One Measure of US Economic Failure

[MasterBlaster]

We've obviously lost many sectors of our economy to foreign competition: consumer electronics, semiconductors, automobiles, textiles, manufacturing, etc.
So, the argument for US economic growth is that for every sector we lose, we grow or gain another.
So, where are we kicking butt?

We are really good at coming up with new and inovative ways at doing home equity loans. That and Jerry Springer documentaries.

 

[bow-tie]

We are really good at coming up with new and inovative ways at doing home equity loans. That and Jerry Springer documentaries.

We must get to work on exporting Jerry Springer immediately...

 

[Gone4Good]

I'm sure HaHa's ancestors worried about the "hallowing out of the agricultural base" too.  Thankfully we allowed capitalism to work its magic so now I can work in an air-conditioned office earning many multiples of what would be possible in an agricultural economy.  The same is happening to manufacturing.

There is a reason why the US is moving away from heavy manufacturing . . . because it is a lousy business.  Here is a sample list of company profits / worker:

Goldman Sachs                        $250,123
Microsoft                                    177,451
Bank of America                          93,111
Citigroup                                 76,448
Merck                                     75,309
Oracle                                     60,232
Dell                                         54,785
GE                                          51,750
Caterpillar                                   33,531
Toyota                                             29,155
General Dynamics                         20,292
Boeing                                    16,745

If you think about the areas where the US is strong (finance, pharmaceuticals, software) you'll see those areas also rank at the top of the list in terms of profitability / employee.  In other words, the US is allocating its scarce human capital to areas where it generates the highest return (just like capitalism is supposed to).  If you implement policies to protect or increase the manufacturing base, the economy will have to pull workers and resources from other areas.  Considering that workers in finance, pharma, etc. produce more than 3x the profits of Toyota's workers, its easy to see why those type of "managed economy" policies will make us all poorer. 

And as employees, who do you think earns a better living?  The folks at Boeing who each generate $16,000 per year in profit or those at Goldman Sachs who generate 15-times as much??

 

[al_bundy]

it's OK, manufacturing will make it up on volume

 

[ladelfina]

astromeria.. you would love the "Unity Day" festivities all around Italy -- chance for the downtrodden workers to sing stirring communist songs. 

"Made in Italy" is a big issue here, with bazillions of economic commissions, etc. (read, money wasted) to protect local industries. But the only glimmer of growth is in high-tech, for which Italy is only slowing adapting itself, with some successes in bio-tech and specialized manufacturing, like helicopters. The fabulous textile mills are mostly gone, along with the leather trade, the clothing trade. Big protections for agriculture but that, too, is fading for obvious reasons mentioned by 3 Yrs to Go. The EU is doing its damndest to extirpate any possible 'home-grown' advantage (legislating the permissible length of asparagus and trying to abolish wood-fired pizza ovens Union-wide are but two of their infamous diktats). The Italian companies that are having success are those who invest overseas, no doubt about it. Fashion and eyewear (go LUX!) designed in Italy but made in China.

In the US I used to be a "liberal", but here, between the unions and the gov't. I see first hand that socialism and protectionism has not helped the Italian worker; instead, it's just another form of slavery. The salaries here are (take home) about $1200-1500/month, even for people with degrees, like computer programmers. (Of course, you can't fire most people, though).

As if that weren't enough, cartels and protectionism ensure that consumer goods cost double or more: normal Braun coffeemaker made in Germany, no auto-shutoff: here $70 (literally identical model in the US =$20); normal fridge (1/2 American size) $650.  Banks charge high monthly fees for any kind of account AND charge you to close your account. You can't find even medium-cheap-quality items of clothes or shoes for less than $40, even at 1/2-off sales (fondly remembering my last trip to Marshall's and the $11 skirt I got). P.S. Sales are only allowed on certain weeks of the year, in January and August!!! Not sure who that is supposed to protect... the shopkeeper who can't move stuff as quickly as he'd like? the consumer who's forced to pay higher prices year-round? or the worker who ends up producing less due to reduced demand..    :

Everyone is so caught up in "protecting" their special labor class or business interest that it hurts everyone.

I like Nords' comment:

We're kicking butt in the industry of dreaming up (or discovering) new concepts and finding ways to pay other country's workforces to execute them for us while we retain the lion's share of the margins.  It's the ultimate outsourcing.

tho' you could replace "concepts" with "must-have trinkets" and cover a lot of it. The whole world aspires to have American-style "stuff". All we have to do is make sure we keep raising the bar and cashing in on the margins.

Plus, there are things worse than "services". What does Goldman Sachs provide if not a service? Only a few types of services can be easily outsourced; for instance, I hear there's big money to be made in the handyman biz!

 

[astromeria]

Sounds like fun But seriously, I'm not in favor of protectionism--or socialism for that matter (well, I do favor public education and public safety services--fire, police, EPA, OSHA, SEC, FDIC...--and public catastrophic health coverage). But when American companies are making their greatest profits ever, I get steamed that productive workers don't get to share in their own success.

From yesterday's NYTimes:

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”
http://tinyurl.com/erxao

 

[Scrooge]

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation.

Labor stats is a tricky area that can be easily manipulated to make it look better or worse depending on what the author wants to prove. Two common sources of obfuscation are (a) substituting "wages" (usually private non-farm non-supervisory wages) for total income and (b) ignoring benefits, which have been growing rapidly (see, e.g., http://stats.bls.gov/news.release/eci.t12.htm). If you want to see the whole picture, you need to read the fine print (http://stats.bls.gov/news.release/eci.tn.htm) and then do enough additional reading to understand the jargon, which can be time consuming.

Edit: Oh yes, forgot to add one of the better summary tables: http://www.bls.gov/news.release/prod2.t02.htm

 

[al_bundy]

NY Times is a bad source since they always fudge the numbers by picking years to support their conclusion.

All I know is that in 1981 when i first came to the US all the middle class people didn't have a lot of money for discretionary spending. today we have DVD players, DVD collections, CD collections, cheap vacations to all kinds of places, cheap airfare almost everywhere, cell phones, home theaters, large screen TV's, game consoles, crazy expensive phones with all kinds of features, a whole industry based on home improvement sprang up in the last 25 years, cable and satellite TV with hundreds of channels, internet service, eating out is a regular occurrence and another industry sprang up to fill the demand, people are buying more expensive cars, new homes today offer features only the rich had 25 years ago, child fashions and anything else i forgot which is a discretionary expense.

if people are so much poorer today than 25 years ago like the NY Times says where is the money coming from for all this spending? we should be spending all our money on food, clothes and shelter and not have anything left.

 

[perinova]

Labor stats is a tricky area that can be easily manipulated to make it look better or worse depending on what the author wants to prove. Two common sources of obfuscation are (a) substituting "wages" (usually private non-farm non-supervisory wages) for total income and (b) ignoring benefits, which have been growing rapidly (see, e.g., http://stats.bls.gov/news.release/eci.t12.htm). If you want to see the whole picture, you need to read the fine print (http://stats.bls.gov/news.release/eci.tn.htm) and then do enough additional reading to understand the jargon, which can be time consuming.

Edit: Oh yes, forgot to add one of the better summary tables: http://www.bls.gov/news.release/prod2.t02.htm

If I read correctly the article/graph mentioned earlier, the wages are decreasing but the total work benefit is constant. (Constant as a whole but much bigger for large company CEOs )
What benefits are increasing? Probably only health costs which are slowly strangulating American companies providing them. The consequences are huge for the competitiveness of companies as well as the well being of all of us (financial if you have insurance and health if you dont). Health insurance is now like having a second mortgage.
The Fed. Government needs to do something.

 

[jeff2006]

NY Times is a bad source since they always fudge the numbers by picking years to support their conclusion.

All I know is that in 1981 when i first came to the US all the middle class people didn't have a lot of money for discretionary spending. today we have DVD players, DVD collections, CD collections, cheap vacations to all kinds of places, cheap airfare almost everywhere, cell phones, home theaters, large screen TV's, game consoles, crazy expensive phones with all kinds of features, a whole industry based on home improvement sprang up in the last 25 years, cable and satellite TV with hundreds of channels, internet service, eating out is a regular occurrence and another industry sprang up to fill the demand, people are buying more expensive cars, new homes today offer features only the rich had 25 years ago, child fashions and anything else i forgot which is a discretionary expense.

if people are so much poorer today than 25 years ago like the NY Times says where is the money coming from for all this spending? we should be spending all our money on food, clothes and shelter and not have anything left.

A lot of the evident money is debt that wasn't present a generation ago.  Also sending the spouse out to work (two income families v one income family a generation ago)

 

[MasterBlaster]

The Fed. Government needs to do something.

Be very careful of what you ask !

As you just might get it !

 

[al_bundy]

A lot of the evident money is debt that wasn't present a generation ago. Also sending the spouse out to work (two income families v one income family a generation ago)

which is also one reason for inflation since two paychecks means more money chasing things like housing

 

[haha]

"M. King Hubbert used to point out that the economy of Spain was severely disrupted during the 16th century by the gold and silver from conquests in Mexico and Peru. The gold allowed Spain to import everything from food to luxury goods and the Spanish economic infrastructure withered. After the gold and silver supply slowed down, Spain was never again a major world power." -Ken Deffeyes

Update the centuries, and substitute USA for Spain, and "assume debt" for plunder gold and you have the US today. This is our moment in the sun, just like Spain's was the 16th century. At least the Spaniards went out and stole the gold. We sit here sucking on the big debt teat in the sky.

Ha

 

[brewer12345]

At least the Spaniards went out and stole the gold. We sit here sucking on the big debt teat in the sky.

Ha

You would prefer we went around killing Aztecs? I suppose you could ust stick in "Iraqi" and get much the same effect, except that I am not sure what we are getting out of Iraq except body bags and owing more money to our Asian and Middle Eastern creditors.

 

[perinova]

You would prefer we went around killing Aztecs? I suppose you could ust stick in "Iraqi" and get much the same effect, except that I am not sure what we are getting out of Iraq except body bags and owing more money to our Asian and Middle Eastern creditors.

Spooky: costofwar.com

 

[haha]

You would prefer we went around killing Aztecs?

No, I prefer "diplomacy" to killing the natives. Diplomacy is mostly what Cortez employed with Montezuma. Montezuma was killed by other Aztecs. Cortez took over and ruled mostly by bluff. Before he returned to Spain a hero, he established many mines and farms, arguably leaving the Aztecs better off than he found them.

Bringing it to the present, it is too expensive to run wars without grabbing some spoils of war. That is just Imperialism 101. The neo-cons and their lackey Giorgio seem not to have figured that one out. I guess this should be termed “neo-imperialism”. Imperialism which costs a lot, but offers no offsetting economic benefits.

Ha

 

[Gone4Good]

"The gold allowed Spain to import everything from food to luxury goods and the Spanish economic infrastructure withered. " -

Do you care to offer any evidence that the economic infrastructure has withered?

 

[haha]

Do you care to offer any evidence that the economic infrastructure has withered?

No.

 

[Gone4Good]

No.

Never let some facts get in the way of strongly held opinions.

 

[brewer12345]

Do you care to offer any evidence that the economic infrastructure has withered?

You must not know anyone who used to have a manufacturing job...

 

[al_bundy]

manufacturing is stronger than ever, maybe not in Detroit but there are a lot of other things we make here. If GM was as efficient as Toyota things would be different.

Maybe if the UAW stopped believing that efficiency means lost jobs and takes a look at Toyota and Honda they would still be relevant.

 

[haha]

Never let some facts get in the way of strongly held opinions.

One of the truly wonderful things about retirement is that you only have to research things until you alone are satisfied with your view. It is not that having false views doesn't have sanctions, because as you know investment success depends on a fairly accurate appraisal of the world.

But you don't have to write white papers for anyone. Particularly for someone like you, who has no intention of letting facts get in the way of your strongly held opinions.

No problem for me- my contest is with markets, not with you.

Ha

 

[wabmester]

C'mon, Ha.   You can't generate any heat or light if you won't argue. 

Aspects of the US economy are fairly strong.   For example, I believe our exports are increasing.   It's just that our imports are increasing a bit faster.    Most of that is due to oil.   So, if Americans simply stop consuming so many imports and we free ourselves from our dependence on foreign oil, our books will look swell.   Simple! 

 

[youbet]

manufacturing is stronger than ever

How are you measuring that?

 

[Gone4Good]

You must not know anyone who used to have a manufacturing job...

How are you measuring that?

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