What happened to this economy and what will happen next.

I put this on another thread, but I think it needs a thread of it's own so everyone can read and understand it because it's for sure most people don't understand what's going on.

According to this month's Consumer Reports, we lost almost 6 million manufacturing jobs from 2000- 2010 to companies that moved out of the country because of NAFTA and Free Trade. I know Democrats would like to put all the blame on lost jobs on Bush and his 5% tax cut, but that just isn't true. Dems cut taxes 21% back in the mid 1960, during the Vietnam war and then Johnson started his multi billion war on poverty and it didn't do to our economy what Free Trade and NAFTA did and Bush can't be blamed for those. They were started before Bush got in office, but it was his administration that took the blunt of those job loses. Of course the rich took advantage of what the government gave them and moved those jobs out. That's where they put their money.

Your right and that is another fault of Free Trade and NAFTA. A company here dealing in the same product made in China, can't pay $15.00-$20.00 and hour plus benefits when China is paying $3.50 an hour. But Liberals feel that if they force unions on that American company, they can force him to pay more. But what it will do is force that American company to move out too.

We are going through a transition we have never had to deal with before. We have lost millions of jobs and billions of tax dollars that have put government agencies in a bind. They have these workers contracts require them to pay so much wages and benefits and are no longer getting in the tax dollars to pay them. So that is why we have this war on unions. They have given back, but not enough to dig the government agencies out of the hole. Companies have had to cut wages and benefits to try and compete with foreign business.

Things have come down here and up in China just enough to begin a slow move back to America. I have a thread put up of the companies moving back. Now these won't be high paying jobs, at least for awhile. We can't afford to jack up wages and benefits to fast. But as time goes on, wages in China and Mexico will continue to go up. As oil prices and the cost of shipping rises, we will once again be able to compete. But we have several years of this transition to go through before things straiten out. People need to understand that.

 

The aggregate economic benefits resulting from NAFTA, free trade agreements, and other economic liberalization policies outweigh the costs. First, the positive affects to United States consumption and real investment spending resulting from such measures is tremendous. Second, such measures revealed a structural deficiency resulting from the division between labor demand and labor value. Before the series of major economic liberalization efforts, this shortcoming was heavily subverted by the government in the form of tariffs, import and export quotas, subsidies, and the like. Third, and finally, economic liberalization measures are rampant throughout NAFTA and other free trade agreements such as the implementation of new copyright and patent laws. Therefore, while there are significant downsides to free trade resulting from structural unemployment, there are outstanding upsides resulting from consumption and real investment spending.

 

The manufacturing jobs were leaving decades before NAFTA.

In the 40s, the US radio industry was the standard of the world, but when transistor radios came along US radios were simply too expensive and the radio business died. When cameras changed from Speed Graphics to 35mm, American manufacturers didn't even try. TVs held on for a few decades but the last of them guttered out long before NAFTA. When AT&T was broke up the old Western Electric rotary dial phone (a paragon of durability and reliability) was simply too expensive to sell.

Since the 70s an avalanche of regulations has made it very difficult for new industries to come along to replace the old ones as they die off. Before the 70s the permits required to build something amounted to nothing more than heads-up to the local assessor. Now they run hundreds of pages and take years to get.

Now that ObamaTax is in place everything made in the US has to have a premium in its cost structure to cover the ObamaTax on the US workers.

 

Well, it is rather disconcerting, to me, a Democrat, progressive, environmentalist, and advanced energy proponent, to see the Obama administration continue tarriffs on cheaper, Chinese made, solar panels, which are 1/3rd the cost of American made solar panels.

So much for solar energy independence.

And likewise, it disturbs me, that for 4 years, the price of a gallon of gas has remained well above $3/gallon, and the Obama administration has done nothing at all to promote biofuel alternatives, that include vertical stack farming, which could produce ample supply of ethanol from non edible vegetation.

My current opinion, is that the Mayan duel symbol of man in 2012, represents the illusion of choice of two candidates, both of whom, are not going to advance us to a higher level of civilization, but will continue the practice of raping the earth for profit, and suppress any technological advancement where energy production is decentralized.

 

It is in my opinion that market entry should encompass little to no prerequisites. Rarely does the process generate negative externalities. On the other hand, once in a market, there must be regulations internalizing the negative externalities caused by firms. Unfortunately, as businesses develop in a given market, they have an increased interest in concentration market forces around themselves. Henceforth, they will use illegitimate force to establish monopolies, but also use the legitimate force of government to do so for them by applying unreasonable barriers to entry.

 

I have a little trouble blaming NAFTA and free trade for manufacturing's demise. While they obviously have an effect I believe other factors are more important. In 1970 something like 40% of workers worked for mfg concerns. By 1990 it was in the teens. If I had to choose 3 factors for mfg employment decline they would be 1. innovation(technology), 2. regulation, 3. offshoring. I put regulation ahead of offshoring because much of the offshoring is a result of regulation. It continually confounds me that while american manufacturers are at a disadvantage against foreign competition in virtually every aspect of business our only response is to see how many new costs we can put on them.

I wish I could share the optimism out there. I've heard the "mfr is coming back" line so many times that I just categorically dismiss it when I hear it now. As of this moment I have 2 family member who work in mfg, one is currently laid off because the company he works for is in a fight with OSHA, the other just started working for a medical device mfr that has had their operations shut down by the the FDA. They make wheelchairs. (would wheelchairs be a food or a drug?). Typically, the OSHA case is not the result of an injury but the results of firing a disgruntled employee. The FDA from everything I can gleen is not the result of faulty products, but apparently paper work. Rumor has it they will be shut down until at least June. They've already laid off over 100. Another person I know that works there told me they have cleared a room in their factory of equipment and replaced it with floor to ceiling file cabinets.

From my perspective, you could not devise a more efficient strategy to dismantle mfr in this country than has been carried out at the fed govt level over the last 40 years.

 

While it's true we had job loss before NAFTA and Free Trade, much of it was caused by bad trade with Japan and it started back in the 1960's. There has been a television series done on it and several magazine articles done. There is a web sight that brings it all out and it's quite long. But I can give you several examples of what happened and hope that you take the time to read the rest. Because some of what Japan did then, we see China doing things similar. Here is the article. http://www.csse.monash.edu.au/~jwb/japanyes.txt

IN THE BEGINNING, THE TV CARTEL:

A very famous example of Japanese national government and corporate
coordination to take over a foreign industry is that of the Japanese TV cartel,
first set up in the 1960's. This is how Japan took the free-world TV industry
away from the United States. PBS TV's "Frontline" program did an excellent
documentary on this called "Coming From Japan", (see Appendix for how to get
transcript via Internet).

In the 1960's, the Matsu(*)(*)(*)(*)a Industrial Electric Company, Sanyo, Toshiba
and others formed a TV cartel in Japan. They got US TV technology from the
giants in the industry (Zenith, RCA, Quasar) in the following way. The Japanese
government prohibited US made TVs from being sold in Japan. Instead, they
insisted that the technology be licensed to Japanese manufacturing companies
rather than importing (still often the case today in Japan). The US companies
thinking they could still make money this way, agreed to these terms which
enabled the Japanese companies to acquire the technology on how to build TVs.

The above Japanese companies, with tacit approval from the Japanese
government, set up a cartel to inflate TV prices in Japan in order to turn
around and use the money to sell below cost TVs in America. This was to drive
US makers out of the American and world markets. US TV makers went bankrupt or
left the industry as they could no longer fund research to continue making
improved and high quality TVs. They could not compete with the artificially low
Japanese TV prices in America and were forbidden to enter the Japanese market
to take advantage of the high prices there. Hence, the US makers could not make
money. Furthermore, secret deals to thwart US customs, illegal under US trade
law, were set up by Japanese TV makers and US retailers such as Sears and
Montgomery Ward to sell Japanese TVs under store brand names. Concurrently, the
Japanese mounted an important lobbying effort in Washington to ensure that this
scheme was not disrupted by the US government or customs services [Agents of
Influence p77]. As a result, once famous brands such as Sylvania, Quasar,
Admiral, Philco and RCA have vanished or are foreign/Japanese owned. Zenith is
the only remaining US TV maker today. No US companies make VCRs although they
were an American invention.

In the 1980's the Japanese applied this same strategy to the computer flat
panel display industry (also invented in the US) and now completely dominate
that industry as well. Before that was motorcycles, machine tools and computer
memory chips (the US tried to retaliate but failed as our companies couldn't
organize with each other during the now famous "dram shortages" a few years
ago). It will be happening again in the financial services industry [Yen! p32],
telecommunications equipment, kitchen/washing appliances and aircraft
manufacturing during the 1990s and beyond [Newsweek 1/18/93 p17].

 

More of Japans dirty tricks to keep American products out of Japan, while they had full access to ours.

http://www.csse.monash.edu.au/~jwb/japanyes.txt

A US lamp manufacturing company encountered exactly this problem [Time 2/10/92 p19]. It took them 9 months to get lamps off the ship sitting in the harbor and into retail stores in Japan after customs, and other government agencies stalled and stalled (which cost this particular company lots of money). Making foreign goods (ie. food, or apparel) which compete against domestic Japanese products wait on ships long enough to rot or not be desirable to the consumer is another practice.

 

As an example of a consumer "protection" law really created to prevent
foreign competition in Japan, one may look at the auto industry. All non
Japanese cars which enter Japan today must be "safety-tested" by Japan for
"safety to the consumer". The fee for this "safety-test" is several thousand
dollars PER CAR imported and must be borne by the importer (and consequently
the buyer) of the car. Cars made by Japanese companies (even if they originate
from foreign Japanese plants such as the US Honda Accord plant) are exempted
from the inspection and the fee as Japanese car companies are permitted to
"safety" their cars themselves at their factories. The result of this practice
is to make the prices of non-Japanese brand cars uncompetitive against Japanese
brands sold within Japan. This law adds upwards of $5000 to the price of each
US car for sale in Japan. [New York Times/CNN 12/25/92]. To further discourage
non-Japanese car purchases in Japan, auto insurance rates for non Japanese
brand cars in Japan have been rigged by auto producers (who own many of the
insurance companies) to be three times higher than rates charged for equivalent
Japanese brand cars [Agents of Influence p156]. It is these practices and laws
(and not that the steering wheel is on the wrong side) that prevent US car
companies from making headway in the Japanese market. Both GM and Ford ship
cars to Japan with the steering wheel on the correct side for Japanese roads
[Agents of Influence p156].

 

Right, a lot good those laws have done. They have found 22 fake Apple stores in China. They are forging almost everything we make, even aircraft parts.

Fake Chinese Apple Store Looks Amazingly Real


gizmodo.com/5822918/fake-chinese-apple-store-looks.../gallery/


Jul 20, 2011 – Don't be deceived by the slick marketing materials and blue shirts with Apple logos. This is not an Apple Store. It's a cheap knock-off located in ...

 

What is America's biggest export to China with Free Trade? Trash

No doubt. But the report draws no attention to the components of a relatively recent surge in U.S. exports to China, perhaps the result of growing American concern about its mammoth trade imbalance with the Middle Kingdom. Between 2004 and 2008, these exports more than doubled from $34.7 billion to $71.5 billion, far short of the $337.8 billion the U.S. imported from China in 2008, but still a step in the right direction.

And while electronic components as well as oilseeds and grain continue to rank among the top three categories of exported goods, the fastest growing and now No. 1 export category is--"Scrap and Trash."

According to data provided by the U.S. International Trade Commission, Chinese imports of U.S. cast-offs (scrap metal, waste paper, and the like) surged by an eye-popping 916 percent over the 2000-2008 period, with most of that expansion occurring after 2004.

Perhaps not many observers will judge this a suitably glamorous role for America to assume on the global stage. But one might take comfort in the thought that if there is one thing that Americans still excel at producing, it's trash.

http://www.usnews.com/opinion/blogs.../americas-biggest-trade-export-to-china-trash

 

??? Demise?. China and the US are close to tied as the two largest manufacturers of good in the world. US does this with less that 1/4th of the population of China. What demise?

 

Correct. This still does not mean China is gradually surpassing US manufacturing output.

 

Not yet, but one of our best exports to China is commercial aircraft and that might soon come to an end. China may also be a big competitor to Boeing. They will be ready to launch their own commercial planes in just a year or two with the help of GE which just built an aircraft engine plant in China. GE had to take on a Chinese partner as many companies that move to China have to do. What has been happening is the Chinese partner will acquire the secrets of making the product and then a few years later open a factory of their own in direct competition with the American company. Usually undercutting it in price. It will be interesting what will happen to Boeing sales in a few years from now.



Comac C919 - Wikipedia, the free encyclopedia

en.wikipedia.org/wiki/Comac_C919

It will be the largest commercial airliner designed and built in China since the ... Its first flight is expected to take place in 2014, with deliveries scheduled for 2016. ... 45 C919s, as well as an agreement to be the launch customer for the aircraft.

 

If the Chinese build their airliners as well as they knock off MiGs, there will be a bunch of horrendous crashes.

 

Will China Kill Boeing's Most Important Airplane? - Minyanville


www.minyanville.com › Business News

Nov 19, 2010 – Boeing effectively gave Tier 1 suppliers a large part of its proprietary manual, 'How to Build a Commercial Airplane,' a book that its aeronautical ...

How GE Is Arming China to Compete With Boeing -- and America ...


www.dailyfinance.com/.../is-ge-arming-china-to-compete-with-ameri...


Jan 18, 2011 – GE plans to sell its aircraft electronics to Chinese companies, and if you don't have ... (BA) to Boeing's Chinese competitors -- which are trying to build a .... BE MAKING AND SELLING THESE SAME SPARE PARTS CHEAPER!

Boeing to build factory in China – Trade Reform


www.tradereform.org/2011/04/boeing-to-build-factory-in-china/


Apr 25, 2011 – S aircraft manufacturer Boeing and Aviation Industries Corporation of China (AVIC) on Monday unveiled a new factory as part of their ...

 

No one is going to convince me that we haven't been completely screwed in the trade with Japan and China.

 

You nailed it.

 

You already know what I'm going to say. Free trade, competitiveness, America shouldn't be in the business of manufacturing goods if it can't compete and all that stuff.

Meanwhile, most of us who could care less about what happens are moving their recourses aboard and renouncing their citizenship.

 

The poor who benefit the most are free to stop purchasing their foreign made products if they feel they have the short end of the stick.

 

Agreed. I should have said mfr employments demise. Many seem to lay the decline in mfr jobs strictly to one or two issues when the truth is more complicated.

 

I actually agree with you. The transfer of technology, often developed with my tax dollars, is obscene. I worry that the zeroing in on Nafta & free trade ignores the road blocks we put up in this country. Whether people want to hear it or not the attitude of companies sending jobs overseas is often not "hey we can make a couple extra bucks" but more "why stay where you're considered the enemy". We not only transfer the technology, we then do everything we can to hamper it's use here.

 

Darn...maybe we shouldn't have embraced them as a "business" partner all these years. Seems history is repeating itself in some aspects once again. The Russians were the "boogieman" when I was growing up. China was our economic savior and partner after that...now..China is the boogieman. Not corporate America...China. Who's the next host sucker country to finance our smoke and mirrors economy? Japan maybe? They're good now..I guess they'll be the boogieman not too far off..

 

Then there's those fat cat profiteers that would stop benefiting too....

There's gotta be another small brown country we can invade and manipulate out there somewhere to save us all though, isn't there?

 

Japanese competition in cars with the USA has actually made the US car industry better.

The US must produce better, more reliable, more fuel efficient cars to compete with the Japanese.

And they have.