Sunday, May 1, 2016

Changing from a U.S. Economy Focused on Manufacturing to One Based on Services ... Message for Donald, Bernie and Hillary ... Maintaining America's Greatness

America is NOW a great country, it has always been a great country, and it will remain a great country as long as its citizens, aka We the People, are free to pursue our chosen paths and dreams -- and to tell each other the truth as we see it.

Americans also know for a fact that freedom doesn't come free. We know too that many of the good things 'provided' to us from government first have to be paid for by taking money from other Americans. With respect to its economic role, government is simply a high cost conduit that produces nothing that the private sector can't produce much more efficiently.

Most Americans also know that politics sucks, especially in an election year, and that truth telling often isn't part of the political landscape, regardless of who's doing the spinning, aka vote seeking.

We also know that our future will be what We the People make it to be, and that the only constant is change.

Finally, we realize fully that the manufacturing sector isn't the jobs provider it once was, and that it won't ever be so again. That's the result of advancing technology and ongoing global competition, which also bring to us greater consumer value offerings in exchange for our hard earned dollars, regardless of what the politicians would have us believe.

The Mirage of a Return to Manufacturing Greatness lays out the future American manufacturing story for us, and while it's not a totally pleasant story today, it is one which needs to be told:

"Half a century ago, harvesting California’s 2.2 million tons of tomatoes for ketchup required as many as 45,000 workers. In the 1960s, though, scientists and engineers at the University of California, Davis, developed an oblong tomato that lent itself to being machine-picked and an efficient mechanical harvester to do the job in one pass through a field.

The battle to save jobs was on. . . .

These days, the battle to save American jobs has a different flavor. It echoes in Hillary Clinton’s promise “to win the global competition for manufacturing jobs and production.” It lives in Donald Trump’s call to break Nafta and impose a 45 percent tariff against Chinese imports, and in Bernie Sanders’s rallying cry against trade agreements. . . .

By the year 2000, only 5,000 harvest workers were employed in California to pick and sort what was by then a 12-million-ton crop of tomatoes.

In America’s factories, jobs are inevitably disappearing, too. But despite the political rhetoric, the problem is not mainly globalization. Manufacturing jobs are on the decline in factories around the world.

“The observation is uncontroversial,” said Joseph Stiglitz, the Nobel-winning economist at Columbia University. “Global employment in manufacturing is going down because productivity increases are exceeding increases in demand for manufactured products by a significant amount.”

The consequences of this dynamic are often misunderstood, not least by politicians offering slogans to fix them.

No matter how high the tariffs Mr. Trump wants to raise to encircle the American economy, he will not be able to produce a manufacturing renaissance at home. Neither would changing tax rules to limit corporate flight from the United States, as Mrs. Clinton proposes.

“The likelihood that we will get a manufacturing recovery is close to nil,” Professor Stiglitz said. “We are more likely to have a smaller share of a shrinking pie.”

Look at it this way: Over the course of the 20th century, farm employment in the United States dropped to 2 percent of the work force from 41 percent, even as output soared. Since 1950, manufacturing’s share has shrunk to 8.5 percent of nonfarm jobs, from 24 percent. It still has a ways to go.

The shrinking of manufacturing employment is global. In other words, strategies to restore manufacturing jobs in one country will amount to destroying them in another, in a worldwide zero-sum game. . . .

Manufacturing . . . can quickly employ lots of unskilled workers. . . .

Moreover, production isn’t constrained by a small domestic market: Exports of goods can easily flow around the world, allowing industry room to grow and giving developing countries time to ride up the ladder of income, skills and sophistication.

The natural resources that dominate the exports of many poor countries don’t have these features. They employ few workers and offer little added value. They do not encourage acquiring skills, and they expose countries to violent swings in commodity prices.

High-end services such as finance and programming do pay well. But these aren’t the service sectors most poor countries build. A majority of service jobs in most poor countries are generally limited to housework, mom and pop retail and the like. Since these sectors offer little productivity growth and are generally isolated from foreign competition, they cannot pull a nation out of poverty.

The first large transition from agriculture to industry in the early 20th century — well lubricated by public spending on world wars — liberated workers from their chains far more effectively than Karl Marx’s revolution ever did.

The current transition, from manufacturing to services, is more problematic. . . .

Note to Mrs. Clinton, Mr. Sanders and Mr. Trump: A grab at the world’s manufacturing jobs is the wrong answer. Walls will damage prosperity, not enhance it. Promises to recapture industrial-era greatness ring hollow. . . .

Yet just as the federal government once provided a critical push to move the economy from its agricultural past into its industrial future, so, too, could it help build a postindustrial tomorrow."

Summing Up 

Why not increase starting pay for America's workers and decrease taxes paid by those employers who hire the workers? And why not do it one dollar of increased pay for one dollar of reduced taxes? 

We've long since transitioned successfully from what was once an agricultural to an industrialized economy. And that economy has provided millions of good jobs for a multitude of unskilled and semi-skilled workers. 

But now those days are gone and it's time that we learn to make the successful transition from an industrial to a postindustrial services oriented American economy.  

This will require better educational outcomes, higher skills and a new learning curve for America's world leading workforce. We're ahead now and can stay ahead, providing good jobs and good pay for people skilled in the developing service oriented economy of the future.

But focusing on trying to make happen what is being driven by modern technology in the U.S. and low paid largely unskilled workers in China and the developing world won't make our inevitable transition to a services oriented economy any easier or any quicker, let along any more successful.

I don't pretend to have the answers, that's for sure, nor do I believe that anyone else has them. However, I do believe that it's time we start asking ourselves the right questions.  

And those right questions about job creation, higher wages and a stronger economy are directly related to an emphasis on greater output and productivity in the service sector and not on local manufacturing.

At least that's my apolitical, non-vote seeking take.

Thanks. Bob.

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