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02 August 2009

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charlottemom

A country (US) that exports its manufacturing out will not lead technologically. Technology innovations don't just happen in a vaccuum. Invention happens in the manufacturing environment. If country is not producing how can it be expected to innovate production methods, processes, etc. We mortgaged away our future -- like we mortgaged away so much else. China rising, sun setting on US if the current trajectory isn't altered drastically. But alas, we are investing (using credit from abroad) on car subsidies, bank subsidies, etc. china is happy to oblige.

R Whitman

Curious:

Technological game changers are not the military-cultural will of a country that will rise and fall with history.

They are things like the cotton gin, the wheat reaper, railroads, steam engines,electricity and electric motors, radio, television, motorcars, airplanes, nuclear technology, jet aircraft, space ships, computers, lasers, pharmaceuticals, instrumentation and the internet.

While Americans did not invent all of this, we have been the leading commercial exploiter of these technologies as well as a host of others.

Long after nations rise and fall thse technologies or their sucessors will still be around.

I feel that there is an intangible in American society that encourages people to innovate, invent and exploit so they can get rich. This drive has been around since at least the early 1800s and shows no sign of abating, and has always been the lifeblood of the USA. This is true regardless of which political party or economic regime is in power here.

curious

Technological game changers are not the military-cultural will of a country that will rise and fall with history.

Posted by: R Whitman | 03 August 2009 at 08:44 AM

True. In fact if you note, all examples I brought has tragic end. The fast military raiser, most are small countries with very insecure history, that suddenly experience massive military build up... usually military fascist regime.

But I picked military technology out of laziness. 1) military technology is more isolated. One can track who invented particular machine, techniques, organization or strategy. (as oppose to open market consumer goods) 2) whoever kicks ass in the battle is the one with best implementation of the complex brew that makes a military technology works. (far easier data to get than comparing technical merit of a consumer good vs. market share)

just an example. LCD television. Who invented that? If one walks in walmart, all those names are Korean (not even Taiwanese or Japanese) Do we play hand in LCD screen invention? Is the Samsung the most prolific LCD maker? ..(good luck with that.) LCD is a complex modern technology, The theoretical engineering works was done by Japanese and American corporations, made to work by taiwanese manufacturing know how combined with japanese line, and Korean have the biggest capital to put them together to win the big screen race. taiwanese corporations control the LCD screen market, Korean is distant second.

(in fact consumer electronic is prime example how fast the top dog come and go. But the variables are complex, including public taste, trade policy, politics, global financing, etc)

see name listing of LCD patent (then see the citation list. This is not even searching scientific literature that was key to electrochemical theory and processes.)
http://www.freepatentsonline.com/4838659.html

-
The early rocket and the use of airplane in war are european things up until opening of WWII. Most of major scientific and engineering works are european. Then we took over the cutting edge. (50-60 yrs reign)

--------

Another things to contemplate. (outdated discussion, most transport uses those modified container ship now. The korean made those container ships like walmart toys. As a result, all those clever navy scheme probably wasn't worth the paper they were printed on. The money better used to buy actual ships, since they probably are cheaper than the cost of printing paper for all those useless budget report)

http://www.globalsecurity.org/military/library/report/1987/REK.htm

While merchant shipping both in peace and wartime has remained
vital to the national security of the U.S., the U.S. merchant fleet
has steadily declined to the point where the foreign trade of the U.S.
is effectively controlled by the merchant fleets of foreign nations.
The number of U.S. merchant ships has declined from 4500 in 1945 to
approximately 736 commercial and government owned ships at the end of
1986, and these ships only carry 8.5% of the U.S. imports and exports
that are transported by ship.14 It is also interesting to note that
the decline of the U.S. merchant fleet occurred at a time when both
the number of ships and dead weight tons of world-wide merchant shipping
were increasing. Two government agencies discussed below, the Military
Sealift Command and the Maritime Administration, are responsible for
administering the various strategic sealift programs.

Duncan Kinder

By way of comparison, Europe has had limited success, at best, in building up the Balkans.

This has been going on for the past 14 years. It has cost €13 billion ($18.2 billion) in reconstruction aid, and the salaries of aid workers have probably consumed another €13 billion. The European official who is supposed to be in charge of reconstruction for the region is EU chief diplomat Javier Solana. In Bosnia-Herzegovina, he is seen, not without good reason, as the guarantor of an untenable status quo.

Both Bosnia-Herzegovina and Kosovo are dominated by a greedy, irresponsible elite that only too often crosses the line into organized crime, as anyone who asks around in the region is likely to hear. And it isn't as if these two countries were incapable of doing anything under their own steam. They are simply unwilling to do anything constructive, as long as they are under no obligation to do so.

It continues:

Since 1999, the United Nations has sent 70,663 employees to Kosovo, at a cost of €2.5 billion ($3.5 billion). The international community has already spent an estimated €33 billion ($46 billion) on the development of this small country, or about €18,300 ($25,600) per capita. A donor conference recently approved another €1.2 billion ($1.68 billion) for a wide range of projects, from education to healthcare to agriculture. The EU is contributing €500 million ($700 million) and Germany is donating €100 million ($140 million) to the new fund.

See: Europe Has No Exit Strategy for The Balkans

There is a Russian YouTube Video characterizing Kosovo as a Mafia state.

(While Russian sources about Kosovo are probably biased, the strongest counterargument I can think of is that Russian allies Serbia and Bulgaria are just about as bad.)

For all of their problems, the Balkans nevertheless are far better prospects for COIN type development than Afghanistan is.

William R. Cumming

Great post and great comments. Why? Well seems to me that seeds of future have been planted and this post and comments some of the first to see them sprouting. First, now clear that war-winning is no longer the formula for AF-PAK but instead what policy or strategic or tactical approach will best convince the civilian leadership of the US to stick with it! "It" being investment of blood and treasure in AF-Pak! Hate to say it but truth-telling to the civilian leadership either has disappeared or only incompetent time serveers and ticket punchers in the Armed Forces trying to keep the military-industrial-American Empire going for one more generation. This seems self-desstructive to future of US in the world and at home but maybe I am wrong.
Second, the economic future of the US is no longer dictated completely by our leadership both political and economic. Now dictated by decisions or lack of decisions of foreign powers.
The KOBE Earthqake is somewhat instructive. The Japanes poured in about $250B (US) into reconstruction of the PORT/CITY! Was the largest port in Japan by traffic but no longer. Events now have a way of moving beyond current arrangements if any kind of disruption. Why the true impact of Globalization where capital and trade largely globalized and cannot be truly regulated and taxed by nation states any longer in an effective manner. Yet the political leadership cannot admit this because to do so would admit their irrelevance to the future. Let's face it whatever label is put on the US depression/recession as long as the good old days of consumers being 70% of GDP are gone forever, the US is no longer the driver. The other 6 billion people on earth are the demand driver. Simple to figure out tha much of what demand provided in the US does not have much relevance in third world. What good are electronics when no power? What is the grid like in AF-PAK? Hey those large generators hum around US forces but how many help the civilian economy. DOD and the FED have two things in common. Neither understand energy policy and economics and neither under the real strength and weaknesses of the civilian just in time economy. Watching DOD announce more and more that it cannot get what it wants (not even of course ever at the price it wants) is a whole different world for DOD and Armed Services from the last 70 years. Somethings you cannot buy! What, time and brainpower! US make be still trying but my guess is more failing than succeeding. And hey I am an optimist.

VietnamVet

Colonel,

I couldn’t agree with you more.

To quote Paul Krugman the Obama administration still seems to operate on the principle that what’s good for Wall Street is good for America. Insider High-speed trading and 100 million dollar bonus for a Citi Group oil trader are symptoms of Wall Street greed and power over the federal government at expense of American citizens.

History does play variations of same theme. Small unit left to fend for itself in Afghanistan “By the end of the battle, 75 percent of the U.S. troops were wounded or dead”. Eerily similar to stories I heard second hand in Vietnam about my company, Hill 875 and ghost soldiers. A 500 pound bomb had landed in the center of the 2nd Battalion's position, killing 42 men and wounding 45. It was the worst friendly fire incident of the Vietnam War. The same Company. The same Battalion. So Similar. All in one life time.

J

25 Republican members of the House prostituting themselves before the Israeli Idol. Minority whip Rep. Eric Cantor appears to be leading the trip.

30 Democrats to follow in lockstep this coming Sunday according to AIPAC who is footing the bill for all their trips to Israel and back.

Will members of Congress do the right thing and register themselves as agents for a foreign government (Israel) under FARA? Guess that's too much to hope for. Guess all we can expect is their continued Israel Idol worship.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=200908030432dowjonesdjonline000094&title=largest-ever-group-of-us-republican-lawmakers-in-israel

Patrick Lang

VV

I hear you. The worst day of my life so far was a day in the Autumn of 1968 when a rifle company (B/2/5 Cav)that I was in the field with lost 52 killed and over 70 wounded out of about 150. In some sense I wil always be there in Phuoc Long Province that day. pl

curious

afghanistan history. Probably will be replayed again.

http://en.wikipedia.org/wiki/Mohammed_Daoud_Khan

By 1956, having been rebuffed by the US for both sales of arms and loans, and with the independence of the former parts of the British Empire in South Asia, his government turned Afghanistan toward the Soviet Union.

Daoud supported a nationalistic and one sided reunification of the Pashtun people under Afghanistan, but this would involve taking a considerable amount of territory from the new nation of Pakistan and was in direct antagonism to an older plan of the 1950s whereby a confederation between the two countries was proposed. The move further worried the non-Pashtun populations of Afghanistan such as the influential Tajik's who suspected Daud's intention and the possibility of increasing the Pashtun demographics in Afghanistan.

With the creation of an independent Pakistan, the Durand line conflict with the British colonialist was inherited by the two countries.

In 1961, as a result of Daoud's antagonistic policies and support to militia's in areas along the Durand Line, Pakistan closed its borders with Afghanistan causing an economic crisis and greater dependence on the USSR. The USSR became Afghanistan's principal trading partner. Within a few months, the USSR had sent jet airplanes, tanks, heavy and light artillery for a heavily discounted price tag of $25 million.

In 1962 Daoud sent troops across the international border into the Bajaur region of Pakistan in a foolhardy, unsuccessful attempt to manipulate events in that area and to press the Pashtunistan issue, but the Afghan military forces were routed by local Pakistani Pashtun tribesmen along with the superior training and tactics of the Pakistan military. During this period the propaganda war from Afghanistan, carried on by radio, was relentless.[4]

The crisis was finally resolved with the forced resignation of Daoud in March 1963 and the re-opening of the border in May. Pakistan has continued to remain suspicious of Afghan intentions and Daud's policy has left a negative impression in the eyes of local Pashtun tribesmen who felt they were exploited.

Kung.Fu.Panda

curious,
Well said. The only question is do the Chinese want to expand outward? They've been good at various things over the past 1000 years but never seemed to make it past their current borders.

If they were serious about building a navy they'd be doing it, right now. I don't see any evidence of this.

Different Clue

Norwegian Shooter,

By "the Basin", I mean the whole geographic land area of the Great Lakes watershed, and by extension; everyone and everything who lives in it.

David Habakkuk knows and explains things I merely suspected about protectionism and the rise of the Japanese car industry. Free Trade fundamentalists might well say..."bad Japan! Bad bad Japan! Protectionism bad!" I would say it demonstrates that reality-based protectionism can serve a country better than faith based Free Tradism. Charlottemom makes a useful point about how innovation becomes difficult for a people who have lost the knowledge of thingmaking on which to innovate. And America has lost/ is losing enough thingmaking capacity that we are now losing our cadre of skilled thingmakers as they retire and die without being replaced by younger successors; because there is little thingmaking left for rising cadres of new thingmakers to be trained for.
I am just a layman without the depth of scholarly knowledge of most commenters here, so I can only go on memory. During the pre-NAFTA runup I remember an article in Bussiness Week magazine gloating about how NAFTA would flood Mexico with cheap American corn. That flooding of the Mexican corn market would destroy the domestic corn economy of Mexico and force the breakup and abolition of the ejidos and the privatization and selloff of the ejido lands for efficient private agriculture. And that has happened exactly as the NAFTA planners planned. Mass produced midwestern corn based on petro-energy and petro-chemical subsidies
(which will run out as the oil runs out) has destroyed the rural Mexican corn growing economy along with the several million peasant livlihoods which were based on that economy. And semi-slave labor vegetable production in Mexico has been used to pressure and undercut vegetable production in America. The destruction of several million corngrowing livelihoods in Mexico has forced millions of Mexicans to come to America to seek the living which was taken away from them in Mexico. They should not be thought of as "interloping intruders". They should be thought of as economic exiles who have been driven out of Mexico by NAFTA exactly as intended by the Free Trade partisans who crafted NAFTA to begin with.
I am not an expert, but I have heard of numerous factories in the Midwest being literally dismantled and crated up and shipped to China and rebuilt there to take advantage of semi-slave wages and anti-social counterstandards prevailing there in order to downprice production from there as against production here. And vastly more manufacturing capacity has been built in place there to take advantage of those same wage and conditions differences between China and America. So several million middle-class-paid Americans lost their jobs and get new subjobs (if any)
at subwages which barely allow them to consume those wonderful low priced products from China.

One symbolic example stands out for me. Who remembers Etch-a-Sketch? I remember Etch-a-Sketch. It was made by a small company in Ohio called Ohio Arts. It remained profitable right
up until the moment a cynical group of "investors"
decided that Ohio Arts was not quite profitable enough.
That group bought Ohio Arts and closed the factory in Ohio and opened a factory in
China to make Etch-a-Sketches in China to make even huger profits by arbitraging Chinese costs against American prices. Are all the laid-off Ohio Arts workers paid enough to afford those China-made Etch-a-Sketches for their kids?
So who benefits from those wonderful low China prices? Free Trade yuppies who haven't lost their yuppie jobs yet. My Midwestern bitterness leads me to hope their yuppie jobs get outsourced so they too can pay the "China price" of Free Trade.

I think a major outlet for American Inventiveness going forward will be growing substantial amounts of food, water, indoor climate control, etc.; on the part of millions of homeowning suburbanites who will start looking for ways to make their houses and yards "pay for themselves".
(I am making my own paltry efforts in that direction in my co-op unit micro-yardlet.)

Babak Makkinejad

Different Clue:

Free Trade is not the problem.

The fact remains that US & EU wages, for identical work, are unsustainable as industrial production capacity of the workd expands.

That Japanese admire and follow List has not been a secret. What has been a secret is the reason for the American automobile manufacturers' refusal to sell vehicles in Japan with the steering wheel on the right hand side.

The fundamental problem with the United States has been that investments were directed towards financial sector. In effect, over a 40 year period, US leaders bet the farm on the proposition that US will be the financial hub of the world and thus will make its living.

That bet worked for quite sometime quite well while agriculture, manufacturing, and industries were starved of investment. The exception, was the Silicon Valley Venture Capitalists who funded their activities through their gains in the US capital markets.

The financial hub paradigm is finished and US now has to make money the old-fashioned way; earn it.

toto

If free trade is the cause of the (perceived) destruction of the US engineering and manufacturing base, then how come puny Germany is still the leading exporting nation in the world, despite exporting mostly industrial products? How come Scandinavia, or - hell - Japan still have major high-level industries? How come the biggest carmakers outside the US are from Japan and - of all places - France?

Also, you're aware that most of these Toyotas you see running around are made in the US, right?

curious

curious,
Well said. The only question is do the Chinese want to expand outward? They've been good at various things over the past 1000 years but never seemed to make it past their current borders.

If they were serious about building a navy they'd be doing it, right now. I don't see any evidence of this.

Posted by: Kung.Fu.Panda | 03 August 2009 at 11:30 PM

Cultural influence. The heart of asia is china. The current nation states "border" is irrelevant. It's a relic from colonial era. The borders are nothing more than elaborate random exploration chart marking.

Most of those border has only been around 50-60 years, while what people remember are 3-4 generations down. (family relationship, language, travel pattern, where money and goods flow, etc) Modern nation states border is not the natural state equilibrium in asia.

It's about as relevant as european countries border. It's administrative. History and time horizon are different there. 10 years from now the practical border will be very different.

So, whatever one does in Asia, he will bump into chinese institution first. I am sure sooner or later afghanistan case will bump into china, since the traditional forces that shape afghanistan (Islamic empire, Russia, Britain, US) are all in trouble. Iran will be china's first big test.

incidentally, the public image of US and China in most asian countries are now inverted from the 50's. US is the unpleasantry that needs to be managed, while china is the one pure business. In the 50-60's US was the force that change status quo, colonization and improve things via mining exploration and trade. But now, US is associated with mining exploitation, corrupt status quo, political tension and conflict. China is the one who pays good money fostering trade and investment. (they have the money and national interest urgency to get away from dollar economy.)

This is important considering all global growth in next 10 years will be in asia. (plus latin america.)

Chinese navy: Chinese sold 4 frigates to Pakistan with 4 more to come soon. (So, you can guess their ship building capacity if they can sell that many ships for export in short time.) I am sure quality is not up to snuff. But, surface ship can be seen as nothing more than floating chunk of metal with electronic toys and firework devices on top of it. Maybe add few planes for topping. But in general in real war they are useless. too slow and easily destroyed to do "maneuvering" or what not. It's all about quantity.

submarine is the real deal, and chinese now has the third largest submarine fleet in the world. (granted they are clunker, but they have steep learning curve.)

Patrick Lang

In re Free Trade

Babak

"The fact remains that US & EU wages, for identical work, are unsustainable as industrial production capacity of the workd expands." All that you have said here is that you consider it to be a natural thing that the US and EU should become poor. Why is it that I can not share your thirst for "justice?

Toto

"despite exporting mostly industrial PRODUCTS" Products out --- money in. Get it now? They export products,not their manufacturing base. Toyotas are made in the States with repatriation of profits. Are Chevrolets made in Japan with repatriation of profits?

NS

"when another country can produce it cheaper." A noble and useless statement of the principle of "competitive advantage." Have you ever actually earned a living? pl

Patrick Lang

curious

You will be allowed one comment per day from now on. pl

Different Clue

Babak Makkinejad,

I had forgotten that American carmakers didn't want to put their steering wheels on the right side for a while. (Does anyone know if some of our carmakers did start putting the wheel on the right side?
And if so, did our cars sell better? Or did they encounter barriers?)

In the wider scope, the American leaders who decided
to bet the farm on financial
products and services were the same American leaders who established the Free Trade regime through a whole system of treaties. They made a conscious decision to write off thingmaking in the United States so of course they discouraged any ongoing investment in thingmaking as best they could. The leaders made that choice, not the people. And now that our Dear Leaders' financial hub paradigm has finished, how exactly are we
supposed to make money the old fashioned way by earning it when most of our factories have been shut down and shipped overseas or replaced by overseas factories? Neo-industrial semi-autarchy behind a neo-protectionist wall is the only way I can see us rebuilding the old-fashioned work-based economy
you advise us to rebuild. After all, the only way we can make money the old fashioned way by earning it is if we have work we can do to earn the money with. And the only way for us to get our work back is to take our work back from the countries our rulers gave our work away to.

Toto, the American industrial base first arose to supply the American internal market. Most American industrial production was for American internal consumption. I believe the American leaders
threw America much more open
to foreign industrial production than European (including German) leaders threw open their markets. But I am willing to be corrected with facts to the contrary. And the reason so
many Tototas (and Hondas too) are assembled in America is because UAW President Douglas Fraser demanded that Japan make here the cars it sells here back when the UAW still had enough power and influence with the Industrial Zone Congressfolk that the UAW could make credible threats in the trade-political arena.

Norwegian Shooter, I read
your two links. They are written from a Free Tradist viewpoint and the "Free Trade" article especially tries to pretend that "economists" support Free Trade. In fact, only "Free Tradist" economists support Free Trade. And they often resort to rhetorical tricks like inviting the reader to confuse natural comparative advantage (Maine does lobsters better than Jamaica which does rum better than Maine) with the artificial comparative advantage conferred by such governmental measures as secret police assassination of union organizers to keep slave wages at slave levels.
There are plenty of anti-FreeTrade economists who are just as credentialed as the Free Tradists. Charles Walters the author of Raw Materials Economics for one.
John Culbertson the author of Competition, Constructive And Destructive
and The Dangers Of 'Free Trade' for another.

(I feel bad about not properly addressing the Afghanistan half of this post, but trade is really gripping my brain).

Brian Hart

Note McChrystal is about information mangement to the American people - no measures of meaningful progress are published (body counts, territory, etc), and selected leaks of information such as the 'sudden' shortage of qualified Afghan police and army soldiers. With no measure of victory or defeat, no general can be blamed. So when the American public gets tired or bankrupted, it won't be the generals that lost the war, it will be the politicians - just in time for Petraeus to throw his hat into the presidential ring as the MacArthur of our time.

Babak Makkinejad

Col. Lang:

You misunderstand me.

My observation was only empirical and not a value judgement.

Cieran

It is worth mentioning here that the U.S. still leads the world in manufacturing, and by a healthy margin, too. This country has not exported its industrial base, or at least not yet.

The current trend is not a good one, as the U.S. has fallen behind much of the rest of the world in the rate of increase of manufacturing activities.

But to borrow a phrase from Mark Twain, the reports of the death of U.S. manufacturing capability have been greatly exaggerated.

Babak Makkinejad

Different Clue:

In 2006, 40% of US corporate profits came from the financial sector. These profits translated into higher share-holder values for many millions of people whose retirement accounts were managed by very large institutional investment funds. These people had no issue with the de-industrialization of the United States as long as their quarterly return reports indicated a positive slope.

The best and the brightest left to go work in that sector, leaving the next-best or the next-next-best to staff the productive sectors of the US economy. Moreover, for decades, US Federal Tax policy drained money from the Great lakes states and shifted that to the so-called Sun Belt states as well as California and the states in the Northeastern part of US, further starving these manufacturing regions of investment dollars.

You asked: “how exactly are we supposed to make money the old fashioned way by earning it when most of our factories have been shut down and shipped overseas or replaced by overseas factories?”

My answer, in terms of concrete action-able steps, are 2 folds: the introduction of socialized medicine in US without the insurance companies (without it no manufacturing will be left in US), and significant reduction in corporate, income, and social security taxes across the board – say 20 to 30%.

Patrick Lang

cieran

all right. we are in the process of exporting our manufacturing base. pl

Different Clue

Babak Makkinejad,

The first of your two concrete steps would definitely help. We wouldn't even have to outright socialize health and medical care as Great Brittain did. Even if we only went as far as to socialize the coverage and keep the practice private, the way Canada has done; we would lift the unequal burden of coverage provision
from America's bussinesses.
About the general lowering of taxes; I don't know enough to know if that would really work or not. I also wonder whether we even can lower taxes for very long if we ever expect to raise the money to retire
our Multi-Trillion Dollar national debt. So even if that second step could help us in theory, I don't know if that second step is even available to us.
I still think we are going to have to introduce some kind of forced-fairness tariffs against goods from jurisdictions whose costs wildly undercut our own. Either we do that or we choose between letting
undercutters undercut our manufacturing and farming into complete extinction...or adopting Chinese/Vietnamese/Cambodian
wagescales and environmental
standards and so forth so as to lower our "playing field" down to their level.
But that is a choice of legal and treaty contrivance, not a force of nature.

You are also correct to remind us that in 2006, 40% of U.S. corporate profits came from the financial sector. And the people whose retirement accounts thereby gained higher share-holder values did not complain at the time. I suspect that they have lost some of that value over the last year and a half; and they will lose most or all of those values in the years to come. Well...we Free Trade rejecters tried to warn everyone that this outcome would result. And now it has.

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