I hesitate to stir this hash up, because it gets complicated in a hurry, but some countries don't want to export more than they import. The U.S., for example. Our policies are not oriented toward running a "positive" trade balance. And that's by design.
The trouble with our trade policy is not trade deficits per se, but (IMO) overwhelming "surges" of trade deficits. In fact, we haven't had the kind of big surges yet that worry me. What worries me is the surges we're likely to face in the next five to ten years.
For example, Ford is now importing $1B worth of car parts from China. In
2010, they plan to import $10B worth. GM is now importing roughly $2.1B from China. In 2007, they plan to import $20B worth.
That's real money, and that's enough outsourcing to kill a lot of companies in our automotive supply chain. Nobody has ever seen a surge like that in modern times. I don't think we can survive it without a hell of a lot of dam age to our employment structure and to our economy as a whole.
The current administration is betting on the idea that cutting taxes will stimulate enough business and job creation to make up the difference. On paper, it probably works out. In practice, I'm afraid that the job creation they have in mind is a generalized abstraction, and that they have no specific ideas about where these jobs will come from. They have a '50s mentality and a '50s-type of blind faith in "innovation" and "growth." They appear to think these jobs spring up by magic. Optimism is a powerful force but it can also be a dangerous delusion. I can't picture the displaced tool & die makers in this country being re-trained for jobs in currency exchange and stock brokerage.
There are big issues involved that are over the heads of most of us. One is the ability of currency-value adjustments to overcome fixed exchange rates. Another is the real value of our exports of financial services. There are many other financial issues that require more expertise than most of us have.
Anyway, keep reading _Machining_. We won't wimp out on these difficult issues, but we aren't going to explain the world economy or solve it in a couple of articles, either.
That's a bit sad - I hope you haven't got any friends and family!
I'm a software developer by day, metalwork is something I'm studying as a hobby, but I'm also planning on getting good at it over the next few decades so that when I retire I can try to supplement my income by making pretty and/or useful things to sell at craft fairs!
I'm in the same situation that your in, and I think about this all the time. I'm 25 and have been in the trade now for 6 years. I doubt the company where I work at now will be in the business in 5 years. The company is basically an assembly plant and they pay very low wages to their employees. I believe it's just a matter of time before they pack up and head east. Nevertheless, I'm going to tough it out here as long as I can. But in the mean time, I'm also going to college to learn something else. Like others have said, you have a good job in racing. If you like it, then I'd probably stay there. I'd work all the overtime I could and save my money for the future.
I don't know if this was mentioned already, but I was reading in a magazine about something called micro machining. It involves making tiny parts with very small cutting tools. The article went on to mention that this may be a successful field for a machinist to pursue. It may be something to consider.
Here's a question to the group: What if there was a war in the China region and they were unable to make or deliver products for their customers(the world). Do you think this would bring back some manufacturing to the US?
And what if another IT doesn't come along? And why would we have an exclusive on new energy technology?
Technology has become a commodity on world markets. IT may be the last big example in which one county had an edge. The reason we had an edge in IT for so long is that Europe made a big mistake, protecting their emerging IT market with quotas. And Japan made another mistake, with "industrial planning," putting huge government support behind particular chip technologies, which quickly became obsolete.
China and India have learned from those mistakes of others and are not likely to make them again.
One US tool company manager who traveled to China early this year was struck by seeing more advanced EDMs and molding presses on plant floors than the ones that are used by US industry. The linear-motor Sodicks and long rows of German presses knocked him out. The Chinese can implement new technology fast enough to make your head spin. And U.S. companies that invest there tend to put in better technology than that which they have in their North American plants. Shanghai-GM's new engine line, which is now starting to make the complete engines for the 2004 Chevy Equinox SUV (to be installed in Canada, and then shipped to the US), probably is the most advanced engine manufacturing line in the world.
It's hard to imagine an innovation on which we would have an exclusive for very long.
-- Ed Huntress (remove "3" from email address for email reply)
That is always the question! What will we do if we cannot make buggy whips? There is no guarantee that we will have a lock on any new technology. What can give us the edge is to have a society that is receptive to change. The attitude that we must protect industries where we were successful is fatal. Japan is no better example.
New technology favors no one. The ones that will win are those that are willing to embrace it.
Technology is not a commodity. Existing technologies become commodities. How can new technologies be commodities? We don't even know what they are.
We don't know if China and India have learned from other's mistakes, they have not had the opportunity to make their own mistakes. Only time will tell. Who would have thought that Japan would self-distruct?
No one is given a free ride. It is very damaging to expect one. If we concentrate on using governmental protection for industries where we have had past success, we will surely miss the boat for the next new thing. Indeed, the "next new thing" has been our savior many times in the past. What gives people weak knees it that it is awfully hard to see where the next one is coming from.
Perhaps it is useful to have these arguments because we get delayed in doing anything too damaging.
None of these arguments are new. I just hope that we don't follow the protectionist course, it will surely be our doom.
You got that right. I think I'm gonna probably be working forever. At one time the average length of time that my company paid out retirement benefits was measured in 'months' units.
Much less than a year.
Jim
================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================
Of course, there is always the very good possibility that you will be given your freedom involuntarily. My former company had three employees over 60. Mysteriously, all of us were liberated during the last downsizing. All of were ready to leave, just didn't like someone else making the decision.
Fortunately, I was prepared and could retire without trauma.
And what would you like to change to? Our edge now is in financial innovation. Are you ready to re-train to become an arbitrageur?
Our receptiveness to change doesn't seem to be doing much for manufacturing. If you take a very broad view, and consider "change" to be any economic activity that responds to opportunities in the markets, you probably have a point. But that generally means change *away from* implementing manufacturing capability in the United States. If you happened to read my first article on the subject, "The China Conundrum," you noticed that I broke economic interests in manufacturing into six categories. The people in the top categories think that things are just fine. Those are the people who have no personal interest in keeping manufacturing in the US from going to pot. The people in the bottom categories are people like you, me, and nearly everyone else involved directly with manufacturing.
Japan is an example of something, but the problems that stem from protecting industries probably isn't it. That was a source of trouble but probably not the trouble that's put them into the financial bind they're in now.
The Chinese are embracing it big-time. Or, we should say, the foreign multinationals who are investing in China's manufacturing are embracing it big-time.
They're commodities because the multinationals that invest in their implementation can now do so anywhere they choose. And where they choose is the countries with the lowest wages and with sufficient infrastructure to function.
Oh, yes, they've already avoided many of Japan's mistakes. They're making some of their own, and some of them look larger than the mistakes the Japanese made. It's quite right that we don't know yet what the long term outcome will be.
In the meantime, though, how long are you willing to hold your breath to find out? China is ten times larger than Japan, with many times the manufacturing capability and with a FAR heavier weight of unemployment and underemployed peasantry that are holding wages down. They probably will be able to undercut us in manufacturing costs for at least another two to three decades. Unlike Japan, they have the full assistance and compliance of the world's largest corporations in doing so. They aren't competing with Motorola, Ford, and General Motors. The competition coming from China IS Motorola, Ford, and General Motors.
And China's manufacturing isn't the only example of the new reality we're facing. There's also India, which is now able to perform many of our financial and computer services perfectly well from halfway around the world, in the blink of an eye. That's innovation for you, eh?
Some economists, as far back as 1980, realized that their industrial policy was going to cause them trouble if they didn't drop it when it got in the way. But many of those people thought the Japanese were smart enough and quick enough to recognize it, and that they'd get rid of it when the time was right.
In general, those economists had the right idea, but the problem cropped up in a different place than many thought it would. Some say the Japanese lost their edge when they succumbed to world pressure to let the yet float upward in value. Most believe, however, that the problem stemmed from the same cultural factors that led them to follow the authority of MITI and their penchant for respecting authority without question. The result was a financial system they couldn't fix because they couldn't acknowledge the enormity of their mistakes. They couldn't fix their problems fast enough, and they piled up.
I recognize your feeling here, Pete, but I believe your faith in "the next new thing" is misplaced. The point is that the next new thing is unlikely to be ours, or anyone else's, salvation. Technology doesn't take a decade to cross borders today. It doesn't take a few years. In fact, you may find, as in the case of the new Shanghai-GM engine line, it winds up being implemented in the low-wage country before it's implemented in the country that invented it.
That's because we've been so successful in breaking down the barriers to capital flow. The multinationals have gotten what they really wanted most of all: the ability to implement new technologies anywhere they want to, wherever the wages and other costs are lowest. And what they don't own, they'll buy from the low-wage countries.
What makes some of us cautious is the recognition that we're relying on yesterday's solutions to a new kind of problem, one that we've never seen before.
The arguments have to be made to Congress and the administration. Our trade policies have to be based on a fuller recognition of what's happening in manufacturing. And we have to be more transparent about our trade policies. If you read the policy journals, such as _Foreign Affairs_, you get the feeling that the whole trade agenda is something that's being cooked up behind closed doors, with no public access to the real planning or negotiations.
The traditional forms of protectionism, which are punitive tariffs and quotas, subsidies, and non-trade exclusionary barriers, are usually a bad thing, based on their history. Not always, but usually. Trade barriers helped Japan wrench itself from peasantry to world manufacturing dominance in less than 30 years, so you have to be cautious when you impugn protectionism as an absolute.
However, we do need something more than relying on blind faith in "innovation." If you read the assertions of our Commerce Dept., you realize that, if they believe what they're saying, they're off in the ozone somewhere, paying attention to the things that they like and ignoring the things they don't. And I do believe that they believe what they're saying.
Our US Trade Representative is another matter. The people who are making policy at that level are smart, subtle, and sophisticated. But they have an agenda that isn't well understood by most of us. For example, after decades of pushing for a unified world market through the WTO, they've now broken ranks with most of the developed world and they're pursuing regional trade blocks, such as NAFTA, and bilateral trade deals. It's all based on an agenda that we don't fully understand, because they don't talk very openly about it.
We'll be writing more about it in _Machining_. Stay tuned.
-- Ed Huntress (remove "3" from email address for email reply)
snipped-for-privacy@yahoo.com (Jody7818) wrote in news: snipped-for-privacy@posting.google.com:
Real micromachining uses silicon processing methods (the methods used to make computer chips).
If you want to do this be prepared to get a Bachelors or Masters degree in a "hard" science (usually EE, also ME, Physics, Mat. Sci., sometimes BioE, or ChemE).
I understand, but I'm not sure we have a choice. This may not be the right forum for it, but I also need to find a new career, and so far I haven't heard of one that's not scheduled to shrink. (I'm open to suggestions.)
It's a little hard to tell because of where we are in the business cycle-- right now *every* business has too many people in it, but that will change in the short run. I'm more concerned about retraining for a new career and then having it drop out from under me (as happened to many people in the IT business).
I'm not aware of any others. And I don't see how it's sustainable (in terms of dollars, not necessarily manufactured goods). We've minimized the effects via inflation in the past.
That's what happened to the farm economy in the 1920s, when there was a huge jump in productivity. Most of those people found other jobs-- *ten years later*.
In theory, they're not supposed to-- it "just happens". The hole in the theory is that we're supposed to be able to live off our savings until the new jobs appear, no matter how long that takes.
snipped-for-privacy@aol.com (SMuel10363) wrote in news: snipped-for-privacy@mb-m20.aol.com:
I don't think we could affort to buy our own products because so many of us are out of work from the manufacturing move overseas. Even if it did come back, I doubt we'd have enough skilled craftsman to handle it....maybe I'm thinking too small.
In any case, my hat is off to all you old timers that served your appreticeships and learned and loved your craft. I wished I could learn .0001% of what you all know. Be proud of what you did and who you are. I'll never forget....
Right, but we seem to have it backwards. I don't recall reading about Caesar making a famous speech before the Senate asking for 100,000,000 denarius to rebuild Gaul after he just finished sacking it.
A lot of 'craft fair' items are semi-assembled from kits made in Asia. The 'crafters' just paint the birdhouse/teacup/pencil holder and sell it. Really.
Ok. The biggest growth field over the next 20 years is going to be in the medical field, particularly any job which deals with geriatrics. Medical technicians, physician's assistants, pharmacists, nurses, etc, are all going to be in high demand.
Right, you primarily have to be service oriented. Mass production is fleeing the high wage countries, and it isn't likely to come back. You have to find a niche where you can perform an individualized service. In other words, you have to sell yourself and your skills at the retail level instead of at the wholesale level of mass production.
Maybe the energy costs in China are lower than here, because they run everything on soft coal with no polution controls?
Jim
================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================
Well, as for China's "agenda," it's simply to improve the lives of their people and to become an economic power like the other economically advanced countries. Nothing would be better for the US than for Chinese machinists to be making $50,000/year.
I seriously doubt if most car salesmen have the slightest idea where the engines in their cars are made.
Of course I mean change that responds to economic demands. I disagree that it must mean a shift away from manufacturing. It will probably mean a shift away from the type of manufacturing that anybody can do because; anybody can do it. The type of knowledge intensive manufacturing that we excel in is the future of manufacturing in the US. That is not to say that we won't have competition in that area, we will. What I am saying is that it is our best hope and that is where we should be.
The type of manufacturing that depended on cranking the cranks on the old Bridgeport is dead and we should make no effort to protect it. The type of manufacturing based on new materials, new processes, software, nano-technology, etc is the future. The problem is that many in this industry don't even think of some of those things as manufacturing. If you think of manufacturing as only the cutting of metal, then manufacturing is dead.
The problem in Japan is the mindset that says that "we must protect our industries". This probably really means "lets protect our buddies" at the big corporations. Now it has degenerated into "lets not loose face" and "I know that we need to restructure, but you do it first".
The solution, as we so painfully know, is periodic restructuring of the economy. We have experienced these "blood on the floor" situations many times in the past. They are not pleasant and not fair but they are necessary.
China certainly does have a labor cost advantage. If it is cost and not knowledge that is the deciding factor on the location of a certain industry then the US is probably not the ideal location. This is a factor that we cannot change and we should not attempt to.
Interestingly; there are low tech industries that will not move overseas. Boat anchors and gasoline containers for example. They are too low value per weight or low value per volume to ship very far. These products are even regional in the US. No California boar anchors are shipped to Boston. There are some industries that cannot move overseas no matter what.
commodities.
If the decision is based on the cost of labor and not the skill and knowledge of the labor force then it will go overseas. It is a simple choice. If the government attempts to thwart the economic forces behind that decision the advantage gained will be temporary but the damage done will be permanent.
In interesting observation on Chinese industry; Generals in the Chinese Army run major industries for their own benefit! These generals have a lot of political power both because of their position in the military and due to their personal wealth. That has got to be a formula for getting into a "protect our industry" mode of thinking. That and the old Communist thinking about "protect the worker" seem to be almost a guarantee for stagnation.
I love the Keynes quote "In the end we are all dead". If you are cranking the cranks of a Bridgeport, you are dead. Unless, of course, you are making anchors. If you are at the cutting edge then you are probably OK.
India is quite different from China. It has a very different history from China. Both China and India have pressing social problems that must be solved before they will be world beaters. There are no comforting answers here.
I remember reading an article refuting the thesis that says that the Japanese will fix their problems and be a powerhouse once again. The article said that countries that fall in a slump do not always come out of it. History has a long list of examples; Roman empire, Venice, British empire, etc. The point is that things don't always get better, things don't always turn around.
The "next new thing" is not guaranteed to be out salvation, of course. What will be our salvation is to be the best place to develop and manufacture the "next new thing".
One disadvantage to using China or most other low wage countries to manufacture the "next new thing" is the absence of intellectual property protection. Where that is not an issue, and wages is an issue, China cannot be beat.
Fasten your seat belts, we are in for a rough ride!
You are correct that protectionism can work for insignificant players in their efforts to get their foot in the door of international trade. As a policy, it will not work for full fledged members of the international trade community. Japan is having a hard time making the transition. I would love to borrow a few hundred billion Yen at 0% interest and invest it in US government bonds at a few % interest. ;-)
"Blind faith in innovation" is all that we have. America, more than anyone else, has "blind faith in the future". What are you suggesting? 5 year plans?
I do get Machining and have read your articles. My concern is that this whole thing degenerates into protectionism. I fully understand that the reality if international trade is not clean in the theoretical sense. There is a lot of "you scratch my back and I will scratch your back". That is just human nature. That is, no doubt, the origin of a lot of US trade policy. The danger it that it can go too far.
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