineations between sciences are quite arbitrary. There’s no clear line between physics and chemistry, no clear line between chemistry and biology, no clear line between biology and psychology, and no clear line between psychology and economics.
If you’re trying to find out the nature of reality through the examination of the evidence, you are engaged in science.
Experimental economics is the name being used in economics departments for what we know as behavioral economics. My daughter is in grad school running these studies like crazy. It is a vitally important area, but it has nothing to do with the macro issues being discussed in this thread.
The real problem is the same problem that FDR faced many years ago. Our solution should be along the same lines.
FDR’s best move was abandoning the gold peg. We don’t have the particular option available to us, but that’s no matter. A fiat currency leaves us with plenty of options. ZIRP is simply an empty excuse for inaction. Almost everybody in the popular media concentrates on interest rates, but that’s not where we’re off course. Well, not exactly. The underlying problem lies somewhere else.
There’s no barrier here at zero percent that couldn’t be overcome by a credible response from the Fed. And credibility, ultimately, is just about doing what you say. The Fed could say, tomorrow, that it’s going to do everything within its power to return to our long-term price level (or better, NGDP) trajectory, the path we were on in late 2008 before expectations plummeted. Then it could take immediate action to demonstrate that it meant what it said.
The economy would react positively to that, and the benefits would be seen fairly quickly. There would be more jobs. This wouldn’t drop unemployment back down to 5%, but it would be a significant push in the right direction. Now, to be honest, I don’t believe they’ll do that. Although the Fed has started talking about long-term level targeting in its minutes (a very encouraging sign) I don’t have a lot of confidence that they’ll backdate the level targeting from late 2008 to help with the current downturn. They could, but they probably won’t.
Still, that’s where our big problem lies at present. We’re facing a massive drop in aggregate demand, with heavy private debt loads in the wake of a financial crisis. That’s the number one issue for today. (Number one issue long-term is debt.) The Fed could take action for this big problem at present, and they’re not (yet), and so they’re the people we should be complaining about. Often and loudly. Blame the Fed, blame the Fed, blame the Fed. They’re not doing what they oughta.
That’s the short version, anyway. This is the long version.
For the record, the BusinessWeek article has this to say:
This article is from three years ago.
At that time, it could not substantiate the actual overestimate from “Phantom GDP”.
Since then, there is no newer information. We have no reason to believe this was ever a significant problem, let alone that it’s still a problem today. There is nothing here we can rely on as an indictment of offshoring.
The other article you cite is scholarly, but it still doesn’t convey quite what you think it does.
The first thing to notice is that they’re not talking net effect, as I was. They’re talking labor market exclusively. That’s fine. It can be useful to narrow your scope. But we should notice that even with that narrow scope, the effect in the labor market is still not clear, as they say themselves. They have their own conclusions, of course, but even they admit that the information is not conclusive. There’s a lot of noise in the system.
The article cites Paul Krugman, who suspects that this offshoring has led to increased income inequality, but doesn’t believe it’s possible to prove it. The weird thing here is that I actually do agree with him. I think it’s perfectly plausible that the wave of offshoring might have led to certain labor problems. In fact, I said this in my own post: “That doesn’t make the process painless. It sucks, and some workers take it on the nose.” There are winners and losers here, exactly as your own cite says.
People in the US, even some US workers, are benefiting, and that’s according to your cite. You titled this thread “Offshoring - the snake that is eating itself”. And the only evidence you’ve brought to bear is that maybe the net benefits aren’t as big as otherwise believed, and that maybe a subset of unskilled workers are suffering a loss. Well, that is important information to discuss, but it’s not anything remotely on the lines that offshoring is destroying itself.
It’s very possible that offshoring is at least partly responsible for our “jobless recoveries”. But we have to keep in mind that these recoveries were not, actually, devoid of job growth. It’s just that the job growth came later and slower than improvement in other broad macroeconomic indicators like GDP. The US economy can create jobs. Low wage growth for unskilled workers might, again, be attributable to offshoring. Again, this is plausible. But it’s not an overwhelming case against offshoring in general, if you bother to read your own cites.
A richer China and India will still make us all better off in the long run. We don’t know the exact effects of offshoring on current wages–it might be negative for some groups–but we do know the long term effects. Richer trade partners can afford to buy more things from us. The richer they get, the more stuff they will want. India and China have more than a billion people each. Someday, the economies of both will be greater than that of the US. That’ll happen in the 21st century.
It will take much longer for per capita GDP to catch up, but even so, the US will be able to sell them stuff. A lot of stuff.
Maybe the net effect for unskilled US workers is negative at present. But it’s not negative for the US as a whole at present, it’s not negative for the Chinese at present, and it won’t be a net negative for our own workers in the future. The richer they get, the more they’ll be able to buy, and that will be good for everybody, up to and including our own workers. There’s nothing “magical” about this. It’s just what happens. People have been losing jobs to mechanization and trade for, literally, centuries. Some people do lose out for the present. But our standard of living tends ever upward over time, and that is precisely because of more efficiency from specialization and trade. That’s the engine of growth, and even when we want to help the losers transition to new jobs, we don’t want to stall that engine.