Guest Post by Tom Luongo
I’ve been making arguments for months that Donald Trump’s trade war with China is the height of stupidity. While Trump has the power to do what he’s been doing — sanctioning actors and applying tariffs — some power is best left not used.
The simple fact is that America is uncompetitive. This is at a deep and structural level. It’s at an education level. And this is something Trump’s trade team and his adherents refuse to admit.
When it comes to manufacturing and assembly, U.S. workers are not worth the money they are paid. Period.
Don’t take my word for it. Take Tim Cook’s. In an eye-opening interview from the end of 2017 Cook explains the basic problem with the U.S.
And China has an abundance of skilled labor unseen elsewhere, says Cook:
“The products we do require really advanced tooling, and the precision that you have to have, the tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here. In the US you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China you could fill multiple football fields.”Cook credits China’s vast supply of highly skilled vocational talent:
“The vocational expertise is very very deep here, and I give the education system a lot of credit for continuing to push on that even when others were de-emphasizing vocational. Now I think many countries in the world have woke up and said this is a key thing and we’ve got to correct that. China called that right from the beginning.”
Is this Tim Cook talking or Mike Rowe?
Rowe argues all the time that “we don’t value work, anymore.” VoTech schools struggle. Thousands of solid, honest jobs go unfilled. Kids are sold on the idea of college as the only path to a good job and a stable future.
And that is simply not true. The reason it is no longer true is because of the simple adage of Ron Paul’s, “When you subsidize something, you get more of it.”
We have diverted so much money and capital to education that we have cheapened its value in the labor market while encouraging two generations of kids to go heavily into debt to chase some dream of fame or fortune that had an ever-shrinking probability of ever coming true.
$100,000 for a Women’s Studies degree will not train you to run a production line. It won’t get your air-conditioner fixed. And it won’t prepare you to take responsibility for your wasted time and energy.
We hear this all the time. “Job Openings are at record levels” and they are according to the BLS.
But the flip side is that wage growth has been stagnant. And it is only just now approaching something close to sustainable. This speaks to a labor market completely out of phase with the needs of the society. You can laud Trump for fixing some of this, certainly, but it’s not going to fix the underlying structural problem of malinvestment.
This is not China’s fault. This is our fault. It’s our fault for diverting trillions upon trillions to uneconomic and wasteful projects and staggering amounts of bureaucracy to administer them over the past two generations.
It’s our fault that a cultural malaise of self-indulgence begun by the Baby Boomers has had the downstream effects of growing nihilism among their children and grandchildren who face a lifetime of debt slavery and poor mate-choice selections.
It’s our fault that we fueled an empire with cheap debt and cheaper attitudes towards life and are now angry that many Americans don’t have a viable future as the wealth of the nation was sucked up into the ruling class and its quislings.
Don’t worry, China’s headed down the same road we are on, they just are just getting hitting the on-ramp while we’re heading for the unfinished overpass.
But blaming China for this loss of expertise in things we used to be great at is the wrong approach to solving the underlying problem. We have to address the way money flows through this society. We have to admit that central planning doesn’t work.
I laugh when I hear commenters on my YouTube videos or on Zerohedge in response to my articles complain about the ‘dirty ChiComs stealing our tech’ and all the rest of the insanely stupid, xenophobic talking points spoon-fed to these oh-so-original thinkers by the very banksters and oligarchs they think they’re fighting.
They are no better than the special snowflakes on the left screaming about ‘white privilege’ and ‘the patriarchy.’ It’s all just a reflection of a society unwilling to look itself in the mirror and realize that we’ve met the enemy and he is us.
All things come in cycles. We grew so rich rebuilding the world after World War II that we thought we could have not only guns and butter but that we were entitled to it because we were the instrument of goodness in a blighted planet.
I get what animates Trump to do what he’s doing. But it’s not going to work.
You can’t take back by force that which was freely given away. You have to work for it. You have to earn it. It doesn’t matter if you were screwed over by your government and employer. That’s not China’s fault.
China’s earned its wealth. Has some of that money that came in over the past thirty years been malinvested? Absolutely.
But listen to Tim Cook and listen hard. Most of its hasn’t. All I ever hear about is the ghost cities and the highways to nowhere. The trillions in shadow banking debt and the imminent (since 2012, btw) housing collapse.
And yet, that is all simply projection for the crumbling infrastructure, hollowed out rural towns, and yawning funding deficits that all this debt created here at home.
If you want to fix America. Fix America. But don’t punish the Chinese while we’re at it. To fix America will require access to that market in a web of mutually beneficial trade with them not shutting us out of it.
Tim Cook understands this. Trump’s rampage against China will hurt Apple in ways that won’t be reversible. If you think Trump will stop with his blacklisting Huawei you aren’t paying attention.
And no matter what happens, he won’t pay the price. We will. Because for all of the money we over-invested in education the one thing we didn’t do was teach the basics of economics, knock-on effects and the opportunity costs of putting faith in the hands of the most venal people on the planet, politicians.
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Hate to rain on your parade. Especially the knowledgeable and cultured and worldly Mr. Cook.
But the deliberate Marxist Kultural Revolution going on at all levels of big.gang.guv and big.gang.biz and “education” and “entertainment” cannot be stopped or even slowed by some minor tinkering with tariffs. This country’s Communists, disguised as Dems & Reps, taxing and regulating and counterfeiting the USA to death, culminating in the All Destroyer Obomba, accomplished what those sneaky Russkies couldn’t – they created the 20th Century New Soviet Man … here.
And woe onto the kulaks
Maybe I missed it in the article but it seems that ‘unionization’ is another big aspect in the lack of competitiveness by the US.
Tariffs/trade wars are a lose-lose for all concerned.
What a moron.
Chinese stocks traded here get a more rapid response to the down draft of all the IPO pump and dump of the mega money losing Unicorn’s.
Who says they do not ring a bell at the top?
Comparing American labor with Chinese labor is not a good comparison. Yes, U S wages are much higher, but so is the standard of living.
Henry Ford “got it right” when he CREATED a market for his cars by making them inexpensive while paying his workforce a decent wage. He realized that a well-paid workforce would be able to buy his products, among other things. It could be safely argued that Ford, CREATED the middle class. Automobiles, once “playthings for the rich” were affordable for the “ordinary common man”.
Today’s capitalist “mantra” is that labor costs must be as cheap as possible while the “value” (profit) to the stockholder must be as great as possible. Sacrificing labor on the altar of “maximum profits” NEVER works. Of course, in the short term, with cheap Chinese goods flooding the market, the economy looks, good, but without CONSUMERS who hold jobs that pay reasonably well, all bets are off. There needs to be a balance between profits and labor. Presently, labor is looked upon as a “necessary evil” to be minimized at all costs. The problem arises-without labor there are no consumers. As I previously stated, a “balance” must be maintained. Labor is not evil, but a necessary component of capitalism.
If labor costs need to be trimmed to assure “profit”, something is seriously wrong. In fact, in the well-paid American automobile industry, labor costs account for approximately 10% of total costs.
Offshoring production results in consumers (customers) being “lost”.
As to “tariffs”, the American country ran on tariffs from its inception until 1913, when the “income tax” and “federal reserve” was established.
The American economy is being propped up by the “social safety net” which obscures the TRUE economic situation in the U S .
Never a truer word spoken, anarchyst thank you, you have nailed it. But I can’t think of a suitable strategy to correct all the wrongs you list short of the coming crisis which should burn out all the malinvestment like a forest fire and return us to an equitable labour/capital balance.
In the New Economy, arising from the depths of dispair of this present one, we may well face a fall in our standard of living but at least we might obtain a sustainable economic model this time assuming the oligarchs are defeated and a new global financial paradigm prevails.
Eugenics. The answer will be eugenics.
Hey Lugano: Why not write about something you know about – obviously NOT manufacturing.
Most companies that have outsource to CHIcoms have gone elsewhere – AND some have brought the work back home – that is to say made in America!
You’re the same douche bag railing for Grabby your guns Gabbard, right. Pull thyne head out of thyne ass.
Anon – I myself do know a lot about manufacturing, and I can say that much of what he says re the situation is accurate. In fact, I have said much the same thing many times myself.
The US needs to compete. It is that simple. If they cannot, then nothing will save them, especially not tariffs.
Agreed, though I think it’s will to compete rather than can or not.
A pencil pusher and a CEO telling me that we are not competitive. Why don’t you get your ass down here in the trench and show us how it is done. He is right but hearing it from the ivory tower/peanut gallery is bullshit. Part of the reason we are not competitive is that there are too many over paid chiefs and not enough engines(yup, engines).When the shit goes down these idiots can’t grow anything or work on a car or roof or plumb or fix a … so just shut up and get back to non-work.
Anon – you should have just said he is right and stopped there. By the way, let’s see you work a Tesla.
I can see the day when a moratorium is placed on most imports from China if they continue to “bargain” in their current manner. In 2018 America had a trade deficit with China of $419.162 Billion, while China’s net trade surplus with the entire world was $351.6 Billion. If we cut off most trade with China their surplus would turn into a net $67.402 Billion DEFICIT. Who says we can’t fuck over China?
America would still have a trade deficit of $472.138 Billion, but if we can tell China to go fuck off, then Canada, Mexico, the E.U., and Japan will be a push over.
If you’re worrying about Treasury Bond Debts and what will happen to their value; well, their eventual value will go to zero in the next 16 years anyhow. We might as well get it over with, and yes- your pension will never be paid, but it too will achieve the value of zero just like everything else on paper, no matter what happens. It’s time to put on your big boy skivvies or big girl panties and accept this eventuality. You will work until the day you die.
Also, the companies who outsourced American jobs to score a quick profit can go file bankruptcy after they are denied those imports they chose in lieu of products made in the United States. Someone will come along and buy up their assets for pennies on the dollar, and may actually build companies that actually make something. Yes, Big Box retail will go belly up and stink just as bad as a dead carp on a river bank, but who really likes shopping there, anyhow.Now the Big Shot people who lose everything they have invested in those companies- well, they can go eat cake after they go fuck themselves.
If you’re in fear of lack of availability of the latest iPhone, maybe you should call the telephone company and have them run a land line to your house and hook an old Western Electric Rotary phone to it. I have one here at the house and it’s a dandy- it’s fire engine red. You may have to teach your kids and grand kids how to use it, but even a cave man can do it.
You do not understand the Chinese. Unlike Americans, when this stuff comes up, they will VOLUNTARILY quit buying US made goods. But for idiot Americans, it takes tariffs.
China is gonna kick US ass over the coming decades.
If China cannot grow enough food to feed their own people, they will not get much beyond where they are right now. Also, if China gets too pushy, then they will have problems with the wild card everyone seems to discount nowadays and that is a resurgent militaristic Imperial Japan.
Coal – stop, you are killing me. The Japanese? Hahahahahahahahaha! What, they will Hello Kitty the world into submission?
Your package arrived safely. Thanks for your generosity, even though the bank teller at TD Bank was annoyed for 45 minutes converting the currencies.
I bet the Chinese weren’t laughing after the Japs killed 20 million of them in World War II.
I guess he thinks we should all work for a dollar a day. I work with Chinese crap every day. They have no clue about quality control. The quality of their steel makes me worry about all the cars on the road using Chinese crap parts.
Yahsure – that is some pure stupid right there. China makes some excellent products, and gets better everyday. They supply to a pricepoint.
Re a dollar a day – the issue is you have to earn whatever it is. If you are earning a dollar, you get a dollar. If you earn a thousand, you get a thousand. And Americans are not earning what they are getting. They are not alone in that, of course. But that is why wages are not increasing for many Americans.
Gibson Guitars opened an Epiphone plant in China. Not exactly sure where it is located though. The first units coming off the production line were so bad the company had to scrap them when they arrived in the united States. Mind you most of this line of guitars are made by automated machinery. The second run didn’t get checked and customer’s complained so loudly about the poor quality that Gibson sent a QC team to China from the united States.
Epiphone started in Kalamazoo, Michigan making mandolins, violins and other kinds of folk musical instruments. It was bought out by Gibson. Gibson moved production from Michigan to Japan, then Korea, then the Indonesia and finally to mainland China. The first time Gibson had any major QC issues came with the China move. Of course, Japan, Korea, and Indonesia all had start up issues as is common with any new factory. However, the QC issues from China lasted over an extended period of time and only improved once the QC team from the united States arrived. From what I understand Gibson paid to move them and their families to China as a permanent solution to QC.
I own Gibson guitars (American made), Epiphone Guitars (Japanese, Korean and Chinese made), Fender guitars (made in Mexico and the united States), Simon and Patrick (from Canada) and a Jackson guitar (made in the united States). I even have a Squier bass from China. I have had all the guitars I own checked by my luthier brother. His evaluation of my inventory is they are all well made guitars. I have purchased several Epiphone guitars when the factory in China first opened that were just plain crap and returned them to the seller. However, several years later I purchased a Chinese Epiphone Les Paul Pro and now it is one of my travel guitars.
Case in point regarding poor quality from China, my Kenmore Elite countertop microwave convection oven recently failed. I purchased a Toshiba replacement. It was built in China and was so bad the convection took 30 minutes to preheat to 350 degrees and even then the temp was off by a 100 degrees. The internal temp after preheating was 250 degrees. It went back to the store I bought it from. Normally Toshiba has a good reputation for quality products but in this case their QC team in China failed. Additionally, after checking the reviews for this particular model of M/C oven I find I am not the only person that has experienced this issue. I have yet to find a decent replacement M/C oven at this time.
Bottom line is unless there is a QC team dedicated to excellent quality, what you will receive from China is crap.
This guy is an idiot. If you can pay workers a dollar an hour, then all other critiques of what is wrong with America are meaningless. Go live in China, pal.
To compete suggests that there is a kind of parity. A grown man playing full on basketball with a toddler wouldn’t be a competition, it would be form of abuse or sadism.
Free men cannot compete against a race of slaves over who produces more, especially when the slaves outnumber you 10 to 1. And especially when they can use whatever materials they want, pollute as much as they want, force their labor to work whatever hours they want, don’t have to worry about trademark or patent laws and produce an inferior product that won’t last as long.
This has never been about apples to apples.
This is what has to happen to wake an entire generation from it’s addictions to cheap shit produced by slave labor as if it were some sacred right.
Great post, Hardscrabble
HSF – bullshit, with due respect. Free men ALWAYS outproduce slaves. Slaves are massively unproductive, unimaginative, and unreliable.
One issue is that the US is addicted to cheap shit bought on credit, as you mention. But the rest of your argument is just one big excuse for failure.
There is some truth in what you say, but the real issue is that US workers became inefficient due to the commanding commercial position of the US, they became lazy, they stopped advancing in education overall, they are overpaid relative to their competition, etc.
The issues you mention can be overcome. But it takes a concerted effort to compete. Because you cannot control what the other guys do – you can only control what you do. And what the US, indeed the entire West, has done is allowed its entire system to fall into a bucket of shit.
HSF – my entire career has been built fighting the argument you put forth. The argument is basically wah! we cannot win becuase x,y,z.
It has been bullshit every time. It is an excuse. It is an excuse for failure. And every time I have encountered it, or something similar, I simply crash through and get the job done anyway.
Excuses are for pussies and losers. The US simply has to decide to compete, and to stop rewarding failure. It is that simple.
HSF – you say “And especially when they can use whatever materials they want, pollute as much as they want, force their labor to work whatever hours they want, don’t have to worry about trademark or patent laws ”. You mean, just the way the US built their nation? But you want to deny that to others, because now it is unfair to the US.
Wow.
600,000 men gave their lives so that Union industrial systems didn’t have to compete against a slave driven agricultural economy to it’s south, not sure how you overlooked that. Considering the greatest advances in the industrial era were POST-slavery, comparing it to the modern Asian equivalent is both ahistorical and irrelevant.
You seem to be trying to make this into a moral lesson about who did something right or wrong. I was making a direct, contemporaneous comparison of Asian trade practices versus Western trade practices and the downstream effect on national economies. Their doo dads and gimcracks are cheaper than ours because our current social and geopolitical behaviors are subordinate to theirs in terms of cost per unit. I’m not sure how much simpler I could have made it. As long as Western consumers continue to demand cheap products as opposed to products priced to markets, then we will continue to be beaten. There’s no emotion in it, no judgement over which is superior to the other. In terms of political elites looking to the best possible outcomes for their own populations, than it should always fall in their favor as opposed to some foreign economic model, hence tariffs.
You understand manufacturing far better than I do and I trust your judgements on what we are capable of and where our current weaknesses seem to be, but when it comes to understanding the historic relevance you grasp at a lot of straws to make your points.
Both sides are missing the point if you don’t realise that the main beneficiary of tariffs is the government who gain more tax revenue from sales. Either way, whether it’s expensive products from US manufacturers, or highly-taxed cheap imports, the consumer ends up poorer, whilst the government expands its tax revenues through tariffs and sales taxes.
Where does Tim sell his phones?
Luongo is a moron.
Anyone seriously thinking that the Reds don’t rip off US technology is both naive and ignoring reality. They require partnerships with full access to the technology they manufacture. We have seen a lot of dual use stuff appear in in the Chinese military, as well as civilian use technology being built by Chinese and under cutting their former “partners.”
There are problems here, but there is also a large base of institutions that turn out the very sort of people Cook thinks we lack. And, whether he thinks it or not, his company is getting ripped off by the Red Chinese. In the end the main person he is lying to is himself.
By the by, my son is a Manufacturing Controls Engineer. He can get the sort of technicians he needs, but the market place can’t find enough Controls Engineers to do the sort of work he does. Those who make the right choices will prosper, but it is no thanks to idiots like Cook.