The refusal of China and India to go along with the carbon-dioxide limits
should be the death knell for the Cap and Trade bill currently being
considered by the Senate. The legislation is a pretty hard sell. Even
advocates admit restrictions would only have a small effect -- only a
fraction of 1 degree Celsius, a virtually unnoticeable .07 degrees -- on
global temperatures by 2050.
Even if a worldwide agreement made sense, an agreement without China, India
and other developing countries can be counterproductive. It could actually
mean more, not less, carbon-dioxide emissions. With massive increases in
energy costs for the United States, Europe and Japan, energy-intensive
manufacturing will move to countries without limits. That would negate some
of the carbon-dioxide reductions in countries with limits.
On Mon, 13 Jul 2009 16:28:54 -0700, the infamous "azotic"
Yabbut it puts billions of ducats in the pols' pockets while raising
the utility bills until half the population can't afford to use them.
What's not to like?
Mistrust the man who finds everything good, the man who finds everything
evil, and still more the man who is indifferent to everything.
-- Johann K. Lavater
a bit naieve, don't you think? energy prices are rising and will continue
to do so, hence transportation costs. your doomsday scenario will not
happen. what is more likely is a protectionist approach to prevent imports
from those who won't comply, just like child labor laws block import of some
carpets and stuff
There are plenty of other good markets, the US is headed for the bottom of
the heap. A friend of mine set up a satellite plant in Indonesia five years
ago to service his 20% of eastern customers. That plant is now doing three
times what his US plant is doing...at MUCH lower costs. He says he has
plenty of room for me.
In reality, I'm not moving out of the US just yet, but we are moving into a
more efficient building in another city. We are planning for electricity
and natural gas to triple within three years and labor costs will skyrocket
with mandatory COLAs, union demands and healthcare. More automation, less
people. Almost the same effect as if I moved to Indonesia...less and less
employees! I hear the same talk from other business owners. So much for
job creation! The number of jobs I have and will eliminate will be
multiplied by hundreds of thousands.
Protectionism, even in the smallest form will never pass! Too much money
goes into too many politicians' pockets. The US is now so corrupt with
wealth redistribution, blatant political lies, (not so) hidden agendas,
ruined education system, etc., that I doubt it's light will ever shine
brightly again. They've managed to cut open the goose to get all the gold,
and we all know how that turns out.
Yep, as long as there is demand for the products produced. Less employees
equals less money circulating in communities. A dollar gets spent 7 times
locally. That's created wealth from manufacturing, cheese checks don't
count. Even low-end jobs give accomplishment satisfaction to people,
cheese-checks cause despair, apathy and crime.
It isn't clear what your point is, Tom. Are you arguing for trashing
automation? For paying people Chinese wages? Or what?
You and Wes seem to be implying that you wouldn't automate if there weren't
factors that raised labor costs. That's a mistake. What drives automation is
competition, not labor. That's been true since manufacturing began, and the
commentary I read in _American Machinist_ from the 1920s, '30s, '40s, etc.
said exactly the same things you're saying now. And it was just as wrong.
It wouldn't matter how low your labor costs were. The greatest influence on
the economics of automation is the interest rate you pay for capital
equipment, in combination with the availability of credit for large capital
investments -- investments in automation, in other words. And the
relationship between the viability of automation and labor costs ALWAYS
trends in favor of automation. That's happening even in China today.
If you take a look at the automotive parts plants in Mexico, you'll see the
same thing. We were selling Wasinos for that work and they had to be sold
without our gantry autoloaders -- not because it was more economic to run
without the automation, but because the Mexican government required it. Even
with their low wages, automation won, on the P&L statement. It just lost
temporarily because the government didn't want to face the inevitable.
In the US, or Mexico, or China, competition always applies pressure to
automate. One Chinese company competing with another will cause each of
*them* to automate -- and put even more pressure on you to do so. There's no
getting around it.
And trying to avoid it is just like pushing on the end of a rope. However,
if you succeed in driving down wages as a temporary stop-gap on the way to
further automation, you will have one economic effect: You'll drive real
wages, and the real economy, into a race for the bottom.
Actually I agree on the competition theme to your reply. The point Tom was
making is if
the costs of employing people increases significantly due to policies likely to
Washington, that will be that 'extra' budget that makes marginal automation
"Additionally as a security officer, I carry a gun to protect
government officials but my life isn't worth protecting at home
in their eyes." Dick Anthony Heller
But that's the fallacy, Wes. If you look at it that way, you're always
behind in investment. If *today's* pricing and *today's* competition are
driving your decisions, you've already lost the game.
What you're describing is the kind of static thinking that killed the US
machine tool industry, among others. You are going to have to automate or
make other productivity-enhancing investments, no matter what happens to
your labor costs. If you're waiting for labor costs to make the decision for
you, you're too late. Your competition, overseas or domestic, has already
made that decision. That is, the competition that you will be fighting for
price and quality tommorow, rather than today.
If you use labor costs as your trigger for automating, you're using them as
a scapegoat for your own lack of foresight. Competition will force you to
act. And if you act by putting pressure on labor, you're just racing to the
bottom, because you're squeezing your own market, directly or indirectly.
Recognizing that is the "enlightened" part of the phrase, "enlightened
EXACTLY! I think nothing of spending $30k on a project anymore because I
know the pay back is so fast with displaced labor costs. And, I don't have
to negotiate labor contracts with machines, nor can the state increase my
cost on a whim. I've given my engineering team a blank check and a mandate
to replace employees. I feel bad about it, but...
I know it sounds funny but I feel guilty for eliminating jobs due to
automation. The lack of continual improvements in the previous generation
gave me a huge opportunity to make a lot of simple, easy improvements that
had big impacts in profits. I always had a lot of empathy with my workers
because I've done every job in a production role. A lot of the jobs were
very simple and a lot of the people we had just weren't capable of anything
more complex. But, they did the jobs proudly and felt good about
themselves. I worked side-by-side with everyone, ate lunch and told jokes
with them. Those are the jobs most easily eliminated and I know they won't
GET another job...they are doomed to welfare. But, If I wanted to stay in
business, I had to cut costs. The State of Ohio was no help to these people
by raising the minimum wage by almost 50%. Almost a third of my people were
affected. I couldn't keep everybody at that rate. The people that I had to
let go would gladly WORK for the lower wages rather than not work at
all...and they knew it! I think it's VERY important for all people to work
and feel productive as a contributing member of society. The left doesn't
get this at all! The left thinks that if somebody isn't making $30k, they
should be on welfare, they are worthless and can't contribute to society.
The average employee salary is much higher now as is the training level and
skill level. BUT, my labor costs are a lot lower, production is much
higher, and quality is higher. I've even managed to have a structure in
place that has allowed me and my sister to take a lot of time off. A few
phone calls and a half-day here and there have kept everything going
smoothly. Good for me but bad for guys like "Robert" who used to sweep and
move stuff around for me. That was all he was capable of doing and he was
happy. I had to let him go, I liked him and he was handy to have around.
And, with his past record, he'll NEVER get another job. But guess what - I
couldn't justify the unnecessary expense, especially after union demands. I
would love to provide a bunch of jobs to people
Meanwhile, my neighborhood is blighted with the jobless and crime is worse.
Are these people better off on the dole? The yearly COLA from Ohio won't
increase my labor cost or put more money into the neighborhoods, it'll hurt
the people THAT MUCH MORE! Sure, my first responsibility is to keep the
business running and profitable, but why does the State, unions and other
democrats demand that I hurt my community? It just goes against my grain.
Sorry, just another fanatical right-wing rant.
I don't think that's a rant at all. That's the result of some very admirable
attitudes and behaviors on your part.
This reminds me of the arguments I used to have with Andy Ashburn, the
editor at _AM_ when I was there. Every time we wrote about some amazing new
automation idea I'd ask, "and what happens to the 20 workers who were
displaced?" Andy would get really pissed at me for asking. So would the
other older guys. The idea was, there would always be jobs for them, because
the automation improved productivity, increasing economic activity and thus
increasing demand for labor.
I scratched my head over this, wondering why they didn't realize that their
entire idea depended on a high, probably unsustainable level of growth. And
now we're seeing what happens when growth flattens out. As it inevitably
So your displaced workers are inevitable, if you accept the precepts of
capitalism, unless you can figure out a way to grow faster than you're
displacing workers. That was possible for a few decades in the middle of the
last century but my guess is that the rate of productivity improvement has
now outstripped the rate of job expansion. If you consider it as a math
problem, you'll recognize that the economy has to grow at some logarithmic
rate to produce a linear increase in jobs, given that productivity is
increasing all the while. Sooner or later, it becomes a Malthusian problem.
That's life. You do the best you can for your workers. But you'll never be
able to compete in a manufacturing field that responds to technical
productivity improvements and still keep them employed, without a high rate
of growth for your business, because it would require an ever-declining wage
rate -- until they couldn't live on it at all.
Yeah, you have to pay attention and keep broadening your business into areas
where growth will occur.
What you said was that growth can't keep up. The facts and the evidence
don't support that unless you want to keep making buggy whips. Then there is
Let's take Cleveland as an example.
The cities population and tax base continue to evaporate. One area that will
definitely grow is the downsizing business.
Flint Michigan is taking the lead on this. They will be wiping out half of
the place with bulldozers and putting something, or in saome cases nothing,
in the space created. The population will move to the space that is left. I
was born in Flint's East Side Ed. My grandmothers family had a successful
screw machine business on Dort Hwy. in Grand Blanc for half a century. Two
years from now the East side of Flint won't even exist and the screw machine
shop in Grand Blanc died with my Uncle Del, but what is left of all of that
when the city is done will be serviceable and vibrant. They will attract
new industry. I might move back just to watch it happen and lend a hand. The
valuations will certainly be right but I'm pretty well hooked on warm
wheather and ocean breezes.
Tom might consider expanding into the automation industry. He seems to have
a knack for it. There are also a ton of trainable people in his area. He'd
experience real growth if he focused on the sort of automation the energy
business was going to need to make, oh I don't know, batteries for vehicles
that we'll otherwise buy from Korea.
What you have to be able to do is see opportunity, get organized and seize
it. Otherwise, you just set yourself up to fail eventually.
What I said was that you can't maintain employment without a healthy rate of
growth. That applies to goods-producing industries in general, and to
individual companies in particular. I've never tried to sort it out for the
whole economy, but the pattern has been clear for years now in
Here's employment in goods-producing industries since 1940:
Here's the growth it took to sustain those levels of employment:
Since about 1970, the output of goods produced in the US has had to be on a
pretty steep incline just to keep manufacturing employment about level. In
other words, you need a lot of growth to keep from laying people off in
manufacturing, due largely to improvements in productivity. And if you have
even a slight downturn in manufacturing output, you get a big dip in
All of this is happening, of course, while the population is increasing. So
the percentage of people in manufacturing keeps dropping, even though the
total number is fairly flat. Where do the others go? As I've said, I've
never tried a full analysis, but a lot of them never return to
So, as I said to Tom, it doesn't matter if you're chasing wages or not; your
competition is automating, here and abroad, and you have to, as well. And
unless you grow, you're going to wind up with fewer people.
All well and good. That requires getting into another business. If he wants
to keep all of his people employed, he'll need to sell more than brushes.
Yep, or at least new products into new markets. 80% of what I make today,
didn't exist 10 years ago. The trick for me is to find a market/product
that is hard to make, over priced and nobody want's to really do but they
have to keep customers happy with "me-too" items. Then I'll just tell my
guys that it can't be done.
Nobody wants to deal with flat wire, it's a bitch. We're now the biggest
and best in the world. It's a little niche but it's a nice little niche and
not even the Chinese want anything to do with it.
To be fair, I should be self-contradictory and confusing here by pointing
out that you're more or less making John's point, and contradicting mine.
This is one of the enigmas of mixing micro- and macroeconomics, because your
effort to seek new products and markets is what John is talking about, and
it's the way to look at things from the point of view of a businessman, or
of a microeconomist. Looking at you and what you do, from the point of view
of a microeconomist, one sees the necessity to keep innovating and pushing
the boundaries of what your business does. From that microeconomist's point
of view, that *is* what you do. As an economic agent, you don't just make
brushes. You discover or create brush markets and fulfill them. That's
John's mindset, too.
Then the macroeconomist looks at the situation and puts it into a different
context -- the national statistics and trend lines in manufacturing,
finance, etc. -- and sees that it doesn't matter very much what you do.
You're like Brownian motion in a problem that, to that macroeconomist, is a
problem of gas pressure and volume. A businessman or a microeconomist looks
at Ohio Brush and sees a dynamic system that has an individual path and a
fate of its own. The macroeconomist sees a particle taking its random walk
in a stochastic process, and he isn't concerned with where you're going, as
an individual or an individual company.
In this thread I've been talking about the pressure/volume issue: the
macroeconomics. John is talking about the microeconomics. The
self-contradictory part is where I'll agree with him and say that you can
indeed find ways to employ Robert and that your emotional involvement in his
welfare, and that of your other employees, is hardly in vain. You can do
something about it. The goals of your enterprise are yours to choose.
But the macroeconomist will say, that's interesting and good human interest
copy for page 3 of your local newspaper, but I only read the index tables in
the business section. I want to know the parameters as they're being set by
economic conditions. Individual particles can go where they may; they're not
my concern, any more than the behavior of individual vapor molecules are a
concern to someone trying to adjust the running of a steam engine. No matter
how any individual particle may behave, the dynamics I'm looking at are
based on the safe assumption that they'll behave in a certain average way.
Many of the enigmas, frustrations, and arguments that arise in talking about
business, trade, employment, wages, and so on are the result of not keeping
the macro and micro in their appropriate boxes. When you're looking at
government wage policies and the state of competition with China, you're
looking at macro issues, which have their own driving forces and desired
outcomes. When you consider how to run your business, those are among the
parameters you're working with. The confusion and frustration come from
assuming that the micro benefits you would gain if we followed some
different policy would project to general benefits across the economy, ones
that are greater than the negative macro consequences. Lower wages would
keep more people employed -- for a while. But the consequences of driving
down wages would be a running down of the entire clock mechanism that is our
economy. Everyone will be hurt by it, once the particles are averaged out
into units of pressure and volume.
You won't solve our problems with competition, or even of a slumping
economy, by starting a race to the bottom.
It would be interesting to study a group as close to communism as one
could get- our girls in the slammer.
Federal Prison Industries pays about fifty cents an hour. The living
expenses of the inmates are paid for from another account, so to speak.
The prices are hard to beat, and the quality is good.
The fellows at work that deal with FPI tell me that clusters of machine
shops, started and staffed by ex-cons, have sprung up around the
prisons, to supply the manufacturing inside. I have been told that the
redivicisim rate among ex FPI employees is very low.
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