Trump’s NAFTA Deal Simply Can’t Solve America’s Manufacturing Problems

Lambert: This is an important post, especially as it pertains to our implicit and unacknowledged industrial policy, militarization.

By Marshall Auerback, a market analyst and Research Associate at the Levy Institute. Cross-posted from Alternet.

President Trump and his Mexican counterpart, Enrique Peña Nieto, recently announced resolution of major sticking points that have held up the overall renegotiation of the NAFTA Treaty (or whatever new name Trump confers on the expected trilateral agreement). At first glance, there are some marginal improvements on the existing treaty, especially in terms of higher local content sourcing, and the theoretic redirection of more “high wage” jobs back to the U.S.

These benefits are more apparent than real. The new and improved NAFTA deal won’t mean much, even if Canada ultimately signs on. The deal represents reshuffling a few deck chairs on the Titanic, which constitutes American manufacturing in the 21st century: a sector that has been decimated by policies of globalization and offshoring.

Additionally, what has remained onshore is now affected adversely to an increasing degree by the Pentagon. The experience of companies that have become largely reliant on military-based demand is that they gradually lose the ability to compete in global markets.

As early as the 1980s, this insight was presciently confirmed by the late scholar Seymour Melman. Melman was one of the first to state the perhaps not-so-obvious fact that the huge amount of Department of Defense (DoD) Research and Development (R&D) pumped into the economy has actually stifled American civilian industry innovation and competitiveness, most notably in the very manufacturing sector that Trump is seeking to revitalize with these “reformed” trade deals.

The three biggest reasons are:

1. The huge diversion of national R&D investment into grossly overpriced and mostly unjustifiable DoD R&D programs has tremendously misallocated a large proportion America’s finest engineering talent toward unproductive pursuits (e.g., the tactical fighter fiascos, such as the F-35 Joint Strike Fighter that, among myriad other deficiencies, cannot fly within 25 miles of a thunderstorm; producing legacy systems that reflect outdated Cold War defense programs to deal with a massive national power, as opposed to combatting 21st-century terrorist counterinsurgencies). Indicative of this waste, former congressional aide Mike Lofgren quotes aUniversity of Massachusetts study, illustrating that comparable civilian expenditures “would produce anywhere from 35 percent to 138 percent more jobs than spending the same amount on DoD [projects].” The NAFTA reforms won’t change any of that.

2. By extension, the wasteful, cost-is-irrelevant habits of mind inculcated into otherwise competent engineers by lavish DoD cost-plus contracting have ruined these engineers for innovation in competitive, cost-is-crucial civilian industries.

3. The ludicrously bureaucratized management systems (systems analysis, systems engineering, five-year planning and on and on through a forest of acronyms) that DoD has so heavily propagandized and forced on contractors has, in symbiosis with the Harvard Business School/Wall Street mega-corporate managerial mindset, thoroughly wrecked efficient management of most sectors of American industry.

52 comments

  1. Mark Pontin

    From Auerback’s article: “Silicon Valley grew like a weed with essentially no Department of Defense investment.”

    Absolutely false.

    In 1960, 100 percent of all microprocessor chips produced by Silicon Valley — therefore, IIRC, at that time 100 percent of all microprocessor chips produced in the world — were bought by the U.S. Department of Defense. This was primarily driven by their use in the guidance systems of the gen-1 ICBMs then being developed under USAF General Bernard Schriever (which also supplied the rockets used for NASA’s Redstone and Mercury programs), and by their use in NORAD and descendant early-warning radar networks.

    As late as 1967, 75 percent of all microprocessor chips from Silicon Valley were still bought by the Pentagon.

    By then, Japanese companies like Matsushita, Sharp, etc. had licensed the technology so Silicon Valley was no longer producing all the world’s chip output. But still ….

    That aside, I think Auerback makes some very good points.

    Reply
    1. Anthony K Wikrent

      While I think Auerback’s Melman’s point that the best engineering talent was diverted by military spending, it does not mean that military spending had an entirely negative effect on the ability to compete in other markets. What no one addresses is: Why did USA computer and electronics industries become so successful, while those of Britain did not?

      The key, I think, is the conscious policy to deliberately seed new technologies developed under military auspices into the civilian economy. The best recent example was the Moore School Lectures in July – August 1946, which can be identified as the precise point in time when the USA government, following Hamiltonian principles of nation building, acted to create an entire new industry, and an entirely new phase shift in the technological bases of the economy.

      This followed historical examples such as the spread of modern metal working machine tools out of the national armories after the War of 1812; the role of the Army in surveying, planning, and constructing railroads in the first half of the 19th century; the role of the Navy in establishing scientific principles of steam engine design during and after the Civil War; and the role of the Navy in creating the profession of mechanical engineering after the Civil War.

      The left, unfortunately, in its inexplicable hatred of Alexander Hamilton (such as the left’s false argument that Hamilton wanted to create a political economy in which the rich stayed rich and in control — easily disproven by comparing the descendants of USA wealthy elites of the early 1800s with the descendants of British wealthy elites of the early 1800s) cannot understand Hamiltonian principles of nation building because the left does not want to understand the difference between wealth and the creation of wealth. The left sees Hamilton’s focus on creating new wealth (and, be it noted, Hamilton was explicit in arguing that wealth is created by improving the productive powers of labor) and misunderstands it as coddling of wealth.

      Reply
    2. Scott

      I agree, please see this presentation titled The Secret History of Silicon Valley, which details the relationship in fair greater detail. It is not from a professional historian, but the depth of research and citations show a story that runs counter to the common myths.

      https://steveblank.com/secret-history/

      Reply
      1. Scott1

        I am on my third name on Naked Capitalism. I never had seen Scott till about 4 or 6 months ago. I saw a comment under my name I had not written and changed to Scott 1 so as to not be a confusion created. I’d like to return to my web all over everywhere I have gone excepting some of facebook name or Avatar as called on CR4. Before that was Popwar writings.

        Otherwise I watched the entire hour long lecture, making a wreckage of my afternoon for which I had other mental space & time dedicated.
        I think of the story of Alfred the Great of 800 England & its coasts where were the stores attacked by the Danes (Vikings) Referencing David Hume & The History of England. For me it is the ideal.
        I feel as much threatened by my government as I do defended and I am not defended from Cyber attacks on me and my money in the bank or the equipment I use to participate in the Amazon marketplace where you have to get anything you might have gotten from a store selling things of specificity.

        I have this ideal where it is the strength of the nation to be about food, tools, shelter, clothing & the hobbies from which innovations come.
        The militarization of Rome was for the protection from barbarians.
        The difference between barbarians and civilized people is that barbarians steal what they want and civilized people work for what they want. Looting by the Americans during their wars was discouraged and 150 were shot for rape. (Check my numbers) I can’t remember the reference.

        That the Romans never wrote down debts as had prior civilizations seems to have meant eventually the militarization allowed bankers to use the Roman Legions as a collections unit.
        Then came the dark ages.

        IN-Q-TEL is the CIA Venture Capital Company subsidized with 685 million a year. It is 685 million a year that goes to American Airlines.
        I believe that Americans are definitely vulnerable to Cyber Attacks much greater than what we have seen hurt us. It hurts me when I am advised not to answer my phone. It hurts me when the bank records are stolen from either the store, or the bank. My wife has had to change her bank card numbers three times over the last 6 months.
        I know that the US Treasury can provide infinite numbers for military industrial complex accounts.

        The US almost lost the war in the Pacific. WWII was a counter attack when it was realized Europe was defeated and that was and Japan was a real threat to civilization as we knew it and wanted it to be.
        I fear now that our adversaries know how to make our luck run out faster than it did in the Pacific.

        There is too much evidence in the way I have to live and the fears common to us all. “In Science Salvation” was what I wrote on a bill I designed for my model nation long ago.

        The exoskeleton is now better to have on a soldier or material handing labor. It is the thing that competes with AI, and is in order for transformational employment.

        Damned late to the Forklift rental companies. Capitalism as it is today with Finance as a parasitical pirate means barbarians in suits chasing fads and winning from crimes made legal under Clinton Unit 1.

        Finance, a stock market is supposed to put money into transformational products & bring them into the market. That only the Spies can succeed at that sort of thing, is a portent of decay.

        The decay in my mind is that the classical reasons for an Armed force are lost when the tools of the conflict change and what is needed doesn’t look like what was needed.
        We have less real to touch when there is more of the unreal touching us.
        Photonic identity death threatens to be just death.

        Reply
    3. Marshall Auerback

      But there had already been substantial private investment EARLIER than 1960. The DoD investment came later and initially was unsuccessful. I do later acknowledge that the Pentagon played A role, but not THE role, and that by and large the military’s role has been unhelpful to American manufacturing (as opposed to the common myths to the contrary). Multiple events, multiple players, and multiple points of origin need to be mentioned in any sensible understanding of the emergence of Silicon Valley, starting with Bell Laboratories in 1947.

      Reply
      1. Carolinian

        Thank you for this bit of pushback against anti-SV paranoia. And the above comment is only referring to one aspect of Silicon Valley whereas the industry as we now think about it is as much about personal computing and software as about hardware.

        That doesn’t make them good guys necessarily but the notion that the USG is running the whole show is surely wrong.

        Reply
        1. Mark Pontin

          @ Carolinian –

          I’m not anti-SV.

          Nor am I suggesting that the USG is running the whole SV show. (Though with Google and Facebook there’s a blurring of the two sides into one entity that’s starting to get a bit disturbing, no?)

          But the historical fact is, for instance, that John von Neumann’s ability to drive and fund the development of early computers was based on his and the military’s need to model hydrogen bomb explosions. Similarly, it’s a fact that at the end of the 1950s the need to put reliable electronic brains in ICBMs initially provided a military customer base for microprocessor chips.

          Reply
          1. Carolinian

            And I’m not denying that the MIC has a paw in what the computer industry is doing. But surely it’s more true that the geeks who created our digital world were piggybacking on the defense industries rather than, as some have recently alleged, acting as the “deep state’s” creature all along. Indeed if you look at the politicians and think tank types who actually run the country they seem to barely know anything about computers at all–thinking some run of the mill hack (by persons unknown) is the same as Pearl Harbor.

            Reply
      2. Epistrophy

        I support your view. The US military is really a technological follower, not it’s leader. The same can be said of any other huge bureacracy, such as the US government in general. Nonetheless, once on board there is the potential for a complete take over of an industry, but they are not the innovators, generally speaking.

        … tool and die makers, maintenance technicians, operators capable of working with highly sophisticated computer-controlled equipment, skilled welders, and even production engineers [all of whom] are in short supply …

        So, so true and so easily overlooked. This loss of skill, training, experience and tooling may never be recovered.

        In my opinion, the zenith of American tooling capability was the 1970’s – a time when a mechanically minded teenager could strip down a car, take the parts to local machine shops with the result being better than factory standard. Those machine shops and skills were largely gone by the mid-1980’s.

        … the truth is that U.S. manufacturing basically suffered a catastrophic setback when China entered the World Trade Organization (WTO) back in 2001 …

        Perhaps a ‘final nail in the coffin’ but the internment occured decades earlier.

        Reply
  2. 4corners

    With China’s entry into the WTO, it is possible that the U.S. manufacturing has hit a “point of no return,” which mitigates the utility of regional trade deals.

    So, what then does Mr Auerback propose? Give up on trade deals all together? Leave in place the unbalanced tariff structures that Trump claims to be addressing?

    Re: autos, 25% imported content (by weight or what?!) seems like a significant move from 37.5%. But the author just dismisses that with a vague suggestion that the higher value-added products might constitute the 25%, and that it probably doesn’t matter anyway.

    The other half of the double feature – about inefficiency from DOD investments —is interesting, but what is the main criticism about DoD? Is it that contracting with the private sector is inherently inefficient or should it be more about how those programs have been managed? For example, the F-35 seems ill-conceived and poorly managed but does that suggest DoD-private sector projects are inherently counterproductive?

    Reply
    1. anon48

      “So, what then does Mr Auerback propose? Give up on trade deals all together?”

      That was my takeaway too…Mr Auerback should we wait until you drop the other shoe?

      Reply
    2. sharonsj

      An F-35 jet costs $100 million. It can’t be flown unless the pilot wears a special helmet, which costs $400,000. I read that, should something go wrong and the pilot must eject, the height of the pilot can result in the helmet being smashed (not to mention the head). I don’t think I’ve read anywhere that the problem has been fixed. Does that count as inherently counterproductive?

      Reply
  3. Mark Pontin

    I guess I should cite a source. An interesting one is Donald Mackenzie’s Inventing Accuracy: A Historical Sociology of Nuclear Missile Guidance MIT Press, 1992-93.

    MacKenzie — a professor of sociology at the University of Edinburgh, specializing in science and technology studies — is also a good deep dive on financial engineering, the algorithms and the actual hardware of HFT, etc. A book of his from 2008, An Engine, Not a Camera: How Financial Models Shape Markets is absolutely worth reading.

    Reply
  4. The Rev Kev

    Even working in the private sector can let engineers get into bad habits. Electronic engineers were used to just selecting whatever material they needed to finish an engineering design in at least one major corporation. That is, until the EU but a strict ban on the import of electronic equipment that contained certain metals and chemicals due to the fact that they were such bad pollutants. But the EU is far too big a market to ignore so it looked like adjustments had to be made.
    A talk was given by a consultant of how the new rules would work in practice. Straight away the engineers asked if a deferral was possible. No. Was it possible to get a waiver for the use of those materials. No. The consultant stated that these were the rules and then went on to point out that he was now on his way to China to give the same identical talk to Chinese engineers. He also said that these rules would probably become de facto world standards. Wish that I had saved that article.

    Reply
      1. John Wright

        This appears to be the original ROHS (Removal Of Hazardous Substances) EU directive.

        This involved a lot of different chemicals, but of interest to me was the replacement of tin-lead solder in electronic equipment.

        In the early 2000’s my job involved migrating a number of shipping tin-lead (sn-pb) printed circuit assemblies to pb free designs to meet ROHS standards.

        A lot of changes were necessary as the new pb-free (tin-silver-copper) solder melted at around 223c while the previous tin-lead solder melted at 183c.

        Components had to all take the higher temperature and this caused a slew of problems. Usually the bare board had to be changed to a different material that could take the higher temp.

        The EU ended up being somewhat flexible in the ROHS implementation, as I know that they allowed a number of exemptions for some high pb content (>= 85% pb) solder where there was no good substitute. (example, high temperature solders for devices that run hot such as transducers and loudspeakers and internal power IC connections)

        see: http://rohs.exemptions.oeko.info/fileadmin/user_upload/Stakeholder_comments/Exemption-7a_5_Pecht_Uni_Maryland_25_March_2008.pdf

        As I remember, medical equipment and US military equipment were not required to adhere to ROHS.

        It was not a simple task to meet the new ROHS standards, so I can understand that some engineers wanted a deferral.

        But it provided employment for me.

        Reply
        1. David

          When a system is designed to last 20+ years with high reliability and availability requirements, techniques and methods that are used to design and build this years I-phone aren’t always applicable.

          The lead in the solder helps prevent the growth of “tin whiskers”, which can cause electronic systems to fail over time. One usually gets a RoHS waiver for the part(s) for longer life systems.

          But what happens in five or ten years when the part(s) need to be replaced? Will one be able to find that leaded-part? Try and buy a new 5 year old I-phone.

          Will that part be a genuinely new part or one that was salvaged, and possibly damaged, from another piece of equipment? How would one know if the part is damaged? It looks okay. It functions in the lab, but will it function, as expected, in the real world? For how long?

          What’s the risk of putting a similar but different part in the system? Could people be harmed if the part fails or doesn’t function as expected?

          This is systems engineering. Some wave it off as a “ludicrously bureaucratized management systems”, but it is important. They may prefer the commercial approach of letting the public find faults in designs, but that’s how people get run over by autonomous vehicles.

          Unfortunately, systems engineering doesn’t directly contribute to the quarterly bottom line, so it is usually underfunded or neglected. It only becomes important when, after all the designers have moved on, the system can’t be used because it can’t be repaired or something dangerous happens because the system was maintained with parts that were “good enough”, but weren’t.

          What this has to do with NAFTA, I don’t know.

          Reply
  5. AbateMagicThinking But Not Money

    Perhaps covert regime change may be the only way (instead of tariffs):

    The medicine required will probably involve hard-faced interviews with all the top CEO’s (involving rubber gloves at the private airports as they come from their jaunts abroad). Who better than special ops for carrying our such persuasion. It will have to be done on the QT under stricter than usual national security secrecy so that the ‘persuaded’ won’t lose face.

    Look out for an appropriate and revolutionary “refocusing initiative” announced by all the top people in the private sector as an indication that the threat of the the rubber glove has worked.

    Pip-Pip!

    Reply
    1. Oregoncharles

      A proposal modeled on recent events in Saudi Arabia – although in that case, extortion may have been the main motive.

      Reply
  6. Disturbed Voter

    Utopians will make any society into a no-place. You can’t run a society solely on consumerism, it has to also run on MIC expenditures, because of excess productive capacity, as was shown in WW II and the Cold War. The other trend is … we don’t want to pay anyone with a college degree, more than the minimum wage. Per management, engineers make too much salary.

    Reply
  7. Felix_47

    I work in this area with the government. This is exactly what I see. It is a deep seated cancer on our nation. What can be done to change this. I always thought cut the military budget but then the only jobs American can get (if vets with security clearances) would vanish? Does anyone have any solutions?

    Reply
    1. ambrit

      Declare the Infrastructure Renovation Program to be “In the Interests of National Security,” cut the Military Industrial Complex on for a piece of the action, and start hiring.
      After all, General Dynamics got some serious contracts to run the call centres for Obamacare. The template is there.

      Reply
      1. Jeff

        That’s disgusting. Giving call center contracts to defense firms… And likely for a much bigger mark-up than might have been given to call center management companies.

        Reply
        1. ambrit

          We have one such call centre here in the sylvan community of Hattiesburg. I know a woman who worked there two years ago, before she found a better job. (I met her at the retail h—hole I toiled in once.) She said that you needed to be able to touch type, handle the calls, and navigate a christmas tree styled database, all for $9.05 an hour. College degrees were desired. I checked up on the $9.05 per hour wage and confirmed it through another source.
          The centre is in an ageing mall in the inner suburban ring here. Several hundred people work there, in shifts, the place deals with calls from the West Coast too. There is always a rent-a-cop or two sitting around outside the entrance in their non-militarized golf cart.
          Half of the cars in the parking lot are beat up bangers and the other half are shiny new. As the workers get older, I have noticed that their dressage and coiffure decay. Most of the workers I have looked closely at have the office droid look.
          The woman I mentioned did get a better job with a local call center, answering service.
          Another candle in this cake of dubious ingredients is that, again from multiple sources, the call center management works you till you’re eligible for unemployment and then cuts you loose for the slack times. Next enrollment period, they call you back, out of unemployment. The woman got fed up when the second lay off loomed on her horizon. (If you understood how laughably low the unemployment payments are here, you’d understand her disgust.)

          Reply
    2. Newton Finn

      As Edward Bellamy envisioned in the late 19th Century, one possible “solution” would be to transition the military model into serving benevolent civilian uses. Imagine if our now-monstrous MIC was tasked not with protecting elite wealth and destroying other nations, but rather with repairing environmental damage and restoring environmental health, along with addressing other essential needs of people and planet. Change the purpose pursued, and a great evil can become a great good.

      Reply
      1. Wukchumni

        We largely did that in the early 1970’s, as angst against the Vietnam War was at a fever pitch and the ecological movement was ascendant.

        It took awhile for the effects to be felt, but smog in L.A. went from horrendous to manageable within a decade of auto emissions being regulated. Lakes & waterways across the land were cleaned up as well, to the benefit of everybody.

        Bellamy was quite the visionary, so much of what he described in Looking Backward, actually happened.

        Reply
      2. Scott1

        Yeah, hard not to imagine that sort of redirection of human capital. Far as Co-ops, I lived in the one my Uncle’s family owned a condo in on 55th & Blackstone in Chicago. He said it worked out well. The details escape me. The alley street I thought was a parking lot was named Rochdale.

        I lived in Rochdale College Toronto when I knew little of anything about anything no matter how well read I was for my age. I lived in a Commune. There is the strong man, always. Like flocks of seagulls there will be the stronger leading gull.

        In critique of communes at least I said everybody wanted you to wash their dishes and watch their babies.

        For the Co-op that was the College there was the Board. People went to the Board to ask for money to fund their interests, like a radio station or a tv station. Not very much actually would be accomplished after these awards.

        Money, that was real, came from rents. This was finite. The loan was not paid. Money was made from drug sales but not properly taxed. Utopianism meant “Going out the Country”.

        The building, was lost and those who had husbanded away the resources moved their operations out to a small Canadian town where their parenting ideas produced some dangerous youths who stole things and destroyed things.

        Lessons for me were that corruption destroys nations.
        “Nothing works if you don’t believe in it.”
        Robert Owen was the apparent inventor of Co-ops. It is pretty easy to find Rochdale England & Robert Owen’s history of establishing Co-op communities.

        I turn to the pragmatism of airports, what with their Airport Authorities, (Executive Strong People Group makes sure the place simply accomplishes its functions as a port.) answerable to the territorial government, most robust as a parliament.
        Local to where I live is a very successful food store co-op. It is dominated by one man and his offices that “run” the grocery stores.

        Over all places live and die in direct relation to their functionality as ports. Both fads and firm transformational activities for ideals and profit will be more quickly adopted and will provide ways to get from what is paid, Food, Clothing and Shelter.

        Thanks,
        I have never read Bellamy’s “Looking Backward”. I did live in two co-ops and a commune. I have seen in town a successful co-op. I do think that it appears food co-ops are generally more ubiquitous and successful.

        Reply
    1. Carla

      Thanks for this. I commented on it early this morning, but my comment apparently went to moderation, never to be seen again.

      Reply
  8. MichaeLeroy

    One of my gigs was working as a scientist/engineer for a fledgling Minnesota based medical device company. The company’s R&D team originally consisted of experienced medical device development professionals and we made progress on the product. Management secured a round of funding from Silicon Valley investors. One of the strings attached to that investment was that Silicon Valley expertise be brought in to the R&D efforts. There was a huge culture clash between the Minnesota and the California teams, as the Silicon Valley engineers tried to apply their military systems perspective to development of a device meant for use in humans. From our perspective, the solutions proposed by the weapons guys were dangerous and impractical. However management considered the Silicon Valley expertise golden and consistently ruled in their favor. This was the early 2000s, so none of the Minnesota R&D team had difficulty moving on to other projects, which is what we did. The result of the Silicon Valley turn was a several-fold increase in cash burn, loss of medical device engineering knowledge and ultimately no product.

    Reply
  9. DF

    Another view is that defense procurement is one of the few things that’s keeping a lot of US manufacturing and technical expertise alive at all. I went to one of the only electronic parts stores (i.e., a place that sells stuff like IC’s capacitors, resistors, etc.) in Albuquerque, NM a few months ago. The person at the cash register told me that nearly all of their business comes from Sandia National Laboratories, which is the big nuclear weapons laboratory in ABQ.

    Reply
    1. John Wright

      I suspect there is a lot more USA technical expertise out there than indicated by the small quantity of retail electronics parts stores surviving.

      On-line companies such as Digi-key and Mouser have very large and diverse component selections and quick delivery to retail customers.

      Go to https://www.digikey.com/products/en

      The blank search shows 8,380,317 items.

      Reply
  10. John

    The Aug 21, 2015 NC has a piece “How Complex Systems Fail” that seems appropriate to this. Death is an unavoidable part of the great cycle. Get used to it.

    Reply
  11. Altandmain

    The key issue right now is that we have a system that seems to reward short term profits and making the richer even more obscenely rich. Developing a better society, one that helps working class citizens is not on the radar. NAFTA is just another extension of this.

    You can see this in terms of Trump’s negotiations and his domestic policy. About the only “good” thing I see is that autos are in areas that pay better wages (there is a $16/hour requirement in the deal with Mexico) and that there is more North American content required. The rest of Trump’s actions have been a big handout to the rich.

    Trump’s domestic policy is a big war on the middle class. He has been dismantling labor rights, environmental protections, and giving away the nation to the rich through tax cuts, along with other legislation.

    Ian Welsh has a good article as well:
    https://www.ianwelsh.net/should-canada-concede-to-trump-in-nafta-renegotiations/

    Canada gave up our world-leading aviation industry in the 50s, in essence, for the right to be part of the US automobile industry. It was a shitty deal then, because it made us dependent, and we are seeing that dependency now.

    We’ll see how this plays out. I don’t know if Freeland and Trudeau have the guts to walk away, and there certainly would be a cost. But Trump is not certain to be forever, and anything we give up now we are unlikely to get back in the near future.

    There was a NAFTA renegotiation which would have been a win for all three countries, dealing with issues such as the right of private investors to sue governments for doing perfectly reasonable things like banning anti-cancer additives in oil, but that’s not the renegotiation Trump has chosen to do.

    The thing is, Trump has not structured it in a way to benefit working class Americans. As you can see, along the way, he wants to screw over or try to screw over other nations.

    The other issue is that Trump has not put together a serious industrial strategy. Despite all my criticisms, I agree that manufacturing is critical. There’s no middle class IMO without a solid manufacturing segment. Trump has not put together a strategy for anything on the scale of building a manufacturing sector on the scale of Japan or Germany. It would not be a perfect copy (Ex: those 2 are more export oriented and the US would be seeking to replace imports and only then export), but the point is Trump has not done this.

    Trump inherited a society ravaged by the rich and he will likely make it worse off. He will also destroy America’s image even more than George W. Bush and whatever goodwill that bought. Finally, although he might do a few things here and there right, he has, handed the US to the rich even more than it already is.

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    1. JBird

      The key issue right now is that we have a system that seems to reward short term profits and making the richer even more obscenely rich. Developing a better society, one that helps working class citizens is not on the radar. NAFTA is just another extension of this.

      That looks to be the keystone issue. It is not just some greed based thinking by some capitalists; extremely narcissistic short-term thinking and planning for avarice or rapacity for wealth and power, and not mere greed, that is so blind as to destroy even the future economic survival, of the individual, companies, and even governments doing so, and just forget about the future. It is all the Now.

      The Middle Kingdom, states like Alabama, the Federal government, every investment firm anywhere today, higher education, NGOs, pretty much any industry at least in the United States, all seem to have only the reflexive actions and lack of thinking of an end stage crack addict. They need that hit now, now, now, forget about the rent, forget about the hole in the roof, the next meal, gas in the car, or even the kids. Now!

      Reply
    2. False Solace

      > About the only “good” thing I see is that autos are in areas that pay better wages (there is a $16/hour requirement in the deal with Mexico)

      Yes that should be highly encouraging to workers in Mexico. What exactly that gets Trump voters is another question…

      Reply
    3. jrs

      I think it’s worse than that, they have made a decision to nearly destroy the average person in the name of the economic system. Desperate people make it function smoother. Their loss is it’s gain. They won’t just take any job and love it, they’ll move across the country several times in their life to find work etc.. All this makes the gears of the economic machine turn without friction, but it eats up people.

      Reply
  12. Sound of the Suburbs

    The US is suffering from fake economics.

    Fake economics was a solution for a 19th century problem.

    The Classical Economists had shown that most at the top of society were just parasites feeding off the productive activity of everyone else.

    How can we protect those powerful vested interests at the top of society?

    The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between “earned” and “unearned” income and they conflated “land” with “capital”. They took the focus off the cost of living that had been so important to the Classical Economists to hide the effects of rentier activity in the economy.

    The landowners, landlords and usurers were now just productive members of society again.

    Fake economics was born and the original neoclassical economists would have known what its flaws were and ensured they didn’t do anything they shouldn’t.

    A new generation picked it up and came up with the neoliberal ideology not knowing how the economics had been modified.

    They didn’t realise how free trade required a low cost of living and this would work against the US.

    The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

    The US wasn’t ready for free trade and its businesses began to offshore to places with a lower cost of living where they could pay lower wages and make higher profits.

    Disposable income = wages – (taxes + the cost of living)

    Maximising profit requires minimising labour costs, i.e. wages.

    China, Asia and Mexico looked good for maximising profit, the US was shit.

    A new multi-polar world was soon to be born.

    (it’s Michael Hudson in a different form)

    Reply
    1. Sound of the Suburbs

      Before fake economics.

      The repeal of the Corn Laws was essential to usher in the era of Laissez-Faire and lower the cost of living in the UK, so employers could pay internationally competitive wages.

      Housing the workers in slums got housing costs down, which also had to be covered in wages.

      Reply
  13. Sound of the Suburbs

    The US is suffering from fake economics.

    Fake economics was a solution for a 19th century problem.

    The Classical Economists had shown that most at the top of society were just parasites feeding off the productive activity of everyone else.

    How can we protect those powerful vested interests at the top of society?

    The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between “earned” and “unearned” income and they conflated “land” with “capital”. They took the focus off the cost of living that had been so important to the Classical Economists to hide the effects of rentier activity in the economy.

    The landowners, landlords and usurers were now just productive members of society again.

    Fake economics was born and the original neoclassical economists would have known what its flaws were and ensured they didn’t do anything they shouldn’t.

    A new generation picked it up and came up with the neoliberal ideology not knowing how the economics had been modified.

    They didn’t realise how free trade required a low cost of living and this would work against the US.

    The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

    The US wasn’t ready for free trade and its businesses began to offshore to places with a lower cost of living where they could pay lower wages and make higher profits.

    Disposable income = wages – (taxes + the cost of living)

    Maximising profit requires minimising labour costs, i.e. wages.

    China, Asia and Mexico looked good for maximising profit; the US was a bit of a disaster.

    A new multi-polar world was soon to be born.

    Reply
    1. Sound of the Suburbs

      The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 – a Classical economist

      What does he mean?

      Capitalism – back to basics

      Disposable income = wages – (taxes + the cost of living)

      Employees want more disposable income (discretionary spending)
      Employers want to pay lower wages for higher profits

      Employees get less disposable income after the landlords rent has gone.
      Employers have to cover the landlord’s rents in wages reducing profit.

      Reply
  14. Carolinian

    Lambert’s interesting tale of working in factories could be relevant to this thread. Also the statistic seen here recently–as late as 1970 only 10 percent of Americans had college degrees–has some bearing. It does seem the country is never again going to become the manufacturing powerhouse it was during WW2. Still there are alternatives to weapons making such as the auto industry that has revived my own region. We have some not so picturesque textile mill relics littering the area–many being turned into condos.

    Perhaps the hippies of the 60s were just ahead of their time….practicing for a less materialistic America of the future.

    Reply
  15. Darthbobber

    I still have a copy of a mmid-80s study, “The Impact of Defense Spending on the Machinists Union”, which indicates that even then military Keynesianism paid far fewer dividends than it once had. It’s basically concluded that by then a billion in defense procurement compared favorably only with a billion that didn’t exist. It generated far less employment than the same billion spent on almost any civilian project, and slightly less than just leaving it untaxed.

    Reply
  16. cnchal

    Why was manufacturing destroyed in the first place?

    Stupid people that make stuff are collateral damage in the scheme to get filthy rich by Wall Street.

    https://deep-throat-ipo.blogspot.com/2018/04/the-new-phone-books-herethe-new-phone.html

    First, let me be clear, the dual currency scheme I’ve described above is absolutely brilliant. It’s also the greatest crime in financial history. The CCP has devised a system to take advantage of what can only be considered systemic flaws in a market driven world. The best parallel I can draw is the conniving used car dealer. The slick car dealer locates all sorts of oil-burning, salvage-title, odometer-rolled-back, “cream puffs” and he/she coaches, motivates and compensates his even slicker team of sales reps to move these sweet rides to naive buyers. Of course, in their minds nobody is doing anything wrong, the sales reps didn’t officially know about the salvage titles or bad odometers. It burns oil? Really? It was in a wreck? You’re kidding? I had no idea. The best part of all of it is, even if the slick dealer is caught in a lie, there’s no enforceable penalty. Let the buyer beware. Gotta move the cream puffs and collect my profit and sales commission! That’s capitalism!

    The above described impending financial mess du jour would never have happened if the world’s bankers would have required that the RMB absolutely must float before the Chinese could play in the global sandbox. But the CCP knew full well, again, relentlessly relying on the free trade model which they were taught, oh so well at Western Universities, that the market-driven, used-car-dealer-like Western Investment Bankers could be convinced to make really bad deals for America and Europe if it made them really rich individually. . .

    When the elite can make millions by destroying peasants, here and there, the peasants have no chance.

    So no, Trump’s NAFTA deal or trade war won’t bring manufacturing back, but all that Chinese debt and more could be burned in a bonfire. Peasant’s revenge.

    Reply
  17. Knute Rife

    I think Auerback has part of this backwards. We were dismantling training for skilled trades a half-century ago and finished the job in the 70s, so that by the early 80s we weren’t bringing new blood into those fields, and the retirees weren’t being replaced. There were still plenty of folks who wanted the training, but the programs were gone. The programs that were left were not updating; they were teaching methods that were 20 years out of date and worthless for making US manufacturing internationally competitive.

    Reply

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