What is the future of manufacturing?

jim rozen wrote:
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Sorry, I meant to reference their pathetic initial attempts to produce cruisers, not the overall streetbike market. Pull back bars and teardrop tanks on an inline 4 cylinder do not make a cruiser, at least not in the HD image they were after. You don't see many of those bikes on the road today. Took them a while to figure out what the real attraction to cruisers was. Big inch V-twin engines and that deep throaty rumble.
Overall however, yes they nearly killed most of the competition. The bar has been raised so high today for quality, in terms of power, reliability, handling, braking, etc. that shabby products, or even mediocre products, will not fly in this country. Going to be hard to break into that. Doable, but not easy nor cheap, nor will it happen overnight.
Ducati is a prime example of what China lacks. The bikes have huge appeal even in the face of frequent service requirements and owners sometimes having to wait weeks for parts. They look and sound good and win races. Italian mystique goes a long way here. Chinese mystique in the performance motorcycle arena is a long ways off.... I mention performance bikes here instead of cruisers as the Chinese bike I saw in the article was a sport bike.
Jon

Gunner wrote:
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Oh heck, had a parts manual for one of those a few years ago, traded it for a book...
Jon

Yes, The Peg. Funny how no one in Congress complained about that peg when it changed from 5.0 yuan to 8.2 in the early/mid nineties. Maybe because Our currency was lower at the time. since then, the dollar has surged and now looks at the Chinese RMB as being the evil culprit.
China can float their currency, but does anyone expect them to do so for anyone elses benefit or for their own? Lets be realistic. We dont change our currency for South America's benefit, now do we? (we just bail them out with loans).
The Chinese RMB if floated would more than likely appreciate against most major currencies in the near term. But there are many parts of the Chinese economy that is not ready to assure a solid footing. Case in point is the banks. They have a huge percent of non performing loans. This could easily lead to a crash in their currency far worse than what we see now. it has only happened Time and time again all over the world these past 15 or so years. If you read their economists views, they are trying to be cautious.
Both Taiwan and Hong Kong also peg to the US dollar. This was done out of a need for stability. If HongKong removed the peg today, their currency would probably devalue.Taiwan Just might also, since so much of their mfg is moving to the mainland.
The answer to the original post is "innovation". Should we innovate, we will survive. If we do not,most of our mfg will perish. What is the logic in having toothpicks made in the USA. Many of you will agree that there is no such logic. Well, why should it stop at toothpicks? Lets face it, even satellite manufacturers are all having their systems built and launched in China. If they can build satellites cheaper, what makes anyone think they cant do automotive, machine tools, or anything else between toothpicks and Satellites? One amusing thing about the satellite issue was the blame in the USA was actually put on Clinton in the 90's for giving satellite technology to China. It wasnt Clinton, It was Loral, Boeing and all the rest who needed China to be competitive. They freely gave this information to the Chinese and even lobbied for the right to do so. A few were even fined by Uncle Sam in later years for "giving too much". It is comical. These companies were desperate and still are for that matter.
If we do not innovate, the USA mfg environment will be relegated to small niche markets, and products of conveience. For example, items that are big and heavy, with little dollar value, will cost too much to ship by containers, so they can make them in Mexico or here in the USA. Items that need JIT delivery schedules within a weeks time will also have a good chance to stay.
But the best way for us to "break out" of this cycle is to innovate. we did it with IT in the 90's. Now we just need to find that next engine of growth and innovate. I would nominate energy as being the best all around possibility, with the greatest potential. Cheap energy independence would affect every single industry in the country and the world. Only we would be the masters of a a new technology. The possibilities are limitless.
Now would you like to donate 500 billion to my cause? Best spent 1/2 trill you ever saw.
snipped-for-privacy@shell.core.com (Ron Bean) wrote in message writes:
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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)

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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.
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Technology is not a commodity. Existing technologies become commodities. How can new technologies be commodities? We don't even know what they are.
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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?
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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.
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None of these arguments are new. I just hope that we don't follow the protectionist course, it will surely be our doom.
Pete.

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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? <g>
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.
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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.
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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.
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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.
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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?
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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.
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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.
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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.
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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.
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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)

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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.
Ed Huntress

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Probably not, I am no good with money. ;-)
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manufacturing.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Fasten your seat belts, we are in for a rough ride!
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policies.
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. ;-)
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"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?
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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.
Pete.

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The end to blind faith, and the beginning of rationality in international trade.
After he left his position, after a decade of pushing "free trade" and NAFTA, Mickey Kantor, the former U.S. Trade Representative, finally told it like it is and said "there is no free trade." After roughly nine months of intensive study and interviews with many experts, it's obvious to me that he's right.
There is no question of whether there will be protectionism. We, and every other country in the world, are in it up to our ears. The only question is what kind there will be, and whether it will further our interests or impale us on a sword of mindless ideology.
I'm not falling on any swords, and I'm not buying the free-trade crap from the ideologues. As for what I'm suggesting, it's whatever will enable our economy to maintain its strength and our society to maintain its middle-class, democratic core. I'll consider all practical suggestions.
-- Ed Huntress (remove "3" from email address for email reply)

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Of course there is no "free trade" in the pure ideological sense. In the same way there is no "pure freedom" of "perfect democracy" in the ideological sense. We live in a world of imperfect solutions. In world trade as in politics and sausage; you should not look too closely at the ingredients.
Now that we have established the obvious, lets talk the reality. If our trade policies serve to protect the guy cranking the Bridgeport then we are doomed. We must recognize those technologies that have matured, the ones that anyone can do, and let them go overseas. They are heading over there anyway and to stop them with trade barriers hurts us more then it helps us in the long term.
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impale
Therein lies the conundrum.
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Ideologies are for university professors and think tank gurus. However, if our trade policies serve to protect the current industries at the expense of the future industries then we all will loose. The reality is that the current industries have the political power to have themselves protected. New industries, often 2 guys in a garage, have little political power. The ideology that says that everyone should compete in the marketplace is useful here. It is an ideology that has served us well and serves to counterbalance the strong economic forces for protectionism.
So far America has dodged the protectionist bullet. Often the Europeans are more protectionist than America. They don't have as strong a commitment to the that competitive ideology. However, we have had some close calls. The auto manufacturers and their unions would love to have a lot more protectionism for their industry. That is also true of the steel and textile industries. Those industries now fall into the category of "anybody can do it". The auto industry probably does not belong in that category, yet.
A world in which America develops new technology which, after a time, move to more efficient locations is a very good position for America to be in. This is a competition where we have been very successful in the past. If we stop the race there are surely others that will be happy to take the lead.
Pete.

And lo, it came about, that on Fri, 08 Aug 2003 13:45:54 -0400 in
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         Some of the low skill grunt jobs are just plain disappearing. The strong back kind of jobs, like longshoreman, went away with containerization, etc.     Even the burger flippers are working in a computerized environment: push the key with the picture, the machine does the rest: add up the order, send it to the kitchen, compute change. That is one reason Mcdonalds is going to the kiosk. Why pay several some ones to do what the customer will do?
    My Dad pointed out to me years ago, that you could formerly put the village idiot to work on the mindless tasks, like sweeping, cleaning and the like, but even then you wouldn't exactly turn him loose with a team. Now a days, we've got ride of the horses, the mindless tasks have been automated, and the village idiots are left wondering why they can't get a job.
    And we haven't even addressed the issue of regulations barring entry into the market place. You can't start a cleaning service without being licensed, bonded, and certified. And the idea of raising chickens in your back yard "for fun and profit" just isn't going to happen in most municipalities.
    The good old days, they were different. Some ways better, some ways worse. (The two oldest cliches in the book are "The Good Old Days were better." and "After all, these are Modern TImes.")
tschus pyotr

says...
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Maybe the energy costs in China are lower than here, because they run everything on soft coal with no polution controls?
Jim
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Don't forget hydroelectric dams that block fish breeding grounds, and flood 5000 years of history...
We could never have built there latest dam project in the US.
Vince
jim rozen wrote:
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I have been following this thread with interest.
I have had 2 question for a long time that I have never seen the answer to.
1.) How many foreign man years of labor goes into products consumed by Americans?
2.) How many man years of American labor goes into products shipped over seas?
and for completeness, I should ask
3.) How many man years of American labor goes into products consumed by Americans?
I have a feeling that the imbalance would be scary, and that an augment could be made that the world is really working for America. I could be an elitist and say so what? But I'm not. What scars me is that we will forget how to do things ourselves. At some point factory workers in Chine will have unions, and better pay, and then better pay then Americans, and the world will stop shipping to the US, and start shipping to China where the consumer has money.
It seems to me Germany understands the new world better then us. They make cars in South America, but the engines and transmissions are still made in German. They protest there technology, and send over seas the simple stuff (assembly). From what I have read in this thread, if the US companies are setting up state of the art engine factories in China, then we are hosed.
Vince
P.S. Has anyone ever seen data for my 3 questions?

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That's one way to describe the argument made by Milton Friedman, our Commerce Dept., the Cato Institute, and many economists who take a conservative view of free trade.
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unions, and
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In the long run. <g>
Trade, like most economic activity, is a mixture of win-win (economic growth) and win-lose (zero-sum) transactions. The free-trade ideologues are macroeconomists who pay no real attention to micro issues, where there are many more zero-sum transactions, in which somebody gets hurt badly so someone else can get ahead.
What has the argument fired up today is that the zero-sum games appear to be showing up at the macro level. The Cato Institute looks backwards, and says there is no evidence of economic losses from trade because the figures being used are overwhelmed by the recession. People like me aren't looking backwards, we're looking ahead, and considering the effects of, for example, $30B/yr. worth of car parts that will be imported by just two car companies within the next seven years.
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I've never seen figures compiled that way, but you could roughly derive it from existing trade figures. It would be a lot of work.
-- Ed Huntress (remove "3" from email address for email reply)

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Trade means that there are no win-lose transactions. A deal defined as a willing buyer coming to agreement with a willing seller. Where is the win-lose? A win-lose deal must entail fraud or force. Get the military involved and you surely have a win-lose situation. Often it is a lose-lose situation. ;-)
Pete.

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Actually, it looks like we do now have the materials technology to build a beanstalk. Researchers have now made carbon nanotube structures up to 5 feet long (limited only by their tabletop equipment) with the requisite tensile strength. It is just straightforward engineering development from there to the lengths needed for a beanstalk.
Getting government out of the launch business doesn't somehow change the rocket equation. The mass ratio needed to reach orbit ultimately determines the cost to orbit by rocket, and that's only a function of the gravity well. The equation tells us best case cost is still a couple of orders of magnitude too high for commercial exploitation of space.
Gary

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This SF ebook covers several variants of that theory: <http://www.netassetsbook.com/
See also Victor Koman's "Kings of the High Frontier" <http://www.amazon . com/exec/obidos/ASIN/0966566203/qid60401222/sr=2-1/ref=sr_2_1/104-3402717-7 752729>

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The projectile in the cannon barrel can't exceed the speed of sound in the barrel. With normal propellants at temperatures and pressures tolerable by any reasonable launch vehicle, you could only get about 2700 MPH (about 4,000 fps). You could do a bit better with staged charges (ala Gerald Bull's Supergun).
But even 2700 MPH is too fast to slam a launcher into sea level atmosphere. The launcher would still have to be mostly fuel tanks, and they're rather fragile things. The muzzle would have to extend about 8 miles up to make entry into the atmosphere at that speed tolerable.
Now an 8 mile high cannon is a lot of work to only gain 2700 MPH (you need a bit more than 18,000 MPH to reach low orbit). I don't see it as being cost effective. Fuel is the smallest major expense of launching a payload anyway.
Gary

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The germans were doing this during ww2 IIRC, with a long barrel in the mountainside, and multiple staged charges along its length.
Jim
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