Tuesday, March 09, 2010

tea partiers as true believers

Early Warning | US manufacturing employment has only ever been about a fifth the size of Chinese manufacturing employment.

But, and perhaps more importantly, I want to address a reaction I suspect many readers might have - "Oh, we've been dealing with Asian competition for decades now, yeah it's not good, yeah unemployment in Michigan is bad, but the sky hasn't fallen."

Indeed, this is true. However, I suggest that the problem with China is an order of magnitude larger than the earlier problem with Japan and Korea. Firstly, those countries have population of about 130 million (Japan) and 50 million (Korea). China has a population of 1.3 billion - ten times larger than Japan - and is determinedly trying to bring them all into the twentieth century. Secondly, as the labor cost graph higher up shows, Japanese manufacturing wages, for example, are about 80% of those in the US, while Chinese manufacturing wages are about 3%. It's going to take a very long while, or an unthinkably large correction in exchange rates, for Chinese wages to get anywhere close to those in the US.

You can see the effects of this in the data for US manufacturing employment. It peaked in 1980 and then gradually descended to the 2000 recession. But since then, as Chinese exports have ramped up, it's gone into a much more serious decline. It goes off a cliff in each recession, and it doesn't recover at all in between - in fact it continues to decline, only more slowly.

If we continue with our existing policies, it's very hard to see how this is going to change in the next decade or so (absent some internal collapse in China). As the Chinese figure out how to make cars, computers, furniture, etc, etc, to western quality standards, the entire industrial production capacity of the United States is going to get hollowed out. Manufacturing employment in the United States would appear to be headed towards zero, give or take some noise.

Let's not put too fine a point on this: guys like Errol are fucked.

In fact, the entire working class of the United States is fucked. Without manufacturing jobs, they are reduced to the small number of jobs installing and fixing the stuff that comes from China, and then low paying unskilled retail and service jobs. With large numbers of chronically unemployed, the folks who are employed will have no leverage whatsoever on pay and conditions.

And with a minority of exceptions, this is not something that can be fixed with education. To a rough approximation, the working class consists of the kids who didn't do well in school after they grew up. Remember the kids in your high school who didn't do well. Are they now going to turn around and become electronic engineers or CGI movie animators after some community college classes? A small fraction, sure (and more power to them). The vast majority, no way.

And at some level, Errol is beginning to understand his situation:
“As far as my job position,” he said, “I really don’t know what I want to do yet. I’m not sure.” When he was little, he wanted to be a mechanic, and he did enjoy the machine trade. But now there was hardly any work to be had, and what there was paid about the same as Walmart. “I don’t think there’s any way that you can have a job that you can think you can retire off of,” he said. “I think everyone’s going to have to transfer to another job.” He said the only future he could really imagine for himself now was just moving from job to job, with no career to speak of. “That’s what I think,” he said. “I don’t want to.”
Let's think about the political implications of this situation.