Having been on the fringes of “where do we make this?” decisions for electronic assemblies, the question was always “what’s the best place?”, not where’s the cheapest or how do we screw American workers. When the suppliers are in Asia, and the customers are in Asia, why assemble anywhere else?

The thing about the countries you mention is that they are all smaller and relatively simpler economies; government policy is better able to be effective where things are simpler. In a bigger, highly complex economy, your dirigisme-lite won’t work as well. I would argue that the US couldn’t take the route you are talking about, even if they wanted to. Also, there’s arguably a lot less desire for social cohesion in the US than there is in SweFinSwitz. Try and persuade an East Coast librul to pay twice the price for his lemongrass and hibiscus smoothie so a West Virginian can afford to buy another assault rifle.

The arguments made by other commenters are good in their way, but tend too far to the nostalgic and apocalyptic. The same arguments, by the way, were made by the British when it came to the rise of Germany after WW2, by Europe and the US about Japan in the 1950s and 1960s, Taiwan and Korea in the 1980s, and probably much further back in time as well. It simply is not true that moving things around and designing things adds less value than making things — designing and deciding what thing to make is as important as making it as is financing it. All of these things add value. Very often, the actual making of it is the easy part.

Finally, people don’t always rise up in revolt (though may complain) when they have a problem with their relative wealth, but tend to when their basic needs are not being met. And Cash, anyone who thinks Foxconn workers are literally made to work by having guns pointed at them is, frankly, a loonie, or doesn’t understand the meaning of the word “literally”.

1. The problems of the US economy outlined in the NYT article are not some inevitable result of the rise of the Chinese manufacturing behemoth. Look at Sweden, Finland, Switzerland — they’re doing fine, even with a global economic crisis, and this has everything to do with the enlightened fiscal policy choices these countries have made: High taxes, but with investment in education and in social welfare amid a liberal (in the proper non-US meaning) business climate that nevertheless enjoys some state direction. There is no reason why Americans couldn’t go down the same path, except of course for the visceral reaction around half seem to have towards this idea.

2. The rise of the global information economy tends to favor rising income inequality because the winners in this economy (successful software producers, movie moguls, patent holders, rock stars, designers) can conquer all markets without being bound to physical manufacturing resources. A society can benefit overall if its citizens are heavily invested in these kinds of industries, but needs to redistribute the spoils within society if it wants to maintain social equality. Sorry to trot out Sweden again, but that’s what it does. Swedes in the service industries (the hairdressers, the police, the taxi drivers, the barristas) are paid high wages, and their services are expensive, but that is the price of a remarkable social cohesion. I pay $5.50 for my latte in Stockholm, but I don’t mind, because it is for a good cause (and comes with some truly innovative and creative swirly patterns on top).

There’s no doubt that standing at an assembly line for hours at a time is something of a crappy job, but it was a job that *did* in fact lift many Americans into the middle class (just as it’s doing the same for many Chinese). It wasn’t great, but as you said it put people into a position to improve their futures and the futures of their children.

The problem isn’t that manufacturing jobs are going away, but that the replacement jobs don’t seem to offer the same upward social mobility. In the fifties and sixties if you didn’t finish school or have any family background you could buy a house, raise a family, and even send your kids to college working in a factory. Try doing that cutting hair today and you’re in for a world of pain. The replacement jobs in the service sector are disproportionately lower-paying, and even if education improves there’s the simple fact that not everyone can be doctors and lawyers or engineers; there’s only so many high-paying jobs a society can support.

The whole inequality of jobs touches on another similar point: namely that although most of the value in Apple’s products stays in the US, those profits accrue to only a relatively small number of Apple shareholders and employees. Even the ecosystem around Apple products is limited in its ability to provide for a large number of people. One of the very reasons investors love these kinds of start-ups is because they can scale enormously without needing to hire massive numbers of people.

The lower cost of manufacturing has very definitely increased the quality of life for millions of people, both on the production end and the consumption end. Lower wages isn’t as dangerous when prices also fall. But the final and biggest problem is that while prices of consumer goods, the nice-to-haves, have fallen as median income has stagnated, the price of must-haves has actually risen massively. Namely, the cost of education, health care, and housing have all increased in real terms even as income has not. In material terms (kitchen appliances, TVs, etc) today’s “poor” are actually quite well off compared to their historical counterparts. But in terms of opportunity and relative status they are worse off. That’s why people feel pinched, and that’s why the middle class seems to be shrinking. Not because people are afraid they can’t afford iPads, but because they can’t afford houses or to send their kids off to college.

So in the end, the issue again isn’t that the loss of manufacturing is itself bad, it’s just the lack of good replacements for manufacturing jobs as a way provide for a broad base of people with good living standards. There are certainly many examples in the world of many countries where the citizens enjoy high living standards and don’t depend on manufacturing. It’s just not clear to me how we get there from here without an engine for social mobility to replace manufacturing jobs, or at least some more enlightened social policies.

http://market-ticker.org/akcs-www?blog=Market-Ticker&page=2

Your post does much to support the conclusion that the approaching global chaos that Soros is predicting is in fact to be welcomed. Just as the heedless and obdurate owning classes in France and Russia couldn’t be bothered even to save their lives, the 1%ers and their lackeys will continue with their let-them-eat-cake position until a bad day on Wall St means being killed by an angry mob. An avoidable but apparently inevitable period of chaos and violence will be followed by something unpredictable but at least different, and I think eventually the global popular vote will be that chaotic change is preferable to allowing concentration of wealth and power to continue to a neo-feudal outcome.

P.S. — Write more stuff. Slacker.

Thanks for the congratulations, though I do not seek them. Underperformance is underperformance, and I pity the clients; though I can comfort myself with the thought they could have been invested in something much worse — RIMM, for example.

I wish you the best of 2012 as well, drop me a line on of these days.

Irrespective of how shitty it might feel, upper quartile grants you a seat at the table for the next round. But it reminds me of the ditty about the two colleagues in the jungle being chased by a Lion (with Upper-case ‘L’) on an outing. While making haste down a dense path, one of them suddenly stops, takes his running shoes out of his back-pack and starts putting them on. The other one, panting and outof breath, says “What are doing? Are you crazy??!? You’ll NEVER out-run that thing!” To which the other repsonds: “I know that, I just have to outrun YOU…..!”

All the best for 2012…

-C