Wow, I didn’t even have to write a response –Dissonance and Dr. Love more or less expressed my thoughts perfectly. Thanks, guys.
Just want to back up smiling bandit, even tough I am not as annoyed as he seems to be, his reaction was to the the totally UNTRUE claim that economies only grow through exports, and I for one am glad he nipt this reasoning in the bud.
This is just ridiculous. Investigating, inventing, developing new technologies is what America is doing best these days. Not only in science and engineering and computers and biochemistry etc but in entertainment, business management, marketing, etc. All those are activities which are services, they do not produce anything tangible, they produce knowledge and information which is worth much more than the labor used to produce widgets in China.
The best way for people to have a high standard of living is to do jobs which are productive and valuable, it does not matter a thing if they are producing material goods or services. Doctors, lawyers, engineers provide highly valued services and make money. Labor making widgets OTOH is poorly paid.
I would say that the thrend has been and will continue to be that the successful economies will have bigger and bigger services sector and that to try to stay with manufacturing is to not understand the economy and to try to stay in the past. And this is not a good strategy.
You are confounding things here. The problem is not whether the American economy produces more durable goods or more services. That is totally irrelevant to the problem you bring up which is caused by America spending more than it produces. THAT is the problem you point out. It does not matter if your job is making pants or mowing lawns. If you spend more than you make then you are in trouble just the same. The nature of your job is irrelevant. America today is consuming more than it produces. That is the problem.
I agree. There is also a line of reasoning that thinks that all of China’s development is due to American imports from China and if Americans stopped buying from China the whole country would come to a standstill. Besides the point that China exports massively to Europe an Japan, China’s own internal consumption is huge and growing exponentially.
The fallacy if the need for export can very easily be seen if you consider aggregated or dis-aggregated data. Suppose two countries, A and B, which import-export mutually. That’s good. Now you take them as an aggregate and they no longer import-export. Nothing has actually changed but now we say it is bad? Ar individual American States also required to export to have good economies? Counties? Cities? Neighborhoods?
If you take the entire world in aggregate the import-export balance is zero and yet the world has managed to progress quite a bit over the years and centuries.
Thinking the economy is a zero sum game is probably one of the most damaging ideas to the wealth and progress of nations.
One of my favorite lines from any movie is from PHILADELPHIA where Denzel Washington says “explain it to me like I am a four year old” as a way of cutting out all the techno/high philosophy double talk BS.
So somebody please explain this to me like I am a four year old.
What does 21st century America do with the large number of people with IQ’s in the 80 to 95 range in this new service economy where manufacturing has been sent overseas to insure them a stable and middle class life?
In my family, there are several older men who were not at all bright people. They never finished high school, dropped out, went into World War II as soldiers and served honorably. When they got out, they were not college material and they knew it. They got jobs in factories - and I am going to use a dirty word here but please forgive me - union jobs - at worked at them for the rest of their working lives.
Because of good union contracts, they were able to move to the suburbs, buy decent houses,get married . have kids, but a new car every five years or so, and live a stable and middle class life. They were solid citizens and good members of the community. They were the backbone of American through the Fifties through the Eighties.
Please explain to me what happens to these people in your new Brave New World service USA.
And then explain to me how you can have a successful America with a thriving Middle Class the way we did then.
I posted a thread asking this very question recently (well, not phrased so politely!;)), and was not impressed with any answers. I really can’t see what role less intelligent/educated people have in our future economy.
But on the issue of services, I guess it doesn’t really matter whether our economy produces goods or services, so long as it produces SOMETHING that others will want to buy. My impression is that the majority of services can be produced elsewhere cheaper. So there is little reason for foreign nations to buy from the US what they can buy cheaper elsewhere (or in-house).
And if you abandoned produced goods and raw materials as exports, and folks stop buying your services, what is left?
Your mathematical reasoning is 100% correct but fails to consider certain real-world issues such as standard of living for the citizens of each of the countries A and B.
Let me try to explain with an absurd example I’ll borrow from a statistics joke: suppose you stick your head in an oven heated to 148 degrees and your feet in ice water of 48 degrees. The mathematics says you should be fine because the average is 98 degrees! Yep, your whole body should aggregated as a “holistic global system”. Hmmm… what about how the “local” body parts of your head or feet actually feel?! Obviously, there is a flaw in how we’re thinking about this.
Every mathematical model has to simplify reality by ignoring details. Your mathematical justification of aggregate trade ignores the local standard of living of each country’s (or each city’s or county’s) citizens. The local citizens (Americans) have come to expect a certain lifestyle from products on the world market (eletronic gadgets, oil, etc) so if their financial situation becomes worse in comparison with Japan or Germany, those citizens psychologically will not care that they’re part of a mathematical aggregate that is doing ok.
Yes, individual component economies of states, cities, etc must be considered if you’re trying to analyze the standard of living of each respective area. One can drive through Detroit Michigan and see it is in decline. Does that mean Detroit residents should be happy because California and Florida and the rest of the aggregate USA is doing better?
And relying on math reasoning that is 100% correct but generates overconfidence in false wisdom is also a damaging idea – maybe even more so.
Just wanted to clarify that my post above deliberately assumes the premise of USA exports as a requirement. It will make more sense if interpreted that way.
I do agree in theory that exports are not required for a thriving economy but the USA in its current configuration is not such a country as I’ve already explained earlier.
Let me turn this around and ask you how we are supposed to maintain our current standard of living while maintaining all of these low skill, high wage jobs?
The problem with Mr. Buffet’s line of reasoning is that he assumes the pie size is constant. He writes:
The problem is that he assumes the $50 trillion would be $50 trillion with reduced imports and foreign investment, which isn’t necessarily, or even likely, true. In other words, if factors that caused the trade imbalance also caused the pie to be $50 trillion instead of $45 trillion, then we still come out ahead even if foreigners now own $2.5 trillion of that pie.
In reality, what is happening is not thriftsville vs. squanderville. It’s efficientville vs. inefficientville. As a result of the foreign trade, 1.1 billion Chinese are much more productive workers than they would have been without the trade. As a result of foreign trade, the U.S. has had a vast increase in the amount of capital available for economic development. The world’s economy is bigger because capital is going where it will be most efficiently used, and it is bigger because we are more efficiently using labor.
And then explain what happens when the emerging economies start providing their own ‘services’.
treis
thank you for NOT answering my question. 
This only serves to underline tha basic idea that its not real people with real problems in a real workd that the Right cares about. its all theory and philosophy and idealogy and Econ 101 as taught in the local community college.
I will answer your question however.
That would depend greatly on how you would define a job as “low skill” and jobs as “high wage”. I certainly would NOT call a middle class job paying a person 50 to 60 K per year as “high wage”. I would not call someone who operates millions of dollars of potentially lethal machinery for a living “low skill”.
Everyone who makes a decent living contributes to the collective standard of living of our nation.
I think 50 to 60k per year is high wage. Median yearly income in the States is somewhere around 48k for adult men. I make that much, and I easily could live the lifestyle that you describe. As for low-skill, I assume that’s what you meant by “jobs my uneducated, less than bright relatives” could do. I don’t see the relevance of the potential lethality or dollar value of a piece of machine either. If all the person is doing is screwing the same 5 screws in over and over, it doesn’t matter if he is doing it on a $500 frame, or a $5 million piece of equipment.
I hate this idea, and I hate the glorification of the factory line worker. The backbone of America is not line workers, and it never has been. Every country in the world has people that can tighten the same 4 bolts over and over again. No, the backbone of America is the entrepreneur. They are the ones that invent the new products, come up with the new processes, or found new businesses that provide the rest of us with high paying jobs.
The ideal I have of American workers are the people that stay up late at night so they can get their degree. They are the people that pour 15 hour days with little pay to start up their own business. They are the ones that abandon an easy path through life to create something greater. The guy that drops out of high school and punches a clock at a factory is just about the lowest rung on the acceptability latter. We shouldn’t loathe or despise them, but to hold them up as the ideal is asinine. If everyone tried to do what they did, we’d end up as a 3rd world country.
Treis - I must say that you have an umistakable streak of elite snobbery about your ideas that color every statement you make.
So 48K is a middle class income but 60K is a high wage income? And your source of that is because you make the first but not the second?
You seem to confuse measurable academic intelligence with job skill and the ability to continue to do that job each and every day for thrity to forty years. I could turn this around and be a snob in my own way and denigrate and criticize the complete lack of skill it takes to be a salesperson- little more than a fast talking con man if you get down to it -
or middle management white collar worker… kiss up and say it smells good while kicking and cutting downward …
or the amazing high skill job of financial paper pusher … get people to remortgage homes to churn high fees and then dump those contracts down the road because you know they will be worthless
we could do this all day.
So you do not recognize the union worker as the backbone of America. Fine, its a free country. But go to any big Eastern or Midwestern city and go out into the working class areas and suburbs and you will find acres of three bedroom homes on modest lots populated by these folks. They made our products, they fought our wars, they did the civic work of building a society and they are the ones who are counted on from year to year for social stability.
You and your glorious eager beavers who invent the Ronco peeler in their basement. Great. How many of those folks are there and how many of those factory folks built America?
Do you have some idealogy that excludes one at the expense of the other?
You still have not explained to me what we do with all those folks who used to make living wages in factories but now we have no room for them anymore.
Do not worry about those people. They are taking good care of themselves. They are doctors, lawyers, engineers, scientists, businesspeople, etc. You need not worry about them.
Now you are totally confusing reality with your wishes of what reality should be like. It does not matter how much you wish it weren’t so but when the doctor tells you that you have a tumor and he has to amputate or you die, then you better amputate. Arguing with the doctor and saying “no way! what am I going to do without my left leg?” is going to make no difference.
The world changes all the time and you cannot go back in time. I suppose the southern slave owners also whined about how they were going to live without slaves as well as they did with slaves. Like they were owed such a life for ever for themselves and their children.
Where is it written that Americans without an education deserve to live better than Chinese with a good education and productivity? It will not last forever and it is only fair that it do not last forever. It is only fair that Americans compete with the Chinese on the same terms.
The world in the 20th century was based on the premise that 10% of humanity live well while 90% are dying or, if lucky, being exploited. That foundation is being eroded and I for one am happy about it. I do not think ignorant or lazy Americans deserve to live better than industrious Asians.
You may not like the future but it is coming whether you like it or not. There is no way to delay the future. It is here. Either you adapt and make the best of it or you will just be washed aside. Those who adapt will have no problem. Those who don’t will be left by the wayside. That’s how it works.
And just to reiterate. Plenty of people make perfectly good living selling their services. Whether they are building homes, mowing lawns, designing computers, pulling teeth, doctors seeing patients, lawyers, etc. they will survive.
Those with no skills will have a hard time and I don’t think society owes them anything. This is relaly the lesson which should be taught to young people: get a good education which will allow you to do something for which there is a demand. The days when you could comfortably maintain a family on a salary of flipping burgers are gone and they won’t be back.
Again, I am not saying people will like it. Look at the present crisis. Nobody is liking it but that is not making it go away. Americans may not like that new economies are growing and becoming competition but not liking that is not going to make it go away. The closk has struck the 21st century and we are not going back to the 20th century no matter how much some people would wish we could.
When you expect too much, when you believe you are entitled to a lot while you produce less than that you are living on credit and the result is quite predictable. The only way to avoid disaster is to face reality and start spending less. But that is the only solution Americans do not want to hear.
The rest of the world is not going to pretend we are still in 1950 though.
This is a false question because it assumes America could continue to produce manufactured goods at a competitive price. It can’t.
Again, there is NO difference in value between goods and services. You need to produce value, it does not matter whether in the form of services or in the form of durable goods. The question really is: what can America (or I) produce which is of value? Whatever you can best produce and has value that is what you should produce. Maybe it is movies or medicinal drugs or computer software or whatever but insisting on clinging to the past and on competing in industries with low added value is foolish.
If the world economy has determined that the salary of a factory worker is $200/month, which is what they are paying in China, there is just no way to compete with that unless you pay the same workers in America $200/mo. The solution is to train them to do jobs which are more valuable. It is not possible to make those jobs more valuable by government decree.
This is just silly. Again, you are not facing the inevitable reality but only hoping it will not come.
A country, any country, makes a living by producing something of value. Are you telling me the day will come when America does not produce anything of value? I do not believe it but if you want to see what a country which produces nothing of value looks like you can look at Cuba or some other thrid world countries.
You are just assuming Americans have an inherent right to live better than the rest of the world and therefore some means must be found to perpetuate that. And I have news for you: neither that right exists neither there is a way to perpetuate the present situation. Emerging nations demand the right to compete and they are getting it, whether America likes it or not.
America has two choices: (1) sell crap as cheap as China does it, or (2) sell high value-added products which othe nations cannot compete against.
Hoping for the days when uneducated Americans could live better than educated people in other countries is as futile as hoping 1850 would come back with slavery and all. Those days are gone for good and a good thing it is too.
I asked this question
*What does 21st century America do with the large number of people with IQ’s in the 80 to 95 range in this new service economy where manufacturing has been sent overseas to insure them a stable and middle class life? *
and Sailor replied
Quote:
You could have said simply “screw them” and saved the other 24 words. I guess every day you learn something new is a good day and I should thank you for informing me that that those persons with below average IQ’s from factory jobs will end up as doctors, lawyers, engineers and scientists.