Are you now seriously suggesting that we have been adding millions of indigent citizens to our population over the last several decades?
From your quote:
“(data from 2002) At the same time, the national poverty rate increased from 11.7 percent to 12.1 percent. The number of people living in poverty rose 1.7-million to 34.6-million.”
Here is a link from the National Poverty Center It suggests that your rise and the level is not that dramatic. Especially when you take into account the recent economic downturn. Look at the chart in the middle of the page. While it is true that the percentage of people in poverty has been lower, it is also true that it has been quite a bit higher. Also, I note that the percentage has been decreasing (during a population increase mind you). So, it seems completely untrue that we have hoards of new poverty stricken citizens unable to find jobs.
Now, to set the record straight, I do not deny that people are hurting. People are always hurting. I am simply denying that there is some strange new phenomena going on which will soon doom us to destruction.
This is also a good discussion of the poverty rate change from 2001 to 2002. It contains the paragraph you quoted.
Also, for your personal benifit, it contains a discussion about the methods used to measure the poverty rate. It mentions that “Five of the six alternative poverty measures developed in response to the National Academy of Sciences recommendations show no significant change in the number of people in poverty between 2001 and 2002.” while “Each of the nine additional alternative measures show an increase in the number of people in poverty.”
I eagerly await your link claiming that the government is cooking the books on these numbers as well.
SS:“mind-boggling personal debt” […] And record consumer debt. And record mortgage debt. None of which is a surprise - when interest rates are low, people borrow more. Interest rates are currently at historic lows. It should be no surprise that debt is at historic levels. When interest rates rise, as they will inevitably [do], there will be a correction.
The thing is, Sam, all these debt levels have been steadily rising since at least the early 1980’s, if not the mid-60’s (well, mortgage debt seems to have flatlined a bit in the early 90’s, but the overall trend has just been up up up). In other words, we’ve been steadily setting record debt levels even before interest rates reached their current record lows.
The suggestion that this is just so-called “rational debt”, i.e., a financially defensible level of debt made possible by conditions like low interest levels, is also undermined by trends in bankruptcies. US household bankruptcy filings hit a record high in 1998, dropped somewhat until 2001, and have since surpassed the earlier record.
This doesn’t look to me like a simple cycle of people borrowing more when they can rationally afford it and cutting back when they can’t. It looks more like an ever-growing dependency on debt levels that people can’t afford to sustain.
If the bankruptcy numbers are part of what you consider to be the coming “correction”, then it bids fair to be a pretty economically painful one.
SS:And do you realize that the ‘poverty rate’ in the U.S. is over twice the world average income? That’s the effect of that golden goose again.
“Poverty level” and “golden egg”, I think you mean. Considering that the “world average income” includes the over 1 billion impoverished people living on less than $1/day, I don’t think that statistic is all that impressive.
It certainly doesn’t constitute an adequate defense of laissez-faire economic policies as opposed to the more interventionist ones of other industrialized nations, which also have poverty levels much higher than the world average income.
No, it’s not all rational debt. There’s no doubt that personal debt levels are higher than I’d like them to be. The government debt is too large, but not egregiously so considering all of the new things the government has to pay for. Wars aren’t cheap.
But these two issues do not translate into certain economic doom. And in fact, the other numbers which are more important are doing fine. Now, if GDP growth were negative we’d have a real problem. Luckily, GDP growth is at near record levels. And interest rates are staying low, which keeps the servicing cost of that debt down.
Most of the fundamentals of the U.S. economy are pretty good - better than all but a handful of small countries. Much better than Europe. And the reason for that is because the U.S. is better at resisting the siren call of bigger government.
What’s with the 'tude, pard? You’re sticking a poker in my fire without actually saying where you think I’m wrong.
Semiconductors are now widely recognized to be a mature industry, with CAGR approaching that of consumer electronics (namely, about 7%). And that’s WITH 1M Indians a day signing up for cell phone service. China has pretty much just skipped the whole land line thing, and cell phone are already widely used there.
Still, I think there IS a new industry that’s going to dwarf all others and change this planet into a paradise: VIRTUAL REALITY! Aw haw haw haw…
SS: *Most of the fundamentals of the U.S. economy are pretty good - better than all but a handful of small countries. Much better than Europe. *
Really? As far as I can tell, all you’ve offered for comparison is rates of GDP growth and unemployment rates. As has been pointed out before, the unemployment numbers are wiggly (an additional issue is the high US incarceration rate—over 7 times that of most other industrialized nation—which may be taking up a good deal of slack in official “unemployment” numbers).
More importantly, it is not at all clear to me that those measures are adequate as a set of “fundamentals” for assessing prosperity. Number of hours worked, costs of healthcare, poverty rates, median income stagnation, debt levels, percentage of two-income couples, trade deficits, budget deficits—these are all areas in which the US is doing poorly compared to other industrialized nations. Simply looking at rising GDP doesn’t capture this information, but I think we can all agree that it’s quite important for the big picture of how well our country is really doing financially.
SS: *The [US budget] deficit is peaking at about 3.5% of GDP, and is forecast to drop in half within five years. *
Er, that “forecast” is pretty full of holes. As Robert S. McIntyre pointed out earlier this month,
For example, the household survey that shows a lot of people not looking for work can mean several things. One is that a lot of people have decided to go back to school. In fact, there is good evidence that this is the case - after a few years in decline, college enrollments are starting to pick up.
You seem to be arguing that fewer people are looking for work because more have decided to go back to school. Isn’t that reversing the typical cause and effect somewhat? People generally decide to go back to school (and incur the tuition costs, loans, decreased standard of living, etc., that student life generally entails) precisely because they can’t find work, or can’t find work that pays enough to support them.
Another possible factor in the household survey gap is that the grey and black markets are growing. I personally know two people who are making a living selling stuff on eBay.
Again, this seems backwards. Fewer people are looking for work because they’re choosing instead to trade off the books in the gray and black markets? Isn’t it usually the other way around—that people resort to hustling off the books because they can’t find a regular job?
Your suggestions for why the “discouraged workers” numbers may not really be so bad seem to me more like bass-ackwards interpretations of reasons to believe that the numbers are that bad.
Aeschines you claimed that no new industries would be coming along and said I had rose colored glasses on because I disagreed (thats what I was responding too if you had read the whole post and seen the quote I put in from you). I’m sorry, but how exactly do you know that no new industries will emerge in the future that will radically alter (again) industry, service, etc? The answer is, of course, that you don’t…and to make such a bald statement was foolish (IMO) of you. What exactly leads you to think that no new industries, services, processes, etc will come along?
As to the rest of your comment…well, I have no idea what the hell you are getting at. So, India has cell phone coverage? Whats your point? China also? Again…whats your point? Surely you don’t think that the average India or Chinese peasant BUYS the products they make do you? Their industries are very narrowly focused atm to fullfil OUR demands for goods and services. They aren’t out there on the cutting edge developing new industries, processes, services. Thats why I said earlier that IF a new industry emerges (something I think likely) that it will emerge in the US, Europe, Japan first. The reason is because our companies (and those in Europe and in Japan, South Korea and a few other places) pour money into R&D to stay competetive and to capture and hold market share. Companies in India, China, and other ‘cheap labor’ countries basically gear themselves to fulfilling current needs…OUR current needs. They don’t (generally) pour money into R&D or push technology envelops…such things take big bucks and there are all kinds of risks.
The cutting edge countries and companies though will be able to adapt MUCH faster to take advantage of emerging industries (especially considering that those nations are most likely the ones to actually consume the product or service)…which most likely means more jobs in the short term as companies scramble to ramp up.
As usual I’m not explaining my thoughts well on this subject (I’m not an economic scholar as is obvious…and I can’t compete with the folks posting in these kinds of threads). Lets try an example. Say some time in the near future some company comes out with a cheap and economic fuel cell technology (something thats not TOO unreasonable of an example). The fuel cell needs a distribution system for the fuel (say its hydrogen or methane) and the technology uses some fairly exotic materials. Such an industry would spawn a bunch of spin off industries (such as repair and maintenance, manufacturing and distribution of the new fuel, plus other applications…say in transportations, computers, and anyplace that currently uses battery technology).
Initially the ramp up would be huge as multiple companies compete for market share or race to put products and services out to take advantage of the new technology. They would need a lot of warm bodies in multiple fields initially…manufacturing, engineering, chemistry and materials science, logistics, etc. Initially only the higher tech companies/countries would be able to compete in this field…which means that, initially, they would have use local labor. You simply can’t take a radically new process and outsource it to India or China right off the bat, and the odds of them independantly developing such a radical new technology ahead of the US/EU/Japan are pretty long IMO. For one thing their materials science, chemistry and engineering aren’t up to US/EU/Japanese standards (they are niche manufacturers manufacturing specific products, services or even parts to OUR specifications). Also, there are language problems if we are talking about outsourcing (this is a post in itself about the different language and cultural problems with outsourcing, especially a radically new technolog…I shudder to thing about trying to do something like this). There are import and export (especially of new technology) problems. Even patent and trademark problems (especially initially).
The easiest and most cost effective solution initially would be to use local (US/EU/Japanese) labor. Later on, after the process is refined, after the technology is more common place, and more importantly after those cheap labor countries ramp up their infrastructure to accomodate the new technology (something that takes time, but that you can bet they will be doing) THEN you can start to think about outsourcing.
Anyway, those are my thoughts on the subject. I don’t have economic cites to back up my thoughts as I didn’t take business per se in college (I was an engineering major)…and I haven’t read all the economic theory behind all this stuff. I have worked in several of those cheap labor nations though building their infrastructure. I also have my own company and parts of it do business in those countries. Yes, we even outsource some of our business to several of the pacific rim countries and to India. I’m well aware of those nations strengths…but I’m also well aware of their weaknesses. What they can and what they can’t do.
I don’t know which market you mean, but pick any you like. The NASDAQ is 3000 points! below its height during the bubble, and Dow has been treading water for about 4 years. The reason is clear: tech stock really ARE garbage, so what equities are left besides blue chippers? Still, PE ratios are high as heck. The bond market is widely recognized as ultra-bubbular; if the Fed raises rates, that mf’s gonna pop. Yes, and the housing bubble… What’s not to love?
Not only is Japan propping up the dollar, but so is China! These countries are desperately trying to preserve their export business through a low currency. Haven’t you been paying attention to half the posts in this thread?!
Yeah, a “correction.” Somewhat like that “correction” that lasted from 1929 to 1941? Look, I’m not saying that there will be another Depression. I doubt it. I don’t even label myself a gloom-n-doomer, as some here have. All I’m saying is that the malaise we’re experiencing now could last for decades, dashing the dreams of smart, ambitious people and making life more difficult for us all.
Others have commented on how little this number can mean.
There are also many other questions that this figure does NOT answer: how much time between jobs? When jobs are being destroyed and replaced at a very fast rate, you could have a situation in which unemployment is high but your next job is just a few weeks away. In the current economy, qualified and educated people have been without jobs for YEARS. I myself had to travel to a depressed economy, of all places (Japan), to find MY job. The irony!
Also, WHO is out of work? In the current economy, it’s not just displaced manufacturing workers. No, the smartest and most educated people that are getting the shaft as well. In 2003, at my old b-school, only 30% of the students had jobs upon graduation, and many of them were taking very low-paying jobs–whereas in 1999, 95% of students had jobs, and most of these were in the 70s or 80s or higher. And we’re not talking about bubble, techie-type jobs, but just your basic MBA-type jobs!
The point being, when it’s just manufacturing jobs, you can tell these people (or at least make your own self feel better), that if they were to go back to college or “retrain,” they could do better for themselves. Now, there’s no such line to feed them.
The employment figures don’t take into consideration the McJob-ization of the country. People have been trading down for years now, to the point where programmers with tons of experience are working minimum-wage retail jobs just to stay afloat. It’s a joke, mun.
Glad you’re so satisfied. Maybe you don’t have McJob issues in your area. Or maybe there are problems and you’re just blind to them.
I don’t think it is, actually. The 1970s were worse, on average. But this is definitely the worst JOB MARKET I have ever seen, employment figures be damned.
Man, there is so much more to it than that. You have to look at whom that GDP growth is benefitting, etc.; it sure ain’t the poor and middle class. Those “great” interest rates are clearly an artifact of Fed intervention: a measure against things getting WORSE.
Yeah, and thank GAWD those noble Republicans give it to us straight and don’t demagogue–LOL!
SS:What might that number be? Be specific, please. Should the top 1% pay 10% of the taxes of the country? 20%? 30%? 100%? What do you think is fair?
Depends partly on how much of the income and wealth of the country they have, and how much of the benefits of the country’s overall prosperity accrue to them, and how their ability to afford tax payments stacks up to that of the bottom 99%. 10% is obviously too low because the top 1% earns a much higher percentage of income than that—19.2% in 2002, if I recall rightly. 100% is obviously too high because it’s not fair that the other 99% not contribute to tax revenue (unless our wealth inequality gets so skewed that 99% of the population falls below the zero-tax minimum income, which I really doubt will happen).
I don’t think anyone believes that we’ve seen every industry the planet will ever boast at this point in time. There will obviously be new industries. The question is, will they need a large number of workers?
The last few technological revolutions have been focused on reducing the labor required to create a product. From the Industrial Revolution onward, we’ve gotten progressively better at churning out product with less and less human workmanship. Keep in mind, I think this is a good thing. I love technology, work with it, revel in it. But it seems bizarre to not acknowledge the fact that, as our technology progresses, it’s creating less and less need for labor.
However much labor your theoretical fuel cell development would currently entail, you have to admit that thirty years ago, it would have required a lot more people. Everything from administrative overhead to factory personnel would require more staffing than they would today.
At some point, if our technology does what we’ve designed it to do, there will be more willing, skilled workers than there are jobs.
You know, the vast majority of people in the U.S. at the turn of the 20th century were employed in the production and distribution of food. Modern farming and automation reduced that number to a tiny fraction of the original. And yet, the unemployment rate is only 5.6%. In the last 20 years, we have seen the wholesale destruction of many industrial-age industries in the wake of the computer revolution. And yet, unemployment has plummeted since then.
New technologies that displace workers do so because they are more efficient and therefore increase our aggregate wealth. This efficiency isn’t just eaten up by rich fatcats - it comes to us in the form of cheaper, higher quality products and increased purchasing power. In turn, we demand more things, and create the demand for new jobs. The number of jobs in this economy has been increasing steadily for a long, long time. The employment rate only goes down when the number of immigrants outstrips the number of jobs they are qualified for. But employment growth is the norm and ongoing.
My point is that at some point our demand for new things won’t be able to keep up with the pace at which our production of new things is shedding its need for labor. We’ve spent a century making our means of production more efficient, and there’s no reason to think we won’t keep doing so. Eventually, no matter how many new technologies we lust after, the creation of those technologies won’t necessitate enough jobs to employ the population.
Businessweek is running a cover story and series of article entitled Where are the jobs? (it looks like they are making these stories generally available to all readers, but as a subscriber I can’t tell for sure. So give the linky a try. If it doesn’t, suggest you visit the library or pick up a copy on the newsstand).
They do a good job of covering a lot of what has been discussed here in a less rambling and more concentrated form, hitting all of the issues. They acknowledge, unlike some others here, that there are serious problems but put most of the blame for the problem on productivity increases and acceleration over recent years.
Outsourcing is relegated to the back of the pile as a factor in the problems we face and they take the free trade viewpoint. I don’t completely agree with their view on outsourcing. For instance, when you outsource the jobs at a factory, not only do the current workers lose their jobs, but if demand increase for the company, they will be unlikely to open a new factory and hire more people. Instead, they will offsource additional people from whatever countries they are currently doing business with. So we not only lose the outsourced jobs, but also future expansion jobs if the economy grows. In a similar vein, if tech jobs are viewed as not being stable, people will not study for the tech field, thus forcing even more outsourcing. A 300k figure of jobs lost to outsourcing therefore has little meaning.
My one very major gripe with their report is that they parrot the standard viewpoint - everything will work out for the best - somehow. And like everyone else with this view, they can’t say exactly HOW or WHEN things will work out, they just will because they always have. Sometimes what happened in the past doesn’t necessarily point to what will happen in the future. As they say in the stock industry - “past performance is no guarantee of future performance”. But given the general subscriber profile for Businessweek, I would expect that they have no choice other than try to find a silver lining.
It sounds as though we have no personal bones to pick with each other, which is great. I did not intend to insult you in any way.
I will go with what the skeptics of this board reasonably say: He who posits must prove. If there is an inkling of a twinkling of a “next new thing” that’s going to save us, anyone here is free to tell us what it is.
On the other hand, I will tell you why I do NOT think such a think will be here in the near future. I work in the semiconductor equipment industry, which of course tends to educate one about what’s going on with the equipment and the semiconductors themselves. Despite the fact that '03 was better than '02, and despite the fact that '04 is predicted to be decent, there is still not much joy in the industry. Why? As the cliche goes, “No new killer app.” Now I disagree and think there are a few “killer” apps in the market: China and India are going to be sources of demand for a long while (but not enough to make us drool, as I said in a previous post above), flat-panel TVs are going to become the norm, and we have digital cameras/cell phones as something to toy with for many years to come.
Which brings us to the point: all that still ain’t enough! It’s not! It’s new and bright and shiny and fun and people are buying it all, but it still doesn’t bring a big smile to people in the industry. Why? Prices for ICs keep falling, and competition is red hot and angry.
Oh, and VLSI (an industry market research firm) is predicting a decline in semiconductor sales for 2006. Greeeat.
So, I’m in this industry, which is the cutting edge of all industries, the mother of them all, as Sadaam would say. If the joy and peace ain’t here, where are they? Something new, you say? Well… what?! Sure, eventually something will come along–affordable space travel, teleportation, Slip-N-Slide, who knows. But there is NADA on the horizon that Shake-N-Bake this economy. You can’t name it, I can’t, nobody can. And there is that other point I’ve made and others backed up: whether this mystery NEW industry will actually produce many jobs is an entirely different claim, requiring proof of its own.
The point is simply that increased demand from these new markets isn’t all it’s cracked up to be. They are farther along than most people think, and there is a hell of a lot of labor surplus to sponge up before they start buying John Deer, Caterpillar, and other US-made capital equipment.
Yes, I think so! China is an agricultural and industrial powerhouse, and they use a lot of what they produce. India, of course, is building up its own IT infrastructure with its own labor, etc. These are two countries that are going to kick major butt in the next few decades. They are smart, cultured, disciplined, and, what is more, hungry as hell. Be prepared!
Well, you’ve recognized the hypercompetition from around the world, while apply the qualifier “generally” to two giants–India and China–who therefore might sometimes create new industries or be on the cutting edge of things. Who cares about what happened in the past? You can be damn well sure that China and India want to be just as wealthy as we are and will do everything they can to attain our level. They are NOT programmed to fulfill the needs of other countries, subserviently.
No, I don’t follow the logic here. In my industry companies are buying BILLIONS of dollars worth of capital equipment and sticking it in China, Malaysia, Taiwan, etc. The factories are there; hence, the labor is there as well. Once that “nice new industry” comes along, why will the capital and labor be located in the US?
Sounds great, and I can’t wait, but let’s not forget that a bunch of people at the same time are either going to switch over easily to the new industry or be displaced completely. As for easy switchover, I bet that BP and Mobile would be highly willing to have their gas stations supply the fuel cells with hydrogen, etc.
Yes, this will be huge when it happens.
No, here I disagree. The big energy companies will be on this and shifting personnel to the new area as necessary. Certainly, the net effect on jobs would most likely be positive in the short term. Consider, however, that this is not a brand new thing like electronics–it’s just a switch from one energy carrier (gas) to another (hydrogen).
I can’t agree here; it’s a capital problem, nothing more. You’re probably right that this technology won’t emerge at first in India. But the companies holding the patents can build those fuel cells wherever they please.
Welcome to the 21st century. It don’t work like that no more. Sure, Intel keeps the gravy jobs in CA, but most of the labor is done overseas. So, what you’re saying is that they might do design and prototyping in the US. Great. Hire a couple hundred people. Then go hire thousands in China to do the manufacturing.
I just read the article. Like most big-media pieces, it took about 30 seconds. Yeah, I like that last line–what could be more pathetic?
While America’s faith in its innovation economy has often been tested, it has never been betrayed. Given the chance, the economy will deliver the jobs and prosperity that it has in the past.
Thank you, Horatio Alger! Never been betrayed? What was that thing I heard about a Great Depression?
When the media parrots get this dumb, you know we’re really in trouble.
Just to put some perspective on this, longer term the big challenge will probably come more from India than China for the US and the West. China, believe it or not, is aging rapidly, so much so, that according to this policy paperChina will be old before it has the resources to support such an aged population. Longer term prospects, it would appear, despite the current boom in China, favor stagnation at best for that country.
Some quotes from the above:
On India:
On China:
The upshot is that while Asia as a whole will be doing better in the future, the long-term prospects for India are much better than the long-term prospects for China.
Most ironically of all, while we slowly bankrupt ourselves, our former adversaries in Russia are quite literally dying out:
Hmm. Maybe I should go back to being the Voice of Doom after all.
Well, of course there are plenty of other industries than the semi-conductor industry. In addition, I hate to tell you this, but the semi-conductor industry is whats called a mature technology. Its not exactly cutting edge anymore and hasn’t really been so for a while. Think about the Transistor (or even the older vaccume tube era) industry just prior to the advent of IC’s and semi-conductors. No one had an ‘inkling’ either of what was coming. There also were no known ‘killer apps’ forseen. And basically everyone could and did make the things.
You are right though. I can’t predict the future. I have no idea what scientific or technological breakthroughs that might (and probably WILL) occur next week or next month or next years. But if you are basing your position on the SC industry then I think you are misunderstanding the difference between a wide spread, generally known and understood and mature technology and something thats truely cutting edge. In the SC field there will most likely only be incremental improvements…and in fact have only BEEN incremental improvements to the technology for some time now. Thats why countries like China and India are so heavily involved in that industry…its a mature technology and something they have ramped up too. But thats my point. They are geared to that technology…to providing the US/Europe/Japan with a very vertical and narrow product line. If someone comes up with a totally different technology that replaces SC (to use your own example) then they will not be able to readily switch over to whatever the new technology is. To me the reasons are pretty obvious. The capital investment to ramp them up would be formitable. A new process is not something that is going to be initially widely diseminated, especially not to such countries. Its not like they have vast resources to reverse engineer something like that either. So it will be some time before it bubbles down to such places.
Well, I never made the statement that they would provide short term markets for US products so not sure what you are responding too here. I think eventually they WILL provide new markets not just for US products but other countries too, but thats 20 years or more down the pike. My point was that they are niche providers (for labor, manufacturing, services) catering to US (and other countries industries) needs and wants. That doesn’t give them the flexability to shift radically into a whole new direction (if one comes…which I think is pretty likely to happen in the next 5 years, and which you don’t).
Do you have a cite to back up this statement, because at least when I was in India this didn’t seem to be much the case. Most of the people working in India did not seem to purchase much of the products they manufactured. They were mostly exported. In fact, in many cases I remember they actually IMPORTED electronics (fully manufactured electronics) as they were building parts and components. This might have changed since I was there of course, and I was never in China (I was in Hong Kong but that was before the turn over) so I’d be interested if you can back up the statement that China and India are currently consummers of their own products.
You seem to be trying your best to put some kind of racist lable on me with this and the above paragraph, or at least in misunderstanding what I’m saying. I’m not saying that Indian or Chinese laborers are programed to be some kind of colonial slaves to the US. Where are you getting that from?? I’m saying that Indian and Chinese industries are currently oriented narrowly to providing goods and services to our (and other industrial nations) companies.
In other words, say that a clothing company in China has contracts with The Gap here in the US. Their production, quality control, patterns, etc are positioned and maintained to provided THOSE products to The Gap which The Gap requests and desires. Same with component manufacturing. If Sony has a contract to a company in India to manufacture components, then the company in India is oriented through their manufacturing processes, quality control, etc, to provide Sony with what they want. As far as I know, that remains the stage Indian and Chinese companies generally fall into. Of course this will change as more capital is poured in, and I have no doubt that in the comming decades that both nations will evolve into something much more dynamic…much like South Korea and Japan did. However, at that point they will most likely not be such vast sources of cheap labor anymore (just like Japan and South Korea are no longer vast sources of cheap labor) and the focus of outsourcing type companies will shift to other cheap labor areas.
Right…exactly. They are pouring billions of dollars into manufacturing SC technology. However, what happens if the next ‘big thing’ ISN’T SC oriented? If it basically obsoletes SC technology? Pouring billions of dollars into purchasing capital equipment for India or China doesn’t give them R&D money or orientation…it simply allows them to manufacture components to the companies in your industries standards more cheaply. Once the ‘nice new industry’ comes along, you’ll have to again pour billions of dollars into those countries infrastructure to once again ramp them up to the great new thing. And basically companies that initially develop whatever it is aren’t going to do that in the short term, but instead capitalize on it (remember that whatever it is will initially be fairly expensive…look at DvD players to see the progression Im’ talking about) with local labor and manufacturing or services. LATER there will be a rush on to outsource whatever it is to cheap labor countries (after the technology is widely copied and becomes more mature and more readily available) to cut costs and maintain market share.
Definetly…and its a huge downside. It seems to happen all the time, and as the world gets more technologically advanced it happens more often…and its more devastating to those caught in the middle. A look at the telephone industry is a good example of folks displaced by technology…or even by success (like telephone linemen and such). Any new advance that obsoletes an older or more mature technolgy is going to displace all those folks that have there careers tied to that older industry. I don’t think there is a way around that.
Well, it was just an example to try and convey (probably poorly) my point. However I think you are failing to really look deeply at the example. Ok, so we have a new energy source. Yes, the big energy companies will most likely shift personnel, but they will ALSO, at least initially, have to continue to support the old hydrocarbon based energy extraction and distribution. So they will HAVE to hire, at least in the short term. And then there are the auto manufacturers. They also will be divided, at least initially, until the market is fully penetrated by the new product line and they can discontinue the old. And then there are the repair people…have to be pretty much a new breed, unless you think a guy that is steeped in internal combustion can just switch over easily to something radically different. Then there are the spinnoffs like laptops and other electronics that will be using the new fuel cells as power sources. Something like that could have a huge short term (say 2-3 years…maybe more) on increases in local labor as companies scramble to bring products to market and gain market share in their various fields. After that then, again like most other industries/services, there will be a fall off as companies look for ways to cut costs to maintain profits and market share against stiffening competition.
Most companies that come up with a radically new technology or process want to, at least initially, keep it pretty close to the vest. I seriously doubt that a company that comes up for a radical replacement for SC or a new fuel cell that replaces internal combustion engines or batteries would be willing, initially, to go to the expense of building up the infrastructure in another country. Not only the expense but the distribution of a protected technology would give them pause. I remember IBM getting burned in Japan because they tried to do something like this in fact. The canny Japanese basically took the technology, copied it and they started making it for themselves…screwing IBM in the process. And I don’t think countries like India and China are that far out of being ready to do such things and go into business for themselves so to speak. At any rate, a lot of companies in the US (and at a guess other countries too) took that to heart, so I have my doubts that some cutting edge technology, at least initially, is going to be outsources right away. That usually comes after the markets are throughly penetrated and there is stiff competition from other companies for market share in an effort to cut costs. Initially costs won’t really be as much of a factor (depending on what the ‘new thing’ actually is, of course).
Right, but again Intels technology is widely competed against…there are many other companies that also make SC, IC and processors…so it makes a lot of sense for Intel to outsource to cut costs and maintain market share. Intel of course does the majority of its R&D and experimental manufacturing in the US…there is a plant that does such right here in New Mexico in fact. And of course, if Intel comes up with a radical new processor that uses nano-tubes and some exotic black hole technology and obsoletes silicon and the silk screening processing, then they are going to initially manufacture such here in the US…not in China or India. Again, there are several reasons for this I’ve already discussed.
Anyway, thanks for the interesting discussion, Aeschines. I usually avoid these economics threads, merely peaking in as I’m not in the same league as most of the other regular posters. I don’t have an MBA nor did I study business in college, nor do I find the esoteric economic theories and counter theories appealing. My only redeeming quality in this is I actually own a company that does this kind of thing, having built it up from scratch to a present 7 figure a year affair…and one that has increased in value every year (as well as increased our staff, both local and foriegn) and will do so again this year. And I started this company, ironically, when Williams Communications/Nextira One (my old company) folded in 2001 and I lost my job.
