Manufacturing Jobs Have Nothing To Do With China

Donald Trump (and others) have been complaining that China has "stolen" all the manufacturing jobs from the United States. According to Trump, that's because we make "bad deals".

But the reality is that manufacturing output in the United States is at an all time high. We have never manufactured as many goods as we do today. What's not at an all time high is employment in manufacturing. Below is a chart showing the percentage of US employment in manufacturing.




This trend line is not a result of making "bad deals" with China. The downward trend is 50 years old. It predates the end of Bretton Woods. It predates the union-crushing, deregulating era of the late 1970s and early 1980s. It predates the era of Japanese dominance, the rise of the Asian tigers, and the recent surge in Chinese growth. What is driving this trend is technology. Manufacturers steadily improve manufacturing productivity, automating tasks that used to be done with labor.

This is not going to change no matter how many Yuge Deals you do. Trump is just another in a long line of demagogues who prey on the emotions of the economically ignorant.

Why Government Continues to be "Floppy"

An article in The NY Times describes the efforts of Megan Smith to bring technology practices in the White House into the 21st century (they still use floppy disks there for example).

My prediction is that Ms. Smith will largely fail. Large, stodgy companies may be somewhat slower to adopt technology than those in Silicon Valley, but they do so at lightning speed compared to government. They don't do it to be "cool". They do it because it makes them more efficient. They do it because they are competing against other companies. They do it because it is profitable. None of these drivers are at play in government.

Instead, what drives government are political considerations that are often counterproductive. Exhibit A. In this article we learn that Ms. Smith is greatly concerned about what? Recruiting more female technologists. Can someone (Ms. Smith?) please explain why if the primary objective were to introduce technology for greater efficiency it would make one iota of difference what chromosomes are possessed by those designing the systems and writing the code? No doubt there will also be a push to recruit black technologists, Hispanic technologists and homosexual technologists. All of whom will continue to use floppy disks.

The Really Productive Driver Behind Income Inequality

As the uproar over income inequality reaches ever higher decibel levels, it is worth reminding ourselves that technology is the principal driver that is responsible. Technology allows the best people to leverage their skills in ways that could not have been done before. Think about these examples:

1. When Babe Ruth was playing baseball, he was one of the best. He and the Yankees were able to monetize that greatness every time he played in front of 30,000 or so people. Today, you might argue that Miguel Cabrera has similar greatness. When he plays he, the Tigers and MLB can monetize that greatness over perhaps millions of people who can watch him play via electronic media.

2. Imagine you were a good trader on the NY Stock Exchange 60 years ago. How many shares could you trade every day? A few hundred thousand? How many could you today? A few hundred million? What's that worth compared to the same job 60 years ago.

3. Assume you are a really good tax accountant. Sixty years ago you might leverage that ability over, say, 20 clients. Today with software you might be able to leverage it over hundreds of clients. And if you created TaxAct software you'd be leveraging it over millions of clients.

4. Assume you were a really good merchant. Sixty years ago you might have worked for Macy's or Marshall Field and made them quite a bit of money.  Today, if you're name is Jeff Bezos and your store is Amazon.com, think how much more your skill is worth today.

Scale matters. Being the best performing manager for a hedge fund matters A LOT. Designing a whole new social media network matters ever more. If you're working at a job that doesn't scale well -- e.g.  as a waiter or a a school teacher -- the gap between what you can produce and what someone harnessing technology can do is increasing. Of course it's increasing. Would you want it not to?  But if you're Hillary Clinton, you consider it a "cancer".