10 industries in which the US is no longer #1

[Tsotne]

Just found very interesting article on yahoo:

10-industries-in-which-the-us-is-no-longer-no-1: Personal Finance News from Yahoo! Finance

 

[FEnzo]

Lettuce production?...lol
Besides, per capita tells a much better story.....

 

[DominiConnor]

I suspect that not being the top exporter of beer or lettuce is a wound that a country as big as the USA can live with.

I was actually quite surprised that the USA was #2, and how recently it lost #1. US cars are astonishingly bad. Odd since non-US made Fords etc are actually quite decent, my next car is most probably a Ford, yet US Fords remind me of downmarket fairground rides.

The aircraft thing, is not of itself clear evidence of decline, indeed by some measures it might even be a success. Not very long ago Europe had several large aircraft makers, whose products ranged from little propeller based gadgets made in shed to supersonic airliners that could outrun US fighter planes. But all wilted against the US competitors.

Now there's Airbus, and pretty much nothing else. Major parts of Airbuses are made in the UK, Germany France, Italy and the USA... Europe is not a country, and I'm pretty sure that America isn't in it anyway. If we were to apply the same logic, America would be first and second, and quite possibly third as well.

High tech is a tricky one...
A lot of assembly is indeed China, but not much of the R&D, indeed it is odd that the 2nd or 3rd largest economy produces far less R&D than (say) Holland which is something like the 35th largest population in the world. The US still leads in high tech stuff, but not in making it.

The critical term I think is whether outsourcing is "portable". By that I mean if Apple wanted to move production from Foxconn, could it ? Could HP change manufacturer for its laptops ?
I don't actually know, my feeling is that they could, but if that changes...

What we are seeing is a blurred picture. Long ago you could say "this aircraft was bulit in America", that stopped being true long ago. both Airbus and Boeing ship aircraft with Rolls Royce engines, a Linux server will may have code written in Sweden, CPU made in Germany, RAM from Japan the power supply made in Mexico, the motherboard in China, and assembled in the USA. Is that American ?
Ford and Chrysler US engineers are not exactly masters of their craft are they ?
So if their parent company gets decent British and German engineers to use short words to explain how grownups have been making cars since 1970 does that count as a US car, or do you count it as a Germany outsourcing to the USA.
If you count an iPad as Chinese, then before long you will have to count nearly all new cars as German or Japanese.







The Kennedy dynasty have lost much of their political power, since the most powerful of the bastards are dead, so wind power, which they fought because it could spoil their view, is going to go up everywhere, not just the US.

 

[Tsotne]

Very interesting point of view Mr DominiConor. Let's take a brief look at the possibility of outsourcing which actually determines the change of a parent country for a product. For example after GM sold the right of Hammer to Chinese, the Hammer cars became a pure Chinese in sense, not American. We can think of outsourcing in different ways:

1) Not-Beneficial for US: Paul Samuelson provided his view on outsourcing stating that it does not bring benefits to US for much of American jobs moving offshore to China, India, Indonesia, Philippines, etc... Many Americans are loosing their jobs, lowering the consumption and therefore lowering the GDP, this process is faster and detrimental for US economy than corporations moving offshore, gathering much profits and recovering GDP decline.

2) Beneficial for US: Jaggish bagwatti who is a former student of Samuelson and professor of economics wrote a compete rebuttal to Samuelson saying: Outsourcing is profitable for US for 1 trivial reason: decreasing costs for corporations and 2nd more influential and important argument(actually beating Samuelson's view) US is getting net benefit from it. People who loose jobs in America due to American corporations moving offshore to those countries, become reemployed in US in more productive industries.

What I want to say with this is that I agree with your statement:

I suspect that not being the top exporter of beer or lettuce is a wound that a country as big as the USA can live with.

Meaning that US allow other countries produce those goods and import them and spend its own resources in more productive industries rather than producing those goods themselves and having opportunity cost for not switching to sophisticated things.

 

[Daniel Duffy]

"People who loose jobs in America due to American corporations moving offshore to those countries, become reemployed in US in more productive industries. "

Such as?

I don't live in USA but that's not how things are panning out here. It is very difficult to do CAD in land X and CAM in land Y. But people still think you can.

 

[Tsotne]

"People who loose jobs in America due to American corporations moving offshore to those countries, become reemployed in US in more productive industries. "

Such as?

As Mr DominiConor Stated:

I suspect that not being the top exporter of beer or lettuce is a wound that a country as big as the USA can live with.

So switching to high technology goods like airplanes, cars, yachts, etc..has more potential for US economy than producing Sports shoes, microchips, etc. which can also be made in China and India for much cheaper price.

I don't live in USA but that's not how things are panning out here. It is very difficult to do CAD in land X and CAM in land Y. But people still think you can.

I didn't fully understand what you meant Daniel. I never meant to produce a left foot shoe in China and the right foot shoe in Island.

 

[Anthony DeAngelis]

People lose their jobs and become re employed elsewhere. That is life and the economic cycle. If you stop outsourcing you will simply see an increase in robotics and automation. People had their head in the sand for too long.

This country needs skilled machinists. You don't need a degree to be one of these. We need semi skilled workers. What we do not need is unskilled workers. These jobs are best suited for developing nations. The USA is a developed nation. The average American is much higher educated than the average Indian and Chinese citizen. Unskilled, general labor goes to those countries who can benefit from it more.

This means some people in this country suffer. Such is life.


The USA will always be a leader in a variety of fields. Things ebb and flow. The thing about the USA is that we are not a country of one race or people. Chinese citizens come here, with their schooling and search for a better life and become US citizens. Same thing with every country.

 

[DominiConnor]

Yes, Tsotne, the sale of Hummers was an interesting case. The market for these vehicles is in a nosedive which is why the business was sold. Anyone think there is a big market for vehicles whose core design is now really quite old, and guzzles gas faster than a flamethrower ? Also it is not fashionable. You can sell obsolete cars at a premium price, if and only if people think it's cool to have one. Hummers had that for a while, they don't now. Celebs turn up in Priuses.

Outsroucing is not good or bad, it is something that companies do. When done badly, as is so often, it is bad. I'm old enough to remember the first wave of computer based office automation. It was bloody. Even now 40 years later "we can't do anything the system is down" is still seen as an output of a dysfunctional firm.

As someone who has done economics, I see this as the same thing.
Computers have been quietly chipping away at manfuacturing jobs for decades. When I was at school, being working class I was expected to learn "Technical drawing" this is an arcane craft involving compasses, rulers and a sort of manual geometry that takes years to master. This was a valuable skill, and literally millions of people in the UK, USA Germany, Japan et al did it.
It's gone now, CAD packags do this shit.

A large and growing % of "manufacturing jobs" are actually maintaining the machines.

What we have here is classic substitution of capital for labour. Americans are expensive so their employers have for a long time invested in machinery from steam to silicon. This has led to US workers having a very high productivity level. The economic shock has been the influx of nearly free Chinese & Indian workers into the market, priced at nearly zero because their governments mismanagement varies between incompetent and evil. This has meant that many jobs that by now would have been automated out of existence are still cheaper to do by hand.

But Chinese & Indian workers aren't so cheap as they once were, indeed some jobs pay better there than in the West, and wage inflation is vicious. Sure there's a billion "spare" people who can be taught how to drive a screwdriver, but the set of people is who know how to drive a CAD system, or diagnose impurities in electroplating solutions is very much smaller. The set of people who can manage them is even smaller.

So people in shit countries are getting richer, which personally I see as a good thing, but they are sailing close to a digital black hole. Take call centres. If you have to pay $25 an hour for someone to read from a script, you will happily pay a software licence of > $30,000 per person to automate that.

But currently it's not quite worth it. But speech recognition is getting better and cheap workers are getting more expensive.

Be aware that "high tech" is not the solution.

If you look at high tech companies and how they die, you will see them going "upmarket" and abandoning what their execs spin as "commoditised" markets to their competitors. The classic studies are on disk drive makers, but we see that with IBM with whole computers, with European aircraft makers, British car firms and many others. It's intersting that the successful drug companies mostly still retain a foothold in high volume stuff and very expensive drugs. Some make consumer drinks, aspirin (the lowest margin drug in the world), and mass immunizations, as well as pills that cost $500 each.

Germany has amazingly expensive workers, and Americans will mostly know it for prestige Brands, but it does a lot of volume car manufacture as well. Japan is #1 car maker in the world, despite workers that are not exactly cheap either, and it actually is most comfortable in the lower end of the market.

"Hi tech" is thus a shit slogan for arts graduates.

What works is doing what you do very very well.
Heinz ships truly colossal amounts of stuff, say "you need to go hi tech" to their management and they might politely suggest you might like to learn more about the business.

Remember I talked about Concorde, the passenger jet that could outrun US fighter jets ? Was a complete financial disaster. Antibiotics were a British invention, anyone know that ? anyone care ?
There's the offensively shit pork barrel called NASA.
Really high tech. Useless and can't even build rockets as reliable as the French or Russians. If there is any part of your economy, no matter how small that can't produce things more reliable than Russian industry, then you are in trouble. Yes, France builds better rockets, with a bit of help from ther Germans. France does, that France, the one near Belgium. India also has a space program that will probably make money, not because their people are cheap, but because the need to spread contracts to the "right" states causes NASA to overpay for crap.
Microsoft execs have a more viable space program than the USA, which they run as a hobby.

Intel is high tech of course, and well run. But some of it's output is almost quaint, but it sells in good numbers so they make it. You don't hear Intel saying "we are only going to do only leading edge CPUs", because the day you hear it, sell your holdings and go short for the long term.






I wouldn't have bought that business unless you'd paid me good money to take it away.

 

[Andy D.]

Intel is high tech of course, and well run. But some of it's output is almost quaint, but it sells in good numbers so they make it. You don't hear Intel saying "we are only going to do only leading edge CPUs", because the day you hear it, sell your holdings and go short for the long term.

Especially now with ARM chips cornering the mobile device market. Everyone from Apple to MS is using ARM technology.

 

[Daniel Duffy]

"I didn't fully understand what you meant Daniel. I never meant to produce a left foot shoe in China and the right foot shoe in Island."

No, I means the design (disegno) of both shoes takes place in Italy, but the actual manufacture takes place in land X (X != Italy).

The implicit assumption in the West is that disegno and marketing will never take place in land X. Famous last words.

In my place the rot started when the government realised it was cheaper to import than make. In this case the Dutch guilder was rock hard.

"The USA will always be a leader in a variety of fields. Things ebb and flow."
The 'variety' is much less than 50 years ago. Your quote sounds almost like resignation to the fact.

 

[bigbadwolf]

The implicit assumption in the West is that design and marketing will never take place in land X. Famous last words.

This was what was being said twenty years ago (plus the claim that the West would do all the highly-skilled top-dollar jobs while letting India and China do the grunt work). With the benefit of hindsight we can see how hollow these claims were. Like Japan sixty years ago and Germany even earlier, China is determinedly climbing up the value-added chain.

Once a population becomes deskilled, once collective technical expertise is lost and design and manufacturing teams dissolved and laid off, it becomes next to impossible to rebuild all that has been lost. The rustbelt in the USA and the derelict industrial wastelands of Britan bear mute testimony to this.

Other than outsourcing and finance-driven deindustrialisation, there are jobs lost to automation. Where previously you had a thousand workers, now you have twenty maintenance specialists. What do you do with the other nine hundred and eighty? Not all of them can be retrained, even if the facilities were there. Not all of them can work in Walmart or become Amway salesmen. They just constitute a growing jobless lumpenprole population, finding occasional seasonal or temp work, or in the informal sector. Social engineering is eschewed in Britain and the USA so continental European solutions like job sharing and shorter work weeks are out.

It is because of this that there's no genuine "recovery": there's no effective demand out there from a workforce that is either being laid off, is apprehensive about its job prospects, or has declining wages. Individual tragedies coalesce to become a macro economic problem. This can be seen vividly in Ireland, Britain, and the US. Clearly this is not the best of all possible worlds, as Dr. Pangloss maintained.

 

[Daniel Duffy]

bigbadwolf,
You have summed it up very well.

And indeed the statements that were made 20 years ago are still being made.

The way Ireland solves it is by emigration (again).

 

[bigbadwolf]

The way Ireland solves it is by emigration (again).

Broadening the discussion a wee bit, in the Anglo-American sphere and in other major chunks of the world (the Middle East, for example, which is in the Anglo-American sphere of influence), it's an era of unparalleled economic and political stagnation. It's been deepening over decades.

 

[Tsotne]

But Chinese & Indian workers aren't so cheap as they once were, indeed some jobs pay better there than in the West, and wage inflation is vicious. Sure there's a billion "spare" people who can be taught how to drive a screwdriver, but the set of people is who know how to drive a CAD system, or diagnose impurities in electroplating solutions is very much smaller. The set of people who can manage them is even smaller.

Indeed, there are pay rise for cheap workers. They demand higher wages not than they did once in order to preserve the same purchasing power as they had short time ago. But still, the mainland of China is very poor so there are lots of people willing to work for a dollar or 2. US corporations find it very easy to hire cheap workers and pursue their goal of outsourcing. All in all, I completely agree that:

Outsroucing is not good or bad, it is something that companies do. When done badly, as is so often, it is bad.

 

[Tsotne]

No, I means the design (disegno) of both shoes takes place in Italy, but the actual manufacture takes place in land X (X != Italy).

The implicit assumption in the West is that disegno and marketing will never take place in land X. Famous last words.

Nothing wrong with it. I actually don't know what the implicit assumption is, but we can find tons of examples where that takes place: The design takes place in one country and the actual manufacturer makes tangible objects from it in another country. Let's think about some industries. That's exactly what happens in auto-industry, high-tech(softwares), etc

 

[DominiConnor]

I agree Tsotne that zero skill workers still exist in vast untapped numbers.

But employing someone, even for free is not so cheap as it was. Recently I had to explain to one of my interns about why algotraders often worry more about jitter than latency. He got paid nothing to hear that, but my time has a bit more value.

Also many skills at the bottom of the market are being replaced by computers & robots. The maths of that are quite fiddly. You have to give them somewhere to sit, equipment, manage them, train them, tools etc. Working out whether to buy a machine to replace them is a judgement call as well.

Like Daniel I don't buy the "job X can only be done in the west" idea.
But to an extent it depends upon what exactly you mean by "the west".

There's plenty of "western" jobs done by people who are mostly ethnic Chinese in Hong Kong, but although HK is legally part of the PRC, it is in fact pretty much a western country, not run by white people. There's HK marketers, R&D, bankers, the whole "high value" gig.

The PRC is not a western country. Imagine trying to run a marketing agency in a country where your gay staff may be taken away by police and beaten to death, many western firms simply could not function on straight people alone. That's not a specifically Chinese thing, oppressive regimes are simply economically inefficient, be they Egyptian, Russian, Chinese or Cuban.
If you are doing work that involves people being told what to do, then such cultures may do it well, sometimes very well like in Russian tanks or Chinese assembly plants.
But...
New stuff means that people who aren't the son of the boss have to come up with ideas, and that does not work so well with PRC culture.

 

[bigbadwolf]

That's exactly what happens in auto-industry, high-tech(softwares), etc

Experience indicates that when manufacture shifts elsewhere, design also moves sooner or later. The cents are made in manufacture while the dollars are made in design, marketing, and distribution. So countries engaged in manufacture have a strong incentive to move up the chain. The company making Apple's iPads in China makes little compared to Apple. There's an incentive to move up the chain.

Other than this incentive, even design is encouraged by the presence of a manufacturing culture: the divorce of the two is artificial. Those who do the manufacturing start fiddling around with the design themselves after a while.

And finally, of course, relatively few people are involved in design: specialised engineers, engineering managers, and coders. The rest of the workforce is relegated to the scrap heap. Ah well ....

 

[DominiConnor]

BBW is right, that is indeed what we see in most cases.

As far back as the late 1700s skilled workers from England were migrating to the USA, for instance at one point wallpaper makers were forbidden by law from leaving the country.
Eastern Europe lost many skilled workers, particularly in design to western Europe and the USA when it was socialist. The Berlin wall was built explicitly to stop skilled workers leaving.

China has been bleeding skilled people for centuries bounded only by the willingness of less screwed up countries to to take them.

The fact is that in (say) 1990, the best place in the world to be almost sort of design professional was the USA, so great was the lead, that individual states all by themselves attracted more foreign designers than any country.
For a golden age from about 1900 to 2000, a combination of high living standards, human rights, a choice of climates, and a relatively low chance of being murdered by your government made the USA an obvious choice for many design workers from chips to clothes. Of course once they moved there, that made it even more attractive as a destination because of greater opportunities and creative infrastructure, which attracted more people, forming a strong virtuous circle.
That's of course why the USA is still the biggest economy in the world by a considerable margin.

Of course Obama's racist immigration policy means that many talented people can't go to the USA, and many other places have wised up to the need to attract talent on a global basis. It's hard to see Obama or a possible Republican successor seriously address that issue.

China will struggle to attract global skilled labour; pollution, absence of even a perceived need for human rights, homophobia, and corruption mean that most people would require significantly more money to work in China than (say) California. Not all America's Moslems are treated thte way they should be, but if 9/11 had happened in China, they'd all be in death camps, along with anyone who had a moslem-sounding name, or wore a turban (yes, I know turbans aren't a major item of Moslem clothing)

As BBW says, the stable equilibrium is where design and manufacture are closely coupled. Modern communications make that less true than it once was, but it is still a serious force.

Also there is a tension between being near the people who make the stuff and peoplee who buy it. If I was designing a pad to compete against Apple, I'd want my designers to have some intuition on what it is people do with digital media, and a vast area of weakness for Apple is it's low penetration into business, so I'd want my guys to understand why suits still buy Dell notebooks.

Some of the design is best done in collaboration with the manufacturing guys, Apple has mostly got over the problems it has suffered for decades that it's gear felt like it was built by 9 year olds armed with glue guns, that requires proximity to manufacture. Actually that's not a Chinese thing, Apples were built badly when the plant and design were both in California, but too decoupled by the bean counters.

So a dream design team is not in any particular place, >90% of the world's manufactured goods are not sold in the PRC, and basing design teams there runs into the problem hit by US car makers.

US cars are increasingly hard to export because Americans actually choose to buy cars that most other people see as crap, whereas Japanese people want cars that are pretty much the same as most people in the world want as well, ditto Germany.
America makes a huge % of the world's aircraft because the issues around moving people or bombing them vary little around the world.

A team of Chinese engineers, working in the PRC could easily build a perfectly decent flat screen TV with no outside help, but going back to the iPad...

I am no Apple fanboi, but even a year after it's launch, the pads I've seen are all behind by almost any criteria. Almost all are made in China, some actually manage to be more expensive and less good. Apple has never been shy of high prices for their stuff, so when they undercut your product, you've screwed up. The IPad wasn't even leading edge technology, every component in it from processor through screen was generally available, and again often made in China.

This goes back to my core point.
Apple is good at a very small number of things, but is very very good at these few.

Chinese firms have optimised themselves along the IBM model, towards being bigger and having as many fingers in as many pies as possible. When was the last time a thought about technology that in any way involved IBM crossed your mind ?

Chinese firms can't do marketing, they can barely do sales. They compete on price, and to be fair do that well, but to get serious margins they need to develop brands.