> The US has added around 800,000 jobs in manufacturing employment over the last two years, employing around 13 million workers
It's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
1. 50% tariffs on China, and
2. $100B of subsidies to chip makers and green tech...
The reversal of Reaganomics we're living through will become permanent for at least another generation, and for good reason. Maybe a good time to start a company selling to the government.
I had a professor remark once (this is circa 2009) that we should all learn a highly skilled trade around advanced manufacturing because eventually offshoring will reverse itself and by your early 30s you'll be in a prime position to profit immensely off the re-shoring of advanced manufacturing equipment and processes
Maybe he was right. I'm in my early 30s now, and I don't regret becoming a software engineer, but all the highly skilled tradesmen I've met in the last 5 years make at least what I do, often more, and have the benefit of actually owning their own businesses or real, meaningful slices of other ones.
I'll boldly admit I don't think I would like over physical labor and I do wonder about the toll of it long term, but they make a killing, especially the ones willing to travel all over the US.
Granted, the highest earner I know has both a degree in CS and Industrial Engineering, and goes all over the place working with industrial robotics and makes piles of money doing it. More than elite SV companies in the last 3 years, IIRC, if you discount the stock based compensation package (simply salary to salary comparisons) its north of 300K.
And arguably better retirement benefits, I think 12% goes to the 401K and they get bonuses every quarter right now. Well invested I bet he'd come out ahead. Can't for the life of me remember the name of the company though.
EDIT: forgot to mention the folks making tons of money on the DoD now starting to require things made in the USA and sourced raw materials from either inside the US or from friendly approved countries from the last few years either, and I don't think that's going away any time soon. They've in the last 2-3 years started paying lots and lots of money to get suppliers that are US based and source their raw material from friendly nations only, and they pay alot of money to make it worth while.
> the highly skilled tradesmen I've met in the last 5 years make at least what I do, often more, and have the benefit of actually owning their own businesses or real, meaningful slices of other ones.
_This_. A lot of software developers think they are the only high earners out there. Skilled tradesmen are making a killing in europe as well. And unlike software engineers, the path to starting an actual business is much shorter and the growth potential much higher.
I really envy anyone working in Industrial Robotics. It's such a fascinating field. Automating physical things is so much more rewarding than automating digital things.
>have the benefit of actually owning their own businesses
This sounds like a business is just something that happens to fall on your lap while you're fixing a pipe rather than something that you build with your blood sweat and tears. Most tradespeople make nowhere close to 300k. Their success is credited to their hard work, not their happening to choose the trades.
FWIW, re: comparing to "elite SV company" compensation, it doesn't really make sense to discount stock, since stock at the "elite" SV companies is effectively cash, because they're public. Unless you mean that your friend is also making a significant amount of stock, but since you can't value it (e.g. the company is private), it's harder to compare to the "elite" SV companies.
I know Google was handing out $385k total compensation offers ($200k salary, $150k stock, $35k annual bonus) in 2020 to senior software engineers, and Google's 401k matching is 50%.
I dont get it. Why did he say it will reverse? Do you think other countries arent offering freebies or a high skilled labor at cheaper rates than the US?
The US has outsourced so much, this cash dump is just going to head straight into the pockets of cronies who will then say 2-5 years they need more.
Another important factor is that China's workers make more money than they used to, especially relative to the West. There's not as much of a cheap-labor-arbitrage opportunity as there was in the early 2000s.
It also doesn't hurt that advanced robotics (an area the west has traditionally done well in, sometimes being more advanced) has continued to have breakthroughs.
"lights out" manufacturing[0] can happen with more and more things. The humans in the process can become minimal (thus shifting more costs to fixed capital costs rather than variable costs)
it's been fascinating seeing the expanded representation in imported goods. I bought a baseball the other day and it was made in Cambodia. I think that was a first for me. Seeing lots of tools shift to Taiwan which has long been in the tool fabrication business. Textiles from India. Seems like the stuff I'm seeing in stores in the last say 6 months have dispersed away from China. I think a lot of plastics still come from China I want to say though.
My guess is that the increase in tariffs had little, if anything, to do with it; the article doesn't mention it but does cite CHIPS and the IRA. If anything the tariffs were one of the causes of our recent spike of inflation.
My own opinion is that 40 years of globalization have lifted a billion people out of poverty and now the global pay scales aren't so vastly different. It is becoming more economically viable to produce things in the US. (Which will also put pressure on higher inflation.)
Has any manufacturing facility supported by the CHIPS and Science Act been completed or made operational? The parent commenter is citing manufacturing employment numbers, which are unlikely to be impacted by prospective factories.
Has the Inflation Reduction Act had any positive impact on manufacturing either? Its main provisions seem to be related to economic redistribution, climate change, and infrastructure, all of which may have long-term impacts on industry and employment, but don't seem to have done much in those areas yet.
CHIPS/IRA was the carrot. The tariffs, sanctions, rampant IP theft, supply chain shocks, Chinese lockdown labor shortages, specter of global conflict, energy shortages, etc were the stick. I suspect the whole is greater than the sum of the parts. Organizations are not rational robots that weight every factor and risk optimally. The conversation is probably more just wild gesturing at everything while cargo cult mentality takes over in the dozen boardrooms that control a majority of economic activity.
I suspect that the reliance on China for manufacturing combined with what sort of sanctions would be enacted when they attempt to invade Taiwan, would encourage the US and its European allies to insure they had a good manufacturing base to rely on. We have seen a number of things from the war in Ukraine but two that I think have been really impactful were the challenges of ramping up munition production in the US and the impact of factories rolling out thousands of inexpensive drones/week and those drones being deployed on the battlefield gave everyone a reassessment of some of the national security risks of globalization. Basically the lesson is that industrial war requires an industrial base. In WW2 the US had a vibrant industrial base that could be pivoted to providing war material.
Industrial base takes time to spin up, but if you have solid economy (as the US currently does) then using monetary policy and other incentives to push capital toward industrial base development is good for the country. It also plays well on TV since these factories are revitalizing towns and cities that previously were suffering from a lack of industry.
As a result, I don't see these shifts so much as a "reversal of Reganomics" so much as a realization from the Russian-Ukraine war that "globalism" isn't something authoritarians really like. And if you're primary trading partner is run by an authoritarian regime, that is bad.
I think supply chain risk through peak COVID is also a huge factor giving this shift momentum. Supply chain shocks were comprehensible and visible to most Americans and impacted practically every business owner. It kickstarted renewed calls for localism and reassessments of worst-case scenarios for business continuity. Bringing up the home industrial base is a necessity for shortening those supply chains and bringing that risk under control.
Reducing risk from suppliers based in countries where government policy is less predictable or west-aligned was also highlighted by the pandemic. Shanghai locked down in May 2022, for example, and I am sure many Americans were surprised and annoyed at the time.
The one-two of COVID then the Russia-Ukraine war seems to have knocked us into a new alignment. Remains to be seen how it plays out against our current, difficult social backdrop.
Not blaming Reagan specifically, but the consensus that emerged in the early 80s was that all GDP growth was good, even if it skewed away from manufacturing toward finance, etc.
This basic belief allowed us to write trade deals that reduced manufacturing capacity relative to non-manufacturing.
Totally agree with you the Ukraine war has been incredibly important in previewing what would have been much worse in a Taiwan war.
I doubt these are the stable union jobs with decent benefits from 50 years ago. If we really want to reverse Reaganomics we need to increase taxes on corporate profits, capital gains, and inheritance.
Reagan wanted to get the U.S. back on the gold standard, which leads to balanced trade. He was talked out of it by Fed chair Volker.
What you call Reaganomics goes back to Nixon. I suppose that's probably just as well for you, but I don't think any administration between 1971 and 1991 (or even 2011 or now even) really thought "hey, let's take blue collar jobs and send them to Japan, and later China! haha! suckers!". Nixon didn't take the U.S. off the gold standard because that was something he yearned to do -- he did it because it was the only way to fund the then federal deficit. Sure, we would have been better off staying on a gold standard and being forced to cut that deficit, but every politician from Nixon onward -Democrat and Republican alike- kicked that can into the future. It's a non-partisan issue. Getting off the gold standard created easy credit junkies everywhere, and here we are. Junkies don't care about ideology.
> solution to decades of economic misery for middle class blue collar workers was 50% tariffs on China
Who could have thought that manufacturing using western labor and laws, can't compete with manufacturing in a totalitarian regime with no respect for human lives/rights or the environment? /s
Free trade should only happen as long as the trading partners share similar laws and regulation on human rights and environmental protections, otherwise people and the environment get screwed for the sake of corporate profits, so tariffs should always be in place to level the playing field and prevent such exploitations.
Part of why the US working class has been so angry isn't just the economic misery but the decades of being gaslit by politicians pretending that outsourcing to countries with no OSHA, no EPA, no concerns about carbon emissions, no workers rights, no unions, and radically lower wages is going to create jobs in America.
It's a clearly absurd proposition on its face. Of course that's going to depress wages and destroy jobs, especially in manufacturing.
I'm all for free trade with other free countries with similar levels of rights for workers and concern for the environment. Outsourcing elsewhere should be taxed proportionally to the gap in these areas.
If you want a simple to implement solution, a tax on a combination of wage disparity and CO2 emission disparity would be enough to capture most of the relevant differences. The latter can be very objectively checked using satellite imaging.
These agreements are not the only cause, if everyone would have kept on buying locally produced products, the jobs would have remained. Problem is that we bought the cheaper products, making it impossible for companies producing locally to stay profitable. We want our cake and eat it too.
The US is wealthier than ever and unemployment is persistently low. My fairly simple analysis of those two facts leads me to believe it's not a lack of jobs, but inequality that drives the misery.
Problem with this policy is that it will prevent poor countries from ever getting up the ladder. It also ignores the fact that many advanced human right respecting countries got there not without plundering less fortunate for generations.
Reagan launched the Uruguay Round of trade negotiations that led to the creation of the WTO, which itself resulted from the Bretton Woods system and the General Agreement on Tariffs and Trade (pre-cursor to WTO) that were established after WWII. The US had been on that trajectory for a long time before Bill Clinton put it into overdrive!
Boomers saying: "I don't want my kid to go to machineshop in HS, he'll turn out to be a plumber" is what did it too.
Building things has been looked down upon for 40 years because boomers thought it was a step backwards since their parents worked on the assembly line.
> NAFTA + China-WTO accession really did not help American manufacturing.
American manufacturing was declining way before NAFTA or China. The anti-japanese/asian period of 70s and 80s existed for a reason. The way we are attacking china today is how we attacked japan in the 80s. The only difference is that china isn't going to back down like japan did. Far easier to bully a nation that you militarily occupy.
The trend isn't going to change. Manufacturing will go to ASEAN and India next. All the propaganda about "factories in the US" exist to distract from that reality.
> Maybe a good time to start a company selling to the government.
Why do you think this sudden rise in industrial investment? The US didn't turn attractive overnight. This is the "economy" selling to the government their $280Bn CHIPS package.
> It's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
A 50% tariff does not affect attractiveness. You did not address the core issues, as the tariff will hide it. What will happen is free market economy at play: As the issues are hidden behind tariffs/protectionism, the US will keep falling behind China until you are significantly behind that you can't catch up. Then you become a real third-world country.
Economic philosophy always ignores the real humans who will exist regardless what cherry picked economic markers indicate.
Reality will never care about any human philosophy. Humans will invest agency in interesting things regardless of some model in a vacuum anyone can conjure. Finance is has something very in common with religion; something humanity has zero obligation to perpetuate.
You have no idea what you’re talking about because we’ll just “fix” the philosophy to align with the reality. Trying to “fix people” to serve the philosophy is not happening.
I dunno, my wife works in commodity management and the number of companies she's helped get out of China lately is staggering and they've straight up begged her not to move at times. Begged. I can't imagine how this looks higher on the food chain.
Is a 2020s factory in any significant way similar to a 1970s factory?
Given a factory from each era that produces roughly the same product and quantity, how many are employed at each? What are their inflation-adjusted wages?
It seems difficult to believe that modern factories can employ enough people for your blue collar middle class dreams to become reality. The difference in population alone is 200M vs 330M. And even modest improvements in automation has the modern factory at something like half the personnel of the 70s-era factory for the (roughly) same output.
Pick science or health instead of defense from the list on the left.. but you would be missing out on "MDA23-T002: AI-Informed Algorithms Combined with Differential Game Theory to Support Swarm-on-Swarm Engagements".. Basically to help them build Skynet.
An eye opener is the list of top contractors to the US government:
The coolest one is Atlantic Diving Supply (No. 24): it started as a small dive shop that just happened to be located in Virginia Beach.. some Navy Seals kept ordering things from them.. then 9/11 happened..
"All you young fellas building tech companies that aren't making any money, meanwhile Town Hall has a contract out for $100k/year to clean the floors and no one's bidding on it."
Gov also isn't just federal, there's state and local! In general, the federal government is really bad at procuring pure software products (with some exceptions like Scale AI).
Edit to add: If you're building in the space, YC cofounder matching also does events targeted to gov once in a while, and I personally am doing some ideating if you want to chat
3. Fracking. Cheap, abundant energy which is uniquely close both to very educated labour pool and either the most navigable river basin in the world, or the ocean.
Saudi Arabia, Russia and other countries may have more oil than US, but it's too far from there places where it would be usable for manufacturing.
And fracking itself was developed with massive amounts of government subsidy, which is conveniently forgotten whenever the issue of "subsidies" comes up.
There's also the political motivation of banks, which blindly trusted fossil fuel investments, leading to massive investment that was unprofitable in the first round of fracking.
When it comes down to it, fossil fuels are surviving, and continue to survive, largely as a cultural and political effort, as much as a technology effort. And once we move away from them we will be saving massive amounts of money that can be directed towards improving the economy in other areas that improve people's lives rather than damage their lungs and cause climate change.
"President Reagan decided Friday to impose punitive 100% tariffs on a wide variety of goods produced by Japanese electronic giants in retaliation for Tokyo’s failure to abide by the semiconductor trade agreement between the two nations"
Reagan also jacked up the national debt pumping $$$$ into defense technology and hardware development, but I suspect you know that neither tarriffs nor unrestricted government spending without an eye towards the debt is what "Reaganomics" is popularly remembered as.
Outside of the more immediately-public-facing stuff like tax cuts, Reagan's legacy is very much a "do what we say, not what we did" situation.
There are not just tariffs to china. It's became expensive for all countrys to sale things to the US. 10 years ago, we produced a lot for the US market in our factory, now I think, almost nothing.
I hear this a lot about Clinton, as if it is a condemnation. Seems conveniently forgotten that it was a Republican Congress, and Republican's were the ones pushing globalization, to help big business with all that cheap labor. And Clinton went along with it to be 'bipartisan'.
Do we think globalization failed? because it seems to me it's just getting rebooted from the business side. The cultural impact seems too out of the bag, railing against globalization in a Clinton context just seems like bad lens to be looking through
Maybe we shouldn’t consider this a success while subsidies are happening? We also gave $535 million to Solyndra to manufacture solar panels in 2009 and they imploded once our tax dollars stopped being funneled (as much) to them:
The real test will be once they stop taking our taxes and handing it to businessmen if they can stand on their own merits. Until then this is charity to the private sector.
This is the first time I've seen a non-politically motivated accusation that cutting off money had anything at all to do with their failure.
The tech reason was that they had a way to make thin film panels which was super promising for driving down costs due to a silicon shortage. But then Diamond based silicon tech emerged, eliminating the silicon shortage and reducing input materials, which outcompeted thin film on price.
Such is the way of innovation. Looking only at subsidies gives you a false picture.
We've subsidized things we consider strategically or economically important for, what, at least a century now?
It doesn't make sense to think of infrastructure and technological capacities as less important than agriculture anymore, when it comes to keeping some significant presence locally.
Manufacturing employment is roughly at the same place now that it was in 2020, and still substantially lower than where it would have been had the pre-pandemic trend continued, and even that was nowhere near returning the US to pre-2008 levels.
Construction spending is a terrible proxy for manufacturing - both because the size of a building you need isn't pegged to the value of your output (e.g. a $100 million dollar shop making aerospace components might have a tiny fraction of the footprint of a $1 million sweatshop making t-shirts), and because the cost of factory construction is determined by the cost of construction in general (i.e. if there was a real estate boom building residential buildings then you're competing with that for construction materials, equipment, labor, etc).
But also looking at FRED data we see that manufacturing sector productivity has doubled since ~1990, so it's not clear that headcount is the best proxy either. And if we look at industrial production or sector output we're still near (plateauing) all time highs
If you want to see a renaissance of manufacturing employment, then headcount is clearly the metric that matters.
The fact is that offshoring of manufacturing was a myth - the jobs never left, the industries just transformed in such a way that old, labor intensive processes were eliminated. Those jobs, and the economic prosperity they brought, are never coming back. It's merely a coincidence that at around the same time US manufacturers were computerizing their operations China was building 1920s level industrial facilities.
Certainly none of the data is indicative of a sudden boom in US manufacturing in the past 2 years which could be attributable to any recent decisions or events.
Would be interesting to see 'profit per employee' over time and see how productivity plays agains employment. Ultimately, we want full employment with competitive wages. Profitability relative to employment should tell us if we're on the right track.
Perhaps I'm just bad at economics, but it always seemed to me that the countries making all the stuff would eventually hold all the power (and I say this as someone working in tech who produces nothing tangible). The fact that it costs exorbitant amounts to construct new buildings, railways, etc. in the U.S. and how our cities almost look antiquated or frozen in time compared to Asian cities shows that we missed a generation or two and probably need to catch back up now.
> and how our cities almost look antiquated or frozen in time compared to Asian cities shows that we missed a generation or two and probably need to catch back up now.
It takes 75+ years for a rebar building to reach end of life. The US just built up during earlier decades than many of those Asian cities. In another 30 - 50 years those antiquated buildings should start getting replaced.
It always seemed to me that the country buying all the stuff holds the real power. It just feels far more possible to find alternative manufacturers than it is to find alternative markets.
lots of commodity markets are stuck on "lowest price wins". That means that management does not have as many options as you might think, since they will be put out of business if they cannot compete on price. This really happens quite a bit. Survivors of this brutal system are known to stockpile cash and other assets, for example Apple and their cash piles.
We’ll think about it from the tech perspective: the companies that control marketplaces and access hold all the power.
Sure you have companies like apple that make $$$ from hardware, but most HW players in tech get slowly replaced offshore. Silicon Valley was silicon valley because of hardware. Now it’s mostly software, and HW is increasingly a commodity.
It’s the same thing elsewhere in the economy… it’s easier to set up a factory to sell something anywhere, but when you control buyers, you’re rich. The US is still the shopping powerhouse of the world… and even massive markets like China can’t consume as much because they just don’t have as much money.
Yes, NYC looks and feels like an aging, antiquated city to me. I'd put D.C. above NYC -- it feels cleaner, newer, more efficient. Even London somehow feels less aged than NYC. Sydney, Helsinki, Copenhagen, and Amsterdam are a tier up again, and then cities like Tokyo and Singapore look like they're from the future.
Santa Barbara is a small town with a college/tourist/military economy. New York is an outlier by US standards in every sense, but if you've ridden the subway there you know it feels old, even though it's one of the best systems in the world on paper.
Economic power is held by those that are difficult to replace. THe US gave up on manufacturing because it's low skill work that is easy to replace, just follow the lowest labor cost. Generally I believe that the countries with educated workers and capital will eventually hold all the power.
China is no longer the "world's factory". It will stagnate for 10+ years, similar to Japan's lost decades, but with worser birth rate than Japan today. It reported 8M babies in 2022, low that was last reached in 1940s.
We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years. (factories moving out, which decreases downstream economic activities such as real estate and retail).
> China is no longer the "world's factory". It will stagnate for 10+ years, similar to Japan's lost decades, but with worser birth rate than Japan today.
idk, Japan seems like it thought the party would go on forever, whereas China does seem to have clear eyes with it comes to world politics (eg. long-term investment in the rest of Asia and Africa).
> We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years.
Do you recall NAFTA? or the quick rise of China not long after? These are still studied as huge exogenous economic shocks in business schools!
> China does seem to have clear eyes with it comes to world politics
You're hyping up Xi Jing Ping, who is considered an idiot in most elite circles including Putin, too much. One belt and one road is now considered a failure with Italy, the most prominent member, dropping out of it this year. Most of the countries that took on the debt are unable to pay it back, and China has had to forgive a lot of the loans recently. And no one has aligned US, Japan, South Korea, Taiwan, Philippines, India, Australia, Nato quite like China in recent years. The most recent focus in G7 was squarely on China.
> NAFTA
with respect to NAFTA, US manufacturing only consisted of 15% US economy in 1994 https://www.stlouisfed.org/en/on-the-economy/2017/april/us-m..., whereas Chinese manufacturing consisted 30% of China's economy today. Also, the difference is, the laborers in US manufacturing moved to other higher paying jobs, as a result, average income went from 25k to 30k in 2000. Whereas what we're seeing now with Chinese laborers is that they're moving back home to countryside to farm (< $1 a day)
By your numbers and those of others, both Eastasia and Eurasia are taking it on the chin. Oceania suffers from sociopolitical rot but the economy is pretty lively.
One government sponsored number, vs multiple numbers pointing to China's economic decline, which multinationals check in order to gauge the real health of China's economy. Multinationals know the real numbers, which is why they're all leaving.
It's also fundementally omitting how much PRC has entrenched itself as global factory than ever.
PRC exports to US/west near record highs while trade with global south have exceeded western bloc. The only reason export decline notable is because PRC exports has increased so spectacularly in the past few years (export value grew from 2.5T in 2019 to 3.6T in 2022) that there's nowhere to go but down when global economy underperforms. Net export value is still up ~40% since 2019 - exports stats can be confirmed bilaterally. PRC exports grew as much in last 4 years (~1T) as it did in decade between 2008-2018 (1.4T-2.4T). Meanwhile US increased imports from "friendshore" countries mirrored PRC increased exports to those countries, i.e. it's tarrif engineering and US import dependence on PRC ultimately still increasing.
When it comes to light manufacturing, sure, but they’ve struggled to just get to a point where they can do sophisticated heavy manufacturing at any kind of quality and this has been the result of US policy helping them out here. It wasn’t until Trump that this process ended and it became policy to not allow China to build a competitive heavy manufacturing industry. We will see if they pull through and become a rival in that regard as well; but I’m betting that now we’ve cut off their military from our tech and are pushing our companies out of China that they stagnate.
Their “miracle” was a US creation, a policy to build them up to create a counterbalance to Russia. It’s gonna take ten years to tell, but China is already feeling these effects and feeling them hard.
This was situation 10+ years ago. PRC's been phasing out low value add light industry for years. US export controls tried to limit PRC modernization even pre-Trump (see 5axis CNC bans, trying to cripple PRC compute under Obama). US didn't help - they were outplayed despite efforts to contain PRC progress. Yet PRC inidgenous heavy industries now basically competitive in nearly every sector hence trade wars since PRC indigenous efforts are increasingly displacing western products. Exception being aerospace and semi both of which are closable gaps. Everywhere else PRC has more or less caught up. By most metrics, PRC's already pulled through and still rapidly climbing up value chain, innovation indexes etc. The "effects" is PRC increasingly entrenched in supply chains everywhere, including friendshore destinations that's basically reassembling PRC components - see PRC trade with said destinations increasing proportional to US imports from said countries. It's how PRC went from capturing $8 in assembling fees from each iphone 3G to 25% of value add since iPhoneX. Or how PRC become largest car exporter.
That linked comment is also cherry picked stupid. PRC exports to US/west near record levels, WHILE exports to global south has officially surpassed western bloc, i.e. PRC is MORE factory of the world than at any point in the past. The drop in exports is due recent to global economic downturn that saps demand everywhere, but it's sapping from hilariously record high exports during covid. Meanwhile PRC export:GDP is like 20% down from 35% high in 00s, i.e. it's one of the less export dependant major economies in the world responsible for substantial global exports (including heavy industry) but it's not even an export driven economy anymore.
On demographic front, the reality is PRC is minting OECD combined in skilled talent every year and last 5 years of PRC topping citation (controlled for quality), innovation index is just lag affect of PRC growing with fraction of that talent. The PRC miracle is basically doing all that with ~20% skilled workforce, because at PRC scale that's enough to be globally competitive. Now it's in process to grow that competitive workforce to 50-70% skilled in next 30 years, which is adding anohter couple US worth of talent into the mix.
I hope this trend is real and will continue. Manufacturing is so important to a country. It creates jobs. It builds talent. It stimulates innovation. It improves the lives of millions of people. It keeps a country's defense strong and sustainable. Without a robust and comprehensive manufacturing sector, I don't know how the US can proper in the future. I pains me to see that BYD could produce millions of masks in days in spotless and fully automated factories, while GM workers labored at those manual machines that looked like the scraps from the Soviet Union. Oh, and the $20K toilet? The $200M+ fighter jets? The inability to manufacture the screen of Kindle even if we want to? The list goes on, and I truly want to see the current-day version of the US manufacturing of the roaring ages: cheap, innovative, best workers in the world, full domestic supply chain, and etc.
Maybe fewer jobs per square feet, but it's the natural evolution of manufacturing. What matters is we need engineers and workers on the floor so we can innovate and develop more senior talent.
China becomes less of a competitor on costs as wages rise there. Once the manufacturing wage differential gets into the 4:1 range, offshoring is less attractive. In the 2:1 range, offshoring starts to be a lose. That happened with Japan two decades ago.
There are many factors involved. Just to point out one, when the freeze and blackout hit Texas many makers of adhesives got stuck with volatile products in pipes and pumps. The reconstruction effort from that has been big enough that it is still going on.
Readit News
It's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
1. 50% tariffs on China, and
2. $100B of subsidies to chip makers and green tech...
The reversal of Reaganomics we're living through will become permanent for at least another generation, and for good reason. Maybe a good time to start a company selling to the government.
Maybe he was right. I'm in my early 30s now, and I don't regret becoming a software engineer, but all the highly skilled tradesmen I've met in the last 5 years make at least what I do, often more, and have the benefit of actually owning their own businesses or real, meaningful slices of other ones.
I'll boldly admit I don't think I would like over physical labor and I do wonder about the toll of it long term, but they make a killing, especially the ones willing to travel all over the US.
Granted, the highest earner I know has both a degree in CS and Industrial Engineering, and goes all over the place working with industrial robotics and makes piles of money doing it. More than elite SV companies in the last 3 years, IIRC, if you discount the stock based compensation package (simply salary to salary comparisons) its north of 300K.
And arguably better retirement benefits, I think 12% goes to the 401K and they get bonuses every quarter right now. Well invested I bet he'd come out ahead. Can't for the life of me remember the name of the company though.
EDIT: forgot to mention the folks making tons of money on the DoD now starting to require things made in the USA and sourced raw materials from either inside the US or from friendly approved countries from the last few years either, and I don't think that's going away any time soon. They've in the last 2-3 years started paying lots and lots of money to get suppliers that are US based and source their raw material from friendly nations only, and they pay alot of money to make it worth while.
_This_. A lot of software developers think they are the only high earners out there. Skilled tradesmen are making a killing in europe as well. And unlike software engineers, the path to starting an actual business is much shorter and the growth potential much higher.
This sounds like a business is just something that happens to fall on your lap while you're fixing a pipe rather than something that you build with your blood sweat and tears. Most tradespeople make nowhere close to 300k. Their success is credited to their hard work, not their happening to choose the trades.
I know Google was handing out $385k total compensation offers ($200k salary, $150k stock, $35k annual bonus) in 2020 to senior software engineers, and Google's 401k matching is 50%.
The US has outsourced so much, this cash dump is just going to head straight into the pockets of cronies who will then say 2-5 years they need more.
Here's a chart illustrating this point: https://i.insider.com/532ccb18eab8eadc39f33da6
Probably don't have chain correct, and it is different for different industries.
But there was definitely a progression of 'local salary goes up', 'time to move to next cheapest country'.
"lights out" manufacturing[0] can happen with more and more things. The humans in the process can become minimal (thus shifting more costs to fixed capital costs rather than variable costs)
[0]: https://www.roboticstomorrow.com/article/2016/10/is-a-robot-...
My own opinion is that 40 years of globalization have lifted a billion people out of poverty and now the global pay scales aren't so vastly different. It is becoming more economically viable to produce things in the US. (Which will also put pressure on higher inflation.)
Has the Inflation Reduction Act had any positive impact on manufacturing either? Its main provisions seem to be related to economic redistribution, climate change, and infrastructure, all of which may have long-term impacts on industry and employment, but don't seem to have done much in those areas yet.
Industrial base takes time to spin up, but if you have solid economy (as the US currently does) then using monetary policy and other incentives to push capital toward industrial base development is good for the country. It also plays well on TV since these factories are revitalizing towns and cities that previously were suffering from a lack of industry.
As a result, I don't see these shifts so much as a "reversal of Reganomics" so much as a realization from the Russian-Ukraine war that "globalism" isn't something authoritarians really like. And if you're primary trading partner is run by an authoritarian regime, that is bad.
I think supply chain risk through peak COVID is also a huge factor giving this shift momentum. Supply chain shocks were comprehensible and visible to most Americans and impacted practically every business owner. It kickstarted renewed calls for localism and reassessments of worst-case scenarios for business continuity. Bringing up the home industrial base is a necessity for shortening those supply chains and bringing that risk under control.
Reducing risk from suppliers based in countries where government policy is less predictable or west-aligned was also highlighted by the pandemic. Shanghai locked down in May 2022, for example, and I am sure many Americans were surprised and annoyed at the time.
The one-two of COVID then the Russia-Ukraine war seems to have knocked us into a new alignment. Remains to be seen how it plays out against our current, difficult social backdrop.
This basic belief allowed us to write trade deals that reduced manufacturing capacity relative to non-manufacturing.
Totally agree with you the Ukraine war has been incredibly important in previewing what would have been much worse in a Taiwan war.
Reagan wanted to get the U.S. back on the gold standard, which leads to balanced trade. He was talked out of it by Fed chair Volker.
What you call Reaganomics goes back to Nixon. I suppose that's probably just as well for you, but I don't think any administration between 1971 and 1991 (or even 2011 or now even) really thought "hey, let's take blue collar jobs and send them to Japan, and later China! haha! suckers!". Nixon didn't take the U.S. off the gold standard because that was something he yearned to do -- he did it because it was the only way to fund the then federal deficit. Sure, we would have been better off staying on a gold standard and being forced to cut that deficit, but every politician from Nixon onward -Democrat and Republican alike- kicked that can into the future. It's a non-partisan issue. Getting off the gold standard created easy credit junkies everywhere, and here we are. Junkies don't care about ideology.
Sample result:
Thank goodness they said "no"!Who could have thought that manufacturing using western labor and laws, can't compete with manufacturing in a totalitarian regime with no respect for human lives/rights or the environment? /s
Free trade should only happen as long as the trading partners share similar laws and regulation on human rights and environmental protections, otherwise people and the environment get screwed for the sake of corporate profits, so tariffs should always be in place to level the playing field and prevent such exploitations.
Don't allow Google or US media imports? Sorry, you can't export cheap manufactured goods.
It's a clearly absurd proposition on its face. Of course that's going to depress wages and destroy jobs, especially in manufacturing.
I'm all for free trade with other free countries with similar levels of rights for workers and concern for the environment. Outsourcing elsewhere should be taxed proportionally to the gap in these areas.
If you want a simple to implement solution, a tax on a combination of wage disparity and CO2 emission disparity would be enough to capture most of the relevant differences. The latter can be very objectively checked using satellite imaging.
Building things has been looked down upon for 40 years because boomers thought it was a step backwards since their parents worked on the assembly line.
American manufacturing was declining way before NAFTA or China. The anti-japanese/asian period of 70s and 80s existed for a reason. The way we are attacking china today is how we attacked japan in the 80s. The only difference is that china isn't going to back down like japan did. Far easier to bully a nation that you militarily occupy.
The trend isn't going to change. Manufacturing will go to ASEAN and India next. All the propaganda about "factories in the US" exist to distract from that reality.
Why do you think this sudden rise in industrial investment? The US didn't turn attractive overnight. This is the "economy" selling to the government their $280Bn CHIPS package.
> It's too early to know, but if it turns out the solution to decades of economic misery for middle class blue collar workers was
A 50% tariff does not affect attractiveness. You did not address the core issues, as the tariff will hide it. What will happen is free market economy at play: As the issues are hidden behind tariffs/protectionism, the US will keep falling behind China until you are significantly behind that you can't catch up. Then you become a real third-world country.
Reality will never care about any human philosophy. Humans will invest agency in interesting things regardless of some model in a vacuum anyone can conjure. Finance is has something very in common with religion; something humanity has zero obligation to perpetuate.
You have no idea what you’re talking about because we’ll just “fix” the philosophy to align with the reality. Trying to “fix people” to serve the philosophy is not happening.
Given a factory from each era that produces roughly the same product and quantity, how many are employed at each? What are their inflation-adjusted wages?
It seems difficult to believe that modern factories can employ enough people for your blue collar middle class dreams to become reality. The difference in population alone is 200M vs 330M. And even modest improvements in automation has the modern factory at something like half the personnel of the 70s-era factory for the (roughly) same output.
if only I knew what the government wanted to buy. Besides weaponry that is.
https://www.sbir.gov/sbirsearch/topic/current
Pick science or health instead of defense from the list on the left.. but you would be missing out on "MDA23-T002: AI-Informed Algorithms Combined with Differential Game Theory to Support Swarm-on-Swarm Engagements".. Basically to help them build Skynet.
An eye opener is the list of top contractors to the US government:
https://en.wikipedia.org/wiki/Top_100_Contractors_of_the_U.S...
Caltech, MIT, Stanford... SpaceX is 53.
The coolest one is Atlantic Diving Supply (No. 24): it started as a small dive shop that just happened to be located in Virginia Beach.. some Navy Seals kept ordering things from them.. then 9/11 happened..
https://en.wikipedia.org/wiki/Atlantic_Diving_Supply
--Some old dude about 15 years ago.
Edit to add: If you're building in the space, YC cofounder matching also does events targeted to gov once in a while, and I personally am doing some ideating if you want to chat
Saudi Arabia, Russia and other countries may have more oil than US, but it's too far from there places where it would be usable for manufacturing.
There's also the political motivation of banks, which blindly trusted fossil fuel investments, leading to massive investment that was unprofitable in the first round of fracking.
When it comes down to it, fossil fuels are surviving, and continue to survive, largely as a cultural and political effort, as much as a technology effort. And once we move away from them we will be saving massive amounts of money that can be directed towards improving the economy in other areas that improve people's lives rather than damage their lungs and cause climate change.
March 28, 1987:
"President Reagan decided Friday to impose punitive 100% tariffs on a wide variety of goods produced by Japanese electronic giants in retaliation for Tokyo’s failure to abide by the semiconductor trade agreement between the two nations"
-- https://www.latimes.com/archives/la-xpm-1987-03-28-mn-698-st...
That Reagan?
50% tariffs are rookie numbers.
Outside of the more immediately-public-facing stuff like tax cuts, Reagan's legacy is very much a "do what we say, not what we did" situation.
And recall Globalization was championed by Bill Clinton.
Donald Trump pumped up Tariff’s against China.
Joe Biden pushed for chip and green subsidies.
https://en.m.wikipedia.org/wiki/Solyndra
The real test will be once they stop taking our taxes and handing it to businessmen if they can stand on their own merits. Until then this is charity to the private sector.
The tech reason was that they had a way to make thin film panels which was super promising for driving down costs due to a silicon shortage. But then Diamond based silicon tech emerged, eliminating the silicon shortage and reducing input materials, which outcompeted thin film on price.
Such is the way of innovation. Looking only at subsidies gives you a false picture.
It doesn't make sense to think of infrastructure and technological capacities as less important than agriculture anymore, when it comes to keeping some significant presence locally.
Or more realistically, charity to one part of the private sector paid for by all of our great grandchildren.
https://fred.stlouisfed.org/series/MANEMP
Construction spending is a terrible proxy for manufacturing - both because the size of a building you need isn't pegged to the value of your output (e.g. a $100 million dollar shop making aerospace components might have a tiny fraction of the footprint of a $1 million sweatshop making t-shirts), and because the cost of factory construction is determined by the cost of construction in general (i.e. if there was a real estate boom building residential buildings then you're competing with that for construction materials, equipment, labor, etc).
https://fred.stlouisfed.org/series/IPMAN
https://fred.stlouisfed.org/series/OUTMS
But not everything is a plateau. Fabricated metal reached an all time high post covid: https://fred.stlouisfed.org/series/A32SNO
Same with semis: https://fred.stlouisfed.org/series/IPG3344S
The fact is that offshoring of manufacturing was a myth - the jobs never left, the industries just transformed in such a way that old, labor intensive processes were eliminated. Those jobs, and the economic prosperity they brought, are never coming back. It's merely a coincidence that at around the same time US manufacturers were computerizing their operations China was building 1920s level industrial facilities.
Certainly none of the data is indicative of a sudden boom in US manufacturing in the past 2 years which could be attributable to any recent decisions or events.
It takes 75+ years for a rebar building to reach end of life. The US just built up during earlier decades than many of those Asian cities. In another 30 - 50 years those antiquated buildings should start getting replaced.
If US-China trade were to stop tomorrow, US would suffer 100x more than China due to lack of critical goods. China would have a dearth of greenbacks.
Sure you have companies like apple that make $$$ from hardware, but most HW players in tech get slowly replaced offshore. Silicon Valley was silicon valley because of hardware. Now it’s mostly software, and HW is increasingly a commodity.
It’s the same thing elsewhere in the economy… it’s easier to set up a factory to sell something anywhere, but when you control buyers, you’re rich. The US is still the shopping powerhouse of the world… and even massive markets like China can’t consume as much because they just don’t have as much money.
Does Santa Barbara or NYC really look antiquated compared to Mumbai? Or Da Nang? Or Fukuoka?
Maybe if you're trying to compare Detroit to Shenzhen or Tokyo.
- exports plunge by 7.5% in May, far more than expected https://www.cnbc.com/2023/06/07/chinas-exports-plunge-by-7po...
- profit tumbles 18% in April https://www.reuters.com/world/china/china-industrial-profits...
- chip progress stagnating. Oppo chip design unit completely shut down https://techcrunch.com/2023/05/12/oppo-chip-disbands-phone-c.... Japan stops shipping semiconductor equipments to China https://asia.nikkei.com/Business/Tech/Semiconductors/Japan-c.... China is still stuck on 14nm chips.
- multinationals moving supply chains out of China faster than ever. Tesla asks Chinese suppliers to build plants in Mexico (June '23) https://cnevpost.com/2023/06/08/tesla-asks-chinese-suppliers.... BYD make EVs in Vietnam (May '23) https://www.reuters.com/business/autos-transportation/chines.... On top of older news this year that Apple wants Foxconn to move out 50% of its production lines from China by 2025. And Dell's production completely out of China by 2027.
China is no longer the "world's factory". It will stagnate for 10+ years, similar to Japan's lost decades, but with worser birth rate than Japan today. It reported 8M babies in 2022, low that was last reached in 1940s.
We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years. (factories moving out, which decreases downstream economic activities such as real estate and retail).
idk, Japan seems like it thought the party would go on forever, whereas China does seem to have clear eyes with it comes to world politics (eg. long-term investment in the rest of Asia and Africa).
> We've never seen a large portion (25%+) of a large modern economy vanish in a span of a few years.
Do you recall NAFTA? or the quick rise of China not long after? These are still studied as huge exogenous economic shocks in business schools!
You're hyping up Xi Jing Ping, who is considered an idiot in most elite circles including Putin, too much. One belt and one road is now considered a failure with Italy, the most prominent member, dropping out of it this year. Most of the countries that took on the debt are unable to pay it back, and China has had to forgive a lot of the loans recently. And no one has aligned US, Japan, South Korea, Taiwan, Philippines, India, Australia, Nato quite like China in recent years. The most recent focus in G7 was squarely on China.
> NAFTA
with respect to NAFTA, US manufacturing only consisted of 15% US economy in 1994 https://www.stlouisfed.org/en/on-the-economy/2017/april/us-m..., whereas Chinese manufacturing consisted 30% of China's economy today. Also, the difference is, the laborers in US manufacturing moved to other higher paying jobs, as a result, average income went from 25k to 30k in 2000. Whereas what we're seeing now with Chinese laborers is that they're moving back home to countryside to farm (< $1 a day)
https://news.sina.cn/gn/2023-01-17/detail-imyanfvn6707213.d....
(Figure 3)
2017 - 17.23 million
2018 - 15.23
2019 - 14.65
2020 - 12.00
2021 - 10.62
2022 - 9.56
Note that this is official Chinese gov statistics. Their numbers are known to be untrustworthy.
https://www.scmp.com/economy/economic-indicators/article/320...
https://www.statista.com/statistics/250650/number-of-births-...
https://www.barrons.com/articles/us-growth-gdp-china-economy...
What other numbers don't lie? 20.4% youth unemployment rate https://www.cnbc.com/2023/05/29/record-youth-unemployment-st.... 22% drop in daily home sales in 2023 vs 2022 https://financialpost.com/pmn/business-pmn/chinas-april-prop.... Yuan losing 7% value against dollar https://www.cnn.com/2022/05/13/investing/china-covid-yuan-us.... and on and on.
PRC exports to US/west near record highs while trade with global south have exceeded western bloc. The only reason export decline notable is because PRC exports has increased so spectacularly in the past few years (export value grew from 2.5T in 2019 to 3.6T in 2022) that there's nowhere to go but down when global economy underperforms. Net export value is still up ~40% since 2019 - exports stats can be confirmed bilaterally. PRC exports grew as much in last 4 years (~1T) as it did in decade between 2008-2018 (1.4T-2.4T). Meanwhile US increased imports from "friendshore" countries mirrored PRC increased exports to those countries, i.e. it's tarrif engineering and US import dependence on PRC ultimately still increasing.
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China totally outclasses the USA when it comes to manufacturing.
https://www.statista.com/chart/28031/manufacturing-racing-ba...
This comment gives a better perspective https://news.ycombinator.com/reply?id=36247499&goto=threads%...
Their “miracle” was a US creation, a policy to build them up to create a counterbalance to Russia. It’s gonna take ten years to tell, but China is already feeling these effects and feeling them hard.
That linked comment is also cherry picked stupid. PRC exports to US/west near record levels, WHILE exports to global south has officially surpassed western bloc, i.e. PRC is MORE factory of the world than at any point in the past. The drop in exports is due recent to global economic downturn that saps demand everywhere, but it's sapping from hilariously record high exports during covid. Meanwhile PRC export:GDP is like 20% down from 35% high in 00s, i.e. it's one of the less export dependant major economies in the world responsible for substantial global exports (including heavy industry) but it's not even an export driven economy anymore.
On demographic front, the reality is PRC is minting OECD combined in skilled talent every year and last 5 years of PRC topping citation (controlled for quality), innovation index is just lag affect of PRC growing with fraction of that talent. The PRC miracle is basically doing all that with ~20% skilled workforce, because at PRC scale that's enough to be globally competitive. Now it's in process to grow that competitive workforce to 50-70% skilled in next 30 years, which is adding anohter couple US worth of talent into the mix.
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Today factories in the US are built automated. No jobs, not for anybody but an accountant, an administrator, a couple of engineers.
Could I please borrow your time machine?
China becomes less of a competitor on costs as wages rise there. Once the manufacturing wage differential gets into the 4:1 range, offshoring is less attractive. In the 2:1 range, offshoring starts to be a lose. That happened with Japan two decades ago.
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