Lessons from the Toy Factory

The post about 11 Trends Destroying America lists utterly obvious symptoms of some things ailing America – but nothing about causes.  In addition, many of the assertions in that article are flat out wrong.

The author bemoans tariffs unfairly levied against American goods.  Tariffs are a stupid approach to economics and never accomplish their desired ends.  In every case the enacting country becomes worse off, sometimes a great deal worse off.  In fact, tariffs are a tax on the enacting country’s citizens (bled dry by the resulting increase in consumer products) to “protect” the in crowd of crony capitalists and their allied big unions.  Retaliation in any form is dumber than the original offending tariff.  It’s like saying, “You screw your citizens by coercively increasing the prices of our goods so we will, in turn, beat up on our citizens by hiking the prices of the goods you send to us.”

In fact, when it comes to trade, trade deficits and the current controversy over currency manipulation, the US is the greatest con artist the world has ever seen, making the Madoffs of the world look like pipsqueak pikers in comparison.  We are bleeding China dry, not the other way around.  We are pulling the same scam on the Chinese that we did with Japan.  We buy great stuff from them by the hundreds of $billions and give them garbage paper in return.

As the years went by we printed new, even cheaper garbage paper with abandon so our currency collapsed and we now owe all those dollars at a 75% discount as in the case of Japan, whose currency went from 360 per dollar in the 1960s to about 82 today.  Today we are doing the same to the Chinese, though more brazenly as we are printing putrid paper an even faster rate and also politically attempting to strong arm them into giving us an immediate 40% discount (via revaluation of their currency) on the turdy treasuries they already hold (over $1trillion).

The same idiocy applies to every discussion of manufacturing I have ever seen.  Manufacturing jobs are low skilled, which is why poor countries can successfully compete.  When you are poor you undercut the competition – which is how market economies are supposed to work.  Workers from poor countries can quickly develop these low skills very quickly.

I know this from personal experience as well as intellectual inquiry.  I grew up in a manufacturing household and worked many hours over the years of my childhood at the various toy factory assembly lines supervised by my father.

Even the alleged tedium is a myth.  The tasks were so simple that you could carry on conversations or daydream if you wished.

My assembly line experience began over fifty years ago.  I became proficient at many tasks and witnessed many proficient workers.  Yet none come close to the proficiency of the Chinese.

The desire to reestablish a “manufacturing base” of such low skilled and deservedly low paying jobs is just dumb.  The relatively high pay achieved just after WWII was an anomaly resulting from the utter destruction of nearly all of the entire world’s infrastructure except ours.

High paying jobs must have high intellectual content, like designing products and processes – not making or assembling them.  Unfortunately we do ourselves no favors with our children when we send them to waste their time in college.  Over the last 25 years the total number of degrees awarded in math, science and engineering has increased about thirty percent.  Factoring out degrees awarded to foreign students, I wager the number of such degrees earned by US citizens actually declined.  At the same time the number of degrees awarded in the oxymoronic appellation of “social science” has nearly doubled.

Now even though I am a passionately committed radical Randite, if I were made dictator the first thing I would do (after outlawing margarine, skim milk and diet soda) is nuke every B-school.  This comes from someone “trained” in economics.  You don’t want a professor completely devoid of private sector business experience in any position to influence young mushy minds.

Parenthetically, we went through the same nonsense with the loss of farming jobs.  Imagine where we would be if we actually took the same approach to farming that is now pushed by today’s manufacturing maniacs.  After all, nothing is more important than food.  Of course, we continue with stupid farm policies –a subject for another post.

For a discussion of the genesis of trade deficits and why we have chronic trade deficits please see my post On Why Free Trade Is Important to the US.  Easily the best literature on trade was written by Frederic Bastiat more than 150 years ago.  Happily, the writing style is every bit as excellent as the economic analysis and chock full of side splitting hilarity.

Finally, the most fundamental reason for our problems, and the true reason for the fall of empires is that humans are evolutionarily hard wired to deal with adversity.  We have no evolutionary base for handling abundance.  Therefore, we successfully deal with privation but miserably fail at handling prosperity.  The other fundamental reason is the inherent irrationality of the human species.  We have the capacity for rational thought but rarely use it.

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