>The US manufactures 12 fold what it manufactured in 1945, it does it with only a million more people than were employed in 1945 in manufacturing jobs. Productivity growth is slow, but it is relentless. The reason we can produce so much more is because capital equipment and improved technology allows US manufacturing companies to produce so much more stuff with far fewer people.>
I don't know exactly how manufactured products are counted. If GM assembles a car in USA and gets most of its parts from other countries, does the car that leave the factory be counted in the manufactured goods count or it is (car-imported parts) that gets counted? If former then 12 fold does not really measure true productivity.
In any case, the manufacturing process can be replicated in another part of the world. The Solectron facilities in Taiwan may even be better than the plants in USA, if the Taiwanese plants is more recent.
Also, if net US productivity was that high, why would all the semiconductor companies be getting their products made elsewhere?
Manufacturing is not the full story. The chinese jacket arriving in the US for $25 sells at the retail level for $100-$200 depending on the store. So $75 of american service is required to sell the jacket. The same jacket can be sold for $30 to a chinese middle class person. So in selling, US worker needs $75 to sell $25 worth of manufactured goods. And a Chinese spends $5 to sell $25 worth of manufactured goods to a chinese. Who is more efficient? Another example - US companies need to spend $300 to acquire on wireless customer, Chinese companies $30. That is why there are more cell phone users in China, in spite of the same $100 price tag of the phone.
>In the US people are more expensive than machines because we have a high cost of living and high employment costs.>
Are you mixing cause and effect?
US has a dynamic economy, healthy competition, good work-force, reasonable regulations, efficient markets, and good infrastructure. This dynamism creates the demand for labor. What is driving this? The advertising, keeping up with Joneses, quest for perfection, or easy credit? Maybe all of the above. In any case, the economy has relentlessly absorbed women, kids, legal immigrants, and illegal immigrants. The labor pricing is dependent on demand supply situation. Highly skilled legal residents and citizens can command the best prices. Illegal immigrants actually are cheaper than machines. The illegal immigrants prop up the businesses that are otherwise unviable at their level of scale, such as small farms, restaurants, small retail shops, etc.
Even in India and China, wherever economy of scale prevails, people are more expensive than machines.
>It pays to reduce head count with capital equipment, patents and R&D needed to improve processes. This makes each US employee in manufacturing highly productive, regardless of their level of education or expertise. Higher order goods are capital intensive, even retail in the US is now capital intensive due to the high cost of labor.>
Don't dispute that. Except in many slow moving industries, less capital can deliver the same result in India and China. It still needs a certain skilled and educated labor pool, which did not exist in sufficient quantities 25 years ago, but now does.
>China, OTOH, because of it's inexpensive standard of living and low wages, much smaller capital base, has a hard time being competitive (against other Chinese companies) when they replace people with machines. Capital equipment is relatively more expensive for them, than people are, even highly educated ones. This will be true until they start to approach income parity with the developed world. So they are far better off competing with us in those industries which require a high head count and not a high capital expenditure. They make the stuff we used to make, sometimes even the way we used to make it. Meanwhile we make the stuff they can't make yet because their capital base isn't mature enough yet.>
I disagree. A large Indian or Chinese company can now raise enough money through International markets. Worse comes to worse their cost of acquiring the capital is a little higher. After that it depends on how the company is managed. There are good and badly managed companies in all countries.
>You assume that the best can work anywhere in the world, assuming where the largest concentration of smart people are and where the living expense is low.... but if that were true why would Silicon Valley exist where it does now? You assume it is the minds which create the goods and this is true to an extent, but even the most brilliant mind in China in the 57 years of Communist rule couldn't do what a mediocre student could do in Silicon Valley.>
I think geographical location is important. Industry specific geographical eco-systems can last for centuries.
>
Inventors and entrepreneurs require access to risk capital, before you risk your capital you require good personal property laws including protection for intellectual property (China has very few laws protecting private property and a sometimes capricious interfering government). Capitalists also require low taxes and a non-confiscatory government. <
All of the above are true.
>Then the finished product requires a populace wealthy enough to afford it and want it.>
Not true. That has been the mode of thinking for multinational companies. Affordability is defined as the cost of producing goods to serve the average american. If you define affordability as that to the average world citizen, huge market opportunities open up.
>BTW PCs are already commodities, there's no margin in them anymore. If we tried producing them here the biggest PC makers would get eaten alive. We're already on the next thing.>
We had better be.
-Arun |
