Regarding the Middle Class Generation Problem
There has been a good deal of justified noise surrounding the New York Times’ great feature on How the U.S. Lost Out on iPhone Work (which case is really used as a metaphor for how the U.S. is losing out on next generation manufacturing jobs). It’s a long, really great piece and well-worth the read. You should read it. I won’t do it justice by summarizing it quickly, but I need a summary to respond to here, so basically:
- Lack of workers rights/benefits means it’s possible to (cheaply) do a lot of things that would be impossible to do in the U.S. (e.g. bring up/down a huge supply chain in less than 100 hours)
- We cost too much
- We don’t have enough people trained with the kind of mid-level technology manufacturing needed for this work
- Government subsidies in the China exacerbate the problem
There is a lot to be said on this topic and I am no expert, but I did want to make a couple of quick points.
Government subsidies are a complicated question. I haven’t read a great discussion yet of modern mercantilism (state capitalism) vs. modern capitalism, though I know the The Economist has some great pieces this week on related topics. My gut feeling is the standard capitalist feeling: it’s impossible for subsidies to be as efficient as the market in deploying capital*
* - with the exception being the creation, if possible, of international monopolies.
The “human rights/our wages too high” arguments (1,2 above) get solved by the development of the Chinese middle class. Part of growth of a capitalist society is the empowerment of the middle class. As middle class citizens get more (tvs, cars, homes), they demand more (wages, basic rights). The basic cycle is that growth breeds success. Success means more people are employed at slightly higher wage earning jobs (or they wouldn’t have taken them over their former agricultural jobs). These jobs allow them to buy consumer products. Consumer products keep them informed. Being informed means wanting even more. Wanting even more means eventually being dissatisfied with no rights and demanding more. This process is well under way in China, where, for example, people are watching more and more TV and becoming more and more disenchanted with censorship. I cannot predict how long it will take, but I can say with near certainty that at some point the Chinese labor advantage will just about go away on its own.
That leaves the “training” issue (3). Knowing little about the long-run statistics of social policy on education, training, and employment, I feel ill-equipped to really know how (3) will resolve itself. I do have faith that America is one of the freest, and most integrative societies on the planet and that those qualities (freedom and willingness to integrate) are the most important for a modern society.
The one issue I do not feel comfortable about in the near future is the fact that whatever my long-term optimism, I have nothing to offer people who are in their late middle ages and finding themselves displaced, their skills useless, their lives unproductive. I think we all realize the generational issue here and wish our politicians would concentrate on that.
