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How To Create A Manufacturing Renaissance – Change The Definition | Zero Hedge

How To Create A Manufacturing Renaissance – Change The Definition | Zero Hedge.

With US manufacturing jobs down almost 40% from their 1980s peak, proclaiming the last few years marginal increase a “manufacturing renaissance” is more statistical noise, smoke, and mirrors than fact. That is a problem for an administration (and entire genre of Keynesian dreamers) that rely on this sector to prove how effective they have been with stimulus (and not just pulling demand so colossally forward that the future is bleak). How to fix this apparent dilemma between policy talking points and factual data? Easy – as WSJ reports, change the definition of “manufacturing.”

 

Behold the Renaissance…

 

So how do we fix this uncomfortable truthiness to fit with talking points that everyone can understand is unquestionably bullish…

Via Wall Street Journal,

U.S. Agencies Consider Redefining Manufacturing

Should a company be called a manufacturer if it doesn’t make what it sells? The answer isn’t as obvious as it seems.

Some refer to companies like these as “factoryless goods producers”—firms that handle every part of making their products except the actual fabrication. As industries have gone global, this model has proliferated from furniture making to electronics: Think of Apple Inc. and its iPhones. Now, there is a move afoot among U.S. government agencies to count these companies as manufacturers, which is a surprisingly fraught issue.

The upshot would be an overnight increase in the apparent size of the U.S. industrial sector without adding a single assembly line. It would also change its geography, as places like Silicon Valley would suddenly look much more like a manufacturing hot spot. Backers of the change say this would give a truer picture of the nation’s productive capability, because these firms still do most other functions of manufacturing, from designing goods to overseeing their production and distribution.

But critics like Miles Free, director of industry research and technology at the Precision Machined Products Association, a trade group for small U.S. producers, say the change in wording would gloss over the erosion of domestic manufacturing. “We think it would be bad for policy makers to say, ‘Look at these numbers, we have great manufacturing,’ ” he said, when the production in many cases is actually taking place on the other side of the world.

“I’m not sure if this is a good idea or not,” says Andrew Bernard, one of the authors, “but if we don’t understand what’s going on, we might implement bad policy.”

Bad policy indeed… but who cares about that as long as the ruling elite have a talking point to sell to the people to show that more of the same will solve the world’s problems…

Of course, this “change” already has precedent with the unbelievable addition of goodwill and R&D into the GDP figures to boost their appearance…

How To Create A Manufacturing Renaissance – Change The Definition | Zero Hedge

How To Create A Manufacturing Renaissance – Change The Definition | Zero Hedge.

With US manufacturing jobs down almost 40% from their 1980s peak, proclaiming the last few years marginal increase a “manufacturing renaissance” is more statistical noise, smoke, and mirrors than fact. That is a problem for an administration (and entire genre of Keynesian dreamers) that rely on this sector to prove how effective they have been with stimulus (and not just pulling demand so colossally forward that the future is bleak). How to fix this apparent dilemma between policy talking points and factual data? Easy – as WSJ reports, change the definition of “manufacturing.”

 

Behold the Renaissance…

 

So how do we fix this uncomfortable truthiness to fit with talking points that everyone can understand is unquestionably bullish…

Via Wall Street Journal,

U.S. Agencies Consider Redefining Manufacturing

Should a company be called a manufacturer if it doesn’t make what it sells? The answer isn’t as obvious as it seems.

Some refer to companies like these as “factoryless goods producers”—firms that handle every part of making their products except the actual fabrication. As industries have gone global, this model has proliferated from furniture making to electronics: Think of Apple Inc. and its iPhones. Now, there is a move afoot among U.S. government agencies to count these companies as manufacturers, which is a surprisingly fraught issue.

The upshot would be an overnight increase in the apparent size of the U.S. industrial sector without adding a single assembly line. It would also change its geography, as places like Silicon Valley would suddenly look much more like a manufacturing hot spot. Backers of the change say this would give a truer picture of the nation’s productive capability, because these firms still do most other functions of manufacturing, from designing goods to overseeing their production and distribution.

But critics like Miles Free, director of industry research and technology at the Precision Machined Products Association, a trade group for small U.S. producers, say the change in wording would gloss over the erosion of domestic manufacturing. “We think it would be bad for policy makers to say, ‘Look at these numbers, we have great manufacturing,’ ” he said, when the production in many cases is actually taking place on the other side of the world.

“I’m not sure if this is a good idea or not,” says Andrew Bernard, one of the authors, “but if we don’t understand what’s going on, we might implement bad policy.”

Bad policy indeed… but who cares about that as long as the ruling elite have a talking point to sell to the people to show that more of the same will solve the world’s problems…

Of course, this “change” already has precedent with the unbelievable addition of goodwill and R&D into the GDP figures to boost their appearance…

How Junk Economists Help The Rich Impoverish The Working Class — Paul Craig Roberts – PaulCraigRoberts.org

How Junk Economists Help The Rich Impoverish The Working Class — Paul Craig Roberts – PaulCraigRoberts.org.

How Junk Economists Help The Rich Impoverish The Working Class

Paul Craig Roberts

Last week, I explained how economists and policymakers destroyed our economy for the sake of short-term corporate profits from jobs offshoring and financial deregulation.
http://www.paulcraigroberts.org/2014/01/25/economists-policymakers-murdered-economy-paul-craig-roberts/

That same week Business Week published an article, “Factory Jobs Are Gone. Get Over It,” by Charles Kenny. http://www.businessweek.com/articles/2014-01-23/manufacturing-jobs-may-not-be-cure-for-unemployment-inequality Kenny expresses the view of establishment economists, such as Brookings Institute economist Justin Wolfers who wants to know “What’s with the political fetish for manufacturing? Are factories really so awesome?”

“Not really,” Kenny says. Citing Eric Fisher of the Cleveland Federal Reserve Bank, Kenny reports that wages rise most rapidly in those states that most quickly abandon manufacturing. Kenny cites Gary Hufbauer, once an academic colleague of mine now at the Peterson Institute, who claims that the 2009 tariffs applied to Chinese tire imports cost US consumers $1 billion in higher prices and 3,731 lost retail jobs. Note the precision of the jobs loss, right down to the last 31.

In support of the argument that Americans are better off without manufacturing jobs, Kenny cites MIT and Harvard academic economists to the effect that there is no evidence that manufacturing tends to cluster, thus disputing the view that there are economies from manufacturers tending to congregate in the same areas where they benefit from an experienced work force and established supply chains.

Perhaps the MIT and Harvard economists did their study after US manufacturing centers became shells of their former selves and Detroit lost 25% of its population, Gary Indiana lost 22% of its population, Flint Michigan lost 18% of its population, Cleveland lost 17% of its population, and St Louis lost 20% of its population. If the economists’ studies were done after manufacturing had departed, they would not find manufacturing concentrated in locations where it formerly flourished. MIT and Harvard economists might find this an idea too large to comprehend.

Kenny’s answer to the displaced manufacturing workers is–you guessed it–jobs training. He cites MIT economist David Autor who thinks the problem is the federal government only spends $1 on retraining for every $400 that it spends on supporting displaced workers.

These arguments are so absurd as to be mindless. Let’s examine them. What jobs are the displaced manufacturing workers to be trained for? Why, service jobs, of course. Kenny actually thinks that “service industries–hotels, hospitals, media, and accounting–have taken up the slack.” (I don’t know where he gets media and accounting from; scant sign of such jobs are found in the payroll jobs reports.) Moreover, service jobs have certainly not taken up the slack as the rising rate of long-term unemployment and declining labor force participation rate prove.

Nontradable service sector jobs such as hotel maids, hospital orderlies, retail clerks, waitresses and bartenders are low productivity, low value-added jobs that cannot pay incomes comparable to manufacturing jobs. The long term decline in real median family income relates to the movement offshore of manufacturing jobs and tradable professional service jobs, such as software engineering, IT, research and design.

Moreover, domestic service jobs do not produce exportable goods and services. A country without manufactures has little with which to earn foreign exchange in order to pay for its imports of its shoes, clothing, manufactured goods, high-technology products, Apple computers, and increasingly food. Therefore, that country’s trade deficit widens as each year it owes more and more to foreigners.

A country whose best known products are fraudulent and toxic financial instruments and GMO foods that no one wants cannot pay for its imports except by signing over its existing assets. The foreigners buy up US assets with their trade surpluses. Consequently, income from rents, interest, dividends, capital gains, and profits leave US pockets for foreign pockets. It is a safe bet that Hufbauer did not include any of these costs, or maybe even the loss of US tire workers’ wages and tire manufacturers’ profits, when he concluded that trying to save US tire manufacturing jobs cost more than it was worth.

Eric Fisher’s argument that the highest wage growth is found in areas where higher productivity manufacturing jobs are most rapidly replaced with lower productivity domestic service jobs is beyond absurd. (Possibly Fisher did not say this; I’m taking Kenny’s word for it.) It has always been a foundation of labor economics that workers are paid the value of their contribution to output. Manufacturing employees working with technology embodied in plant and equipment produce more value per man hour than maids changing sheets and bartenders mixing drinks.

In my book, The Failure of Laissez Faire Capitalism And Economic Dissolution Of The West (2013), I point out the obvious mistakes in “studies” by Matthew Slaughter, a former member of the President’s Council of Economic Advisors, and Harvard professor Michael Porter. These academic economists conclude on the basis of extraordinary errors and ignorance of empirical facts, that jobs offshoring is good for Americans. They were able to reach this conclusion despite the absence of any visibility of this good, and they hold to this absurd conclusion despite the inability of a “recovery” (or lack of one) that is 4.5 years old to get off the ground and get employment back up to where it was six years ago. They hold to their “education is the answer” solution despite the growing percentage of university graduates who cannot find employment.

Michael Hudson is certainly correct to call economists purveyors of “junk economics.” Indeed, I wonder if economists even have junk value. But they are well paid by Wall Street and the offshoring corporations.

What the Brookings Institute’s Justin Wolfers needs to ask himself is: what is the redefinition of economic development? For my lifetime the definition of a developed economy is an industrialized economy. It has always been “the industrialized countries” that occupy the status of “developed economies,” contrasted with “undeveloped countries,” “developing countries,” and “emerging economies.” How is an economy developed if it is shedding its industry and manufacturing? This is the reverse of the development process. Without realizing it, Kenny describes the unravelling of the US economy when he describes the decline of US manufacturing from 28 percent of US GDP in 1953 to 12% in 2012. The US now has the work force of a third world country, with the vast bulk of the population employed in lowly paid domestic services. The US work force no longer looks like the work force of a developed country. It looks like third world India’s work force of three decades ago.

Kenny and junk economists speak of the decline of US manufacturing jobs as if they are not being offshored to countries where labor is cheap but replaced by automation. No doubt there has been automation, and more ways of replacing humans with machines will be found. But if manufacturing jobs are things of the past, why is China’s sudden and rapid rise to economic power accompanied by 100 million manufacturing jobs? Apple computers are not made in China by robots. If robots are making Apple computers, it would be just as cheap to make the computers in the US. The Chinese manufacturing workforce is almost the size of the entire US work force.

US companies employ Americans to market the products that are produced abroad for sale in the US. This is why US corporations employ Americans mainly in service jobs. Foreigners make the goods, and Americans sell them.

Economic development has always been about acquiring the capital, technology, business knowledge, and trained workforce to make valuable things that can be sold at home and abroad. US capital and technology are being located abroad, and the trained domestic workforce is disappearing from disuse and abandonment. The US is falling out of the ranks of the industrialized countries and is on the path to becoming an undeveloped economy.

The Death Cross Of US Manufacturing | Zero Hedge

The Death Cross Of US Manufacturing | Zero Hedge.

The theme of both the robot-ization of the global workforce and the populist desire for a hike in the minimum wage have been popular and ongoing ones here at Zero Hedge. However, never has it been more clear just where the future lies than this chart from BofAML’s Michael Hartnett… As he says, “we are long robots, and short human beings.”

Of course – from Applebees to Jamba Juice and now fast-food restaurants, the robots are coming and cries of millions of minimum-wage-hike-demanding union workers will do nothing but encourage it… (oh and the Fed’s financial repression)

Chart: BofAML

Central Hong Kong Sees Near-Record Pollution Levels in 2013 – Bloomberg

Central Hong Kong Sees Near-Record Pollution Levels in 2013 – Bloomberg.

Roadside pollution worsened in Hong Kong’s Central district last year as vehicular emissions helped send nitrogen dioxide concentrations to near-record levels, an environmental advocacy group said.

Citywide levels of the pollutant, linked to damaged lung function, were the second-highest on record, according to Clean Air Network Ltd.. Particulate matter levels at all monitoring stations exceeded World Health Organization guidelines by two to three times, the group said in a report yesterday.

Hong Kong’s legislators yesterday approved HK$11.4 billion ($1.5 billion) in funding to replace old diesel vehicles. Aging buses and trucks have led to a worsening in air quality since 2007. Nitrogen dioxide levels are getting worse because of local emissions, rather than from China’s Pearl River Delta region, the environmental group said.

“As you can see from the air quality in 2013, end-of-pipe solutions are not enough considering the time it takes,” Sum Yin-Kwong, chief executive officer of Clean Air Network, said in a statement. “To speed up the improvement in air quality, we hope to see the government look into the problem from a comprehensive transport management perspective in this year’s policy address.”

The city will use the approved subsidies to phase out 82,000 pre-Euro IV diesel commercial vehicles in a program that will begin on March 1, according to an e-mailed government statement citing the Environmental Protection Department. The plan should lead to a cut in levels of respirable suspended particulates and nitrogen oxides by 80 percent and 30 percent respectively, the department said.

Roadside Monitors

Hong Kong has three roadside pollution monitoring stations in the busy districts of Central,Mong Kok and Causeway Bay. The Central monitor, sandwiched between the Asian headquarters of JPMorgan Chase & Co. and a Tiffany & Co. outlet, recorded nitrogen dioxide concentration levels of 126 micrograms per cubic meter last year, according to the environmental group report.

The Central roadside gauge stood at 6, the highest level in the “moderate” health risk range, at 3 p.m. today. The reading at the Causeway Bay roadside station, located in a busy shopping area, hit 7, considered to pose a high health risk, according to data posted on the department’s website.

Hong Kong introduced an air quality index on Dec. 30 pegged to pollution-induced hospital admission risks. Readings on the index are calculated based on health risks from inhaling concentrations of ozone, nitrogen dioxide, sulfur dioxide and particulate matter. Air pollution in the city contributed to 3,183 premature deaths last year, according to the group.

To contact the reporter on this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net

To contact the editor responsible for this story: Hwee Ann Tan at hatan@bloomberg.net

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