Matt writes: "If imposing tariffs on Korean washing machines results in the construction of new appliance factories in the United States, that is a cost of the policy, not a benefit. The labor and materials that go into building that factory could have been used to build houses or roads."
I think you are missing the thesis of the critique, at least from the Bernie Sanders and, increasingly, the JD Vance/MAGA viewpoints. Their critique of your statement is that the previously employed appliance factory labor isn't redeployed into houses or roads. Those jobs are being done by low skilled, low paid labor. Often by immigrants, legal and illegal alike (this line has been dropped by Bernie since 2016).
The lost appliance factory jobs were high-skilled, predictable and provided the worker with stability and dignity. And the community benefited from this predictability by having a stable and prosperous workforce, rather than an itinerant workforce moving from job to job hoping to one day put down roots and raise a family.
I used to dismiss this idea out of hand, and still largely do. But the decline of manufacturing jobs in favor of technology, healthcare and services seems to have had more knock-on effects than I would have expected. Maybe that is mere correlation rather than causation. But maybe not.
You make a good point. But I think it's also important to note that we have huge labor shortages right now in construction and green tech manufacturing jobs. We also, obviously, have a very tight labor market, so it isn't like there are millions of unemployed manufacturing workers just sitting around waiting for work. The China Shock obviously devastated many communities in the rust belt, but it represented just a fraction of the overall job loss in the US in the 21st century. I think what Oren Cass at American Compass and JD Vance are pushing is really just unhelpful nostalgia that is going to make things more expensive.
As someone who works in the construction industry this very obvious fact is what drives me completely insane about discourse from both left and right. We are so critically short on labor that any of the trades will hire basically anyone who can:
A) Pass a drug screen
B) show up on time
That's it! That's the bar to getting into a solid career in any trade. Meanwhile the right is fearmongering about immigrants stealing jobs like they're precious rare earth metals in critically short supply and the left is talking about root causes of crime as poverty when there's never been an easier pathway to high wage jobs available. If you want a job, you can get one, and you should immediately dismiss any public official or activist or academic who posits a theory that this is not true!
plenty of people who smoke pot are willing and able to contribute to the economy. if you still exist on regulating your employees private lives, you don’t need labor that badly
It’s a drug SCREEN. If you don’t have enough control over your cannabis use to abstain when you’re looking for a job, you probably shouldn’t be hired for a job that involves risk to your own safety or that of others.
I mean, you're not wrong, but still, if there really was a crushing labor shortage, wouldn't you expect the construction companies to be making some riskier calls on the hiring front? And what would we expect the wage pressure to look like?
I'm not saying Jim Ed is wrong about the environment where he is specifically, but I've also seen guys who would've liked to work in the trades getting stuck working part-time at AutoZone because they couldn't figure out how to jump through the hoops to make it happen.
Getting high and working an email job or retail is all well and good, but there are important industries where you cannot have people impaired while working them: Pilots, daycare workers, and construction workers to name a few.
Construction is still very dangerous work even with the best safety protocols in place. Fatal accidents are rare, but they do happen, and they're awful. You cannot have it come back that someone involved in it was impaired. It opens the liability floodgates, and most importantly it puts other workers on site at risk.
"...if you still exist on regulating your employees private lives...."
So, is screening for cannabis a regulation of employees' private lives, but screening for heroin or meth not a regulation of employees' private lives? Or is it okay to regulate your employees' private lives vis a vis heroin, but not vis a vis cannabis?
I mean -- I don't think occasional recreational cannabis use is a big deal -- I've never tried it myself, but I have seen people live functional lives despite using it.
But I also don't think that "regulation of employees' private lives" is a terrible thing, either, if it keeps the bus-drivers from driving buzzed, or it keeps one construction-worker from injuring another through inattention.
Cannibis stays in the system significantly longer that heroin and meth - up to a week for smoked and up to 30 days for edibles. Depending on the dosage, you could be just imbibing on the weekends and never be able pass a drug a test.
Also, heroin (can't speak to meth) is a different breed due to the need to be consuming regularly to prevent withdrawal.
Ah yes pot smokers. A group famous for their work ethic and ability to show up on time. If only we could find a way for employers to give them a chance, I'm sure they would leap off their couches and get in the game.
That is absurdly too high. It's only half of adults who have ever tried marijuana, and the difference between regular users and an occasional dabbler would make that percentage go down significantly. I'm sure young males are the largest consumers of cannabis, but that large a percentage seems statistically impossible based on my priors.
I'm sympathetic to what you're saying, but one thing about growing up in poverty is that you grow up surrounded by people who are more permissive of drugs and who are not teaching the value of punctuality among other job skills. Those people will always be substandard employees to begin with, and employers will avoid hiring them unless they have no choice. But if they do end up getting jobs, many of them will learn those skills and become better employees in the future. Importantly, their children will grow up in an environment that will make them better employees in the future. Reducing poverty will yield results, but it takes generations to fully realize the gain.
Let me repeat my original comment: "I used to dismiss this idea out of hand, and still largely do."
Having said that, I think the charitable view of Cass (and Bernie, let's not forget) is that they realize their proposals will make things more expensive but they value the expected benefits more than the higher expense.
Male prime-age employment is nowhere near all-time highs. Real hourly wages for production and non-supervisory workers in both manufacturing and construction are also not at all-time highs.
Those facts don’t seem consistent with huge worker shortages in those sectors.
1) The labour market overall is pretty strong. Not record-breaking but solid
2) "Manufacturing" in particular but also "construction" are not really industries, they're more a category of a large number of specific industries. The federal government has enacted a huge stimulus for specific industries such as semiconductors and clean energy. So in an overall solid labour market, it's very reasonable to expect *localised* skill shortages in those specific industries.
3) Employers will all-but *always* complain about skill/worker shortages in their industry because it creates pressure for government to fund training programs.
So if I google, everything seems to say half a million construction workers short.
We currently have male prime-age employment at 86%? That's certainly not all-time high.
But the unemployment rate for 25-54 males is only about 2.8%. That only counts those LOOKING for work, IIRC.
And "why are males having trouble finding jobs" seems to suggest poor work history, etc as options.
So, I posit:
1) They aren't able to meet the "work ethic" bar for these jobs. You don't want to hire a construction worker who can't show up on time.
2) They aren't looking for work as much (for w/e reason) - this could still have a construction shortage with lower employment rate (but not unemployment rate)
I'd say that if you have a real labor shortage you start to hire guys who aren't super conscientious for decent wages anyway. You just need hands.
Those guys who "aren't looking" for work notice this and they start looking.
So I'd guess the 500,000 number is just cheap talk. That seems more likely to me than a steady secular decline in work ethic among American men over the past 50 years.
There's a parallel here with one of Strong Towns' criticisms of the so-called "infrastructure gap": Every year, the ASCE puts out a report saying that the US is many trillions of dollars behind on infrastructure. And yeah, some roads and bridges certainly do crumble, but have you ever noticed that they aren't failing at a rate that would suggest we're THAT far behind?
Part of it is inflation, the cost disease, and a separate NIMBYism/everything-bagel-ism-induced cost *crisis*. But the ASCE also clearly has an overly-expansive definition of what projects they think NEED to be done.
The point is, we probably don't actually need to spend $8T or whatever the ASCE's latest report says; and hinging our analysis on that number alone would distract us from all the reasons WHY our infrastructure is so unsustainable -- to wit, per Strong Towns at least, because suburban geometry requires it to be overbuilt at unsustainable levels.
Likewise, I suspect you're right about "the 500,000 number [being] just cheap talk". As far as I know, there's no national crisis of plumbing work not getting done. The shit is not literally backing up over large swathes of the country. Plumbing, like other trades, is certainly disproportionately contributing to the cost disease due to a suboptimal recruitment rate, but it can't simultaneously be true that (A) tradesman wages are higher than ever due to their scarcity AND (B) that they can't recruit enough because the wages aren't high enough. As tradesmen like to point out, their wages are WELL above average/median.
Also, we shouldn't necessarily believe the trade industries' own stories at face value here. Industry insiders are notorious for being fonts of valuable information and insight while also having profoundly myopic perspectives that limit their own ability to understand their industries' problems.
If I were to hazard a guess at squaring these circles, I'd submit it's possible that, because of the Housing Theory of Everything, even elevated tradesman wages are just not worth the hassle vs. college. Even if the mid-career wages are good, it probably takes WAY too long to get to a reasonable level, and when you compare that against the college wage premium, maybe most people feel they're better off taking a gamble than "settling" for the trades.
I'd also suspect regulatory arbitrages -- the trades are literally where the guild system originated (!) -- so it wouldn't be surprising if incumbents were rigging the playing field in ways that harm recruitment.
Not to mention, there's probably an information problem: Many trades go through the private college industry, which is notorious for its fly-by-night and unregulated operations. If we REALLY want to fix this, we should probably pass a reform that helps community colleges to stand up more trade programs.
Lastly, per the aforementioned Housing Theory Of Everything, I'd expect that reducing the cost of living via abundance would help lower the stakes on the college-vs-trades decision. If you can have a middle-class lifestyle pretty easily right out the bat, then you're less incentivized to waste time on college unless you actually have a decent shot at graduating.
I think that the folks of Flint Michigan who are still waiting for clean water would take issue with the idea that there isn't a national gap in plumbing work being done.
At least in Seattle, the shortages in the trades are leading to both higher costs and also construction delays in private development and there is a lot public investment that should be done.
I tend to agree with Strong Towns that the suburb and exurb model of development leads to an excessive road mile to human ratio and that we should be encouraging more dense development to reduce these costs.
But I think our need for infrastructure improvements is frequently undersold. Seattle doesn't even have sidewalks in many parts of the city and the sidewalks are in poor shape and/or lack ADA compliant curb cuts in much of the area that has sidewalks. We still have lead piping in much of our water system. Our water treatment isn't making that a Flint like problem but it isn't good. Our sewer system dump sewage into the sound about once every other year due to huge storm overflows. We still have a couple of neighborhoods who need to rely almost exclusively on bridges that need earthquake retrofitting to reach the rest of the city. And I suspect we are doing better than a lot of older cities with poor populations.
I think we pretty desperately need more folks in the trades. I think that the issues with getting folks into those are complex. I think that there are cultural esteem issues that make those jobs less appealing to some folks even if the income is more secure. I also think that we have done a poor job preparing a lot of young people for those trades in terms of teaching any manual labor skills or greasing the skid into those professions. In Seattle Public Schools they are working on that by offering more training in high school. We have a whole magnet program to get folks ready for the maritime trades and programs where kids can do a half day program to get started training in other trades as well. I think having more publicly funded community college based training would be useful to.
I also think we should be less blase about writing off folks who would currently not make great employees due to drug use or other issues with personal management. Addiction can be addressed with a combination of medical assistance and therapy and we not offering that in easy to access ways. Personal Management issues are also ones that can be addressed with a combination of therapy and life skills training. There are countries who understand that their people are their greatest resource and that are committed to investing in maximizing their potential. We don't do that and we should.
“I'd say that if you have a real labor shortage you start to hire guys who aren't super conscientious for decent wages anyway. You just need hands.”
Hands of people who don’t have much work ethic and who can’t be relied on to show up when promised aren’t in fact a value add all the time. Especially in team projects like construction, where between fixing their mistakes, waiting on their work for next steps, and their being in the way, those hands can in fact contribute negative value.
Probably both. If you have to hire less conscientious people you do a worse job / take longer and people might not want to buy the construction you're selling at that.
We had some windows replaced and the company hired a different company to handle our drywall/repainting. That company did an excellent job, so I hired them to do some other exterior maintenance/repair work which didn't _need_ to be done yet, but I thought they were very conscientious about their interior work.
The exterior work was more mixed - some of it excellent, some of it mediocre. I didn't feel like I got a _bad_ deal but based on that work I wouldn't have gone out of my way to find more work for them.
Conscientious people can have more work available to them than they have time to do, and you can be "short" those workers, but there's also deferred home maintenance type stuff that homeowners/landlords might not hire less conscientious people to do.
Both can be true at the same time, especially when you consider the opioid epidemic. We've never had more junkies and fewer men in the workforce. Something tells me they are related.
It's true that nominal wages in construction have increased since December 2019, but just enough to keep up with inflation. Where we've plateaued recently is similar to where we were in the mid-80s in real terms, which is about 20% below the all-time highs on this metric. Just doesn't feel to me like how things would look if there were urgent shortages.
Usually it’s NAFTA then China that’s blamed. The China Shock thesis is for people who want to salvage free trade, a way to argue that it’s the right policy all the time except that one time it was massively wrong.
Addendum: The concept of "putting down roots" is, I believe, the core of the disagreement between Matt and many of his critics. I suspect Matt (and many of his readers) would be equally comfortable living in DC, NYC, Chicago or Seattle. I suspect many of us have moved from place to place during our lives, and see NIMBYs as making moves more expensive and our economy less dynamic. We are richer and more prosperous, as the recent reader survey confirms.
But the other side prefers communities with deep roots over a richer society. Where driving 10 minutes to go to Mom's for Sunday dinner is the norm; where the kids go to the same schools the parents went; where you know the owner of the local store because her Dad socialized with your Dad. They see the changes to their community brought by globalization -- having the kids leave for college and not return, the factory closing down and moving to the Carolinas or Mexico or China, the increase in immigration -- as being too costly for the benefits (which are accruing to other communities anyway).
A very good point, and something PMCs like us should be mindful of.
I disagree with you, though, on NIMBY. Housing supply is good for the “put down roots” people too. If the small-town folks want their children to stay nearby, should they not want adequate housing supply nearby?
I think this overlooks that peoples’ concerns about density changing the character of their community are essentially genuine. They would presumably like their kids to stay (which is nominally achievable on a fixed housing supply at an average reproductive rate of 2, or 5% per lifetime at 2.1, both of which exceed the current US average) but not at the expense of their reliance interests in selecting location A instead of location B to live in, in which case they may as well have moved anyway.
You can't have it both ways. Nothing in the world is just going to stay exactly the same. Either you can build housing so your kids can afford to live in the neighborhood, or you can not build housing and prices will go up
We are speaking about people who have generally negative views of immigration. They don’t want the population of their communities to grow. They want their children to move into great grandma’s place. You don’t really have to build for a population that is roughly flat.
you can preserve the character of your neighborhood through zoning. you can even have entire historic districts. and you can achieve housing abundance through building new cities and exurbs and building mid rise condos in rich urban areas
It bothers me bigly when people conflate "your concerns are outweighed by other factors" (fair enough!) with "your concerns are false and/or offered in pernicious bad faith".
To his credit, I think Matt is pretty good about not doing that when conducting YIMBY advocacy.
"It bothers me bigly when people conflate "your concerns are outweighed by other factors" (fair enough!) with "your concerns are false and/or offered in pernicious bad faith"."
But there are more important factors than what bothers you bigly, so you must be offering this in pernicious bad faith.
I’m sure the concerns are genuine, they just don’t seem to consider that prices going up doesn’t just price some people out of living in the same old place—it prevents it from staying the same old place. They change the character, one might say, into a rich enclave.
Turning a neighborhood into a "rich enclave" is are I say the point to steal from the famous Adam Serwer essay.
Matt has noted a number of times that it's probably not the case that people advocate for NIMBY in a conscious effort to drive up the value of your home. But the keyword is "conscious" and people are capable of putting 2 and 2 together. Me and my neighbors block an apartment + block visible construction of any other infrastructure = my house went up thousands of dollars in value. Ergo blocking housing must be good.
The typical YIMBY rejoinder to this is that land values go up even if house prices per se go down (although note that this appears to be a marginal effect that *can* be overcome by sufficient building to satiate land demand, at least on some temporal scale). Conversely, from the NIMBY side there's an awareness that folks are basically net neutral the housing market because any capital gains from a sale just get plowed into some other inflated house price because people gotta live somewhere (I had a discussion with a coworker who had seen his home price skyrocket during the pandemic to exactly this effect).
Had a good discussion from July 15 here re exactly this typic:
The more proximate explanation to me seems likely to be less first-order price-mediated and more second-order "rich enclaves are often nice places to live."
Correct, and then the same exact people will complain about gentrification. You really can't win against this series of arguments, the only thing to do is ignore them.
I’m having trouble following you here, when you talk about kids staying as achievable on a fixed housing supply—are you suggesting people live with their parents? I know that is common in Europe and other places, but tends to be a mark of economic failure in American culture.
The idea is that a lifetime reproductive rate of 2 (or 2.1 accounting for mortality), ex immigration, gives you a stable population, so if you have adequate housing supply at time T0, and the same population at time T1, you definitionally still have an adequate housing supply. Things can get a bit out of whack if you start with out an uneven age distribution or if people stop living together as adults, and immigration / population increase obviously breaks this equilibrium, but the gist is “same number of people, same number of houses.”
Ed.: I should note that my previous comment ignored mortality, treating 2 as stable and 2.1 as 5% increase.
Sure, if you think kids will be fine not having a better life than their parents (actually would probably have a worse life, because houses age over time).
But even that ignores the fact that rich people get richer over time, which means that the middle class will become mostly renters, as the rich buy up all the housing stock. And some of those homes would be vacation homes that would remain empty most of the time, so you'd still see housing scarcity.
I'm not sure the kind of stability you're talking about here has ever been a realistic baseline, though I'm not sure how I would quantify my disagreement.
I always if this takes into account the average household size taking over time... If the population is stable, but it's more single adults and less families with children (true basically across the US), you'd still need more units to allow adults to live on their own. Not that people can't have roommates, but I think most adults prefer not to.
This is pretty irrelevant for the NIMBY issues that are actually on the table whihc is about housing in already dense metropolitan areas where no one drives 10 minutes to visit grandmother anyway.
I hear you but also feel that it is important to note that urban folks also have roots. I live is Seattle. I was born and raised here. My parents have lived here since they were in high school. My daughter is being raised 10 minutes from her grandparents. My grandparents lived 10 minutes from me during my entire adult live until they passed away. There are lots of tech transplants here to be sure but I have a strong network of friends who are raising kids here and also have parents here.
That said, most of us are YIMBY in part because we want our kids to be able to live here too. At this point, the only road towards home ownership that I can imagine for my daughter before middle age would be that her grandparents die and we can sell their house to buy her one. Otherwise, she would likely struggle to rent in our neighborhood as a nurse (her anticipated profession).
But I do chaffe a bit at the notion that only small town folks have roots are attachment to place. Cities are places too and I think are actually more likely that suburbs to contain multiple generations of the same family and frankly more likely to be able to sustain that if housing were more affordable since cities tend to have more nimble economies.
To some extent this is true, but I think we have to disaggregate here. Most of the NIMBY problems are in the larger, faster growing cities which are the engines of economic creativity. That doesn't sound like the kind of communities John from FL is writing about. In those communities, is NIMBY-driven high cost of housing the thing that is preventing adult children from living near their parents?
IMO NIMBY manifests differently in cities than their outlying areas.
Like, there's no Midtown Angry Neighbors' Association of Empire State Building tenants who are demanding that no skyscrapers get built next door which might ruin their views.
But there are air rights (rights to the column of air above your building) which price in the marginal utility of a new skyscraper for neighboring properties, there are incumbent corporate tenants, permits, and hundreds of other regulatory issues to getting a new skyscraper built, most of which weren't in place even 100 years ago. These are all ultimately "incumbency dividends" that make incumbents *feel* richer but raise the overall cost level to absurd amounts that inhibit construction.
So, it's very different than the uppity Boomers in the neighborhood across the river from me in my small CT town all crashing a zoning meeting over a proposed duplex zone.
Yes, in some cases. Many boomers in Seattle that I encounter in my work who need family to live nearby end up having to have them actually move into their homes because the adult children can't afford housing near enough to them. I worry that my kid can't live near me when she grows up with serious support in affording housing, support I could probably only give her after my local parents pass away.
* Outside the US (where most of the population's ancestors literally moved continents sometime within the last five generations), this sort of rootedness norm is even stronger. A friend of mine from Glasgow in Scotland (a big city!) stressed out his mother by moving to Edinburgh, which is about an hour's train ride away. (In the US, these cities would be in the same metro area.) In Lebanon, people living in Beirut would talk about being homesick for villages which were about a half hour drive away.
* At least a certain amount of deracination is good, actually. Economic growth necessarily requires change, and a willingness to move to where economic activity is offers both downside protection and more ability to capture upside. Americans' willingness to move is probably one of the factors that's helped us perform well economically over the years.
* An underappreciated aspect of the sort of near-universal military service that was common in the mid-century US is that it uprooted young men while also providing their lives with some degree of structure. One of my grandfathers grew up on a farm without electricity or internal plumbing. Being conscripted, traveling, and getting to meet people with backgrounds very different from his really opened up his horizons, and he went on to try a lot of new things and take a lot of positive-EV risks. (Moving away from home, courting a woman from a higher social class, getting a college education, switching from farming to sales, becoming an unusually good stock investor.) Going to college provides this sort of benefit now, but it’s costly (generally positive-EV but negative-EV for marginal students) and not universal
I'm going to be thinking a lot about "structured uprooting" this morning, and to what extent I found something like it by moving a thousand miles to shack up in a shitty dorm at Big State U.
It’s a really interesting concept! University and the military both make you move but also both give you a structure for how you do it, and give you insurance of a sort to help you find new roots later.
Gradually easing into adulthood in an environment where it’s easy to develop a big and (after graduation) geographically diverse network of friends and acquaintances is one of the big benefits of the university experience. (And “remove people from home and throw them together” is a classic state building/governing class formation process.)
I wonder if there are a lot of "non-uprooted" people who, rather like George Bailey in "It's a Wonderful Life," carve out a contented life in a small community surrounded by loving family and friends but deep down inside greatly regret not being able to follow their dreams away from the suffocating place they live in.
I also can't help but wonder if the out-group resentment we see from them is simultaneously a form of jealousy and also a way to justify one's regret over one's choices to oneself by attacking those who made different choices.
I definitely know people who try to have it both ways: talk about how small towns in the Midwest are morally superior and vote Republican because of it, but then latched onto the first person who could help them move to the Blue coasts.
"* Outside the US (where most of the population's ancestors literally moved continents sometime within the last five generations), this sort of rootedness norm is even stronger. A friend of mine from Glasgow in Scotland (a big city!) stressed out his mother by moving to Edinburgh, which is about an hour's train ride away. (In the US, these cities would be in the same metro area.) In Lebanon, people living in Beirut would talk about being homesick for villages which were about a half hour drive away."
Yes, Europeans are funny with this stuff. Edinburgh is viewed as supposed to be on the other side of the moon or something from London and it's actually Boston to DC - it's probably a much nicer drive in a day than Boston to DC.
There's a great line in the Monty Python-adjacent movie "Time Bandits" where a stranger from another medieval village a mile away comes across a local resident who upon learning of his mile-long trip, exclaims, "Oh, I would love to travel someday too!"
My Scottish friend also jokes about American tourists in the UK just wandering around and saying “wow, that’s so old” at every building. And he’s not wrong.
"Hot take" coming. Based on your post above, does NIMBY + sprawl = more dynamic economy? In the situations you describe above one thing seems clear whether we're talking about Glasgow or Beirut is the various family members lived within very close distance from each other. In Glasgow or the villages in Lebanon I'm guessing the mother or people in question could very easily see their friends or relatives likely in walking distance. Which means taking the step to move away is that much more wrenching and difficult even if it's the right decision based on economic circumstances.
In that vein, the fact that US cities are so much more spread out (and suburbs even more so) means that actual physical connection to friends and relatives is that much weaker. Much more difficult to stop by your friend's place, mom's house or aunt Mary's house when they live 45-60 minutes away even if you all live in the same city. That makes moving away that much more of an easy choice.
Not sure how much I buy this of course. Working class people are moving away from very walkable neighborhoods in NYC to warmer climates every day. But just sort of putting out this (again) "hot take" to see if there is any merit to what i'm saying.
I like a good hot take as much as anyone, but the economic benefit from people moving largely comes from workers moving to places with lots of economic activity, and NIMBY-ism prevents that. The US economy would be significantly bigger if the NYC and San Francisco metro areas were twice as dense as they currently are.
Oh I'm pretty sure I agree with you. I should have said "extreme hot take coming".
I do think it's worth teasing out second order effects of having far flung exurbs. We focus on the downsides I think correctly; environmental cost, literal economic costs of stuff like more road building or more money spent on gas and yes lack of connectedness to your community.
But there's a reason there's demand for this type of living beyond the "it's cheaper to live here than the inner ring suburbs". Big houses and big lawns are pretty appealing. Lots of driveway space for lots of cars. And a lot of people really do seem to like the isolation*. So in that vein, worth trying to least consider second order positive effects. And one (possibly) is the lack of connectedness to your neighbors and city at large may mean moving away to an entirely new city way less daunting.
I'll also say, by almost definition, newly built exurbs are filled with people who don't have roots there. Even if they are moving from a town a mile away, it's not like they've lived in that specific neighborhood for long. If you're willing to move to the far flung exurb, guessing moving again isn't nearly as daunting.
*I think there is a group of people who really do thrive in isolated areas. But I think there is an even bigger group of people who think they'd thrive only to discover that after awhile the isolation gets to them. I suspect a lot of people conflate "I want a second home where I can get away from it all especially when the weather is warm" with "I want to permanently move away from everyone and everything I know as I'll be happier permanently being isolated".
I think that you don't need to go quite as far as isolation per se. Think of it more like "I would like around 5-10 reasonably close like-minded friends and a degree of personally owned physical space." Small towns or suburbs (particularly those subject to selection effects) are plausibly compatible with this. The urban response to this desire is more like "best I can do is living cheek by jowl with 7 million people paying thousands for a shoebox, most of whom you will have an at-best neutral interaction with and some proportion of which will actively inconvenience you on a daily basis while suffering no reputational or other harm due to urban anomie and law enforcement tolerance of petty misbehavior." Like, maybe this is the best offer on the table if your desired close-acquaintanceship group is particularly hard to select for and coordination problems are hard, which is how you get phenomena like Gayborhoods / the Castro in SF, but otherwise it seems like what you really want is something more like a bucolic college town of the type that are thick on the ground in the Northeast (or whatever else best approximates an adult version of being a university student) -- replicating the beneficial effects of access to a selected friend-group without all the attendant sacrifices. Why do with 7 million people what you can do with 7,000? Isolation may not be introvert heaven, but cities are kind of introvert hell, and it' s not clear that the sacrifices they demand in exchange for social opportunities are necessary, even if they are sufficient.
I think it's more accurate to say that sprawl is the only way to keep a NIMBY economy dynamic.
But also, sprawl has its limits. About an hour commute -- regardless of the actual distances involved due to traffic/geography -- seems to be the outer limit of what people can tolerate.
Hence is why I think the Great Recession killed the sprawl cycle. We'd already roughly hit the limit of sprawl -- and our ability to finance it (!) -- and were kind of just going on fumes, so that when the recession hit it was impossible to jump-start the engine again.
Deep Cut: When you run out of room to sprawl, that forces densification cycles (which we're going through now), which slowly re-enable a slight crawl of sprawl. The densification also drives value growth in the urban cores. That's probably the next major change to expect in the next 100 years, at least short of another major disruption to transportation technology (like the automobile was).
"I think it's more accurate to say that sprawl is the only way to keep a NIMBY economy dynamic." This seems very correct to me. I keep doing this but look to the UK and see what happens when you combine SF style NIMBY with lack of ability to sprawl (or less ability).
I really think the big shoe to drop is with insurance. I can't begin to tell you how much insurance costs have skyrocketed in places like FL and Houston. I don't think we as a society appreciate how much we subsidize FL living. The "free state" of FL is a great bargain when you can rely on the rest of the country to bail you out in a storm. And those storms and damages are getting worse. This is really the dog that hasn't barked yet. https://www.wlrn.org/business/2024-03-11/florida-home-insurance-market-hurricanes-litigation. Given the political direction FL is taking I think there is going to be a real "showdown" situation soon as a lot of conservative upper middle class and upper class people will continue to want to buy and build on coastal areas and barrier islands, not be able to get insurance and ask for federal bailouts.
Not to mention that FL and the rest of the Sun Belt are diverting population and investment away from the rest of the country.
Part of the problem is that the problems haven't gotten bad enough *yet*. I'm no accelerationist, but it's not accelerationist to simply point out that people haven't reached a tipping point yet.
IMO, this stuff never plays out in some big dramatic showdown where the rest of the country says, "Fuck you guys, NO we're NOT paying the bill for this one!". It's nice to fantasize about, but not realistic.
More likely is, the big storms keep coming, the insurers are gone so the states struggle, and they can't keep up with it, there's only so much money for FEMA, so over time a trickle of financially-ruined exiles stream into the cheap post-industrial Midwest and it becomes a (metaphorical) flood after long.
All that'll be left are the rich folks who can afford to build sturdy houses and the poor folks who don't mind living in easy-to-rebuild glorified shanties.
>Where driving 10 minutes to go to Mom's for Sunday dinner is the norm; where the kids go to the same schools the parents went; where you know the owner of the local store because her Dad socialized with your Dad.<
It's this cheap, highly sentimentalized version of a Rockwellian America that never really existed that drives me nuts (not singling you out John; I realize you're offering the argument rather than advocating it):
1) Americans move LESS than they used to. In the height of the industrial boom, Americans moved across state lines MORE than they do now. JD Vance's people moved from Kentucky to Ohio for work! The decline in recent decades is probably related to weakened economic specialization: every part of the country now has large numbers of healthcare workers, sales reps, accounting managers and IT specialists. You don't need to move to find work (though you may need to move to afford the rent).
2) AFAIK people everywhere in America like to visit family and friends—maybe for Sunday dinner—and the shorter the drive, the better. This is not an activity confined to Appalachia or the Rust Belt.
The version of "Rockwellian America" that you say never really existed did exist, and still does in lots of places. And those places aren't only small towns -- it was the norm for places like Detroit, Dayton, St. Louis and Syracuse. In fact, I have family members (in-laws, but still) for whom it still exists. The job that my brother-in-law has pays less and has less stability than the one his father had, but he still lives the life I describe. The plant where his father worked moved all production to Mexico, leaving behind only a small technical center, for which my BIL isn't qualified, though.
I think to square the circle here a bit, it's probably strictly not true that this "Rockwellian America" didn't exist or still doesn't exist. But Charles is also right that there's a lot of over sentimentalizing going on based on an imagined past shaped by 50s tv shows and advertising (not to mention political messaging).
Maybe I've been negatively polarized too much over the past 8 years but when I see Trump doing his idiotic pretending to shovel coal routine, my first thought is "do we really want to be preserving this? Coal mining is awful for the environment. Coal mining jobs are dangerous and terrible for the workers themselves. And it's an outdated technology from a completely different economy". Now to your point, those few remaining coal miners if you were to interview them would probably talk about how their dad was a coal miner, their dad's dad is a coal miner. How they married a girl who grew up down the street who's dad was a coal miner and friends with his dad. And now some lib elite living in NYC wants to say his job and his family's entire legacy is bad for the country.
I'm not sure I have the best response to this. I know the late 90s consensus of "learn to code" was stupid, insulting and woefully inadequate (I'm exaggerating here a bit but I think I'm not that far off from the sentiment). But to Matt's point "learn to code" from a 1,000 foot level is actually not wrong. We live in a rapidly changing dynamic economy. We can't just have policy wedded to a past that doesn't exist anymore.
Again, I don't know the 100% correct solution here. I said to you in another post I actually have sympathy for the argument you put forth. Maybe some sort of program for moving vouchers? If your job was eliminated due to your place of business closing down, you are entitled to a voucher to help move. This obviously doesn't solve the "people like having roots" problem, but maybe it would make the economic dislocation of living a factory town where the factory doesn't exist anymore more palatable.
I used to be in a position where I would interact with coal industry lobbyists from time to time and the way these companies would talk about their own employees' preventable deaths due to inadequate safety measures was Orwellian.
Feel like a lot of the same conversations happened in C-suites at Boeing the past 5-10 years. Just replace employees with passengers. They probably had some formula as to how many mishaps and actual deaths had to happen before the "cost" actually exceed the money saved on paying real engineers to make sure these accidents didn't happen.
I am also a bit baffled by the desire to retain coal mining as an industry having worked on some black lung cases years ago. I do understand folks not wanting to move away from friends, family, landscape, culture, etc. And I do get that moving from a physically demanding job to coding isn't easy. But it does feel like folks should be just as happy manufacturing wind turbines in their hometown as they were mining if we could incentivize green energy jobs going where fossil fuel industries are being shut down.
Coal is a minimal part of the economy even in West Virginia. However, you need industry and jobs throughout the country, not just in large cities. Many people do not want to live in large cities, and it’s certainly not a sensible place to locate most manufacturing.
The only thing *I* remember from St. Louis was the miles upon miles of strip malls that they tore up the Rockwellian main streets to build.
And then there was the big suburban mall, whose customer base eventually got cannibalized by an even BIGGER strip mall that they built on a flood plain, which got two more outlet malls added to it a decade later!
When the next flood came, it flooded whole different parts of town than in the past, because the big strip mall's owners got the county to build the nearby levees higher, which forced the water to go somewhere else.
Whatever was left of Rockwellian America where I was born, was killed by the people who professed to love it so much, all so they could put a Red Robin on top of it.
"Whatever was left of Rockwellian America where I was born, was killed by the people who professed to love it so much, all so they could put a Red Robin on top of it."
The only things I miss from back home are the things that I can't get anywhere else: Lion's Choice and my old watering hole's bar food. I'd take those over Red Robin any day of the week.
I’m the only person in my family this vision doesn’t exist for. All the rest live close to each other and see each other all the time. They’re all big into identities like “mom”, “dad”, and “grandma”.
But hadn't people just moved to Detroit, Dayton, St. Louis and Syracuse to create "the norm" that we now mythologize? Like JD Vance's parents moving from Appalachia to Cincinnati for work? Certain cities boomed in population in the first half of the 20th century, then other cities boomed in the second half (e.g., Sun Belt). Detroit's and Dayton's population have been in flux since... ? seems to predate China entering the WTO or even NAFTA. (And isn't Metro Detroit's population pretty stable? A lot just leaving the metropole for bigger suburban houses/yards and, well... other reasons.) Doesn't Rockwellian America more-or-less exist today in Metro Phoenix and Atlanta and Dallas, albeit with 30-40 min commutes, as people have bigger houses and more cars than they used to (requiring more space for these metropolitan areas)?
Actually, John (from Fl!) pretty much nails what I remember from my childhood in my largish north central Florida town in the 1960s. We ate at my grandmother's house all the time, and hung out with our large extended family frequently and I certainly knew which schoolmate's parent ran which store.
And this, children, is why I blew that town as soon as I could when I turned 18.
People have always moved, the pilgrims moved, after all.
But when I was growing up all of my mom's relatives lived within walking distance of each other, and ditto for my dad's relatives (as you could infer, these were two different localities b/c my dad moved cross state, people have always moved).
But there was something about the labor markets / housing supply / culture that made that more common.
As it turns out, people like walkable neighborhoods where housing abundance and a light zoning touch makes middle-class life affordable and provides ample local opportunities.
I’ve heard claims that the statistics on decreased mobility are actually an artifact of some change in measurement. I don’t exactly know how to verify one way or another.
“The concept of "putting down roots" is, I believe, the core of the disagreement between Matt and many of his critics.”
I agree that we need to be aware of these considerations, and now more than ever. They are adjacent to the more explicitly fascist blood-and-soil style arguments that J.D. Vance was hired to peddle, which claim e.g. that only Americans who have lived in the same place for many generations are real Americans, that immigrants are an invasive species, that rootless cosmopolitans form a cabal corrupting America, and so on.
I am *not* attributing these views to John from Fl, or saying that placing any value on “putting down roots” means that you’ll soon be goose-stepping with tiki torches. Instead, I agree that there is genuine value in community and stability, and our side needs to figure out how to respect that value so that their side cannot co-opt it for fascism.
I am someone who places great value in community, stability, and placemaking. I agree that we should surrender those values to Republicans. I also don't think that they are incompatible with many viable versions of YIMBYism.
That's an interesting argument, but it's not at all clear to me that a more protectionist approach does much to enable that. It depends alot on how it works out. Ok, maybe you get a factory in one part of the country -- probably near an industrial center -- but you've got to move there and on the other hand goods are more expensive meaning its harder to support yourself say doing remote work.
And remember that if you make it harder to access cheap labor it often results in more investment in automation potentially counteracting any perceived greater permanence of factory jobs.
--
But I also think it's mostly besides the point because these communities are dying in large part because the next generation isn't that interested in staying (kinda unsurprisingly). That just can't be fixed by relatively modest tariff measures.
The next generation isn’t interested in staying because this place isn’t where the future is - the future isn’t appliance factories. (Though they might have been the future from 1930-1950, the way “plastics” was the future in 1968 and oil was in 1900 and AI is now.)
Seems to me that protectionism should only be used as a way to keep short-term supply gluts from hostile nations from gutting our healthy domestic industries. Like Chinese EVs, for instance.
But outside of that, it really just makes the Cost Disease worse.
I believe PMC folks are about to discover what factory workers did decades ago. AI is going to upend a bunch of middle management jobs. Popular sentiment on these issues will take an hard turn toward the Bernie/Vance position once that takes hold.
I am a rootless person, having made multiple cross-country moves without regret. “Home” will always be my beloved West Virginia, but home to me is an idea, a memory, not a lived experience. This thing about wanting your kids to live 5 minutes away and such just sounds like “Johnny went to that big gub’mint college and they poisoned him with soshulizm and now he lives in NEW YORK CITY.”
I share that part of your biography, and I don't see any way I could have taken a different path. But I have a lot of friends with generational roots now, and their lives are objectively better for it, in many ways.*
On top of that, my oldest daughter is only a few years from leaving for college, and there's nothing I want more than for her to live nearby when she's done. I'd never stand in the way of her choices, even if those choices take her far away, but I'll do everything in my power to make it possible if that's what she wants (this is approximately 50% of my YIMBYing motivation).
This isn't relevant, but when my mom's health began declining a few years ago, I began seriously entertaining the idea of going back to West Virginia to be near her, just in case she needed me. Her basic response was: I don't like Chicago and I don't want Chicago for you, but you want it for yourself and I won't let you give it up for me.
You reminded me of how special it is to have parents who want you to follow your path wherever it takes you. =]
Appreciate you calling out these couple points. I think in short the free trade economics POV makes 2 critical faulty assumptions.
First, is what you are hinting at, that job change is frictionless. I think after ~25 years of free trade consensus we know this isn't the case. There are major hurdles in re-educating the populations that lost jobs for new industries that is far from seamless. Coupled with the challenges to get folks to move geographically, you start to realize you have a very faulty assumption that was taken for granted.
The second faulty assumption is this idea that we are effectively freeing up human capital to go work in more high value areas of the economy. The really simple model in economics is the assumption that the US is a high skilled country, so those workers would move to other high skilled industries. However, the US has >1/3rd of workers making $15/hr or less in mostly low skilled jobs - we have no lack of labor pool that we could start to tap into to fill more of these high skilled positions (with the obvious caveat that training is required to get this talent pool there).
Obviously a lot more to the arguments on each side of this debate, but I think when you start to look under the hood, you start to see quarter century worth of data suggesting the foundation we made these decisions on was shaky at best.
At age six or whatever, I recall reading in a kid-targeted factoid book that Americans are (circa 1990) overwhelmingly likely to marry someone who was born within twenty miles of where they were born. Whether or not that was particularly well-sourced, it stuck in my brain because I just so happened to be born in a hospital about twenty miles from the house I grew up in.
Now I haven't been in that *time zone* in two years. makes u think.
I worked hard and sacrificed a lot to get where I am today while many others in my extended family chose to stay in our hometown (and worked and sacrificed in their own way too). I'm not judging their choices, and I can see exactly what I should have done differently if I wanted their path. I may make more money than them, but their lives are good too, and I might add, they do benefit greatly from globalization as well as all the economic growth over the decades. And yet they will still buy into the same false nostalgia that somehow they can vote for nothing to ever change. I'm not saying we should be dismissive of their point of view, but let's not wax poetic about it either.
That is true, but it has precious little to do with trade and even less to do with trade _policy_.
Also -- not the point of your comment, but I want to say it anyway -- I am a certified "cosmopolitan." I have lived 13 of my 82 years outside the United States. My wife and children were born outside the US and one of the children does not live and work in the US. And it makes me (I think) _more_ of a Star Spangled Banner singing, "We hold these truths to be self evident" American than someone who has not travelled and seen other cultures.
I understand the argument, but didn't more Americans move around the country in the mid-late 20th century than do today? That in some ways disproves the argument.
One of the strange quirks about American history is that everywhere is populated by someone who decided to move there. Even in towns where people have lived for generations, you can often find historical records for the first members of a family to move to a place. There's a reason that we have sports teams with names like the Vikings and the Celtics. Pretty much every northern or western city with a major black population only does so because of the Great Migration. Indiana's white population mostly came from the South. A lot of the stereotype of the average Texan is an affect put on by people who moved to Texas from elsewhere. It's rather rare to find the same families truly living in the same town for 300-400 years, while in Europe there are towns that families have lived in longer than the US has been a country.
The people with memories of rootedness are basically the people who decided to break with tradition and just stay the same place they were born.
There's a funny context to this idea of moving from place to place. When I moved to NYC from my southern town I found that I worked with two broad classes of people: 1) from somewhere else like me, 2) from a neighborhood in NYC and other than coming to work, never living and rarely venturing more than a few blocks from the house they grew up in. Other people have told me the same about Chicago and I can confirm it's also true about Boston. Going to Mom's for Sunday dinner was a 10 minute walk, not a drive.
The point is that these "small town values" are often shared very much by people living in the coastal elite cities whose roots often go back as long as any in the heartland.
I suspect we agree here. I'm mostly with Matt that free trade on the whole is an economic good. But I think he's underselling the very real costs of free trade. Specifically, I'm surprised he wrote this post without using the term "China shock" which seems to have been very real and very damaging. And I think the point about "predictability" is underrated. Status quo bias is very real and likely explains Matt's very correct observation that the most popular politicians are the ones who basically do nothing of note.
But I have to disagree with your contention regarding NIMBY and large cities. Reality is places like NYC are losing disproportionately working class people and people with "roots" as you say due to housing costs. NIMBY (combined with the perverse effects of rent stabilization) is actually driving out long term residents in favor of upper middle class professionals. Free trade in theory is a net benefit for the working class residents of NYC or SF or Seattle. The cities wealth should mean the opening of more high end restaurants, which means more waiters and bartenders making more money on tips. Without NIMBY, that extra income should have result in more money in working class pockets as opposed to going to rent.
I think this is to a large extent rose-tinted nostalgia. If you ask people in manufacturing today, I'm pretty sure they'll tell you young people are not clamouring to come work for them. Those jobs are not that great, and in the past arguably they were relatively worse: the health and safety regulation of recent decades were focused on reducing the harm of blue collar work, not white collar.
Communities had their economic core hollowed out. That's just a disaster no matter what that economic core is. It doesn't mean whatever it happens to be was good. There are communities that were based on underground coal mining that was crazy dangerous and polluting. Those communities have suffered a lot but it in no way means underground coal mining is a dream job.
"I'm pretty sure they'll tell you young people are not clamouring to come work for them."
I think they are and these are absolutely great jobs. Average salary for an assembly technician in Peoria, IL for Caterpillar is $42k but there's an actual career path to lead and test technician roles that get up to $75k.
Manufacturing often offers upward mobility to people without college degrees. I know a lot of managers and even engineers who do not have college degrees; they were trained on the job over a period of years.
This is becoming less common, people want engineers with degrees. But it’s sometimes easier to spot a person in an entry level job who is smart and works hard, than to find a recent college graduate who has a decent work ethic, doesn’t mind getting a little dirty, and can deal with the chaos of a manufacturing floor.
Totally agree. Manufacturing in the US is awesome. It's a great career path. It offers a ton of entry points with low barriers to entry. I 100% want the older pro-worker, Democratic party. This new one focused on "free trade" is far weaker.
I guess this gets into what is manufacturing? Sewing garments in some downtown Los Angeles textile factory? "Assembling" hamburgers in a McDonalds? Doubtful for the former, but for the latter sometimes people do ascend up the ladder to store manager and can make out pretty well.
The credentialing can be a real issue. At my first job out of college I was trained by a guy who had applied for the job I got but he was told he wasn't eligible for the promotion because he didn't have an engineering degree. I eventually left partly because I couldn't move up myself. It was apparently decided that the level above me required a masters degree regardless of experience.
The amount of "you have 8 years experience and due to understaffing have had all the responsibilities of this job for the last 2, but we can't give you a promotion because you don't have a piece of paper." that I've seen is ridiculous.
IMO the US federal government should not prioritise holding back the tide on declining industries that pay average (not starting) salaries of $42k and where the path only needs leads to $75k. Nobody has a good track record protecting declining industries and $42/75k is too little upside given the low odds of success.
By all means, prioritise the people in those jobs, or the national security implications (if any) of losing them.
The median salary in the US is 48k. Jobs making 75k are making 50% more then the median. I'm not saying that we should be stupid about protecting them, but people making way more than that should realize "we're the outliers."
There's no protecting and it's not declining. 100% of Caterpillar D6T tractors have been made in the US for 100 years now. They will always be made in the US. This is the standard type of high-skilled, complex manufacturing job in the US. & relative to the education requirements -- the pay and career path is awesome, especially vs. options in retail / service.
Yeah. There's not much from a policy perspective. Just fight dumping so we're all on a level playing field. Another nit I have with this article is Matt and others keep referring to the Trump washing machine tariffs as "Trump's". Obama placed the original tariffs. Trump just continued the policy and it was the right policy under Obama and the right policy under Trump. Let's be honest about that.
I think we should also be aware that manufacturing jobs that remain in the US at this point trend high-skill. If we bring more manufacturing back from abroad, I would expect the average quality of manufacturing jobs in the US to decline, perhaps precipitously. (In addition to of course making everyone poorer.)
IDK. I just watched the LG washing machine plant video overview. There's tons of automation. My sense is any greenfield plant is gonna look more like that than one with lower-skill, hand-assembly. Not that it necessarily changes your point (i.e., there's probably not a lot of net-new high-skilled jobs left to bring back because those never left), but IMO every new factory built in the US is a win. Those are long-term CAPEX anchors.
While I'm sure we can cherry pick individual jobs in a variety of companies that look good, I see no reason to believe that any kind of mass clawback of manufacturing from Korea would result in jobs that would raise, and not lower, the overall skill/compensation of manufacturing in the US.
I can't tell if you're agreeing or disagreeing but the LG and Samsung appliance factories have definitely raised overall skill / compensation of manufacturing in the US and probably more importantly, both those states. But that production wasn't shifted from Korea, that was shifted from China. LG and Samsung previously shifted the production from Korea to China to get around the Obama tariffs.
The manufacturing that is likely to come back would be things like pharmaceuticals, microchips, electronics, weapons, and some basic inputs like steel and key chemical production. Those are not low skill sectors.
It’s worth pointing out that those jobs were pretty good in the 1960s, around 90 years since the second Industrial Revolution.
Like literally no one is clamoring for the industrial jobs of 1880. Even though yes these were often quite a boon to the workers at the time compared to subsistence agriculture and other options available. Like laws were passed and people literally fought for better conditions etc.
It seems to me a lot of the work should be. In making the service economy more friendly to being a career and not trying to restart manufacturing which as I understand it will probably be highly automated if it is restored.
Yes, it’s the stability and dignity (and attendant stable middle class quality of life) people miss, not the literal monotony of manufacturing that now characterizes factory work in China or the dangers of coal mining.
I agree but where I find myself more than a little confused is why bring it back is what people want.
Like it seems to me there should be a lot more activity in making the work we have better that isn’t based on throwing hundreds of millions of people back to absolute poverty levels of the 60s.
Manufacturing work, even for floor workers, is not nearly as dangerous or dirty as it was even twenty years ago. So to "bring it back" is to bring back the stability with a slightly improved job, functionally.
Manufacturing today is not similar to the industrial jobs of 1880. It’s far more automated, which is a good thing. Jobs are more technical, and manufacturing onshore is important for innovation and for national security.
I’m not sure how I communicated this so badly. My point was there’s nothing inherent about manufacturing being all the things its described here that was the result of decades of activism and law making and sometimes literal fights. We can make services have a lot of those good things to and the sooner we prioritize that the better.
I’m not anti-manufacturing jobs per se, sometimes that’s really the best option for security, or productivity or what have you. But the view that we can’t have those things without factories seems silly.
I think it’s more that I am not making my point well. Manufacturing onshore advantages innovation in ways that are not easily replaced. This has been a refrain from engineers for years.
Similarly, for national security, there isn’t a good replacement for certain items to be manufactured here. It gives us a wider margin of error for black swan events.
I do agree that we need to make work better in general.
I think it would also be better to engage in what it is, exactly, the CCP thinks they're doing with policies aimed to maintain and expand trade surpluses and hoard manufacturing capabilities. And what smaller countries who use similar strategies think they are doing.
And why more other countries aren't angry about it. If Latin America, Africa the Middle East, India, etc. are going to develop further they are going to need a better industrial base, but that won't happen as long as China and a few others are the world's factory for cheap goods.
Well said. Indeed, the trade has been for high-skill manufacturing jobs for low-skill service work. Rather than the workers being redistributed into new sectors, we’ve been deindustrialized. The fact is that China could produce every manufactured good for the entire world and we could all just ship them raw materials but that is just fundamentally undesirable for many people.
In my experience, that's not been the trade. The trade was low-skill manufacturing jobs for low-skill service work. None of the high-skilled manufacturing jobs were outsourced. Those are all still done here. What was outsourced and mostly just automated was component input manufacturing (e.g., sheet metal panels, molded plastics).
I think the real difference is the wage for low-skill service work compared to the wage for low-skilled manufacturing work.
If a service worker screws up your coffee, I’m sorry, but big deal. If a manufacturing worker screws up, I may not know it for a year, at which point I have a rather costly warranty claim.
"The lost appliance factory jobs were high-skilled, predictable and provided the worker with stability and dignity."
Not sure that's actually true, some of it was unskilled and most of the rest was probably low skilled. Managers and workers involved in industrial design were probably high skilled.
PNTR with China accelerated American manufacturing job lose, for sure. But those jobs were on the decline already. They were not going to stick around. I've never seen an estimate, but I imagine the cost of subsidizing the jobs would have astronomical and had disastrous effects on American political economy.
Economists tend to treat the work people do as instrumental rather than preference-fulfilling in itself despite everyone recognizing that basketball players, painters, and actors would not rather sit at home collecting their work income while watching TV instead.
Matt just misses the biggest point here. Specifically on the LG and Samsung appliance factory story. Both have invested $300-$500m to build these two factories. Those are "assets" in United States and once they're built, that's a sunk cost - so optimal pricing strategy will continue to compete costs down to marginal cost. That's exactly why LG later expanded the production line to include Dryers. It's just way more cost effective to build in market once the fixed costs are invested.
Are we better off with a highly automated factory in the US or getting our washing machines from South Korea or China? Getting *some* manufacturing jobs back onshore is obviously good for the (mostly high skilled) Americans who land them, but it doesn't strike me as a slam dunk.
This, by the way, touches on one of the major points that is ignored by anti-free trade advocates -- many of the U.S. jobs lost due to foreign imports would likely have been lost anyway due to automation and efficiency improvements. Now, you can take this to the next step and say that automation and efficiency improvements should be restricted (whether by union contract or direct government action), but then you're really giving away the game that the fundamental nature of protectionism is actually to make everyone in the economy worse off for the benefit of the fraction of the population who work in politically-favored industries.
What's your distinction between "anti-free trade" and "anti-dumping". This whole thing started when "The Obama administration also imposed tariffs on washing machines specifically imported from South Korea because the administration found that those had also been unfairly subsidized by their home government."
I don't really see one -- how do you distinguish government subsidization from comparative advantage in natural resources, weather, human capital, etc.? The next effect is the same for the importing country, while generating artificial harm to the exporting country. To put it another way, if the government of South Korea is taking tax money from its citizens (who are less wealthy than Americans!) to spend it on making washing machines cheaper for Americans, then that's a terrible deal for South Koreans and they should definitely vote the politicians who created those policies out of office. In the meantime, I'll enjoy my extra cheap washing machine.
I think the logic goes that once the manufacturing infrastructure in the US has dried up, they'll jack up the prices and it will be difficult for us to respond.
It's interesting. I just see it so completely opposite. I'm way too centered within the power of manufacturing and global supply chains. To me, the idea the Korean government would try to put Whirlpool and GE out of business strategically is - literally - a trade war and not one I'm willing to lose. Personally, I love how this whole thing landed and think the Obama administration made the right calls.
I'll just say we agree that this is "obviously good". Of course we're better off with more foreign investment rather than less. If we allow dumping -- it's a race to the bottom and it's a short term strategy at best because as soon as the local manufacturing base is hollowed out ... boom, foreign government subsidies end. The point with this entire 12 year Korean washing machine story isn't about US protectionism. It's about the virtuous cycle of anti-dumping policies.
Ok, so they end dumping, and then we reinvest in machines, and start buying them again - in the meantime we've invested in something _other_ than washing machines which we're making.
To add to this, I think the JD Vance camp would assert that having a domestic manufacturing industry begets productivity gains, as opposed to services which have largely stagnated (and tbd if AI will change this).
That's a good way to put it. I would describe it as, would you rather have more money and inflation, or less money and cheap stuff to buy? Seems to me that having more money and inflation is better because you can choose what you want to spend that extra money on, giving you more agency. But given how much people have hated inflation, I don't think that would turn out to be the consensus. People hated the low wages/cheap stuff dynamic of the 90s and now they hate the high wages/inflation dynamic of today even more. The grass is always greener.
If we're going to deliberately do inefficiencies for the sake of engineering an economy based on manufacturing jobs, then we're also going to have to restrict automation, no?
I don't think I'd take it that direction. Lots of manufacturing capacity is useful in itself. And if the capacity is too much for current domestic demand, you can take steps to increase domestic demand. (e.g. Does every American live in a house with a big kitchen with lots of new fancy cooking appliances? Then we still have room to move more demand from food services to manufacturing/construction. Same deal with full-service hotels vs. RVs. And does every household have a full suite of Roombas? etc.) Or just give the manufacturing workers a shorter workweek and more paid vacations.
I think the additional effect of having domestic manufacturing is that it provides those jobs *outside of major cities* in a way that's difficult to replace with other sectors. Are the construction and green job shortages happening in places like Ware, MA (major trump country in the heart of Massachusetts)? But in a world where robots allow factories to run with dozens instead of hundreds I'm or thousands of people, "bringing manufacturing back" doesn't bring the jobs back. So, I think the original calculus was right--cheaper goods are good--but we still need an answer for how to create value (and therefore build wealth) in areas that don't have the population density to support service economies.
What do you hope he takes away from this? Based on the abstract, he already acknowledges the political tradeoffs from something like NAFTA.
The abstract doesn't seem to counteract the economics argument, even this sentence:
" In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses after its implementation. "
That is bad for those counties, but that doesn't mean it was net harmful for the _country_.
And I'm not surprised there were geographic effects - factories don't always easily retool to other things, and you might not build the new business where the old one was.
1) The people did not move to other sectors of the economy. There are large areas of the country that have not benefited from trade liberalization
2) It is part of the argument that the political realignment often attributed to the Southern Strategy and Civil Rights blowback is more of a blowback to deindustrialization and jobs loss due to trade.
3) Even if the net effect is positive, there are distributional considerations that have been ignored for a long time by political leaders in Washington.
Having an abundant mix of jobs and businesses widely spread across the country was, in itself, a significant economic and cultural asset, not a cost. Before we went full bore into deindustrialization and financialization, most small cities and a significant percentage of towns had manufacturing, regional businesses, regional banks, and a decent range of employment and housing options. People could more easily choose to stay near their birth families if they wanted to and have a decent career, even if they were not in a major city.
Contracting the economy into an ever narrowing number of megacities, by definition, puts upward pressure on housing prices and makes providing housing more complex. To me, YIMBY is responding to the predictable consequences of policy choices that many people didn’t particularly want in the first place.
I agree with that, but can't we also achieve an abundant mix of jobs and businesses without turning back the clock towards the rose- tinted manufacturing past?
The Economic Innovation Group is a really valuable resource on this question. I went to an event of they held a few months back on that sort of "place-based" economic policy: https://eig.org/policy/
No. I don't think so. Manufacturing is unique in offering above-market wage vs. educational requirements and an actual career path. The retail / service sector offers far less wage growth (i.e., there's very few job "bands" in service work, typically just floor and supervisor so the ratio for growth is compressed).
That is certainly true, but our economy is no longer structured to provide the jobs of 50 years ago. We do have a surplus of green tech and construction jobs, but it seems like a lot of Americans don't have the necessary skills for them. I hope we continue to push for effective job training programs, but if we continue to have shortages we're going to need skilled immigrants to fill them.
Our economy is structured by us, and we can restructure it if we choose.
We have negotiated trade agreements to prioritize exporting movies and soybeans, and importing manufactured goods. We have passed regulations that make it hard to build physical things like houses, factories, and power plants, but easy to build new digital services. We have chosen to steadily increase the share of our gdp that goes to providing health services and sending kids to universities.
The loss of manufacturing jobs didn’t just fall out of a coconut tree.
What's changed in our economy in the last 50 years? If you asked me, I think what's changed is the structure of the global economy. Specifically about this post and said differently, LG was *always* able to build a world-class production facility in Clarksville, TN. They could have done in the late 90s when they first entered the US market but they were being unfairly subsidized by their home government. It just took Obama implementing anti-dumping tariffs and then Trump continuing the policy for them to do it. And we're far better for it. This is a huge win.
These are literally just press releases from the companies touting how many jobs they're creating, which is what you sent me last time we discussed this. I think you need a more objective news or data source on LG's manufacturing efforts here in the US
Also a public companies press releases are probably the most fact checked document after their publicly filed financials. It's - literally- the most objective data source you can get.
So what? Do you not think they're producing millions of washers a year here? That they haven't shifted ~ 100% of US consumed production to the US? Like what, they just made this up? These are real plants, that exist in the real world. There's nothing more objecting that that.
Unless your job is 100% remote, it's highly localized and the pay difference has to justify moving to where the job is. Even for someone in a stereotypical dying factory town, it's usually not large enough to justify uprooting all your relationships to fill it. If you're from Guatemala, though, the pay difference is life-changingly immense, which is why these jobs were filled by immigrants even before we neared full employment.
The whole point of the GND was that most of the potential green jobs are not highly skilled -- they're related to construction jobs in that it doesn't take much skill to build a rack of PV cells.
I hate to keep banging the same drum, but the Housing Theory Of Everything is undefeated, as is its "Blame NIMBY" corollary. Solar is now cheaper than coal, but the coal plant's already been built, and it's harder now to get the approvals for the solar plant, the mines to mine the silicon and other materials, retrofitting the houses, etc. than when the coal plant got built.
It's not a mystery. If the private sector was functioning properly, we wouldn't have been hearing about the need for "retraining", because they'd have invested in it themselves. You can't tell me that a former autoworker is too stupid to build a rack of PV cells! The auto companies train autoworkers all the freaking time. Heck, my company does it too; we have all kinds of ads about how we have techs in our factory who used to be hairdressers and shit.
No, the people didn't get trained because the projects didn't go through. We USED to just bounce back manufacturing employment after every major recession with another boom of housing construction, but we reached our "realistic outer limits of sprawl" just before the Great Recession, so it never bounced back and the jobs never came back.
We never did anything else instead; we never built out renewables to create new unskilled jobs. We just sat here on our asses and watched the country crumble and got really mad at each other. Instead of building new shit, we desperately tried to hold onto the shit we already had, for fear we'd lose that TOO.
How is manufacturing unique vs. a trade like pest control (I use pest control rather than plumbing because I have multiple high school classmates that have become fairly well-off via pest control)? I guess the manufacturing we're discussing might be similar in wage/education reqs/career path but did it at scale in a way that individual trades do not?
I'm thinking more manufacturing vs. retail. I think pest control and plumbing and really any trade would be in the middle. If you look at a factory there's more paths upward for an entry level assembly technician. They can become a lead technician then floor supervisor, they can go in to Quality, they can go into sourcing / procurement. There's just more well defined career paths. I think pest control is really just field to supervisor. But yeah, there's a path there too.
I think one change we often fail to incorporate is that population growth slowed.
If you were working retail in 1960, that probably had more upward mobility than a factory because we were building out retail at a quick pace. But that’s no longer true and factories now need many more roles beyond the assembly workers while retail has not evolved similarly.
The track record of groups like this is abysmal, though. At this point, I think they mostly exist because more academic economists need real hobbies, like building model trains.
Why would I? It's a formalized cocktail party for people I don't know. It's fun and interesting if you're learning economics in the process but once you've learned all you can from that eavesdropping on other people's conversations, it doesn't serve a purpose for anyone not in the group itself.
Manufacturing on shore has competitive and security advantages that have nothing to do with rose tinted memories. It is an important component of healthy economies, it increases our long term innovation, and it is extremely important in cases of conflict and national emergencies.
Isn’t this the whole nexus of the semiconductor plants and Taiwan flare up? That relying on another country almost exclusively to manufacture something so vital turns out to be a mistake, because we (the US) are not able to defend it from China?
I’m not sure why you’re getting so much pushback about re-shoring manufacturing to the US.
“Having an abundant mix of jobs and businesses widely spread across the country was, in itself, a significant economic and cultural asset, not a cost.”
Having an abundant mix of jobs and businesses in a lot of different towns and cities is much more expensive than the alternative of having a few big cities with clusters, in a modern economy where services and information technology are the places of most value creation. It has advantages, but we are paying a cost to have those advantages, by making all our industries more expensive to manage.
Back when manufacturing was the site of value added, there wasn’t as much efficiency to be gained by consolidating in a few big cities (and back when agriculture was the site of value added, there wasn’t much to be gained by having towns and cities at all). But the world is changing, and we now have to pay a cost to have the benefits you see.
No, it really is not more expensive to have jobs scattered more widely. Realize, much technology and service work, including my own job, can be performed perfectly well from home. I genuinely do not understand why you would think, in an era of instantaneous communication, consolidating in a few large, crowded, expensive cities would be optimal.
The fact that both workers and firms seem to prefer it, despite the crowding and cost of real estate, is very suggestive that it really is valuable. Instantaneous electronic communication has many virtues for day-to-day work, but it doesn't seem to replace people's interest in occasionally meeting up over drinks or a whiteboard with actual and potential collaborators, or to replace the importance of in-person networking events (both formally organized ones, and the happenstance that occurs when you just happen to live in the same neighborhood as many people who work in your field).
Secondary and tertiary cities are losing out to resort destinations and big cities with the perma-work-from-home crowd, but big cities don't seem to be losing any momentum outside their office districts.
“The pandemic simply accelerated migration trends that had already become established over the 2010s in much of the country. Migration to smaller, affordable metros areas with fewer than one million residents, like Knoxville, Tennessee, doubled during the first year of the pandemic while migration out of the largest metro areas also doubled in 2020.” https://www.coopercenter.org/research/remote-work-persists-migration-continues-rural-america
I have a perfectly decent six figure salary. Senior systems engineer. I would not work in a large city if you offered me a seven figure salary. Life is short and I am not about to waste it looking at concrete.
Workers very obviously do NOT prefer it, given that tech workers scatter to the four winds given half a chance of remote work.
Big cities are losing population and remote workers do not want to go back. Secondary and tertiary cities and exurbs are growing with the move to work from home. Look at the Census data. It’s not equivocal.
Most technical people I work with primarily collaborate remote whether they’re in or out of an office.
I think the challenge of that kind of ecosystem is, it's a lot like the competitive balance in american sports leagues- there have to be lots and lots of rules and overall management in general to try to create a sort of situation where you'd have these clusters of very mixed businesses, because that runs against every notion of economic sense.
And i'm not sure people who favor rural lifestyles want that kind of busybody management that it would take to do that.
Well, it was in some sense an economic equilibrium rather than a rules-based order, but two major changes appear to have removed the loadbearing parts of that equilibrium:
(1) The Internet allows for remote, centralized provision of formerly localized services (banking / ecommerce / death of malls), and creates ruthless optimization efficiency against the success of more localized but less optimized competitors (most businesses not named Amazon). This looks like aggregate consumer surplus but the number of unoptimized players is way, way higher than the number of optimized ones sot the distributional / redistributional effects are particularly acute for the labor market.
(2) Cities in the 70s-90s were famous for crime, filth, crowding, and terrible public schools — basically the 1989 Batman movie version of Gotham City. Arguably the only one of of these that has been essentially fixed is “violent crime” (with filfth perhaps ameliorated) but it seems like that was by far the most important one that disincented people from flocking to cities for economic reasons.
Item (1) removes the “pull” factor (localized labor demand for localized goods and services) supporting a decentralized economy, and item (2) removes the “push” factor keeping people away from cities in spite of the more liquid labor market they represent.
I think you're missing the actual big one—the rise of tightly-monitored on-schedule low-shrinkage intermodal shipping and the attendant collapse in transportation costs (which arguably was the core driver in your (2) ).
I largely agree though I think (1) comes from a broader effect of connection in the country- as deindustrialization was happening before the internet. West Virginia was on an industrial downturn long before that happened, and I think the reason had more to do with infrastructural technology and vastly improved logistics, which made location for non-retail industry just less important.
Nowadays, the reason for the Toyota Plant to exist in West Virginia is the cheap labor, not being close to some other industries that supply it, because the infrastructure to ship in components is so optimized.
What you are describing is still a cost. The economy contracting into megacities happens because it is more efficient. The cost of everything kept going down during that period because everything was getting more efficient. Spreading out again would raise costs. There would be a cultural gain of course, but it's still a tradeoff.
The economy contracted into megacities, in large part, because we stopped enforcing anti trust and we massively weakened the New Deal financial regulations. The economic record of those mergers and consolidations and financialization included significant losses and inefficiencies.
Certainly with our current level of technology, the argument for big city consolidation has never been weaker.
This neglects distributional effects. What if instead of shutting down a factory and building more roads, we shut down the factory and the FAANGs add a few more engineers and designers? “Learn to code” was never realistic, and I think “compensate the losers” hasn’t worked out in practice.
One quarter of the US population is men with below median IQ. If we export all of their jobs specifically, I think that’s going to have bad societal consequences that aren’t captured by very basic models.
That problem combined with the twin to free movement of goods, that being free movement of people, is the source of political crisis throughout the developed world. It is the biggest cost that hasn't been priced in, at least not adequately. Just as it doesnt do us any good for amoral international market forces to result in us selling the Chinese the ropes they use to hang us, it doesn't do any good to allow for those same forces to undermine the legitimacy of liberal democracy.
I had long bought the Friedman style argument that the key to world peace is trade and economic interdependence. I still buy that for the most part, and it's good to see Matt stand firm on at least the economic case. But Matt and a former Slow Borer have been able to steadily chip away an exception in my mind regarding what China is doing. Matt's first moment of change that I remember was the Houston Rockets GM getting flak over supporting Hong Kong. And the other question is whether China doubling down over and over in manufacturing is in anyone's best interest, instead of making the jump to more services. It's a weird place I feel I'm at, one I didn't think I'd ever be. But this is why I read publications like this, to be challenged.
But those don't challenge the underlying claims about beneficial effects of trade on a country. They are concerns that might counterbalance those benefits.
Perhaps the challenge is this: Trading with the US is beneficial for China, and more beneficial for them as they are poorer and more reliant on the trade of manufactured goods. Therefore, we should demand China pay for this benefit, either through changes to their human rights policies or through actual cash.
Do you think that it's good if, say, Walmart says that "you're town needs us you better give us a bunch of tax breaks or we'll leave"? Maybe it's the economically rational way to behave but I've never heard people argue that it's normatively desierable to use your leverage to take things from the poor so you can give to the rich.
And I'm not even convinced that this is true. Perhaps if China wasn't a democracy but at this point I fear that Xi might benefit if he can blame the lack of continued strong growth on western bad behavior -- potentially to out geopolitical detriment.
Since I'm not an owner of Walmart, no I don't think that is good. But as a citizen of the US, I do think it is good for us to use our leverage for our benefit.
Elsewhere in this comment section, you highlight the benefits to the Chinese people from the global trading regime. But you should not be surprised when Americans care more about American prosperity (even if defined in non-economic terms) than Chinese prosperity.
My emotional reaction to this line of thinking is to say fuck the Chinese and their prosperity. If it results in a hostile authoritarian government outgunning us then horrible material deprivation of their people is a price I am willing to pay to prevent it. Maybe if they have it bad enough it will result in them fixing their trash government and the trash that runs it.
But that's the emotional reaction. The mature reaction is to say we need a leadership ready to pivot to new facts. I think it's ridiculous that a lot of obviously anachronistic clearly wrong ideas about the economy are floating around out there in light of developments over the last 20 years. Free trade is generally good and helpful and we should deploy it strategically and in our best interest, but not dogmatically, and not at all costs.
Being part of a collective doesn't somehow create an excuse for ignoring moral demands. The US people should be able to look at what the US government does and be proud of that -- it's acting in their name and it shouldn't do things that they wouldn't be proud to do as individuals.
Yes, of course Americans will tend to be more concerned with the welfare of Americans than other people. But even though I care about my family more than I do other people I wouldn't threaten to shut down a profitable businesses I ran unless my workers - who say can't move to find other work -- accept a giant pay cut so my family gets all the surplus.
That doesn't mean the US should just give China what it wants but there is a huge difference between asking for our interests to be treated fairly (respect IP accept imports) and saying that we should threaten to harm us both on the grounds it will hurt them more so they literally pay us money.
I still think that trade has made the world less militaristic. China hasn't invaded anyone in a long time, that's still something historically. It's just not enough to guarantee world peace.
China increasing manufacturing is great for Chinese peasants and former peasants. Actual Chinese peasants still outnumber Americans of all descriptions.
Even without the China debacle, it seems to me that the arguments for free trade have gotten weaker as we’ve gotten richer and goods have made up a smaller fraction of consumption.
1930s: Should we give up some [predictability/economic sovereignty/independence] in return for a meaningful improvement in living standards for a huge population of impoverished Americans? Sure!
2020s: Should we give up those same things so middle-class Americans can have slightly cheaper fast fashion and consumer electronics? That’s inherently a tougher sell I think.
“the arguments for free trade have gotten weaker as we’ve gotten richer”
You could argue that this is a corollary of the diminishing hedonic returns of increased wealth — happiness increases only as the log of the number of Amazon packages you receive. At some point, free trade has brought you enough widgets that you start prioritizing other non-widget outcomes.
And yet a modest increase in inflation above trend made cost of living the number one political issue since it happened.
The benefits of slightly cheaper goods (though I'd argue the compounding gains of free trade have made goods MUCH cheaper, and you don't get the big savings without sustained progress) may not be felt all that strongly by the average person, but people are very sensitive to when those gains become losses.
I am not particularly rich and I have to think really hard to imagine a material object which would make me happier. But I can imagine dozens even hundreds of social experiences I would enjoy. Anyone who lives in a family making over $250k is in the global 0.5% and the world historical 0.1%. More widgets are not the answer.
Even if this were fair instead of merely witty, it overlooks the opportunity cost of capital and labor allocation.
If the US had kept fast fashion and consumer electronics on shore over the last thirty years, that would have reverberated throughout the economy. In some cases, it wouldn't have mattered. Fewer "Game of Thrones" Lego sets probably wouldn't have stung too badly, but maybe we get worse hormone blockers, or maybe electric car viability doesn't happen until 2050.
It's hard to calculate, hard to sell to the public, and might be worth it anyway to claw back some predictability / economic sovereignty / independence, but worth considering, imo.
This seems like income redistribution in a indirect way, so you have to determine which option creates the smallest deadweight loss: taxes or protection for non-comparative advantaged industries?
Well, distribution is part of it, but what I really mean is that is that case for prioritizing economic outcomes in general gets weaker the richer you are, because of diminishing marginal value of wealth. Also, as tradeable goods get cheaper and form a smaller part of our consumption basket, interventions to further reduce the cost of tradeable goods have a diminishing impact on real living standards.
So, if I want to pursue policy X, for whatever reasons (distributional, aesthetic, national security, long-term productivity growth, economic sovereignty, predictability, environmental, etc.) but then you tell me that policy Y is better because it will reduce the cost of widgets by 10%, that’s a very compelling argument if widgets make up a large part of household budgets and everyone is very poor. But if we’re all rich and the amount we spend on widgets is tiny, at that point why would I sacrifice anything else I value for cheaper widgets?
So, agree that non material needs are becoming more important. But in other ways there is more value to international trade than ever before. Container ships and general logistics improvements mean transportation costs are way down. Another feature of trade is it increases the size of markets (same argument why cities are economic engines), which enables both more niche products and scale driven efficiency. Better information technology and the internet supports both giant multi national companies and a shark tank product with half its sales being international.
The problem with the neoliberal consensus on China, I think, is a bigger glitch in liberalism itself that is hard to grapple with.
A society that promotes individual liberties and rights will often prosper, but those individual liberties can make it vulnerable to coordinated attacks. (“The capitalists will sell us the ropes we use to hang them.”)
Individuals can freely trade with geopolitical adversaries that will opportunistically cut off supplies. The society might grant votes to hostile sub-populations that have no interest in promoting liberalism once they gain power. (Not necessarily likely, but it could happen.) The list goes on…
I’m a fan of liberalism, but I don’t think this drawback is often discussed in a realistic way.
This is why liberal societies have to teach their new generations why liberalism is good. Hannah Arendt wrote that "every society is invaded by barbarians, we call them children." If the people do not believe in liberalism it won't be sustained, because liberalism is an anomoly amongst humans, and not our natural state.
In what way has the old consensus been disproved? Seems like all that's been disproved is a strawman view which claims that China would magically become a democracy in 20 years if we just did a bit of trade. I can't say that literally no one ever believed that but it doesn't seem to be the consensus you identified.
The old consensus -- as illustrated by the quote you include [1] -- was that trading with China would make citizens richer and freer and war less likely **relative to the world in which we didn't open up trade with China**.
The consensus never claimed that trade was the only thing which could influence the level of freedom in China or it's level of belligerence and thus it didn't believe that things like internal leadership changes couldn't create bumps on the road. But there is every reason to believe that initial consensus was correct [2] and that Xi's backsliding was simply the usual consequences of internal Chinese politics not something we made more likely with trade.
It seems like what's happening now is just that people are just now more worried about the costs that policy always involved -- a richer China was going to be a more capable China. Personally, I think the trade off has been worth it -- not just because of the immense good of raising 100s of millions out of poverty -- but even just for the US as I fear without this trade policy instead of Xi's mild backsliding we'd be back to a something more like the relations we had in the late 70s.
But none of that is (meaningful) evidence against the prior consensus and before we abandon that position -- which had alot going for it -- I think we need some reason to believe it didn't improve things over the alternative in exactly the way predicted.
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1: The whole quote is comparative language ( "accelerate", "more likely" and "will rise.". but compared to what? The natural answer is the world in which we didn't pursue more trade with China. Meaning that to disprove the consensus you need to argue that things wouldn't have been worse if we hadn't opened up trade.
2: The Chinese government obviously cares about economic growth as well as political control. If we'd imposed more barriers on trade the costs to the leadership of imposing more effective information control measures would be greater so they'd likely engage in more of that. Also less trade would mean the costs to getting into a conflict with the us would be less and -- as rich citizens tend to both be more globally informed and have more to lose by going to war -- the domestic political costs are higher too.
Weirdly aggressive response (even though I'm partial to it). The Old Consensus made plenty of (non-comparative) claims about the inability of governments to censor the internet that turned out totally false.
It's aggressive (tho I toned down the language since I didn't realize quite how aggressive it came off as) because I keep seeing people use the fact that China isn't now completely free as if it is evidence that there wasn't a benefit to freer trade policy and that just doesn't follow.
And there are all sorts of things people believed about China back then which is why what matters is what Matt identifies as the repudiated consensus so merely finding some other thing people were wrong about doesn't save his argument [1].
But, having said that, I'm not convinced those claims were wrong either. The great firewall is extremely porous and many people have access to pretty extensive information about the world.
I think what changed is our baseline. Back when those arguments were made the internet wasn't all pervasive and we had in mind the idea that people who really cared could get basic information. And they absolutely can. I don't think the fact that we also use the internet for so much more really changes that since the baseline then was people getting almost all their information from state broadcasters.
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1: Whether or not you want to call a consensus repudiated or vindicated is often a choice of level of generality and description. You could equally well say the Obama admin view about healthcare was vindicated in that it did hugely improve medical coverage for many Americans or call it repudiated as many of their more particular theories didn't hold up.
That's why what really determines the substance of a piece like this is the author's choice of how to describe the claims they see as repudiated. Matt picked a description for which he then fails to give any evidence is false. If you don't actually identify the thing that's being rejected then you can just play guilt by association games to reach whatever result you want.
Again, no claim was made about them being overall adverse to war only that they are more adverse than they would otherwise be.
And I think that is clearly true. Even Putin in Russia seems to feel constrained not to do a general mobilization especially in the richer parts of the country. Go back 100 years and he wouldn't have hesitated and at least part of that is because of economic and resulting social changes.
Sure, but we don't really live in a massive parallel Monte Carlo simulation where we can reset to the initial conditions and then run the experiment again. We only have the one simulation and we can't reset it. Ultimately, people care about whether a war will break out or not. Since your post contains no numbers or estimate of how the probability distribution changes, it's not that operationally useful. Going from 90 to 10% would be useful to know. Going from 90 to 85%, not so much.
I'm not the one who made the claim. Matt's post claimed that the view that increasing trade with China would have beneficial effects relative to not doing so has been disproved. Everything you said is a reason to critisize Matt and agree with me that he hasn't justified his claim that the increase trade strategy didn't succeed.
Basically, Matt's argument is the equivalent of saying "We got rid of rent control and housing is still expensive so we should accept that the argument that rent control was harmful was mistaken." Sure, maybe the right thing to say is we don't know but it's still a reason to reject Matt's claim.
It depends on what it means for a country to be averse to war. If you mean the organizational leadership, then a lot of it depends on how that leadership is driven by or drives public opinion.
That is likely true with the current public opinion. But that public opinion was also heavily driven by organizational leadership, and it's very plausible it wouldn't have ended up where it is over three decades of global trade without that leadership.
Matthew, your discussion misses an important point. It's not just about employment/unemployment rates. It's also about the quality of the jobs and the benefits that come with them. I watched over the last thirty years as the old manufacturing base of middle America - ALL of it, from small shoe factories like the one in Dixon, MO to medium sized appliance manufacturing like washer/dryer plants in Michigan, to huge automobile plants like that in in Fenton, MO - was destroyed as American businesses sent these jobs overseas to cheap Chinese and Mexican labor. Most of the jobs that have replaced these American manufacturing jobs are service industry jobs with lower pay, lower benefits and lower protections of all types. We need those services but the jobs suck and many of them have gone to (essential) immigrant labor.
The middle American that was displaced from that old manufacturing economy is now much of the aggrieved MAGA crowd and, policy notwithstanding (I agree with little of their social or economic policy) I totally understand the grapes of their wrath, a generation sold out to Walmart and Chinese labor. And Democrats should have seen it coming. It wasn't Bill Clinton's idea, but it was his biggest mistake. And let's remember, Hillary WAS on the Walmart board. This was unwise compromise with rich American and primarily Republican businesses for which Democrats have ironically paid the highest political price ever since.
I don't disagree but which washer / dryer plant was closed in Michigan and where was it moved? It might have just been moved to the rust belt. Best I can tell is nearly all washers and dryers are now produced in the USA. Whirlpool and GE have always made nearly all product lines here. Then Bosch built their factories here and then LG and Samsung. Those five probably have like > 90% market share.
Two things I think Matt should expand on if possible in later posts.
1. The international trade system has prioritized cheap goods but is also dependent on just in time inventory and complicated supply chains. It is currently fragile, as you see with car parts or milling machines in Russia or cybersecurity updates. We don’t seem to be very good at creating robust trade flows, though we are better at resilient ones.
2. Why didn’t China politically liberalize? Why was the 90s consensus wrong? Was it contingent on specific events that the US had limited control over?
1. I would also love to read about this from Matt, but I think it's a fairly simple case of redundancy vs efficiency. Redundancy is safe but inefficient. Pretty simple concept, but since the future is hard to predict it's difficult to know how much redundancy is enough. Do we plan enough redundancy for a once in a generation event? Enough for a once in a thousand year event?
2. I think this clearly just comes down to Xi coming to power. China was liberalizing until that happened.
I think raising hundreds of millions of Chinese peasants out of abject poverty was a very good thing, morally. I'm sorry a relatively small minority of Americans had to pay the cost for that moral good, though. We really should do a lot more to reward them for that noble sacrifice.
I remember in college, liberals and lefties would say, "If we have both free trade and domestic job losses, we should provide some sort of monetary benefits to the people who lost their jobs." Then conservatives would complain this was welfare and also unfair to only reward those who lost their job due to trade, not for other reasons. Then a decade later, the GOP is rewarded since the people who lost their jobs and felt economically left behind were bitter. It's kind of sick.
Economic integration with China has raised the risks of unilateral disruption via, say, invasion of Taiwan. Beijing power structures are opaque, but surely for every Taiwan hawk there is an oligarch pointing out how many jobs will be lost if the west imposes sanctions.
I don’t know how you quantify that, but it seems like it should be included.
>If imposing tariffs on Korean washing machines results in the construction of new appliance factories in the United States, that is a cost of the policy, not a benefit.<
Milton Friedman used to say something like: "I can't imagine a better deal than trading in these green, wrinkled, dirty pieces of paper called 'dollars' for....all these nice, useful products foreigners lovingly make for us that improve our lives."
Milton is also trading away the ability to make useful those products and knowledge of how to make more useful products in the future. Look at what sucker's the Koreans were to take dollars for technological growth all of those years. I am sure they regret that development!
And to be clear I don't begrudge Korea or wherever their development, but the simplistic Milton view that these countries with deliberately trade surplus-y jobs are suckers is dumb. Matt's essay, for example, would be better if he engaged with what he thought the CCP thought they were doing and other persistent trade surplus as development strategy nations think they're doing.
>Milton is also trading away the ability to make useful those products...<
No he's not. We still have the "knowledge" of how to make cheap patio furniture. Americans rightly choose not to employ that knowledge in pursuit of low value-added manufacturing. I mean, I'm sure you've seen those charts showing America growing leaps and bounds more strongly than other rich nations (Mississippi is now richer than Britain!). We didn't get that way by focusing on economic activities that lower productivity countries can easily emulate.
>Look at what sucker's the Koreans were to take dollars for technological growth all of those years. I am sure they regret that development! <
I don't claim Koreans were suckers for trading with America. Why are you inferring this? Parties don't generally engage in trade unless it's mutually beneficial!
The Milton quote very much does imply that anyone running a systematic trade surplus trading "useful" products for "green, wrinkled, dirty pieces of paper" is a sucker. He would not have used the adjectives he did if he weren't.
And, of course, computer chips or EV's are not cheap patio furniture, which is an odd example to use when discussing either Korean economic development or Chinese trade strategies.
Econ text books would make a lot more sense if instead of talking textiles for toys and lumber they talked soy beans for microchips and advanced technical know-how. Or at least the stakes would be a lot clearer.
It depends on how one defines the strategy. I think critics of neoliberalism think the strategy should prioritize things like community stability, national defense or climate change over maximizing GDP or National Income.
I think this suffers from a non-probabalistic view of history. Yes, Xi came to power and wrecked the halting, contradictory liberalizing reform process in China. If this was inevitable, then Clinton was wrong in his comments. However, if you take the Clinton quote from Matt's piece and ask if it was true of China in 2012, I'd say it was more true than false. Certainly it is wrong to say that it was "wrong". Things could easily have worked out differently.
“American chicken is considered unsafe in Europe, even though as far as I can tell, when Europeans visit the United States they eat the chicken.”
I don’t have any strong opinion on which side of the dispute is right, but I don’t think this fact is particularly indicative. It’s very common for Americans to visit foreign countries with laxer food safety standards and eat the food, and I don’t think most people would consider this evidence that American food safety rules not followed in e.g. Mexico should be repealed.
If you want to convince us that opening up trade with China didn't make the country more free, less tightly controlled by the government etc than it would have been otherwise don't you need to tell a story about how things would have gone if we hadn't pursued freer trade?
I mean you wouldn't argue "we repealed rent control in X city but renting is still expensive so it was a mistake" would you?
In the sixties and seventies, the very small town my father was born near had a manufacturing facility that also hired people with advanced degrees in STEM. It employed hundreds of people.
In the seventies and eighties, the small city that he moved to, to start a business, had two regional banks, a regional transportation company, and multiple nearby manufacturing plants.
By the 2000s, almost none of that was left. I moved to exurbs of larger cities in Virginia, because I wanted to have horses and I could not get a professional job in those once thriving areas.
The regional banks didn’t move to China. They moved to Charlotte, NC, when interstate banking was legalized. That did cost us in terms of geographically distributed banking jobs, but it gained everyone in access to bigger banks. This is related to, but distinct from, the gains and losses of the move of manufacturing to China.
The regional banks consolidated. They moved to Charlotte and Atlanta, and suddenly small businesses had much less access to loans, and most consumers got zero benefit from larger banks. This was all part of rolling back the New Deal protections and moving the economy to lionize finance and denigrate making things.
I had in mind the comparative claim about what China would have been like absent freer trade. I
Regarding this point, first note that no policy we take prevents china from trading with other countries so only domestic consumption can be protected and it's
not clear how much of that is China per se (I suspect that some other country would have stepped in absent China like India) and how much is the result of technological changes as well.
But the loss of those kinds of jobs is very much real and in an idea world the government would have done something about it. For instance, I'm a strong supporter of UBI and believe we need to be working to transition to a society where working for wages is optional (if we don't we risk trapping people in jobs for no reason but to give the very rich extra status).
But what we shouldn't do is reject direct government intervention via transfer payments because it's somehow handouts and pretend that tariffs aren't equally handouts via a less efficient mechanism.
I am broadly supportive of a generous tax-and-transfer system. But if you think a UBI replaces what a good, high paying job provides in terms of dignity, purpose and stability, then I think you are wrong.
I'm not sure people would want the government to pay their employer to employ them if they understood that was the situation rather than giving them the money and I dunno how much that matters.
But, finding dignity and meaning outside of work is a fundamental problem we need to overcome as a society. We are getting very close to the point where virtually all of our actual needs and all but the most complex manufacturing will be provided by fully robotic systems.
We face a choice as a society. People have a near infinite hunger for status and human labor would still be rare so we could keep everyone working making things like handmade mechanical watches or other things bought almost entirely for people to show off their status (if mechanical watch makers had always been all half as productive everyone would be just as happy with a few less complications on their status symbols). But this means we force everyone to always be running to keep up with the Jones and always worried that they could lose their job and end up forced out of their neighborhood (even if there is cheap housing elsewhere).
Or we can recognize that we need to transition away from the idea that we should find our meaning in a traditional job and look for it in personal projects (writing novels, research whatever) our religious and community organizations etc etc.
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Depending on ai we may still need various kinds of software development but there are limits to how many people can be productively employed this way especially if it's not your thing so most people won't be employed in the part of the economy actually making 'useful' stuff.
Although I disagree with your belief that there will be some post-robotic, AI world where products and services appear with minimal human interaction, I do agree with you that we need to figure out ways to provide meaning and purpose outside of traditional employment.
My dad’s job then was a senior industrial chemist. Not sure that’s what you had in mind as “those kinds of jobs.” Manufacturing brings a host of secondary technical jobs and brings significant competitive and national security advantages. UBI does not.
Also, I wasn't aware that was the type of job that was particularly affected by tariffs. Tariffs can't prevent the importation of know-how or research. There are different problems affecting the incentives for companies to engage in research but it's not really a matter of tariffs (except insofar as we can offer to remove them for IP protections).
No it's not but I’m not convinced that we benefit rather than are harmed by producing weapons etc domestically rather than purchasing them from our allies. Sure, we don't want to buy our weapons from China but our military is falling behind China in stockpiles and naval vessels because we won't buy from the much more efficient South Korean shipyards.
I don't think any of the looming security threats we face involve the serious possibility of a protracted war that results in an effective blockade of our ports — we kept up quite a bit of shipping even in WW2 and we aren't concerned that China is going to invade the continental US so if we are facing a multi-year war where we can't import arms from Europe, Korea, Australia and Japan it's hard to imagine we haven't either already lost or let the conflict go nuclear (or we’re doing something so awful our allies won't even sell us weapons).
The US already manufactures its own strategically important weapons. IIRC it’s the largest weapons manufacturer in the world. Much of that is because of classified technology that we don’t want created overseas. Shipbuilding is a weak point for our capacity currently and the Jones Act complicates things.
For other industries, the benefits of innovation from manufacturing just do not happen if you import goods. It’s generally recognized that manufacturing and innovation go hand in hand, a recognition reached independently from the current political climate.
Manufacturing also has ripple effects in communities, strengthening smaller communities and providing a base for other economic activity. We are unlikely to match Germany in percentage of manufacturing, but an increase in manufacturing activity would be beneficial both to increase our innovation and to stabilize our political and social environment - benefits that occur even if individual factories employ modest numbers of people.
Logistics were a huge issue during the pandemic. One bridge in Baltimore caused significant issues just recently. The logistics of moving goods within a country is going to be simpler than shipping, even with modern efficient transportation. It’s efficient, but that efficiency comes at the expense of resilience.
We manufacture some weapons systems in the US, others we buy from allied nations. We probably want to keep the most secret aspects to ourselves -- for instance the way we don't export the F22 (which we tragically cut production short far too earlier on crazily exaggerating the unit cost).
But leaving aside secrets and special IP, what's weird about this argument is the way it seems to track the borders of the United States. I mean Hawaii and Alaska are far away so why should we treat manufacturing there different than manufacturing in allied countries? And if the argument for the benefits of manufacturing 'at home' works then why doesn't it work between all the states? Should each state have their own washing machine factory? Maybe tariffs (imagine it was constitutional) to encourage local manufacturing?
I mean, imagine that after WW2 we'd decided to integrate our sector of west Germany as a new US state. Presumably, that shouldn't change the relative benefits of locating non-secret manufacturing there or in the continental US. If it's merely a matter of distance/logistics than those arguments presumably apply as strongly to Hawaii and Alaska as other countries that have substantial shipping links with us. Aside from concerns about state action/interference (e.g. cutting off supply in the middle of a conflict which I think isn't much of a concern if we aren't acting horribly from countries which depend on us for nuclear deterrence and host large numbers of US troops) the artificial barrier of what country it is shouldn't change the economics and logistical concerns of whether or not it makes sense to specialize between two locations and ship or duplicate the same production in both.
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Regarding the pandemic and logistics, note that if we ever need massive amounts of shells or other military gear we already need to be able to move it halfway around the world (unless it's a protracted war with Canada) so I think we can assume that -- say by paying a bit more and asking people to endure a bit more risk -- we could have gotten stuff moved to the US as well as to the fight if we'd had a war.
Also, I don't think the Jones act really matters for constructing Navy ships and it does encourage US construction what it discourages is the use of ships between US ports but I agree it's an issue for transport and logistics concerns.
While I am broadly sympathetic with MY's view and I do fear we are going to over-correct toward protectionism, I think this summary of the "free market" view from the article points to the tension in trade policy:
"Similarly, if we need targeted protection to create a battery supply chain that does not depend on Chinese factories or Chinese inputs, that’s a cost. The benefits of improved batteries, which are incredibly real, are the benefits to consumers of getting better and cheaper batteries. The way to maximize those benefits is to get them from the cheapest possible source, while allowing American capital and labor to focus on its comparative advantage."
To me, this sounds like something Alan Greenspan would have said in 2006 when he still believed that markets were fundamentally efficient if we would just stop poking them. The assumption hiding in plain sight here (which I think we all see now) is that the price signal ("batteries from China are cheap") is conveying efficiency information ("China's really good at this, let them do it").
I think there is a new, fuzzy, broad consensus that markets can be really imperfect, especially when they have high capital costs, friction, or intersect with politics in weird ways. Some of the disunity among anti-neoliberals is what to do about this. Do we try to 'fix' the market with careful market structure, do we regulate more, what kinds of interventions make sense. (Coming from the left and being a nerd, I'm sympathetic to the moderate left "design markets to work view". For a really different view, listen to Oren Kass on the Ezra Klein podcast a few weeks ago.)
The biggest change in how politicians talk about economics and china post-trump is that industrial policy is no longer a dirty word, and I think this is down-stream of a recognition that the free market will give us an outcome, but maybe not one we like and maybe not for idealistic reasons.
Yes, poorly, as it's not my area of expertise, but rather something I have read about. My understanding is that when center-left think tanks talk about market design, they're talking about how regulations limit and structure the incentives of market participants, and thus change how the free market actors behave.
Some random examples:
* If we think that having a small number of large participants in a market is bad, we can penalize "bigness". For example, in banking, you could have higher capital requirements (as a percentage) on businesses with larger balance sheets.
* A deregulated electrical market could be built around spot prices, or some other mechanism (e.g. auctions) for future power. How power gets priced in the market will affect what kind of power generation gets built and how it gets paid for.
* We have compulsory licensing for covering a song but not for sampling it. This makes covering songs economical and sampling lots of songs economically prohibitive. (We kind of left that last thing up to the industry and ... that's what it came up with.) Pop music is an art form made in a commercial context, and how it comes out is affected by the regulatory environment.
* Obamacare put a floor on the minimum coverage health insurance could cover, made it mandatory for everyone (e.g. including healthy people) and threw in a bunch of subsidies. I think one of the ideas behind it was to "fix" the health care insurance market, where healthy people would opt out and leave the insurance companies facing adverse selection (and where the insurance companies would then make money by trying to hose the sick people who weren't going to be profitable anyway).
Cass's argument in the EK podcast is that intervening in markets to make them better (with a large number of small interventions) is a lot of market interference, so the true free market fundamentalist's best refuge is to do a small number of very large interventions (by becoming protectionist).
I think Cass's view is wrong, partly because across-the-board protectionism is going to result in a ton of lobbying for special favors by American businesses, and partly because I believe that good market design is something we have to do - there is no perfect default state of nature for capitalism.
One option would be free trade only among peer nations with similar wages and environmental rules. If you want a BMW i4 made in the EU, great. If you want a BYD Han then the answer is no or the answer is yes with a massive tariff designed to eliminate wage and environmental arbitrage.
TPP, or this kind of "fair trade with similarly responsible partners" is to unrestricted global trade as "good market design" is to fully deregulated domestic free market capitalism.
Strange to write such a long article without a single dollar sign or numerical trade flow. I’m far more interested in how many and what sort of widgets we are buying from China than the abstractions people devise to rationalize these flows.
Matt basically assumes that full employment throughout the United States is a stable feature of our economy. We may have full employment in most places now, but there has been significant periods of 5% or even 7% unemployment, and there have been pockets of the rust belt with higher levels of joblessness. If an American factory shuts down, that’s a real cost until the labor and capital are reallocated. If we stop buying Korean washers and put unemployed Americans to work building washing machines, total US production increases. Free trade is a great way of curbing inflation during good times, but it can aggravate unemployment during bad times.
I feel like some better quantifying the dispersed benefits of trade would be very significant.
Like living in a city that basically never has had any manufacturing base at all and working in services my whole life any benefit is a boon. But it would be nice to really understand how much sacrifice people are asking for.
Matt writes: "If imposing tariffs on Korean washing machines results in the construction of new appliance factories in the United States, that is a cost of the policy, not a benefit. The labor and materials that go into building that factory could have been used to build houses or roads."
I think you are missing the thesis of the critique, at least from the Bernie Sanders and, increasingly, the JD Vance/MAGA viewpoints. Their critique of your statement is that the previously employed appliance factory labor isn't redeployed into houses or roads. Those jobs are being done by low skilled, low paid labor. Often by immigrants, legal and illegal alike (this line has been dropped by Bernie since 2016).
The lost appliance factory jobs were high-skilled, predictable and provided the worker with stability and dignity. And the community benefited from this predictability by having a stable and prosperous workforce, rather than an itinerant workforce moving from job to job hoping to one day put down roots and raise a family.
I used to dismiss this idea out of hand, and still largely do. But the decline of manufacturing jobs in favor of technology, healthcare and services seems to have had more knock-on effects than I would have expected. Maybe that is mere correlation rather than causation. But maybe not.
You make a good point. But I think it's also important to note that we have huge labor shortages right now in construction and green tech manufacturing jobs. We also, obviously, have a very tight labor market, so it isn't like there are millions of unemployed manufacturing workers just sitting around waiting for work. The China Shock obviously devastated many communities in the rust belt, but it represented just a fraction of the overall job loss in the US in the 21st century. I think what Oren Cass at American Compass and JD Vance are pushing is really just unhelpful nostalgia that is going to make things more expensive.
As someone who works in the construction industry this very obvious fact is what drives me completely insane about discourse from both left and right. We are so critically short on labor that any of the trades will hire basically anyone who can:
A) Pass a drug screen
B) show up on time
That's it! That's the bar to getting into a solid career in any trade. Meanwhile the right is fearmongering about immigrants stealing jobs like they're precious rare earth metals in critically short supply and the left is talking about root causes of crime as poverty when there's never been an easier pathway to high wage jobs available. If you want a job, you can get one, and you should immediately dismiss any public official or activist or academic who posits a theory that this is not true!
plenty of people who smoke pot are willing and able to contribute to the economy. if you still exist on regulating your employees private lives, you don’t need labor that badly
It’s a drug SCREEN. If you don’t have enough control over your cannabis use to abstain when you’re looking for a job, you probably shouldn’t be hired for a job that involves risk to your own safety or that of others.
I mean, you're not wrong, but still, if there really was a crushing labor shortage, wouldn't you expect the construction companies to be making some riskier calls on the hiring front? And what would we expect the wage pressure to look like?
I'm not saying Jim Ed is wrong about the environment where he is specifically, but I've also seen guys who would've liked to work in the trades getting stuck working part-time at AutoZone because they couldn't figure out how to jump through the hoops to make it happen.
It's a simple liability issue for contractors.
Getting high and working an email job or retail is all well and good, but there are important industries where you cannot have people impaired while working them: Pilots, daycare workers, and construction workers to name a few.
Construction is still very dangerous work even with the best safety protocols in place. Fatal accidents are rare, but they do happen, and they're awful. You cannot have it come back that someone involved in it was impaired. It opens the liability floodgates, and most importantly it puts other workers on site at risk.
"...if you still exist on regulating your employees private lives...."
So, is screening for cannabis a regulation of employees' private lives, but screening for heroin or meth not a regulation of employees' private lives? Or is it okay to regulate your employees' private lives vis a vis heroin, but not vis a vis cannabis?
I mean -- I don't think occasional recreational cannabis use is a big deal -- I've never tried it myself, but I have seen people live functional lives despite using it.
But I also don't think that "regulation of employees' private lives" is a terrible thing, either, if it keeps the bus-drivers from driving buzzed, or it keeps one construction-worker from injuring another through inattention.
Cannibis stays in the system significantly longer that heroin and meth - up to a week for smoked and up to 30 days for edibles. Depending on the dosage, you could be just imbibing on the weekends and never be able pass a drug a test.
Also, heroin (can't speak to meth) is a different breed due to the need to be consuming regularly to prevent withdrawal.
Ah yes pot smokers. A group famous for their work ethic and ability to show up on time. If only we could find a way for employers to give them a chance, I'm sure they would leap off their couches and get in the game.
That is absurdly too high. It's only half of adults who have ever tried marijuana, and the difference between regular users and an occasional dabbler would make that percentage go down significantly. I'm sure young males are the largest consumers of cannabis, but that large a percentage seems statistically impossible based on my priors.
I'm sympathetic to what you're saying, but one thing about growing up in poverty is that you grow up surrounded by people who are more permissive of drugs and who are not teaching the value of punctuality among other job skills. Those people will always be substandard employees to begin with, and employers will avoid hiring them unless they have no choice. But if they do end up getting jobs, many of them will learn those skills and become better employees in the future. Importantly, their children will grow up in an environment that will make them better employees in the future. Reducing poverty will yield results, but it takes generations to fully realize the gain.
Just curious... What part of the country are you in?
Let me repeat my original comment: "I used to dismiss this idea out of hand, and still largely do."
Having said that, I think the charitable view of Cass (and Bernie, let's not forget) is that they realize their proposals will make things more expensive but they value the expected benefits more than the higher expense.
Male prime-age employment is nowhere near all-time highs. Real hourly wages for production and non-supervisory workers in both manufacturing and construction are also not at all-time highs.
Those facts don’t seem consistent with huge worker shortages in those sectors.
I think three facts can be true:
1) The labour market overall is pretty strong. Not record-breaking but solid
2) "Manufacturing" in particular but also "construction" are not really industries, they're more a category of a large number of specific industries. The federal government has enacted a huge stimulus for specific industries such as semiconductors and clean energy. So in an overall solid labour market, it's very reasonable to expect *localised* skill shortages in those specific industries.
3) Employers will all-but *always* complain about skill/worker shortages in their industry because it creates pressure for government to fund training programs.
So if I google, everything seems to say half a million construction workers short.
We currently have male prime-age employment at 86%? That's certainly not all-time high.
But the unemployment rate for 25-54 males is only about 2.8%. That only counts those LOOKING for work, IIRC.
And "why are males having trouble finding jobs" seems to suggest poor work history, etc as options.
So, I posit:
1) They aren't able to meet the "work ethic" bar for these jobs. You don't want to hire a construction worker who can't show up on time.
2) They aren't looking for work as much (for w/e reason) - this could still have a construction shortage with lower employment rate (but not unemployment rate)
I'd say that if you have a real labor shortage you start to hire guys who aren't super conscientious for decent wages anyway. You just need hands.
Those guys who "aren't looking" for work notice this and they start looking.
So I'd guess the 500,000 number is just cheap talk. That seems more likely to me than a steady secular decline in work ethic among American men over the past 50 years.
There's a parallel here with one of Strong Towns' criticisms of the so-called "infrastructure gap": Every year, the ASCE puts out a report saying that the US is many trillions of dollars behind on infrastructure. And yeah, some roads and bridges certainly do crumble, but have you ever noticed that they aren't failing at a rate that would suggest we're THAT far behind?
Part of it is inflation, the cost disease, and a separate NIMBYism/everything-bagel-ism-induced cost *crisis*. But the ASCE also clearly has an overly-expansive definition of what projects they think NEED to be done.
The point is, we probably don't actually need to spend $8T or whatever the ASCE's latest report says; and hinging our analysis on that number alone would distract us from all the reasons WHY our infrastructure is so unsustainable -- to wit, per Strong Towns at least, because suburban geometry requires it to be overbuilt at unsustainable levels.
Likewise, I suspect you're right about "the 500,000 number [being] just cheap talk". As far as I know, there's no national crisis of plumbing work not getting done. The shit is not literally backing up over large swathes of the country. Plumbing, like other trades, is certainly disproportionately contributing to the cost disease due to a suboptimal recruitment rate, but it can't simultaneously be true that (A) tradesman wages are higher than ever due to their scarcity AND (B) that they can't recruit enough because the wages aren't high enough. As tradesmen like to point out, their wages are WELL above average/median.
Also, we shouldn't necessarily believe the trade industries' own stories at face value here. Industry insiders are notorious for being fonts of valuable information and insight while also having profoundly myopic perspectives that limit their own ability to understand their industries' problems.
If I were to hazard a guess at squaring these circles, I'd submit it's possible that, because of the Housing Theory of Everything, even elevated tradesman wages are just not worth the hassle vs. college. Even if the mid-career wages are good, it probably takes WAY too long to get to a reasonable level, and when you compare that against the college wage premium, maybe most people feel they're better off taking a gamble than "settling" for the trades.
I'd also suspect regulatory arbitrages -- the trades are literally where the guild system originated (!) -- so it wouldn't be surprising if incumbents were rigging the playing field in ways that harm recruitment.
Not to mention, there's probably an information problem: Many trades go through the private college industry, which is notorious for its fly-by-night and unregulated operations. If we REALLY want to fix this, we should probably pass a reform that helps community colleges to stand up more trade programs.
Lastly, per the aforementioned Housing Theory Of Everything, I'd expect that reducing the cost of living via abundance would help lower the stakes on the college-vs-trades decision. If you can have a middle-class lifestyle pretty easily right out the bat, then you're less incentivized to waste time on college unless you actually have a decent shot at graduating.
I think that the folks of Flint Michigan who are still waiting for clean water would take issue with the idea that there isn't a national gap in plumbing work being done.
At least in Seattle, the shortages in the trades are leading to both higher costs and also construction delays in private development and there is a lot public investment that should be done.
I tend to agree with Strong Towns that the suburb and exurb model of development leads to an excessive road mile to human ratio and that we should be encouraging more dense development to reduce these costs.
But I think our need for infrastructure improvements is frequently undersold. Seattle doesn't even have sidewalks in many parts of the city and the sidewalks are in poor shape and/or lack ADA compliant curb cuts in much of the area that has sidewalks. We still have lead piping in much of our water system. Our water treatment isn't making that a Flint like problem but it isn't good. Our sewer system dump sewage into the sound about once every other year due to huge storm overflows. We still have a couple of neighborhoods who need to rely almost exclusively on bridges that need earthquake retrofitting to reach the rest of the city. And I suspect we are doing better than a lot of older cities with poor populations.
I think we pretty desperately need more folks in the trades. I think that the issues with getting folks into those are complex. I think that there are cultural esteem issues that make those jobs less appealing to some folks even if the income is more secure. I also think that we have done a poor job preparing a lot of young people for those trades in terms of teaching any manual labor skills or greasing the skid into those professions. In Seattle Public Schools they are working on that by offering more training in high school. We have a whole magnet program to get folks ready for the maritime trades and programs where kids can do a half day program to get started training in other trades as well. I think having more publicly funded community college based training would be useful to.
I also think we should be less blase about writing off folks who would currently not make great employees due to drug use or other issues with personal management. Addiction can be addressed with a combination of medical assistance and therapy and we not offering that in easy to access ways. Personal Management issues are also ones that can be addressed with a combination of therapy and life skills training. There are countries who understand that their people are their greatest resource and that are committed to investing in maximizing their potential. We don't do that and we should.
“I'd say that if you have a real labor shortage you start to hire guys who aren't super conscientious for decent wages anyway. You just need hands.”
Hands of people who don’t have much work ethic and who can’t be relied on to show up when promised aren’t in fact a value add all the time. Especially in team projects like construction, where between fixing their mistakes, waiting on their work for next steps, and their being in the way, those hands can in fact contribute negative value.
Probably both. If you have to hire less conscientious people you do a worse job / take longer and people might not want to buy the construction you're selling at that.
We had some windows replaced and the company hired a different company to handle our drywall/repainting. That company did an excellent job, so I hired them to do some other exterior maintenance/repair work which didn't _need_ to be done yet, but I thought they were very conscientious about their interior work.
The exterior work was more mixed - some of it excellent, some of it mediocre. I didn't feel like I got a _bad_ deal but based on that work I wouldn't have gone out of my way to find more work for them.
Conscientious people can have more work available to them than they have time to do, and you can be "short" those workers, but there's also deferred home maintenance type stuff that homeowners/landlords might not hire less conscientious people to do.
Both can be true at the same time, especially when you consider the opioid epidemic. We've never had more junkies and fewer men in the workforce. Something tells me they are related.
But if it's really a supply side problem, shouldn't that show up in wages?
You mean like how wages for unskilled workers are going up the fastest right now?
Real wages for construction workers have been more or less flat for a bit.
You can check nominal average hourly earnings for production and non-supervisory workers in construction here:
https://fred.stlouisfed.org/series/CES2000000008#0
It's true that nominal wages in construction have increased since December 2019, but just enough to keep up with inflation. Where we've plateaued recently is similar to where we were in the mid-80s in real terms, which is about 20% below the all-time highs on this metric. Just doesn't feel to me like how things would look if there were urgent shortages.
Usually it’s NAFTA then China that’s blamed. The China Shock thesis is for people who want to salvage free trade, a way to argue that it’s the right policy all the time except that one time it was massively wrong.
Addendum: The concept of "putting down roots" is, I believe, the core of the disagreement between Matt and many of his critics. I suspect Matt (and many of his readers) would be equally comfortable living in DC, NYC, Chicago or Seattle. I suspect many of us have moved from place to place during our lives, and see NIMBYs as making moves more expensive and our economy less dynamic. We are richer and more prosperous, as the recent reader survey confirms.
But the other side prefers communities with deep roots over a richer society. Where driving 10 minutes to go to Mom's for Sunday dinner is the norm; where the kids go to the same schools the parents went; where you know the owner of the local store because her Dad socialized with your Dad. They see the changes to their community brought by globalization -- having the kids leave for college and not return, the factory closing down and moving to the Carolinas or Mexico or China, the increase in immigration -- as being too costly for the benefits (which are accruing to other communities anyway).
A very good point, and something PMCs like us should be mindful of.
I disagree with you, though, on NIMBY. Housing supply is good for the “put down roots” people too. If the small-town folks want their children to stay nearby, should they not want adequate housing supply nearby?
I think this overlooks that peoples’ concerns about density changing the character of their community are essentially genuine. They would presumably like their kids to stay (which is nominally achievable on a fixed housing supply at an average reproductive rate of 2, or 5% per lifetime at 2.1, both of which exceed the current US average) but not at the expense of their reliance interests in selecting location A instead of location B to live in, in which case they may as well have moved anyway.
You can't have it both ways. Nothing in the world is just going to stay exactly the same. Either you can build housing so your kids can afford to live in the neighborhood, or you can not build housing and prices will go up
We are speaking about people who have generally negative views of immigration. They don’t want the population of their communities to grow. They want their children to move into great grandma’s place. You don’t really have to build for a population that is roughly flat.
Do their children want that?
you can preserve the character of your neighborhood through zoning. you can even have entire historic districts. and you can achieve housing abundance through building new cities and exurbs and building mid rise condos in rich urban areas
It bothers me bigly when people conflate "your concerns are outweighed by other factors" (fair enough!) with "your concerns are false and/or offered in pernicious bad faith".
To his credit, I think Matt is pretty good about not doing that when conducting YIMBY advocacy.
"It bothers me bigly when people conflate "your concerns are outweighed by other factors" (fair enough!) with "your concerns are false and/or offered in pernicious bad faith"."
But there are more important factors than what bothers you bigly, so you must be offering this in pernicious bad faith.
I am a staunch believer in pernicious good faith, to the point that I think the bad kind is exceedingly rare.
I’m sure the concerns are genuine, they just don’t seem to consider that prices going up doesn’t just price some people out of living in the same old place—it prevents it from staying the same old place. They change the character, one might say, into a rich enclave.
Turning a neighborhood into a "rich enclave" is are I say the point to steal from the famous Adam Serwer essay.
Matt has noted a number of times that it's probably not the case that people advocate for NIMBY in a conscious effort to drive up the value of your home. But the keyword is "conscious" and people are capable of putting 2 and 2 together. Me and my neighbors block an apartment + block visible construction of any other infrastructure = my house went up thousands of dollars in value. Ergo blocking housing must be good.
The typical YIMBY rejoinder to this is that land values go up even if house prices per se go down (although note that this appears to be a marginal effect that *can* be overcome by sufficient building to satiate land demand, at least on some temporal scale). Conversely, from the NIMBY side there's an awareness that folks are basically net neutral the housing market because any capital gains from a sale just get plowed into some other inflated house price because people gotta live somewhere (I had a discussion with a coworker who had seen his home price skyrocket during the pandemic to exactly this effect).
Had a good discussion from July 15 here re exactly this typic:
https://open.substack.com/pub/matthewyglesias/p/monday-thread-mailbag?r=kmp6e&utm_campaign=comment-list-share-cta&utm_medium=web&comments=true&commentId=62139829
The more proximate explanation to me seems likely to be less first-order price-mediated and more second-order "rich enclaves are often nice places to live."
Correct, and then the same exact people will complain about gentrification. You really can't win against this series of arguments, the only thing to do is ignore them.
I’m having trouble following you here, when you talk about kids staying as achievable on a fixed housing supply—are you suggesting people live with their parents? I know that is common in Europe and other places, but tends to be a mark of economic failure in American culture.
The idea is that a lifetime reproductive rate of 2 (or 2.1 accounting for mortality), ex immigration, gives you a stable population, so if you have adequate housing supply at time T0, and the same population at time T1, you definitionally still have an adequate housing supply. Things can get a bit out of whack if you start with out an uneven age distribution or if people stop living together as adults, and immigration / population increase obviously breaks this equilibrium, but the gist is “same number of people, same number of houses.”
Ed.: I should note that my previous comment ignored mortality, treating 2 as stable and 2.1 as 5% increase.
Housing also has a mortality rate that needs to be factored in
Sure, if you think kids will be fine not having a better life than their parents (actually would probably have a worse life, because houses age over time).
But even that ignores the fact that rich people get richer over time, which means that the middle class will become mostly renters, as the rich buy up all the housing stock. And some of those homes would be vacation homes that would remain empty most of the time, so you'd still see housing scarcity.
I'm not sure the kind of stability you're talking about here has ever been a realistic baseline, though I'm not sure how I would quantify my disagreement.
I always if this takes into account the average household size taking over time... If the population is stable, but it's more single adults and less families with children (true basically across the US), you'd still need more units to allow adults to live on their own. Not that people can't have roommates, but I think most adults prefer not to.
This is pretty irrelevant for the NIMBY issues that are actually on the table whihc is about housing in already dense metropolitan areas where no one drives 10 minutes to visit grandmother anyway.
I hear you but also feel that it is important to note that urban folks also have roots. I live is Seattle. I was born and raised here. My parents have lived here since they were in high school. My daughter is being raised 10 minutes from her grandparents. My grandparents lived 10 minutes from me during my entire adult live until they passed away. There are lots of tech transplants here to be sure but I have a strong network of friends who are raising kids here and also have parents here.
That said, most of us are YIMBY in part because we want our kids to be able to live here too. At this point, the only road towards home ownership that I can imagine for my daughter before middle age would be that her grandparents die and we can sell their house to buy her one. Otherwise, she would likely struggle to rent in our neighborhood as a nurse (her anticipated profession).
But I do chaffe a bit at the notion that only small town folks have roots are attachment to place. Cities are places too and I think are actually more likely that suburbs to contain multiple generations of the same family and frankly more likely to be able to sustain that if housing were more affordable since cities tend to have more nimble economies.
To some extent this is true, but I think we have to disaggregate here. Most of the NIMBY problems are in the larger, faster growing cities which are the engines of economic creativity. That doesn't sound like the kind of communities John from FL is writing about. In those communities, is NIMBY-driven high cost of housing the thing that is preventing adult children from living near their parents?
IMO NIMBY manifests differently in cities than their outlying areas.
Like, there's no Midtown Angry Neighbors' Association of Empire State Building tenants who are demanding that no skyscrapers get built next door which might ruin their views.
But there are air rights (rights to the column of air above your building) which price in the marginal utility of a new skyscraper for neighboring properties, there are incumbent corporate tenants, permits, and hundreds of other regulatory issues to getting a new skyscraper built, most of which weren't in place even 100 years ago. These are all ultimately "incumbency dividends" that make incumbents *feel* richer but raise the overall cost level to absurd amounts that inhibit construction.
So, it's very different than the uppity Boomers in the neighborhood across the river from me in my small CT town all crashing a zoning meeting over a proposed duplex zone.
Yes, in some cases. Many boomers in Seattle that I encounter in my work who need family to live nearby end up having to have them actually move into their homes because the adult children can't afford housing near enough to them. I worry that my kid can't live near me when she grows up with serious support in affording housing, support I could probably only give her after my local parents pass away.
Arguably housing supply is more important for the put down roots people! The other people can move.
Some thoughts on this:
* Outside the US (where most of the population's ancestors literally moved continents sometime within the last five generations), this sort of rootedness norm is even stronger. A friend of mine from Glasgow in Scotland (a big city!) stressed out his mother by moving to Edinburgh, which is about an hour's train ride away. (In the US, these cities would be in the same metro area.) In Lebanon, people living in Beirut would talk about being homesick for villages which were about a half hour drive away.
* At least a certain amount of deracination is good, actually. Economic growth necessarily requires change, and a willingness to move to where economic activity is offers both downside protection and more ability to capture upside. Americans' willingness to move is probably one of the factors that's helped us perform well economically over the years.
* An underappreciated aspect of the sort of near-universal military service that was common in the mid-century US is that it uprooted young men while also providing their lives with some degree of structure. One of my grandfathers grew up on a farm without electricity or internal plumbing. Being conscripted, traveling, and getting to meet people with backgrounds very different from his really opened up his horizons, and he went on to try a lot of new things and take a lot of positive-EV risks. (Moving away from home, courting a woman from a higher social class, getting a college education, switching from farming to sales, becoming an unusually good stock investor.) Going to college provides this sort of benefit now, but it’s costly (generally positive-EV but negative-EV for marginal students) and not universal
I'm going to be thinking a lot about "structured uprooting" this morning, and to what extent I found something like it by moving a thousand miles to shack up in a shitty dorm at Big State U.
(turned out pretty alright, I think!)
It’s a really interesting concept! University and the military both make you move but also both give you a structure for how you do it, and give you insurance of a sort to help you find new roots later.
Gradually easing into adulthood in an environment where it’s easy to develop a big and (after graduation) geographically diverse network of friends and acquaintances is one of the big benefits of the university experience. (And “remove people from home and throw them together” is a classic state building/governing class formation process.)
I wonder if there are a lot of "non-uprooted" people who, rather like George Bailey in "It's a Wonderful Life," carve out a contented life in a small community surrounded by loving family and friends but deep down inside greatly regret not being able to follow their dreams away from the suffocating place they live in.
I also can't help but wonder if the out-group resentment we see from them is simultaneously a form of jealousy and also a way to justify one's regret over one's choices to oneself by attacking those who made different choices.
Media probably contributes to this. We need more shows like Yellowstone, The Ranch, and Tulsa King to make the jealousy go the other way!
I definitely know people who try to have it both ways: talk about how small towns in the Midwest are morally superior and vote Republican because of it, but then latched onto the first person who could help them move to the Blue coasts.
"* Outside the US (where most of the population's ancestors literally moved continents sometime within the last five generations), this sort of rootedness norm is even stronger. A friend of mine from Glasgow in Scotland (a big city!) stressed out his mother by moving to Edinburgh, which is about an hour's train ride away. (In the US, these cities would be in the same metro area.) In Lebanon, people living in Beirut would talk about being homesick for villages which were about a half hour drive away."
Yes, Europeans are funny with this stuff. Edinburgh is viewed as supposed to be on the other side of the moon or something from London and it's actually Boston to DC - it's probably a much nicer drive in a day than Boston to DC.
“American think 100 years is long ago, and Europeans think 100 km is far away.”
There's a great line in the Monty Python-adjacent movie "Time Bandits" where a stranger from another medieval village a mile away comes across a local resident who upon learning of his mile-long trip, exclaims, "Oh, I would love to travel someday too!"
My Scottish friend also jokes about American tourists in the UK just wandering around and saying “wow, that’s so old” at every building. And he’s not wrong.
"Hot take" coming. Based on your post above, does NIMBY + sprawl = more dynamic economy? In the situations you describe above one thing seems clear whether we're talking about Glasgow or Beirut is the various family members lived within very close distance from each other. In Glasgow or the villages in Lebanon I'm guessing the mother or people in question could very easily see their friends or relatives likely in walking distance. Which means taking the step to move away is that much more wrenching and difficult even if it's the right decision based on economic circumstances.
In that vein, the fact that US cities are so much more spread out (and suburbs even more so) means that actual physical connection to friends and relatives is that much weaker. Much more difficult to stop by your friend's place, mom's house or aunt Mary's house when they live 45-60 minutes away even if you all live in the same city. That makes moving away that much more of an easy choice.
Not sure how much I buy this of course. Working class people are moving away from very walkable neighborhoods in NYC to warmer climates every day. But just sort of putting out this (again) "hot take" to see if there is any merit to what i'm saying.
I like a good hot take as much as anyone, but the economic benefit from people moving largely comes from workers moving to places with lots of economic activity, and NIMBY-ism prevents that. The US economy would be significantly bigger if the NYC and San Francisco metro areas were twice as dense as they currently are.
Oh I'm pretty sure I agree with you. I should have said "extreme hot take coming".
I do think it's worth teasing out second order effects of having far flung exurbs. We focus on the downsides I think correctly; environmental cost, literal economic costs of stuff like more road building or more money spent on gas and yes lack of connectedness to your community.
But there's a reason there's demand for this type of living beyond the "it's cheaper to live here than the inner ring suburbs". Big houses and big lawns are pretty appealing. Lots of driveway space for lots of cars. And a lot of people really do seem to like the isolation*. So in that vein, worth trying to least consider second order positive effects. And one (possibly) is the lack of connectedness to your neighbors and city at large may mean moving away to an entirely new city way less daunting.
I'll also say, by almost definition, newly built exurbs are filled with people who don't have roots there. Even if they are moving from a town a mile away, it's not like they've lived in that specific neighborhood for long. If you're willing to move to the far flung exurb, guessing moving again isn't nearly as daunting.
*I think there is a group of people who really do thrive in isolated areas. But I think there is an even bigger group of people who think they'd thrive only to discover that after awhile the isolation gets to them. I suspect a lot of people conflate "I want a second home where I can get away from it all especially when the weather is warm" with "I want to permanently move away from everyone and everything I know as I'll be happier permanently being isolated".
I think that you don't need to go quite as far as isolation per se. Think of it more like "I would like around 5-10 reasonably close like-minded friends and a degree of personally owned physical space." Small towns or suburbs (particularly those subject to selection effects) are plausibly compatible with this. The urban response to this desire is more like "best I can do is living cheek by jowl with 7 million people paying thousands for a shoebox, most of whom you will have an at-best neutral interaction with and some proportion of which will actively inconvenience you on a daily basis while suffering no reputational or other harm due to urban anomie and law enforcement tolerance of petty misbehavior." Like, maybe this is the best offer on the table if your desired close-acquaintanceship group is particularly hard to select for and coordination problems are hard, which is how you get phenomena like Gayborhoods / the Castro in SF, but otherwise it seems like what you really want is something more like a bucolic college town of the type that are thick on the ground in the Northeast (or whatever else best approximates an adult version of being a university student) -- replicating the beneficial effects of access to a selected friend-group without all the attendant sacrifices. Why do with 7 million people what you can do with 7,000? Isolation may not be introvert heaven, but cities are kind of introvert hell, and it' s not clear that the sacrifices they demand in exchange for social opportunities are necessary, even if they are sufficient.
I think it's more accurate to say that sprawl is the only way to keep a NIMBY economy dynamic.
But also, sprawl has its limits. About an hour commute -- regardless of the actual distances involved due to traffic/geography -- seems to be the outer limit of what people can tolerate.
Hence is why I think the Great Recession killed the sprawl cycle. We'd already roughly hit the limit of sprawl -- and our ability to finance it (!) -- and were kind of just going on fumes, so that when the recession hit it was impossible to jump-start the engine again.
Deep Cut: When you run out of room to sprawl, that forces densification cycles (which we're going through now), which slowly re-enable a slight crawl of sprawl. The densification also drives value growth in the urban cores. That's probably the next major change to expect in the next 100 years, at least short of another major disruption to transportation technology (like the automobile was).
"I think it's more accurate to say that sprawl is the only way to keep a NIMBY economy dynamic." This seems very correct to me. I keep doing this but look to the UK and see what happens when you combine SF style NIMBY with lack of ability to sprawl (or less ability).
I really think the big shoe to drop is with insurance. I can't begin to tell you how much insurance costs have skyrocketed in places like FL and Houston. I don't think we as a society appreciate how much we subsidize FL living. The "free state" of FL is a great bargain when you can rely on the rest of the country to bail you out in a storm. And those storms and damages are getting worse. This is really the dog that hasn't barked yet. https://www.wlrn.org/business/2024-03-11/florida-home-insurance-market-hurricanes-litigation. Given the political direction FL is taking I think there is going to be a real "showdown" situation soon as a lot of conservative upper middle class and upper class people will continue to want to buy and build on coastal areas and barrier islands, not be able to get insurance and ask for federal bailouts.
Not to mention that FL and the rest of the Sun Belt are diverting population and investment away from the rest of the country.
Part of the problem is that the problems haven't gotten bad enough *yet*. I'm no accelerationist, but it's not accelerationist to simply point out that people haven't reached a tipping point yet.
IMO, this stuff never plays out in some big dramatic showdown where the rest of the country says, "Fuck you guys, NO we're NOT paying the bill for this one!". It's nice to fantasize about, but not realistic.
More likely is, the big storms keep coming, the insurers are gone so the states struggle, and they can't keep up with it, there's only so much money for FEMA, so over time a trickle of financially-ruined exiles stream into the cheap post-industrial Midwest and it becomes a (metaphorical) flood after long.
All that'll be left are the rich folks who can afford to build sturdy houses and the poor folks who don't mind living in easy-to-rebuild glorified shanties.
>Where driving 10 minutes to go to Mom's for Sunday dinner is the norm; where the kids go to the same schools the parents went; where you know the owner of the local store because her Dad socialized with your Dad.<
It's this cheap, highly sentimentalized version of a Rockwellian America that never really existed that drives me nuts (not singling you out John; I realize you're offering the argument rather than advocating it):
1) Americans move LESS than they used to. In the height of the industrial boom, Americans moved across state lines MORE than they do now. JD Vance's people moved from Kentucky to Ohio for work! The decline in recent decades is probably related to weakened economic specialization: every part of the country now has large numbers of healthcare workers, sales reps, accounting managers and IT specialists. You don't need to move to find work (though you may need to move to afford the rent).
2) AFAIK people everywhere in America like to visit family and friends—maybe for Sunday dinner—and the shorter the drive, the better. This is not an activity confined to Appalachia or the Rust Belt.
The version of "Rockwellian America" that you say never really existed did exist, and still does in lots of places. And those places aren't only small towns -- it was the norm for places like Detroit, Dayton, St. Louis and Syracuse. In fact, I have family members (in-laws, but still) for whom it still exists. The job that my brother-in-law has pays less and has less stability than the one his father had, but he still lives the life I describe. The plant where his father worked moved all production to Mexico, leaving behind only a small technical center, for which my BIL isn't qualified, though.
I think to square the circle here a bit, it's probably strictly not true that this "Rockwellian America" didn't exist or still doesn't exist. But Charles is also right that there's a lot of over sentimentalizing going on based on an imagined past shaped by 50s tv shows and advertising (not to mention political messaging).
Maybe I've been negatively polarized too much over the past 8 years but when I see Trump doing his idiotic pretending to shovel coal routine, my first thought is "do we really want to be preserving this? Coal mining is awful for the environment. Coal mining jobs are dangerous and terrible for the workers themselves. And it's an outdated technology from a completely different economy". Now to your point, those few remaining coal miners if you were to interview them would probably talk about how their dad was a coal miner, their dad's dad is a coal miner. How they married a girl who grew up down the street who's dad was a coal miner and friends with his dad. And now some lib elite living in NYC wants to say his job and his family's entire legacy is bad for the country.
I'm not sure I have the best response to this. I know the late 90s consensus of "learn to code" was stupid, insulting and woefully inadequate (I'm exaggerating here a bit but I think I'm not that far off from the sentiment). But to Matt's point "learn to code" from a 1,000 foot level is actually not wrong. We live in a rapidly changing dynamic economy. We can't just have policy wedded to a past that doesn't exist anymore.
Again, I don't know the 100% correct solution here. I said to you in another post I actually have sympathy for the argument you put forth. Maybe some sort of program for moving vouchers? If your job was eliminated due to your place of business closing down, you are entitled to a voucher to help move. This obviously doesn't solve the "people like having roots" problem, but maybe it would make the economic dislocation of living a factory town where the factory doesn't exist anymore more palatable.
I used to be in a position where I would interact with coal industry lobbyists from time to time and the way these companies would talk about their own employees' preventable deaths due to inadequate safety measures was Orwellian.
Feel like a lot of the same conversations happened in C-suites at Boeing the past 5-10 years. Just replace employees with passengers. They probably had some formula as to how many mishaps and actual deaths had to happen before the "cost" actually exceed the money saved on paying real engineers to make sure these accidents didn't happen.
SIR!
Moving vouchers are a demand-side subsidy.
You know what ALSO makes it easy for people to move without worsening the Cost Disease?
YIMBY YIMBY YIMBY
I am also a bit baffled by the desire to retain coal mining as an industry having worked on some black lung cases years ago. I do understand folks not wanting to move away from friends, family, landscape, culture, etc. And I do get that moving from a physically demanding job to coding isn't easy. But it does feel like folks should be just as happy manufacturing wind turbines in their hometown as they were mining if we could incentivize green energy jobs going where fossil fuel industries are being shut down.
Coal is a minimal part of the economy even in West Virginia. However, you need industry and jobs throughout the country, not just in large cities. Many people do not want to live in large cities, and it’s certainly not a sensible place to locate most manufacturing.
The only thing *I* remember from St. Louis was the miles upon miles of strip malls that they tore up the Rockwellian main streets to build.
And then there was the big suburban mall, whose customer base eventually got cannibalized by an even BIGGER strip mall that they built on a flood plain, which got two more outlet malls added to it a decade later!
When the next flood came, it flooded whole different parts of town than in the past, because the big strip mall's owners got the county to build the nearby levees higher, which forced the water to go somewhere else.
Whatever was left of Rockwellian America where I was born, was killed by the people who professed to love it so much, all so they could put a Red Robin on top of it.
"Whatever was left of Rockwellian America where I was born, was killed by the people who professed to love it so much, all so they could put a Red Robin on top of it."
To be fair, the bottomless fries are worth it!
Yuck.
The only things I miss from back home are the things that I can't get anywhere else: Lion's Choice and my old watering hole's bar food. I'd take those over Red Robin any day of the week.
Seriously.
I’m the only person in my family this vision doesn’t exist for. All the rest live close to each other and see each other all the time. They’re all big into identities like “mom”, “dad”, and “grandma”.
But hadn't people just moved to Detroit, Dayton, St. Louis and Syracuse to create "the norm" that we now mythologize? Like JD Vance's parents moving from Appalachia to Cincinnati for work? Certain cities boomed in population in the first half of the 20th century, then other cities boomed in the second half (e.g., Sun Belt). Detroit's and Dayton's population have been in flux since... ? seems to predate China entering the WTO or even NAFTA. (And isn't Metro Detroit's population pretty stable? A lot just leaving the metropole for bigger suburban houses/yards and, well... other reasons.) Doesn't Rockwellian America more-or-less exist today in Metro Phoenix and Atlanta and Dallas, albeit with 30-40 min commutes, as people have bigger houses and more cars than they used to (requiring more space for these metropolitan areas)?
Actually, John (from Fl!) pretty much nails what I remember from my childhood in my largish north central Florida town in the 1960s. We ate at my grandmother's house all the time, and hung out with our large extended family frequently and I certainly knew which schoolmate's parent ran which store.
And this, children, is why I blew that town as soon as I could when I turned 18.
People have always moved, the pilgrims moved, after all.
But when I was growing up all of my mom's relatives lived within walking distance of each other, and ditto for my dad's relatives (as you could infer, these were two different localities b/c my dad moved cross state, people have always moved).
But there was something about the labor markets / housing supply / culture that made that more common.
As it turns out, people like walkable neighborhoods where housing abundance and a light zoning touch makes middle-class life affordable and provides ample local opportunities.
YIMBY YIMBY YIMBY!
I’ve heard claims that the statistics on decreased mobility are actually an artifact of some change in measurement. I don’t exactly know how to verify one way or another.
The description is extremely close to how my parents and many of my cousins grew up. It did exist, and it was simply a reality, not sentimental.
“The concept of "putting down roots" is, I believe, the core of the disagreement between Matt and many of his critics.”
I agree that we need to be aware of these considerations, and now more than ever. They are adjacent to the more explicitly fascist blood-and-soil style arguments that J.D. Vance was hired to peddle, which claim e.g. that only Americans who have lived in the same place for many generations are real Americans, that immigrants are an invasive species, that rootless cosmopolitans form a cabal corrupting America, and so on.
I am *not* attributing these views to John from Fl, or saying that placing any value on “putting down roots” means that you’ll soon be goose-stepping with tiki torches. Instead, I agree that there is genuine value in community and stability, and our side needs to figure out how to respect that value so that their side cannot co-opt it for fascism.
I am someone who places great value in community, stability, and placemaking. I agree that we should surrender those values to Republicans. I also don't think that they are incompatible with many viable versions of YIMBYism.
"I agree that we should surrender ...."
I'm thinking maybe you wanted a "not" in there?
That's an interesting argument, but it's not at all clear to me that a more protectionist approach does much to enable that. It depends alot on how it works out. Ok, maybe you get a factory in one part of the country -- probably near an industrial center -- but you've got to move there and on the other hand goods are more expensive meaning its harder to support yourself say doing remote work.
And remember that if you make it harder to access cheap labor it often results in more investment in automation potentially counteracting any perceived greater permanence of factory jobs.
--
But I also think it's mostly besides the point because these communities are dying in large part because the next generation isn't that interested in staying (kinda unsurprisingly). That just can't be fixed by relatively modest tariff measures.
The next generation isn’t interested in staying because this place isn’t where the future is - the future isn’t appliance factories. (Though they might have been the future from 1930-1950, the way “plastics” was the future in 1968 and oil was in 1900 and AI is now.)
Seems to me that protectionism should only be used as a way to keep short-term supply gluts from hostile nations from gutting our healthy domestic industries. Like Chinese EVs, for instance.
But outside of that, it really just makes the Cost Disease worse.
" Ok, maybe you get a factory in one part of the country -- probably near an industrial center"
Appliance Park apparently has been in Louisville since 1950, so even the amazing old days, they were consolidating factories.
The places they are moving to, however, are sprawling suburbs.
That's not great but still means tariffs don't take us back to that world mentioned here.
I believe PMC folks are about to discover what factory workers did decades ago. AI is going to upend a bunch of middle management jobs. Popular sentiment on these issues will take an hard turn toward the Bernie/Vance position once that takes hold.
I am a rootless person, having made multiple cross-country moves without regret. “Home” will always be my beloved West Virginia, but home to me is an idea, a memory, not a lived experience. This thing about wanting your kids to live 5 minutes away and such just sounds like “Johnny went to that big gub’mint college and they poisoned him with soshulizm and now he lives in NEW YORK CITY.”
I share that part of your biography, and I don't see any way I could have taken a different path. But I have a lot of friends with generational roots now, and their lives are objectively better for it, in many ways.*
On top of that, my oldest daughter is only a few years from leaving for college, and there's nothing I want more than for her to live nearby when she's done. I'd never stand in the way of her choices, even if those choices take her far away, but I'll do everything in my power to make it possible if that's what she wants (this is approximately 50% of my YIMBYing motivation).
* Not universal! Not recommended for everyone!
This isn't relevant, but when my mom's health began declining a few years ago, I began seriously entertaining the idea of going back to West Virginia to be near her, just in case she needed me. Her basic response was: I don't like Chicago and I don't want Chicago for you, but you want it for yourself and I won't let you give it up for me.
You reminded me of how special it is to have parents who want you to follow your path wherever it takes you. =]
Appreciate you calling out these couple points. I think in short the free trade economics POV makes 2 critical faulty assumptions.
First, is what you are hinting at, that job change is frictionless. I think after ~25 years of free trade consensus we know this isn't the case. There are major hurdles in re-educating the populations that lost jobs for new industries that is far from seamless. Coupled with the challenges to get folks to move geographically, you start to realize you have a very faulty assumption that was taken for granted.
The second faulty assumption is this idea that we are effectively freeing up human capital to go work in more high value areas of the economy. The really simple model in economics is the assumption that the US is a high skilled country, so those workers would move to other high skilled industries. However, the US has >1/3rd of workers making $15/hr or less in mostly low skilled jobs - we have no lack of labor pool that we could start to tap into to fill more of these high skilled positions (with the obvious caveat that training is required to get this talent pool there).
Obviously a lot more to the arguments on each side of this debate, but I think when you start to look under the hood, you start to see quarter century worth of data suggesting the foundation we made these decisions on was shaky at best.
At age six or whatever, I recall reading in a kid-targeted factoid book that Americans are (circa 1990) overwhelmingly likely to marry someone who was born within twenty miles of where they were born. Whether or not that was particularly well-sourced, it stuck in my brain because I just so happened to be born in a hospital about twenty miles from the house I grew up in.
Now I haven't been in that *time zone* in two years. makes u think.
I worked hard and sacrificed a lot to get where I am today while many others in my extended family chose to stay in our hometown (and worked and sacrificed in their own way too). I'm not judging their choices, and I can see exactly what I should have done differently if I wanted their path. I may make more money than them, but their lives are good too, and I might add, they do benefit greatly from globalization as well as all the economic growth over the decades. And yet they will still buy into the same false nostalgia that somehow they can vote for nothing to ever change. I'm not saying we should be dismissive of their point of view, but let's not wax poetic about it either.
That is true, but it has precious little to do with trade and even less to do with trade _policy_.
Also -- not the point of your comment, but I want to say it anyway -- I am a certified "cosmopolitan." I have lived 13 of my 82 years outside the United States. My wife and children were born outside the US and one of the children does not live and work in the US. And it makes me (I think) _more_ of a Star Spangled Banner singing, "We hold these truths to be self evident" American than someone who has not travelled and seen other cultures.
I understand the argument, but didn't more Americans move around the country in the mid-late 20th century than do today? That in some ways disproves the argument.
One of the strange quirks about American history is that everywhere is populated by someone who decided to move there. Even in towns where people have lived for generations, you can often find historical records for the first members of a family to move to a place. There's a reason that we have sports teams with names like the Vikings and the Celtics. Pretty much every northern or western city with a major black population only does so because of the Great Migration. Indiana's white population mostly came from the South. A lot of the stereotype of the average Texan is an affect put on by people who moved to Texas from elsewhere. It's rather rare to find the same families truly living in the same town for 300-400 years, while in Europe there are towns that families have lived in longer than the US has been a country.
The people with memories of rootedness are basically the people who decided to break with tradition and just stay the same place they were born.
There's a funny context to this idea of moving from place to place. When I moved to NYC from my southern town I found that I worked with two broad classes of people: 1) from somewhere else like me, 2) from a neighborhood in NYC and other than coming to work, never living and rarely venturing more than a few blocks from the house they grew up in. Other people have told me the same about Chicago and I can confirm it's also true about Boston. Going to Mom's for Sunday dinner was a 10 minute walk, not a drive.
The point is that these "small town values" are often shared very much by people living in the coastal elite cities whose roots often go back as long as any in the heartland.
That is me in Seattle.
I suspect we agree here. I'm mostly with Matt that free trade on the whole is an economic good. But I think he's underselling the very real costs of free trade. Specifically, I'm surprised he wrote this post without using the term "China shock" which seems to have been very real and very damaging. And I think the point about "predictability" is underrated. Status quo bias is very real and likely explains Matt's very correct observation that the most popular politicians are the ones who basically do nothing of note.
But I have to disagree with your contention regarding NIMBY and large cities. Reality is places like NYC are losing disproportionately working class people and people with "roots" as you say due to housing costs. NIMBY (combined with the perverse effects of rent stabilization) is actually driving out long term residents in favor of upper middle class professionals. Free trade in theory is a net benefit for the working class residents of NYC or SF or Seattle. The cities wealth should mean the opening of more high end restaurants, which means more waiters and bartenders making more money on tips. Without NIMBY, that extra income should have result in more money in working class pockets as opposed to going to rent.
I think this is to a large extent rose-tinted nostalgia. If you ask people in manufacturing today, I'm pretty sure they'll tell you young people are not clamouring to come work for them. Those jobs are not that great, and in the past arguably they were relatively worse: the health and safety regulation of recent decades were focused on reducing the harm of blue collar work, not white collar.
Communities had their economic core hollowed out. That's just a disaster no matter what that economic core is. It doesn't mean whatever it happens to be was good. There are communities that were based on underground coal mining that was crazy dangerous and polluting. Those communities have suffered a lot but it in no way means underground coal mining is a dream job.
This is manufacturing employment since WW2 btw:
https://fred.stlouisfed.org/series/MANEMP
"I'm pretty sure they'll tell you young people are not clamouring to come work for them."
I think they are and these are absolutely great jobs. Average salary for an assembly technician in Peoria, IL for Caterpillar is $42k but there's an actual career path to lead and test technician roles that get up to $75k.
https://www.cat.com/en_US/articles/ci-articles/seeing-a-machine-come-to-life-at-caterpillar.html
Manufacturing often offers upward mobility to people without college degrees. I know a lot of managers and even engineers who do not have college degrees; they were trained on the job over a period of years.
This is becoming less common, people want engineers with degrees. But it’s sometimes easier to spot a person in an entry level job who is smart and works hard, than to find a recent college graduate who has a decent work ethic, doesn’t mind getting a little dirty, and can deal with the chaos of a manufacturing floor.
Totally agree. Manufacturing in the US is awesome. It's a great career path. It offers a ton of entry points with low barriers to entry. I 100% want the older pro-worker, Democratic party. This new one focused on "free trade" is far weaker.
I guess this gets into what is manufacturing? Sewing garments in some downtown Los Angeles textile factory? "Assembling" hamburgers in a McDonalds? Doubtful for the former, but for the latter sometimes people do ascend up the ladder to store manager and can make out pretty well.
The credentialing can be a real issue. At my first job out of college I was trained by a guy who had applied for the job I got but he was told he wasn't eligible for the promotion because he didn't have an engineering degree. I eventually left partly because I couldn't move up myself. It was apparently decided that the level above me required a masters degree regardless of experience.
This is something I wish got more attention; higher education in America really is an absolute clusterf*** of inefficient credentialism.
Especially in engineering-- the guy who trained you should have been able to take the FE and PE exams in lieu of a degree.
The amount of "you have 8 years experience and due to understaffing have had all the responsibilities of this job for the last 2, but we can't give you a promotion because you don't have a piece of paper." that I've seen is ridiculous.
IMO the US federal government should not prioritise holding back the tide on declining industries that pay average (not starting) salaries of $42k and where the path only needs leads to $75k. Nobody has a good track record protecting declining industries and $42/75k is too little upside given the low odds of success.
By all means, prioritise the people in those jobs, or the national security implications (if any) of losing them.
The median salary in the US is 48k. Jobs making 75k are making 50% more then the median. I'm not saying that we should be stupid about protecting them, but people making way more than that should realize "we're the outliers."
There's no protecting and it's not declining. 100% of Caterpillar D6T tractors have been made in the US for 100 years now. They will always be made in the US. This is the standard type of high-skilled, complex manufacturing job in the US. & relative to the education requirements -- the pay and career path is awesome, especially vs. options in retail / service.
Fair enough, but that sounds like a healthy situation which doesn't require any undue policy intervention.
Yeah. There's not much from a policy perspective. Just fight dumping so we're all on a level playing field. Another nit I have with this article is Matt and others keep referring to the Trump washing machine tariffs as "Trump's". Obama placed the original tariffs. Trump just continued the policy and it was the right policy under Obama and the right policy under Trump. Let's be honest about that.
I think we should also be aware that manufacturing jobs that remain in the US at this point trend high-skill. If we bring more manufacturing back from abroad, I would expect the average quality of manufacturing jobs in the US to decline, perhaps precipitously. (In addition to of course making everyone poorer.)
IDK. I just watched the LG washing machine plant video overview. There's tons of automation. My sense is any greenfield plant is gonna look more like that than one with lower-skill, hand-assembly. Not that it necessarily changes your point (i.e., there's probably not a lot of net-new high-skilled jobs left to bring back because those never left), but IMO every new factory built in the US is a win. Those are long-term CAPEX anchors.
Korea has a per-capita GDP of $32,422.
While I'm sure we can cherry pick individual jobs in a variety of companies that look good, I see no reason to believe that any kind of mass clawback of manufacturing from Korea would result in jobs that would raise, and not lower, the overall skill/compensation of manufacturing in the US.
I can't tell if you're agreeing or disagreeing but the LG and Samsung appliance factories have definitely raised overall skill / compensation of manufacturing in the US and probably more importantly, both those states. But that production wasn't shifted from Korea, that was shifted from China. LG and Samsung previously shifted the production from Korea to China to get around the Obama tariffs.
EDIT: Here's a bit of the background https://www.npr.org/transcripts/584007212
The manufacturing that is likely to come back would be things like pharmaceuticals, microchips, electronics, weapons, and some basic inputs like steel and key chemical production. Those are not low skill sectors.
It’s worth pointing out that those jobs were pretty good in the 1960s, around 90 years since the second Industrial Revolution.
Like literally no one is clamoring for the industrial jobs of 1880. Even though yes these were often quite a boon to the workers at the time compared to subsistence agriculture and other options available. Like laws were passed and people literally fought for better conditions etc.
It seems to me a lot of the work should be. In making the service economy more friendly to being a career and not trying to restart manufacturing which as I understand it will probably be highly automated if it is restored.
Yes, it’s the stability and dignity (and attendant stable middle class quality of life) people miss, not the literal monotony of manufacturing that now characterizes factory work in China or the dangers of coal mining.
I agree but where I find myself more than a little confused is why bring it back is what people want.
Like it seems to me there should be a lot more activity in making the work we have better that isn’t based on throwing hundreds of millions of people back to absolute poverty levels of the 60s.
Manufacturing work, even for floor workers, is not nearly as dangerous or dirty as it was even twenty years ago. So to "bring it back" is to bring back the stability with a slightly improved job, functionally.
Manufacturing today is not similar to the industrial jobs of 1880. It’s far more automated, which is a good thing. Jobs are more technical, and manufacturing onshore is important for innovation and for national security.
Why do you think Germany keeps manufacturing?
I’m not sure how I communicated this so badly. My point was there’s nothing inherent about manufacturing being all the things its described here that was the result of decades of activism and law making and sometimes literal fights. We can make services have a lot of those good things to and the sooner we prioritize that the better.
I’m not anti-manufacturing jobs per se, sometimes that’s really the best option for security, or productivity or what have you. But the view that we can’t have those things without factories seems silly.
I think it’s more that I am not making my point well. Manufacturing onshore advantages innovation in ways that are not easily replaced. This has been a refrain from engineers for years.
Similarly, for national security, there isn’t a good replacement for certain items to be manufactured here. It gives us a wider margin of error for black swan events.
I do agree that we need to make work better in general.
I think it would also be better to engage in what it is, exactly, the CCP thinks they're doing with policies aimed to maintain and expand trade surpluses and hoard manufacturing capabilities. And what smaller countries who use similar strategies think they are doing.
And why more other countries aren't angry about it. If Latin America, Africa the Middle East, India, etc. are going to develop further they are going to need a better industrial base, but that won't happen as long as China and a few others are the world's factory for cheap goods.
Well said. Indeed, the trade has been for high-skill manufacturing jobs for low-skill service work. Rather than the workers being redistributed into new sectors, we’ve been deindustrialized. The fact is that China could produce every manufactured good for the entire world and we could all just ship them raw materials but that is just fundamentally undesirable for many people.
In my experience, that's not been the trade. The trade was low-skill manufacturing jobs for low-skill service work. None of the high-skilled manufacturing jobs were outsourced. Those are all still done here. What was outsourced and mostly just automated was component input manufacturing (e.g., sheet metal panels, molded plastics).
I think the real difference is the wage for low-skill service work compared to the wage for low-skilled manufacturing work.
If a service worker screws up your coffee, I’m sorry, but big deal. If a manufacturing worker screws up, I may not know it for a year, at which point I have a rather costly warranty claim.
Are the rote, monotonous assembly line jobs of old high skill? I think not. There is a reason robots do so much factory work now.
Manufacturing is not just assembly line work.
"The lost appliance factory jobs were high-skilled, predictable and provided the worker with stability and dignity."
Not sure that's actually true, some of it was unskilled and most of the rest was probably low skilled. Managers and workers involved in industrial design were probably high skilled.
PNTR with China accelerated American manufacturing job lose, for sure. But those jobs were on the decline already. They were not going to stick around. I've never seen an estimate, but I imagine the cost of subsidizing the jobs would have astronomical and had disastrous effects on American political economy.
Economists tend to treat the work people do as instrumental rather than preference-fulfilling in itself despite everyone recognizing that basketball players, painters, and actors would not rather sit at home collecting their work income while watching TV instead.
Matt just misses the biggest point here. Specifically on the LG and Samsung appliance factory story. Both have invested $300-$500m to build these two factories. Those are "assets" in United States and once they're built, that's a sunk cost - so optimal pricing strategy will continue to compete costs down to marginal cost. That's exactly why LG later expanded the production line to include Dryers. It's just way more cost effective to build in market once the fixed costs are invested.
https://www.koreatimes.co.kr/www/tech/2024/07/129_343380.html
Are we better off with a highly automated factory in the US or getting our washing machines from South Korea or China? Getting *some* manufacturing jobs back onshore is obviously good for the (mostly high skilled) Americans who land them, but it doesn't strike me as a slam dunk.
This, by the way, touches on one of the major points that is ignored by anti-free trade advocates -- many of the U.S. jobs lost due to foreign imports would likely have been lost anyway due to automation and efficiency improvements. Now, you can take this to the next step and say that automation and efficiency improvements should be restricted (whether by union contract or direct government action), but then you're really giving away the game that the fundamental nature of protectionism is actually to make everyone in the economy worse off for the benefit of the fraction of the population who work in politically-favored industries.
What's your distinction between "anti-free trade" and "anti-dumping". This whole thing started when "The Obama administration also imposed tariffs on washing machines specifically imported from South Korea because the administration found that those had also been unfairly subsidized by their home government."
https://www.npr.org/transcripts/584007212
I don't really see one -- how do you distinguish government subsidization from comparative advantage in natural resources, weather, human capital, etc.? The next effect is the same for the importing country, while generating artificial harm to the exporting country. To put it another way, if the government of South Korea is taking tax money from its citizens (who are less wealthy than Americans!) to spend it on making washing machines cheaper for Americans, then that's a terrible deal for South Koreans and they should definitely vote the politicians who created those policies out of office. In the meantime, I'll enjoy my extra cheap washing machine.
I think the logic goes that once the manufacturing infrastructure in the US has dried up, they'll jack up the prices and it will be difficult for us to respond.
It's interesting. I just see it so completely opposite. I'm way too centered within the power of manufacturing and global supply chains. To me, the idea the Korean government would try to put Whirlpool and GE out of business strategically is - literally - a trade war and not one I'm willing to lose. Personally, I love how this whole thing landed and think the Obama administration made the right calls.
I'll just say we agree that this is "obviously good". Of course we're better off with more foreign investment rather than less. If we allow dumping -- it's a race to the bottom and it's a short term strategy at best because as soon as the local manufacturing base is hollowed out ... boom, foreign government subsidies end. The point with this entire 12 year Korean washing machine story isn't about US protectionism. It's about the virtuous cycle of anti-dumping policies.
Ok, so they end dumping, and then we reinvest in machines, and start buying them again - in the meantime we've invested in something _other_ than washing machines which we're making.
I think I just disagree here. I'm very much pro foreign investment and I'm not willing to risk putting Whirlpool and GE out of business.
To add to this, I think the JD Vance camp would assert that having a domestic manufacturing industry begets productivity gains, as opposed to services which have largely stagnated (and tbd if AI will change this).
That's a good way to put it. I would describe it as, would you rather have more money and inflation, or less money and cheap stuff to buy? Seems to me that having more money and inflation is better because you can choose what you want to spend that extra money on, giving you more agency. But given how much people have hated inflation, I don't think that would turn out to be the consensus. People hated the low wages/cheap stuff dynamic of the 90s and now they hate the high wages/inflation dynamic of today even more. The grass is always greener.
If we're going to deliberately do inefficiencies for the sake of engineering an economy based on manufacturing jobs, then we're also going to have to restrict automation, no?
I don't think I'd take it that direction. Lots of manufacturing capacity is useful in itself. And if the capacity is too much for current domestic demand, you can take steps to increase domestic demand. (e.g. Does every American live in a house with a big kitchen with lots of new fancy cooking appliances? Then we still have room to move more demand from food services to manufacturing/construction. Same deal with full-service hotels vs. RVs. And does every household have a full suite of Roombas? etc.) Or just give the manufacturing workers a shorter workweek and more paid vacations.
I think the additional effect of having domestic manufacturing is that it provides those jobs *outside of major cities* in a way that's difficult to replace with other sectors. Are the construction and green job shortages happening in places like Ware, MA (major trump country in the heart of Massachusetts)? But in a world where robots allow factories to run with dozens instead of hundreds I'm or thousands of people, "bringing manufacturing back" doesn't bring the jobs back. So, I think the original calculus was right--cheaper goods are good--but we still need an answer for how to create value (and therefore build wealth) in areas that don't have the population density to support service economies.
MattY probably needs to look at the recent AER article:
Local Economic and Political Effects of Trade Deals: Evidence from NAFTA
https://www.aeaweb.org/articles?id=10.1257/aer.20220425
What do you hope he takes away from this? Based on the abstract, he already acknowledges the political tradeoffs from something like NAFTA.
The abstract doesn't seem to counteract the economics argument, even this sentence:
" In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses after its implementation. "
That is bad for those counties, but that doesn't mean it was net harmful for the _country_.
And I'm not surprised there were geographic effects - factories don't always easily retool to other things, and you might not build the new business where the old one was.
1) The people did not move to other sectors of the economy. There are large areas of the country that have not benefited from trade liberalization
2) It is part of the argument that the political realignment often attributed to the Southern Strategy and Civil Rights blowback is more of a blowback to deindustrialization and jobs loss due to trade.
3) Even if the net effect is positive, there are distributional considerations that have been ignored for a long time by political leaders in Washington.
1) They still benefit from lower costs etc. Maybe you meant net benefit.
2&3 are good points I agree with, but I'm not sure Matt's article _disagreed_ with them either? 3 is specifically the "concentrated costs" issue.
I think you might kind of have it backwards.
Having an abundant mix of jobs and businesses widely spread across the country was, in itself, a significant economic and cultural asset, not a cost. Before we went full bore into deindustrialization and financialization, most small cities and a significant percentage of towns had manufacturing, regional businesses, regional banks, and a decent range of employment and housing options. People could more easily choose to stay near their birth families if they wanted to and have a decent career, even if they were not in a major city.
Contracting the economy into an ever narrowing number of megacities, by definition, puts upward pressure on housing prices and makes providing housing more complex. To me, YIMBY is responding to the predictable consequences of policy choices that many people didn’t particularly want in the first place.
I agree with that, but can't we also achieve an abundant mix of jobs and businesses without turning back the clock towards the rose- tinted manufacturing past?
The Economic Innovation Group is a really valuable resource on this question. I went to an event of they held a few months back on that sort of "place-based" economic policy: https://eig.org/policy/
No. I don't think so. Manufacturing is unique in offering above-market wage vs. educational requirements and an actual career path. The retail / service sector offers far less wage growth (i.e., there's very few job "bands" in service work, typically just floor and supervisor so the ratio for growth is compressed).
That is certainly true, but our economy is no longer structured to provide the jobs of 50 years ago. We do have a surplus of green tech and construction jobs, but it seems like a lot of Americans don't have the necessary skills for them. I hope we continue to push for effective job training programs, but if we continue to have shortages we're going to need skilled immigrants to fill them.
Our economy is structured by us, and we can restructure it if we choose.
We have negotiated trade agreements to prioritize exporting movies and soybeans, and importing manufactured goods. We have passed regulations that make it hard to build physical things like houses, factories, and power plants, but easy to build new digital services. We have chosen to steadily increase the share of our gdp that goes to providing health services and sending kids to universities.
The loss of manufacturing jobs didn’t just fall out of a coconut tree.
What's changed in our economy in the last 50 years? If you asked me, I think what's changed is the structure of the global economy. Specifically about this post and said differently, LG was *always* able to build a world-class production facility in Clarksville, TN. They could have done in the late 90s when they first entered the US market but they were being unfairly subsidized by their home government. It just took Obama implementing anti-dumping tariffs and then Trump continuing the policy for them to do it. And we're far better for it. This is a huge win.
https://www.lg.com/us/press-release/lg-electronics-to-build-us-factory-for-home-appliances-in-tennessee
https://www.prnewswire.com/news-releases/lg-home-appliance-factory-in-united-states-receives-prestigious-lighthouse-status-301725011.html
These are literally just press releases from the companies touting how many jobs they're creating, which is what you sent me last time we discussed this. I think you need a more objective news or data source on LG's manufacturing efforts here in the US
Also a public companies press releases are probably the most fact checked document after their publicly filed financials. It's - literally- the most objective data source you can get.
So what? Do you not think they're producing millions of washers a year here? That they haven't shifted ~ 100% of US consumed production to the US? Like what, they just made this up? These are real plants, that exist in the real world. There's nothing more objecting that that.
The issue isn't skills.
Unless your job is 100% remote, it's highly localized and the pay difference has to justify moving to where the job is. Even for someone in a stereotypical dying factory town, it's usually not large enough to justify uprooting all your relationships to fill it. If you're from Guatemala, though, the pay difference is life-changingly immense, which is why these jobs were filled by immigrants even before we neared full employment.
Our economy still needs manufacturing, and countries that manufacture on shore have competitive advantages in innovation.
The whole point of the GND was that most of the potential green jobs are not highly skilled -- they're related to construction jobs in that it doesn't take much skill to build a rack of PV cells.
I hate to keep banging the same drum, but the Housing Theory Of Everything is undefeated, as is its "Blame NIMBY" corollary. Solar is now cheaper than coal, but the coal plant's already been built, and it's harder now to get the approvals for the solar plant, the mines to mine the silicon and other materials, retrofitting the houses, etc. than when the coal plant got built.
It's not a mystery. If the private sector was functioning properly, we wouldn't have been hearing about the need for "retraining", because they'd have invested in it themselves. You can't tell me that a former autoworker is too stupid to build a rack of PV cells! The auto companies train autoworkers all the freaking time. Heck, my company does it too; we have all kinds of ads about how we have techs in our factory who used to be hairdressers and shit.
No, the people didn't get trained because the projects didn't go through. We USED to just bounce back manufacturing employment after every major recession with another boom of housing construction, but we reached our "realistic outer limits of sprawl" just before the Great Recession, so it never bounced back and the jobs never came back.
We never did anything else instead; we never built out renewables to create new unskilled jobs. We just sat here on our asses and watched the country crumble and got really mad at each other. Instead of building new shit, we desperately tried to hold onto the shit we already had, for fear we'd lose that TOO.
How is manufacturing unique vs. a trade like pest control (I use pest control rather than plumbing because I have multiple high school classmates that have become fairly well-off via pest control)? I guess the manufacturing we're discussing might be similar in wage/education reqs/career path but did it at scale in a way that individual trades do not?
I'm thinking more manufacturing vs. retail. I think pest control and plumbing and really any trade would be in the middle. If you look at a factory there's more paths upward for an entry level assembly technician. They can become a lead technician then floor supervisor, they can go in to Quality, they can go into sourcing / procurement. There's just more well defined career paths. I think pest control is really just field to supervisor. But yeah, there's a path there too.
I think one change we often fail to incorporate is that population growth slowed.
If you were working retail in 1960, that probably had more upward mobility than a factory because we were building out retail at a quick pace. But that’s no longer true and factories now need many more roles beyond the assembly workers while retail has not evolved similarly.
Building out retail necessarily involves manufacturing jobs--what are the "building out" with?
The track record of groups like this is abysmal, though. At this point, I think they mostly exist because more academic economists need real hobbies, like building model trains.
Did you read any of their policies or know anything about them? Good quip though, people love to hate economists. Sometimes for good reason!
Why would I? It's a formalized cocktail party for people I don't know. It's fun and interesting if you're learning economics in the process but once you've learned all you can from that eavesdropping on other people's conversations, it doesn't serve a purpose for anyone not in the group itself.
Manufacturing on shore has competitive and security advantages that have nothing to do with rose tinted memories. It is an important component of healthy economies, it increases our long term innovation, and it is extremely important in cases of conflict and national emergencies.
Isn’t this the whole nexus of the semiconductor plants and Taiwan flare up? That relying on another country almost exclusively to manufacture something so vital turns out to be a mistake, because we (the US) are not able to defend it from China?
I’m not sure why you’re getting so much pushback about re-shoring manufacturing to the US.
“Having an abundant mix of jobs and businesses widely spread across the country was, in itself, a significant economic and cultural asset, not a cost.”
Well said.
Having an abundant mix of jobs and businesses in a lot of different towns and cities is much more expensive than the alternative of having a few big cities with clusters, in a modern economy where services and information technology are the places of most value creation. It has advantages, but we are paying a cost to have those advantages, by making all our industries more expensive to manage.
Back when manufacturing was the site of value added, there wasn’t as much efficiency to be gained by consolidating in a few big cities (and back when agriculture was the site of value added, there wasn’t much to be gained by having towns and cities at all). But the world is changing, and we now have to pay a cost to have the benefits you see.
No, it really is not more expensive to have jobs scattered more widely. Realize, much technology and service work, including my own job, can be performed perfectly well from home. I genuinely do not understand why you would think, in an era of instantaneous communication, consolidating in a few large, crowded, expensive cities would be optimal.
The fact that both workers and firms seem to prefer it, despite the crowding and cost of real estate, is very suggestive that it really is valuable. Instantaneous electronic communication has many virtues for day-to-day work, but it doesn't seem to replace people's interest in occasionally meeting up over drinks or a whiteboard with actual and potential collaborators, or to replace the importance of in-person networking events (both formally organized ones, and the happenstance that occurs when you just happen to live in the same neighborhood as many people who work in your field).
Secondary and tertiary cities are losing out to resort destinations and big cities with the perma-work-from-home crowd, but big cities don't seem to be losing any momentum outside their office districts.
“The pandemic simply accelerated migration trends that had already become established over the 2010s in much of the country. Migration to smaller, affordable metros areas with fewer than one million residents, like Knoxville, Tennessee, doubled during the first year of the pandemic while migration out of the largest metro areas also doubled in 2020.” https://www.coopercenter.org/research/remote-work-persists-migration-continues-rural-america
I have a perfectly decent six figure salary. Senior systems engineer. I would not work in a large city if you offered me a seven figure salary. Life is short and I am not about to waste it looking at concrete.
Workers very obviously do NOT prefer it, given that tech workers scatter to the four winds given half a chance of remote work.
Big cities are losing population and remote workers do not want to go back. Secondary and tertiary cities and exurbs are growing with the move to work from home. Look at the Census data. It’s not equivocal.
Most technical people I work with primarily collaborate remote whether they’re in or out of an office.
I think the challenge of that kind of ecosystem is, it's a lot like the competitive balance in american sports leagues- there have to be lots and lots of rules and overall management in general to try to create a sort of situation where you'd have these clusters of very mixed businesses, because that runs against every notion of economic sense.
And i'm not sure people who favor rural lifestyles want that kind of busybody management that it would take to do that.
Well, it was in some sense an economic equilibrium rather than a rules-based order, but two major changes appear to have removed the loadbearing parts of that equilibrium:
(1) The Internet allows for remote, centralized provision of formerly localized services (banking / ecommerce / death of malls), and creates ruthless optimization efficiency against the success of more localized but less optimized competitors (most businesses not named Amazon). This looks like aggregate consumer surplus but the number of unoptimized players is way, way higher than the number of optimized ones sot the distributional / redistributional effects are particularly acute for the labor market.
(2) Cities in the 70s-90s were famous for crime, filth, crowding, and terrible public schools — basically the 1989 Batman movie version of Gotham City. Arguably the only one of of these that has been essentially fixed is “violent crime” (with filfth perhaps ameliorated) but it seems like that was by far the most important one that disincented people from flocking to cities for economic reasons.
Item (1) removes the “pull” factor (localized labor demand for localized goods and services) supporting a decentralized economy, and item (2) removes the “push” factor keeping people away from cities in spite of the more liquid labor market they represent.
I think you're missing the actual big one—the rise of tightly-monitored on-schedule low-shrinkage intermodal shipping and the attendant collapse in transportation costs (which arguably was the core driver in your (2) ).
Well said.
I would argue that the greatest contributor to global wealth in the last 60 years was the shipping container.
Great book on it: https://en.wikipedia.org/wiki/The_Box_(Levinson_book)
Oh, my comment was absolutely shamelessly plagiarized from The Box.
I largely agree though I think (1) comes from a broader effect of connection in the country- as deindustrialization was happening before the internet. West Virginia was on an industrial downturn long before that happened, and I think the reason had more to do with infrastructural technology and vastly improved logistics, which made location for non-retail industry just less important.
Nowadays, the reason for the Toyota Plant to exist in West Virginia is the cheap labor, not being close to some other industries that supply it, because the infrastructure to ship in components is so optimized.
What you are describing is still a cost. The economy contracting into megacities happens because it is more efficient. The cost of everything kept going down during that period because everything was getting more efficient. Spreading out again would raise costs. There would be a cultural gain of course, but it's still a tradeoff.
The economy contracted into megacities, in large part, because we stopped enforcing anti trust and we massively weakened the New Deal financial regulations. The economic record of those mergers and consolidations and financialization included significant losses and inefficiencies.
Certainly with our current level of technology, the argument for big city consolidation has never been weaker.
This neglects distributional effects. What if instead of shutting down a factory and building more roads, we shut down the factory and the FAANGs add a few more engineers and designers? “Learn to code” was never realistic, and I think “compensate the losers” hasn’t worked out in practice.
One quarter of the US population is men with below median IQ. If we export all of their jobs specifically, I think that’s going to have bad societal consequences that aren’t captured by very basic models.
That problem combined with the twin to free movement of goods, that being free movement of people, is the source of political crisis throughout the developed world. It is the biggest cost that hasn't been priced in, at least not adequately. Just as it doesnt do us any good for amoral international market forces to result in us selling the Chinese the ropes they use to hang us, it doesn't do any good to allow for those same forces to undermine the legitimacy of liberal democracy.
I had long bought the Friedman style argument that the key to world peace is trade and economic interdependence. I still buy that for the most part, and it's good to see Matt stand firm on at least the economic case. But Matt and a former Slow Borer have been able to steadily chip away an exception in my mind regarding what China is doing. Matt's first moment of change that I remember was the Houston Rockets GM getting flak over supporting Hong Kong. And the other question is whether China doubling down over and over in manufacturing is in anyone's best interest, instead of making the jump to more services. It's a weird place I feel I'm at, one I didn't think I'd ever be. But this is why I read publications like this, to be challenged.
But those don't challenge the underlying claims about beneficial effects of trade on a country. They are concerns that might counterbalance those benefits.
Perhaps the challenge is this: Trading with the US is beneficial for China, and more beneficial for them as they are poorer and more reliant on the trade of manufactured goods. Therefore, we should demand China pay for this benefit, either through changes to their human rights policies or through actual cash.
Do you think that it's good if, say, Walmart says that "you're town needs us you better give us a bunch of tax breaks or we'll leave"? Maybe it's the economically rational way to behave but I've never heard people argue that it's normatively desierable to use your leverage to take things from the poor so you can give to the rich.
And I'm not even convinced that this is true. Perhaps if China wasn't a democracy but at this point I fear that Xi might benefit if he can blame the lack of continued strong growth on western bad behavior -- potentially to out geopolitical detriment.
Since I'm not an owner of Walmart, no I don't think that is good. But as a citizen of the US, I do think it is good for us to use our leverage for our benefit.
Elsewhere in this comment section, you highlight the benefits to the Chinese people from the global trading regime. But you should not be surprised when Americans care more about American prosperity (even if defined in non-economic terms) than Chinese prosperity.
My emotional reaction to this line of thinking is to say fuck the Chinese and their prosperity. If it results in a hostile authoritarian government outgunning us then horrible material deprivation of their people is a price I am willing to pay to prevent it. Maybe if they have it bad enough it will result in them fixing their trash government and the trash that runs it.
But that's the emotional reaction. The mature reaction is to say we need a leadership ready to pivot to new facts. I think it's ridiculous that a lot of obviously anachronistic clearly wrong ideas about the economy are floating around out there in light of developments over the last 20 years. Free trade is generally good and helpful and we should deploy it strategically and in our best interest, but not dogmatically, and not at all costs.
This viewpoint sounds dangerously adjacent to nuance!
Being part of a collective doesn't somehow create an excuse for ignoring moral demands. The US people should be able to look at what the US government does and be proud of that -- it's acting in their name and it shouldn't do things that they wouldn't be proud to do as individuals.
Yes, of course Americans will tend to be more concerned with the welfare of Americans than other people. But even though I care about my family more than I do other people I wouldn't threaten to shut down a profitable businesses I ran unless my workers - who say can't move to find other work -- accept a giant pay cut so my family gets all the surplus.
That doesn't mean the US should just give China what it wants but there is a huge difference between asking for our interests to be treated fairly (respect IP accept imports) and saying that we should threaten to harm us both on the grounds it will hurt them more so they literally pay us money.
Is it moral for the US to be helping China become stronger when it uses that strength to abuse its neighbors?
Xi Jinping likes this comment.
I still think that trade has made the world less militaristic. China hasn't invaded anyone in a long time, that's still something historically. It's just not enough to guarantee world peace.
I think China is a specific case and doesn't directly address the larger question of "free trade -- good?"
If Apple moves all iPhone assembly from China to India then I think the discussion goes somewhat differently.
China increasing manufacturing is great for Chinese peasants and former peasants. Actual Chinese peasants still outnumber Americans of all descriptions.
Even without the China debacle, it seems to me that the arguments for free trade have gotten weaker as we’ve gotten richer and goods have made up a smaller fraction of consumption.
1930s: Should we give up some [predictability/economic sovereignty/independence] in return for a meaningful improvement in living standards for a huge population of impoverished Americans? Sure!
2020s: Should we give up those same things so middle-class Americans can have slightly cheaper fast fashion and consumer electronics? That’s inherently a tougher sell I think.
“the arguments for free trade have gotten weaker as we’ve gotten richer”
You could argue that this is a corollary of the diminishing hedonic returns of increased wealth — happiness increases only as the log of the number of Amazon packages you receive. At some point, free trade has brought you enough widgets that you start prioritizing other non-widget outcomes.
And yet a modest increase in inflation above trend made cost of living the number one political issue since it happened.
The benefits of slightly cheaper goods (though I'd argue the compounding gains of free trade have made goods MUCH cheaper, and you don't get the big savings without sustained progress) may not be felt all that strongly by the average person, but people are very sensitive to when those gains become losses.
I am not particularly rich and I have to think really hard to imagine a material object which would make me happier. But I can imagine dozens even hundreds of social experiences I would enjoy. Anyone who lives in a family making over $250k is in the global 0.5% and the world historical 0.1%. More widgets are not the answer.
Even if this were fair instead of merely witty, it overlooks the opportunity cost of capital and labor allocation.
If the US had kept fast fashion and consumer electronics on shore over the last thirty years, that would have reverberated throughout the economy. In some cases, it wouldn't have mattered. Fewer "Game of Thrones" Lego sets probably wouldn't have stung too badly, but maybe we get worse hormone blockers, or maybe electric car viability doesn't happen until 2050.
It's hard to calculate, hard to sell to the public, and might be worth it anyway to claw back some predictability / economic sovereignty / independence, but worth considering, imo.
This seems like income redistribution in a indirect way, so you have to determine which option creates the smallest deadweight loss: taxes or protection for non-comparative advantaged industries?
Well, distribution is part of it, but what I really mean is that is that case for prioritizing economic outcomes in general gets weaker the richer you are, because of diminishing marginal value of wealth. Also, as tradeable goods get cheaper and form a smaller part of our consumption basket, interventions to further reduce the cost of tradeable goods have a diminishing impact on real living standards.
So, if I want to pursue policy X, for whatever reasons (distributional, aesthetic, national security, long-term productivity growth, economic sovereignty, predictability, environmental, etc.) but then you tell me that policy Y is better because it will reduce the cost of widgets by 10%, that’s a very compelling argument if widgets make up a large part of household budgets and everyone is very poor. But if we’re all rich and the amount we spend on widgets is tiny, at that point why would I sacrifice anything else I value for cheaper widgets?
So, agree that non material needs are becoming more important. But in other ways there is more value to international trade than ever before. Container ships and general logistics improvements mean transportation costs are way down. Another feature of trade is it increases the size of markets (same argument why cities are economic engines), which enables both more niche products and scale driven efficiency. Better information technology and the internet supports both giant multi national companies and a shark tank product with half its sales being international.
Changes in the price level based on moving to more or less trade should be one time changes, without an effect on long-term inflation rates, I think.
It's true that any proposal to increase the price level should be expected to result in a major one-time political backlash.
The problem with the neoliberal consensus on China, I think, is a bigger glitch in liberalism itself that is hard to grapple with.
A society that promotes individual liberties and rights will often prosper, but those individual liberties can make it vulnerable to coordinated attacks. (“The capitalists will sell us the ropes we use to hang them.”)
Individuals can freely trade with geopolitical adversaries that will opportunistically cut off supplies. The society might grant votes to hostile sub-populations that have no interest in promoting liberalism once they gain power. (Not necessarily likely, but it could happen.) The list goes on…
I’m a fan of liberalism, but I don’t think this drawback is often discussed in a realistic way.
This is why liberal societies have to teach their new generations why liberalism is good. Hannah Arendt wrote that "every society is invaded by barbarians, we call them children." If the people do not believe in liberalism it won't be sustained, because liberalism is an anomoly amongst humans, and not our natural state.
In what way has the old consensus been disproved? Seems like all that's been disproved is a strawman view which claims that China would magically become a democracy in 20 years if we just did a bit of trade. I can't say that literally no one ever believed that but it doesn't seem to be the consensus you identified.
The old consensus -- as illustrated by the quote you include [1] -- was that trading with China would make citizens richer and freer and war less likely **relative to the world in which we didn't open up trade with China**.
The consensus never claimed that trade was the only thing which could influence the level of freedom in China or it's level of belligerence and thus it didn't believe that things like internal leadership changes couldn't create bumps on the road. But there is every reason to believe that initial consensus was correct [2] and that Xi's backsliding was simply the usual consequences of internal Chinese politics not something we made more likely with trade.
It seems like what's happening now is just that people are just now more worried about the costs that policy always involved -- a richer China was going to be a more capable China. Personally, I think the trade off has been worth it -- not just because of the immense good of raising 100s of millions out of poverty -- but even just for the US as I fear without this trade policy instead of Xi's mild backsliding we'd be back to a something more like the relations we had in the late 70s.
But none of that is (meaningful) evidence against the prior consensus and before we abandon that position -- which had alot going for it -- I think we need some reason to believe it didn't improve things over the alternative in exactly the way predicted.
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1: The whole quote is comparative language ( "accelerate", "more likely" and "will rise.". but compared to what? The natural answer is the world in which we didn't pursue more trade with China. Meaning that to disprove the consensus you need to argue that things wouldn't have been worse if we hadn't opened up trade.
2: The Chinese government obviously cares about economic growth as well as political control. If we'd imposed more barriers on trade the costs to the leadership of imposing more effective information control measures would be greater so they'd likely engage in more of that. Also less trade would mean the costs to getting into a conflict with the us would be less and -- as rich citizens tend to both be more globally informed and have more to lose by going to war -- the domestic political costs are higher too.
Weirdly aggressive response (even though I'm partial to it). The Old Consensus made plenty of (non-comparative) claims about the inability of governments to censor the internet that turned out totally false.
It's aggressive (tho I toned down the language since I didn't realize quite how aggressive it came off as) because I keep seeing people use the fact that China isn't now completely free as if it is evidence that there wasn't a benefit to freer trade policy and that just doesn't follow.
And there are all sorts of things people believed about China back then which is why what matters is what Matt identifies as the repudiated consensus so merely finding some other thing people were wrong about doesn't save his argument [1].
But, having said that, I'm not convinced those claims were wrong either. The great firewall is extremely porous and many people have access to pretty extensive information about the world.
I think what changed is our baseline. Back when those arguments were made the internet wasn't all pervasive and we had in mind the idea that people who really cared could get basic information. And they absolutely can. I don't think the fact that we also use the internet for so much more really changes that since the baseline then was people getting almost all their information from state broadcasters.
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1: Whether or not you want to call a consensus repudiated or vindicated is often a choice of level of generality and description. You could equally well say the Obama admin view about healthcare was vindicated in that it did hugely improve medical coverage for many Americans or call it repudiated as many of their more particular theories didn't hold up.
That's why what really determines the substance of a piece like this is the author's choice of how to describe the claims they see as repudiated. Matt picked a description for which he then fails to give any evidence is false. If you don't actually identify the thing that's being rejected then you can just play guilt by association games to reach whatever result you want.
It is not at all clear that countries at China’s level of development are averse to war. Russia, for example, clearly isn’t.
Again, no claim was made about them being overall adverse to war only that they are more adverse than they would otherwise be.
And I think that is clearly true. Even Putin in Russia seems to feel constrained not to do a general mobilization especially in the richer parts of the country. Go back 100 years and he wouldn't have hesitated and at least part of that is because of economic and resulting social changes.
Sure, but we don't really live in a massive parallel Monte Carlo simulation where we can reset to the initial conditions and then run the experiment again. We only have the one simulation and we can't reset it. Ultimately, people care about whether a war will break out or not. Since your post contains no numbers or estimate of how the probability distribution changes, it's not that operationally useful. Going from 90 to 10% would be useful to know. Going from 90 to 85%, not so much.
I'm not the one who made the claim. Matt's post claimed that the view that increasing trade with China would have beneficial effects relative to not doing so has been disproved. Everything you said is a reason to critisize Matt and agree with me that he hasn't justified his claim that the increase trade strategy didn't succeed.
Basically, Matt's argument is the equivalent of saying "We got rid of rent control and housing is still expensive so we should accept that the argument that rent control was harmful was mistaken." Sure, maybe the right thing to say is we don't know but it's still a reason to reject Matt's claim.
It depends on what it means for a country to be averse to war. If you mean the organizational leadership, then a lot of it depends on how that leadership is driven by or drives public opinion.
That is likely true with the current public opinion. But that public opinion was also heavily driven by organizational leadership, and it's very plausible it wouldn't have ended up where it is over three decades of global trade without that leadership.
Matthew, your discussion misses an important point. It's not just about employment/unemployment rates. It's also about the quality of the jobs and the benefits that come with them. I watched over the last thirty years as the old manufacturing base of middle America - ALL of it, from small shoe factories like the one in Dixon, MO to medium sized appliance manufacturing like washer/dryer plants in Michigan, to huge automobile plants like that in in Fenton, MO - was destroyed as American businesses sent these jobs overseas to cheap Chinese and Mexican labor. Most of the jobs that have replaced these American manufacturing jobs are service industry jobs with lower pay, lower benefits and lower protections of all types. We need those services but the jobs suck and many of them have gone to (essential) immigrant labor.
The middle American that was displaced from that old manufacturing economy is now much of the aggrieved MAGA crowd and, policy notwithstanding (I agree with little of their social or economic policy) I totally understand the grapes of their wrath, a generation sold out to Walmart and Chinese labor. And Democrats should have seen it coming. It wasn't Bill Clinton's idea, but it was his biggest mistake. And let's remember, Hillary WAS on the Walmart board. This was unwise compromise with rich American and primarily Republican businesses for which Democrats have ironically paid the highest political price ever since.
I don't disagree but which washer / dryer plant was closed in Michigan and where was it moved? It might have just been moved to the rust belt. Best I can tell is nearly all washers and dryers are now produced in the USA. Whirlpool and GE have always made nearly all product lines here. Then Bosch built their factories here and then LG and Samsung. Those five probably have like > 90% market share.
Sorry - that was refrigerators and vacuums...Electrolux in Greenville, Michigan.
Two things I think Matt should expand on if possible in later posts.
1. The international trade system has prioritized cheap goods but is also dependent on just in time inventory and complicated supply chains. It is currently fragile, as you see with car parts or milling machines in Russia or cybersecurity updates. We don’t seem to be very good at creating robust trade flows, though we are better at resilient ones.
2. Why didn’t China politically liberalize? Why was the 90s consensus wrong? Was it contingent on specific events that the US had limited control over?
1. I would also love to read about this from Matt, but I think it's a fairly simple case of redundancy vs efficiency. Redundancy is safe but inefficient. Pretty simple concept, but since the future is hard to predict it's difficult to know how much redundancy is enough. Do we plan enough redundancy for a once in a generation event? Enough for a once in a thousand year event?
2. I think this clearly just comes down to Xi coming to power. China was liberalizing until that happened.
I’m not so convinced that expanded trade with China has been a failure. Has it not made both nations far more prosperous?
I think raising hundreds of millions of Chinese peasants out of abject poverty was a very good thing, morally. I'm sorry a relatively small minority of Americans had to pay the cost for that moral good, though. We really should do a lot more to reward them for that noble sacrifice.
I remember in college, liberals and lefties would say, "If we have both free trade and domestic job losses, we should provide some sort of monetary benefits to the people who lost their jobs." Then conservatives would complain this was welfare and also unfair to only reward those who lost their job due to trade, not for other reasons. Then a decade later, the GOP is rewarded since the people who lost their jobs and felt economically left behind were bitter. It's kind of sick.
Economic integration with China has raised the risks of unilateral disruption via, say, invasion of Taiwan. Beijing power structures are opaque, but surely for every Taiwan hawk there is an oligarch pointing out how many jobs will be lost if the west imposes sanctions.
I don’t know how you quantify that, but it seems like it should be included.
Then again, the central government seemed pretty immune to criticism of COVID lockdowns despite the economic damage.
>If imposing tariffs on Korean washing machines results in the construction of new appliance factories in the United States, that is a cost of the policy, not a benefit.<
Milton Friedman used to say something like: "I can't imagine a better deal than trading in these green, wrinkled, dirty pieces of paper called 'dollars' for....all these nice, useful products foreigners lovingly make for us that improve our lives."
Milton is also trading away the ability to make useful those products and knowledge of how to make more useful products in the future. Look at what sucker's the Koreans were to take dollars for technological growth all of those years. I am sure they regret that development!
And to be clear I don't begrudge Korea or wherever their development, but the simplistic Milton view that these countries with deliberately trade surplus-y jobs are suckers is dumb. Matt's essay, for example, would be better if he engaged with what he thought the CCP thought they were doing and other persistent trade surplus as development strategy nations think they're doing.
>Milton is also trading away the ability to make useful those products...<
No he's not. We still have the "knowledge" of how to make cheap patio furniture. Americans rightly choose not to employ that knowledge in pursuit of low value-added manufacturing. I mean, I'm sure you've seen those charts showing America growing leaps and bounds more strongly than other rich nations (Mississippi is now richer than Britain!). We didn't get that way by focusing on economic activities that lower productivity countries can easily emulate.
>Look at what sucker's the Koreans were to take dollars for technological growth all of those years. I am sure they regret that development! <
I don't claim Koreans were suckers for trading with America. Why are you inferring this? Parties don't generally engage in trade unless it's mutually beneficial!
The Milton quote very much does imply that anyone running a systematic trade surplus trading "useful" products for "green, wrinkled, dirty pieces of paper" is a sucker. He would not have used the adjectives he did if he weren't.
And, of course, computer chips or EV's are not cheap patio furniture, which is an odd example to use when discussing either Korean economic development or Chinese trade strategies.
Econ text books would make a lot more sense if instead of talking textiles for toys and lumber they talked soy beans for microchips and advanced technical know-how. Or at least the stakes would be a lot clearer.
I think there is a reason they always use t shirts and toys.
Sure, there is a strategic, but not economic, argument for making chips domestically. I'm not sure the same can be said for, say, washing machines.
It depends on how one defines the strategy. I think critics of neoliberalism think the strategy should prioritize things like community stability, national defense or climate change over maximizing GDP or National Income.
I think this suffers from a non-probabalistic view of history. Yes, Xi came to power and wrecked the halting, contradictory liberalizing reform process in China. If this was inevitable, then Clinton was wrong in his comments. However, if you take the Clinton quote from Matt's piece and ask if it was true of China in 2012, I'd say it was more true than false. Certainly it is wrong to say that it was "wrong". Things could easily have worked out differently.
“American chicken is considered unsafe in Europe, even though as far as I can tell, when Europeans visit the United States they eat the chicken.”
I don’t have any strong opinion on which side of the dispute is right, but I don’t think this fact is particularly indicative. It’s very common for Americans to visit foreign countries with laxer food safety standards and eat the food, and I don’t think most people would consider this evidence that American food safety rules not followed in e.g. Mexico should be repealed.
If you want to convince us that opening up trade with China didn't make the country more free, less tightly controlled by the government etc than it would have been otherwise don't you need to tell a story about how things would have gone if we hadn't pursued freer trade?
I mean you wouldn't argue "we repealed rent control in X city but renting is still expensive so it was a mistake" would you?
In the sixties and seventies, the very small town my father was born near had a manufacturing facility that also hired people with advanced degrees in STEM. It employed hundreds of people.
In the seventies and eighties, the small city that he moved to, to start a business, had two regional banks, a regional transportation company, and multiple nearby manufacturing plants.
By the 2000s, almost none of that was left. I moved to exurbs of larger cities in Virginia, because I wanted to have horses and I could not get a professional job in those once thriving areas.
The regional banks didn’t move to China. They moved to Charlotte, NC, when interstate banking was legalized. That did cost us in terms of geographically distributed banking jobs, but it gained everyone in access to bigger banks. This is related to, but distinct from, the gains and losses of the move of manufacturing to China.
The regional banks consolidated. They moved to Charlotte and Atlanta, and suddenly small businesses had much less access to loans, and most consumers got zero benefit from larger banks. This was all part of rolling back the New Deal protections and moving the economy to lionize finance and denigrate making things.
I had in mind the comparative claim about what China would have been like absent freer trade. I
Regarding this point, first note that no policy we take prevents china from trading with other countries so only domestic consumption can be protected and it's
not clear how much of that is China per se (I suspect that some other country would have stepped in absent China like India) and how much is the result of technological changes as well.
But the loss of those kinds of jobs is very much real and in an idea world the government would have done something about it. For instance, I'm a strong supporter of UBI and believe we need to be working to transition to a society where working for wages is optional (if we don't we risk trapping people in jobs for no reason but to give the very rich extra status).
But what we shouldn't do is reject direct government intervention via transfer payments because it's somehow handouts and pretend that tariffs aren't equally handouts via a less efficient mechanism.
I am broadly supportive of a generous tax-and-transfer system. But if you think a UBI replaces what a good, high paying job provides in terms of dignity, purpose and stability, then I think you are wrong.
I'm not sure people would want the government to pay their employer to employ them if they understood that was the situation rather than giving them the money and I dunno how much that matters.
But, finding dignity and meaning outside of work is a fundamental problem we need to overcome as a society. We are getting very close to the point where virtually all of our actual needs and all but the most complex manufacturing will be provided by fully robotic systems.
We face a choice as a society. People have a near infinite hunger for status and human labor would still be rare so we could keep everyone working making things like handmade mechanical watches or other things bought almost entirely for people to show off their status (if mechanical watch makers had always been all half as productive everyone would be just as happy with a few less complications on their status symbols). But this means we force everyone to always be running to keep up with the Jones and always worried that they could lose their job and end up forced out of their neighborhood (even if there is cheap housing elsewhere).
Or we can recognize that we need to transition away from the idea that we should find our meaning in a traditional job and look for it in personal projects (writing novels, research whatever) our religious and community organizations etc etc.
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Depending on ai we may still need various kinds of software development but there are limits to how many people can be productively employed this way especially if it's not your thing so most people won't be employed in the part of the economy actually making 'useful' stuff.
Although I disagree with your belief that there will be some post-robotic, AI world where products and services appear with minimal human interaction, I do agree with you that we need to figure out ways to provide meaning and purpose outside of traditional employment.
My dad’s job then was a senior industrial chemist. Not sure that’s what you had in mind as “those kinds of jobs.” Manufacturing brings a host of secondary technical jobs and brings significant competitive and national security advantages. UBI does not.
Also, I wasn't aware that was the type of job that was particularly affected by tariffs. Tariffs can't prevent the importation of know-how or research. There are different problems affecting the incentives for companies to engage in research but it's not really a matter of tariffs (except insofar as we can offer to remove them for IP protections).
No it's not but I’m not convinced that we benefit rather than are harmed by producing weapons etc domestically rather than purchasing them from our allies. Sure, we don't want to buy our weapons from China but our military is falling behind China in stockpiles and naval vessels because we won't buy from the much more efficient South Korean shipyards.
I don't think any of the looming security threats we face involve the serious possibility of a protracted war that results in an effective blockade of our ports — we kept up quite a bit of shipping even in WW2 and we aren't concerned that China is going to invade the continental US so if we are facing a multi-year war where we can't import arms from Europe, Korea, Australia and Japan it's hard to imagine we haven't either already lost or let the conflict go nuclear (or we’re doing something so awful our allies won't even sell us weapons).
The US already manufactures its own strategically important weapons. IIRC it’s the largest weapons manufacturer in the world. Much of that is because of classified technology that we don’t want created overseas. Shipbuilding is a weak point for our capacity currently and the Jones Act complicates things.
For other industries, the benefits of innovation from manufacturing just do not happen if you import goods. It’s generally recognized that manufacturing and innovation go hand in hand, a recognition reached independently from the current political climate.
Manufacturing also has ripple effects in communities, strengthening smaller communities and providing a base for other economic activity. We are unlikely to match Germany in percentage of manufacturing, but an increase in manufacturing activity would be beneficial both to increase our innovation and to stabilize our political and social environment - benefits that occur even if individual factories employ modest numbers of people.
Logistics were a huge issue during the pandemic. One bridge in Baltimore caused significant issues just recently. The logistics of moving goods within a country is going to be simpler than shipping, even with modern efficient transportation. It’s efficient, but that efficiency comes at the expense of resilience.
We manufacture some weapons systems in the US, others we buy from allied nations. We probably want to keep the most secret aspects to ourselves -- for instance the way we don't export the F22 (which we tragically cut production short far too earlier on crazily exaggerating the unit cost).
But leaving aside secrets and special IP, what's weird about this argument is the way it seems to track the borders of the United States. I mean Hawaii and Alaska are far away so why should we treat manufacturing there different than manufacturing in allied countries? And if the argument for the benefits of manufacturing 'at home' works then why doesn't it work between all the states? Should each state have their own washing machine factory? Maybe tariffs (imagine it was constitutional) to encourage local manufacturing?
I mean, imagine that after WW2 we'd decided to integrate our sector of west Germany as a new US state. Presumably, that shouldn't change the relative benefits of locating non-secret manufacturing there or in the continental US. If it's merely a matter of distance/logistics than those arguments presumably apply as strongly to Hawaii and Alaska as other countries that have substantial shipping links with us. Aside from concerns about state action/interference (e.g. cutting off supply in the middle of a conflict which I think isn't much of a concern if we aren't acting horribly from countries which depend on us for nuclear deterrence and host large numbers of US troops) the artificial barrier of what country it is shouldn't change the economics and logistical concerns of whether or not it makes sense to specialize between two locations and ship or duplicate the same production in both.
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Regarding the pandemic and logistics, note that if we ever need massive amounts of shells or other military gear we already need to be able to move it halfway around the world (unless it's a protracted war with Canada) so I think we can assume that -- say by paying a bit more and asking people to endure a bit more risk -- we could have gotten stuff moved to the US as well as to the fight if we'd had a war.
Also, I don't think the Jones act really matters for constructing Navy ships and it does encourage US construction what it discourages is the use of ships between US ports but I agree it's an issue for transport and logistics concerns.
While I am broadly sympathetic with MY's view and I do fear we are going to over-correct toward protectionism, I think this summary of the "free market" view from the article points to the tension in trade policy:
"Similarly, if we need targeted protection to create a battery supply chain that does not depend on Chinese factories or Chinese inputs, that’s a cost. The benefits of improved batteries, which are incredibly real, are the benefits to consumers of getting better and cheaper batteries. The way to maximize those benefits is to get them from the cheapest possible source, while allowing American capital and labor to focus on its comparative advantage."
To me, this sounds like something Alan Greenspan would have said in 2006 when he still believed that markets were fundamentally efficient if we would just stop poking them. The assumption hiding in plain sight here (which I think we all see now) is that the price signal ("batteries from China are cheap") is conveying efficiency information ("China's really good at this, let them do it").
I think there is a new, fuzzy, broad consensus that markets can be really imperfect, especially when they have high capital costs, friction, or intersect with politics in weird ways. Some of the disunity among anti-neoliberals is what to do about this. Do we try to 'fix' the market with careful market structure, do we regulate more, what kinds of interventions make sense. (Coming from the left and being a nerd, I'm sympathetic to the moderate left "design markets to work view". For a really different view, listen to Oren Kass on the Ezra Klein podcast a few weeks ago.)
The biggest change in how politicians talk about economics and china post-trump is that industrial policy is no longer a dirty word, and I think this is down-stream of a recognition that the free market will give us an outcome, but maybe not one we like and maybe not for idealistic reasons.
Could you give an example of how one would design a market?
Yes, poorly, as it's not my area of expertise, but rather something I have read about. My understanding is that when center-left think tanks talk about market design, they're talking about how regulations limit and structure the incentives of market participants, and thus change how the free market actors behave.
Some random examples:
* If we think that having a small number of large participants in a market is bad, we can penalize "bigness". For example, in banking, you could have higher capital requirements (as a percentage) on businesses with larger balance sheets.
* A deregulated electrical market could be built around spot prices, or some other mechanism (e.g. auctions) for future power. How power gets priced in the market will affect what kind of power generation gets built and how it gets paid for.
* We have compulsory licensing for covering a song but not for sampling it. This makes covering songs economical and sampling lots of songs economically prohibitive. (We kind of left that last thing up to the industry and ... that's what it came up with.) Pop music is an art form made in a commercial context, and how it comes out is affected by the regulatory environment.
* Obamacare put a floor on the minimum coverage health insurance could cover, made it mandatory for everyone (e.g. including healthy people) and threw in a bunch of subsidies. I think one of the ideas behind it was to "fix" the health care insurance market, where healthy people would opt out and leave the insurance companies facing adverse selection (and where the insurance companies would then make money by trying to hose the sick people who weren't going to be profitable anyway).
Cass's argument in the EK podcast is that intervening in markets to make them better (with a large number of small interventions) is a lot of market interference, so the true free market fundamentalist's best refuge is to do a small number of very large interventions (by becoming protectionist).
I think Cass's view is wrong, partly because across-the-board protectionism is going to result in a ton of lobbying for special favors by American businesses, and partly because I believe that good market design is something we have to do - there is no perfect default state of nature for capitalism.
One option would be free trade only among peer nations with similar wages and environmental rules. If you want a BMW i4 made in the EU, great. If you want a BYD Han then the answer is no or the answer is yes with a massive tariff designed to eliminate wage and environmental arbitrage.
TPP, or this kind of "fair trade with similarly responsible partners" is to unrestricted global trade as "good market design" is to fully deregulated domestic free market capitalism.
Strange to write such a long article without a single dollar sign or numerical trade flow. I’m far more interested in how many and what sort of widgets we are buying from China than the abstractions people devise to rationalize these flows.
Matt basically assumes that full employment throughout the United States is a stable feature of our economy. We may have full employment in most places now, but there has been significant periods of 5% or even 7% unemployment, and there have been pockets of the rust belt with higher levels of joblessness. If an American factory shuts down, that’s a real cost until the labor and capital are reallocated. If we stop buying Korean washers and put unemployed Americans to work building washing machines, total US production increases. Free trade is a great way of curbing inflation during good times, but it can aggravate unemployment during bad times.
I feel like some better quantifying the dispersed benefits of trade would be very significant.
Like living in a city that basically never has had any manufacturing base at all and working in services my whole life any benefit is a boon. But it would be nice to really understand how much sacrifice people are asking for.