Manufacturing as a % of GDP

[genglandoh]

As a percent of GDP the US has been dropping since 1980.
1980 21%
2008 only 13%.

IMHO the manufacturing provides the best job (high pay with good benefits) and helps create secondary jobs.

What do you think the Government can do to help support Manufacturing?

http://investing.curiouscatblog.net/tag/manufacturing/

[Tylerdurden]

Revolt

[Tall Boy]

well....we may not be tops in the widget department but, we rule when it come to manufacturing cheezburgaz...............

[RonW]

Very interesting chart genglandoh--

It show america has lost about 35% of it's manufacturing jobs. China had a big boom but actually is now
down below where they were when this boom started..
Looks like korea is the winner.

Which I think is proof that we need to rethink the way we manufacture, so as to keep more
people employed even if it is not as productive.

[C. Ross]

Manufacturing as a percentage of GDP is dropping for all countries -- see the line "overall" -- from about 24% to 17%.

Almost every country generally follows that trend except for Brazil whose percentage declines rapidly, Korea increases, and China varies but has the same % of GDP in 2008 as in 1980.

[Gerarddm]

As usual, the real story is more nuanced than some would have you believe, at least if you didn't have a thoughtful bone in your body.

I wish at times I had majored in Economics. If that chart is true, how do you parse manufacturing dropping in nearly all industrialized countries, with the exception of Korea? How is that possible, while the world economy has grown? Is it possible that manufacturing has been decentralized to smaller rising economies like, say, Vietnam? Is it possible that we simply aren't consuming as much ( hard to believe ). That is a fasicnating and perplexing chart.

[RonW]

That is a fasicnating and perplexing chart.

I think there is a lot of economics involve in this chart, figuring out how to de-code it may be another thing.

A lot of shipbuilding has been moved to korea and viet nam starting 30 years and more ago, which lead into
stable increase of other manufacturing.
As for the rest of the world, I suggest the entire world is on a slow down presently, but that doesn't count
for the down turn in the 90's. And this may all relate back to we have finally figured out by robotics and modern
manufacturing how to actually produce things faster then at the rate of which we consume them..

[C. Ross]

If that chart is true, how do you parse manufacturing dropping in nearly all industrialized countries, with the exception of Korea? How is that possible, while the world economy has grown? Is it possible that manufacturing has been decentralized to smaller rising economies like, say, Vietnam? Is it possible that we simply aren't consuming as much ( hard to believe ). That is a fasicnating and perplexing chart.

It makes sense mainly because other components of GDP are increasing faster than what we spend on manufacturing. (Other components are consumer and business purchase of everything OTHER than manufactured products, plus government spending, plus net private investment.)

Of secondary importance, productivity in manufacturing continues to increase a lot. Consider computers. They cost less and less and do more and more. As a percentage of GDP, I'd bet computer equipment is not increasing by much, or probably decreasing.

If you looked at the same graph for agriculture, you would have seen a massive decline in agriculture as a percentage of GDP over the last 100 years. So what? I'm glad we can feed more people for less, and I'm glad I can get fantastic electronics and reliable cars for a smaller percentage of my paycheck.

From a personal perspective, I'm in the period of my life where experience is more important for me than things. I'm glad to be spending more on services than stuff.

[Soundbounder]

If that chart is true, how do you parse manufacturing dropping in nearly all industrialized countries

I think you are correct that manufacturing has been decentralized.

Another point to keep in mind is that the chart is only showing the relative change as a percentage of GDP. If global manufacturing increased, but it increased at a slower rate than oil exploration, mining, finance, service industries, etc..... then manufacturing has decreased as a percentage of GDP.

This chart does not show whether manufacturing has increased or decreased.....it is only showing manufacturing's percentage of total GDP. It is safe to say that in the US, actual manufacturing and the manufacturing percentage of GDP have both declined. But that's not necessarily true of other countries.

I hope I explained that clearly

[Gerarddm]

Soundbounder, that was helpful, thanks.

[genglandoh]

The cost of Manufacturing has many parts.
1. Raw Material Costs
2. Labor Costs
3. Equipment Costs
4. Shipping costs
5. Government costs
Taxes, regulations etc.
6. Environmental costs
Pollution clean air, water etc.

I think the Government could do the following
1. Raw Material Costs – allow companies who have purchased leases to dig/drill for the raw materials.
2. Labor Costs – Fix the school systems so the US labor force is well educated.
3. Equipment costs – not sure the Government can play a role.
4. Shipping Costs – Allow companies to drill for oil will increase the supply and lower the cost of oil.
5. Government Costs – Reducing Taxes and regulations would help.Environmental Costs -
In General the Environmental laws have been good for the country but there is still this feeling in the country that all manufacturing is bad and should be stopped.
I think that once a company gets a permit from the Government 3 protesters with a sign should not be allowed to stop a project just because they do not like manufacturing.

[Waddie]

I've posted several times that manufacturing is the foundation that supports service, and not the other way around. We have tried to base our economy on service but, despite what the experts thought, hasn't worked out too well.

In the 21st century global economy, which has finally become a reality, countries that have a favorable balance of trade are going to prosper. The models we should be looking at include Germany and Israel.

The US is the world's #1 market but only the #3 exporter. We make about 80% of our own products. That number should be somewhere in the 90's. We also run a large trade deficit. We export food and too many raw materials. Instead of exporting iron ore to China we should be making steel out of it and selling that to China (they use 70% of the world's steel ). Instead of logs sell them milled lumber. The Chinese are negotiating for a pipeline for Canadian tar sands (to be built to Canadian west coast). We also want a pipeline down to Louisiana. Guess who will get their pipeline? To be fair we do sell industrial machinery worldwide, but exports should play a much bigger role in our economy. If we had a favorable balance of trade our government deficit would be gone within a short time span.

And it's true that most of our manufacturing job losses have been due to productivity gains. Just walk into any machine shop. CNC computer machining allows a handful of people to do the work of dozens just a few years ago. This increase in productivity makes higher US wages less of an issue, and our better educated work force more attractive. Manufacturing also has a ripple effect on the overall job market that is impressive.

What would help manufacturing?

Treaties that mandate that foreign manufacturers wishing to access our market--and they all do--must meet US OSHA, EPA, accept legal liability for their products, recognize patent and copyright, and meet minimum US style labor standards. These changes alone would almost level the playing field.

Tax capital gains at the filers nominal rate unless those gains were reinvested here. Companies know whether their money was earned here or abroad. That's what accountants are for. A system could be set up inexpensively to reward domestic investors.

Tax profits made overseas even if they aren't brought back into the US. This antiquated law was passed years ago to encourage investment in higher risk Third World countries. It isn't needed now, obviously.

Streamline the permit process for getting a new business up and running. I'm not advocating eliminating any particular regulations--though some need to go--but a person seeking to open a new business shouldn't have to deal with 18 different agencies with overlapping jurisdictions and often conflicting answers at all levels of government. Some permits take decades. The business deserves an answer within a reasonable period.

There are more things we could do to help manufacturing, but this post is already long enough.

regards,
Waddie

[Soundbounder]

We have tried to base our economy on service but, despite what the experts thought, hasn't worked out too well.

I like your post a lot, but your 'experts' comment raised a red flag.

Plenty of economists have warned for decades about the consequences of a deteriorating manufacturing base.

[Waddie]

I like your post a lot, but your 'experts' comment raised a red flag.

Plenty of economists have warned for decades about the consequences of a deteriorating manufacturing base.

I agree that some "experts" have been warning about losing manufacturing, but lots of them back in the late 70's and 80's insisted that service could be the foundation of the economy. I can see why they thought that way....back then service was growing much faster than manufacturing. Now, however, productivity gains ( the computer and communications revolution) are targeting the service sector in a big way.

Another reason I advocate for a favorable balance of trade and transitioning to an export economy is that if we keep on our present (import oriented) path the days of the US dollar remaining the world's reserve currency will end...and this will have a huge negative effect on the US standard of living.

regards,
Waddie

[Nicholas Carey]

I've posted several times that manufacturing is the foundation that supports service, and not the other way around. We have tried to base our economy on service but, despite what the experts thought, hasn't worked out too well.

In the 21st century global economy, which has finally become a reality, countries that have a favorable balance of trade are going to prosper. The models we should be looking at include Germany and Israel.

The US is the world's #1 market but only the #3 exporter. We make about 80% of our own products. That number should be somewhere in the 90's. We also run a large trade deficit. We export food and too many raw materials. Instead of exporting iron ore to China we should be making steel out of it and selling that to China (they use 70% of the world's steel ). Instead of logs sell them milled lumber. The Chinese are negotiating for a pipeline for Canadian tar sands (to be built to Canadian west coast). We also want a pipeline down to Louisiana. Guess who will get their pipeline? To be fair we do sell industrial machinery worldwide, but exports should play a much bigger role in our economy. If we had a favorable balance of trade our government deficit would be gone within a short time span.

And it's true that most of our manufacturing job losses have been due to productivity gains. Just walk into any machine shop. CNC computer machining allows a handful of people to do the work of dozens just a few years ago. This increase in productivity makes higher US wages less of an issue, and our better educated work force more attractive. Manufacturing also has a ripple effect on the overall job market that is impressive.

A big +1!

What would help manufacturing?

Treaties that mandate that foreign manufacturers wishing to access our market--and they all do--must meet US OSHA, EPA, accept legal liability for their products, recognize patent and copyright, and meet minimum US style labor standards. These changes alone would almost level the playing field.

I've been arguing that for years. Corporations offshore jobs and manufacturing for two big reasons.

• Arbitrage in the cost of labor
• Arbitrage in the regulatory environment (part of which factors in to the cost of labor). Don't like the EPAs rules regarding air pollution or disposal of hazardous waste? Move it to China: they don't bother with such piddly stuff.

Anybody wanting to sell their product in this country should be required to meet the following requirements:

• Pay your employees wages, normalized by cost of living, comparable to those of similar workers in the US
• Meet or exceed all relevant Federal laws and regulatory standards.

I'd even go further: if we are in fact Reagan's "shining city on the hill", we have obligations as the standard bearer for liberty and democracy. We can't push democracy at the point of a gun, but we can use the "invisible hand" to encourage it. We are not required to do business with those we don't like: If you want to sell your stuff in the US without a restrictive tariff, your country needs to meet minimum standards for human, civil and political rights. Meeting the standard laid down in the Universal Declaration of Human Rights would be good start.

Tax capital gains at the filers nominal rate unless those gains were reinvested here. Companies know whether their money was earned here or abroad. That's what accountants are for. A system could be set up inexpensively to reward domestic investors.

Tax profits made overseas even if they aren't brought back into the US. This antiquated law was passed years ago to encourage investment in higher risk Third World countries. It isn't needed now, obviously.

If an individual works overseas, they owe United States income tax, regardless of whether or not the money comes back to the US. No reason why that shouldn't be true of corporations (they are persons under the law, or so says the courts.)

[boatbuddha]

Tariffs on imported goods.

[Keith Wilson]

It is safe to say that in the US, actual manufacturing and the manufacturing percentage of GDP have both declined.

It might be safe, but it's dead wrong.

Tariffs on imported goods.

Smoot-Hawley, 1930, the classic case of cutting off your nose to spite your face.

[Soundbounder]

It might be safe, but it's dead wrong.



Smoot-Hawley, 1930, the classic case of cutting off your nose to spite your face.

I stand corrected. Thanks for the heads-up........







......douchebag

[Keith Wilson]

Arrrrrr, ye miserable scurvy poltroon!

You might also note that the US rate of manufacturing growth is faster than every other country on that chart, except China. India and Brazil aren't shown, though.

[C. Ross]

Wilson for the win. Again.

[Keith Wilson]

OTOH, manufacturing employment is down because of much higher productivity. (God help me, I never thought I'd post a chart from the Von Mises Institute, but it's a good chart; what can I say?)

[wardd]

OTOH, manufacturing employment is down because of much higher productivity. (God help me, I never thought I'd post a chart from the Von Mises Institute, but it's a good chart; what can I say?)

and those lines are going to continue to spread

[Keith Wilson]

Yeah, very likely. The jobs that can't be automated to some degree (i.e. you can't increase output per worker) have gone to poor countries. China is losing garment manufacturing jobs to places lie Bangladesh and the poorer parts of Africa. Sewing is one of the most difficult jobs to reduce the amount of hand work, (at least since the invention of the sewing machine) which is the same as increasing productivity.

I wonder if the chart in the first post is really accurate, though; I've seen this chart using data from the Federal Reserve and the BLS. It's from the Cleveland Fed's website;

Because the population and, hence, the labor force has grown, the share of manufacturing employment (to total employment) has been steadily falling since the Korean War. Approximately one in every three workers was employed in manufacturing after the Second World War; today, that number is about one in ten. Although the share of manufacturing employment has steadily fallen over time, the share of manufacturing output (to total output) has been remarkably stable over the same period. Labor productivity growth in manufacturing over this period can explain the falling employment share and the constant output share.

Here's a similar chart for Agriculture:

Changes in manufacturing employment during that last half of the twentieth century are remarkably similar to those in agriculture during the first half of the twentieth century. About a third of U.S. workers were employed in agriculture at the beginning of the century, but by 1950 that number was only a tenth. As with manufacturing, agriculture’s share of employment consistently fell from 1947 into the 1980s, at which point it leveled off, but its share of output remained relatively constant.

[wardd]

Yeah, very likely. The jobs that can't be automated to some degree (i.e. you can't increase output per worker) have gone to poor countries. China is losing garment manufacturing jobs to places lie Bangladesh and the poorer parts of Africa. Sewing is one of the most difficult jobs to reduce the amount of hand work, (at least since the invention of the sewing machine) which is the same as increasing productivity.

another element is people don't see objects as functions like the hammer and nail gun perform the same function

so jobs that can't be automated will be eliminated as the function of that the object they made is given to another object that can be automated

this doesn't pertain to every object but enough to make a difference

[johnw]

It makes sense mainly because other components of GDP are increasing faster than what we spend on manufacturing. (Other components are consumer and business purchase of everything OTHER than manufactured products, plus government spending, plus net private investment.)

Of secondary importance, productivity in manufacturing continues to increase a lot. Consider computers. They cost less and less and do more and more. As a percentage of GDP, I'd bet computer equipment is not increasing by much, or probably decreasing.

If you looked at the same graph for agriculture, you would have seen a massive decline in agriculture as a percentage of GDP over the last 100 years. So what? I'm glad we can feed more people for less, and I'm glad I can get fantastic electronics and reliable cars for a smaller percentage of my paycheck.

From a personal perspective, I'm in the period of my life where experience is more important for me than things. I'm glad to be spending more on services than stuff.

For example:


For manufacturing to remain as high a percentage of GDP, we'd have to be buying more manufactured things at the same rate productivity is increasing. We prefer to buy more Happy Meals and triple bypass operations.

[boatbuddha]

It might be safe, but it's dead wrong.



Smoot-Hawley, 1930, the classic case of cutting off your nose to spite your face.

Ahh but when Smoot-Hawley was passed the US was a net exporter, now it's a net importer. When you're a net exporter protective tariffs are stupid, when you're a net importer they're good policy.

[Keith Wilson]

. . . . like the hammer and nail gun . . . .

I know exactly what you mean. I make my living these days designing large automated machines that nail things together.

[David G]

Moderation in all things (including moderation). I think most of us would like to have an even stronger manufacturing base.

When I think about this issue, some history and a metaphor come to mind.

History: the U.S. preeminence was helped substantially by WWI & WWII. The way I remember the history, ramping up for the first war helped galvanize an economy that was transitioning from an agriculture-centric economy to a manufacturing-centric one. (see Walt Rostow on the classic Stages of Growth model) The Great Depression in between was the result of the resulting boom, and our inability to predict or manage the inevitable bust. As an aside, I'll say we've learned a lot in the interim - which is why it's so disheartening to see us not acting on that knowledge.

WWII was an even bigger catalyst for this transition. Not only that, but in the end, we were kind of the only man left standing. Most of the other 'modern industrial powers' had had their manufacturing capacity reduced - anywhere from substantially to nearly totally. It gave us a clear field for a good stretch of time... and we took advantage of it.

By now, though, those other powers have recovered, and some counties that were Third-World, have risen (India, Brazil, et.al.) We no longer have the field to ourselves, and a certain evening-out seems to be occurring.

Metaphor: while a national economy is not strictly analogous to a firms life, there are some similarities. A successful firm (or industry) typically has a pattern. First comes a period of innovation, flexibility, and rapid growth. Then comes a period of maturity, where sales and growth plateau. Finally comes the decline - fast or slow - as the market for (oh, say... buggywhips) declines. Some (see Paul Kennedy for example) say nations/empires follow this same arc. I say this pattern is not pre-destined, just typical. With knowledge of the pattern, hard work, unwavering intention, and a bit of genius in instilling a corporate culture, a firm can extend the first two periods (see Apple). It can keep reinventing itself in innovative ways. I suspect nations are the same way.

Unfortunately, it appears to me that the inertia of the 'normal' pattern is overwhelming the focus, knowledge, and good intentions. Kennedy's vision is becoming stronger, and the Apple scenario less likely.

It is worrisome. It's not irreversible, but it takes leadership with the historical perspective (or some intuitive genius) to understand the pattern and how it can be avoided. Meantime - the worrisome part provides ammunition for the KnowNothings, and the demagogues... further impeding efforts to move forward productively.

[pipefitter]

The chart in the above post somewhat reflects the population ratios of the included countries as well, except for China. What is shown for the U.S., doesn't account for manufacturing percentages that considers how much of that output is from foreign labor when they use the term "Manufacturing Output" as a total. I wonder what a comparisons chart would look like of actual 'Domestic Manufacturing Output'.

The differences may be more telling when considering a country with a population of 300 million as opposed to a country with under 50 million.

[Keith Wilson]

You do see that the LH scale goes from 11 million to 20 million, right? And the RH scale is from $1.2 to 4.6 billion. Odd way to make a graph; it appears designed to make the drop in manufacturing employment look bigger than it is. Here's pretty much the same data with a scale starting at zero.

What is shown for the U.S., doesn't account for manufacturing percentages that considers how much of that output is from foreign labor when they use the term "Manufacturing Output" as a total.

I don't think that's correct. Reference, please? I think the US Manufacturing Output number is stuff actually made in the US, not things made abroad by US companies.

[Waddie]

Posted by David G;

I think most of us would like to have an even stronger manufacturing base.

All that the charts show us is that manufacturing is important to the US economy and that productivity gains are continuing. However, manufacturing as a way to influence the balance of trade will become ever more important as this century progresses. IMO, the 21st century will evolve into the haves and have nots. The haves will maintain a favorable balance of trade.

The US is the only country that can print it's own money to buy oil and other goods. That's how we finance a 500 billion deficit year after year in trade. We are the world's reserve currency, but that is slowly changing and we won't be the reserve currency much longer. That will have a dramatic effect on the cost of energy and other imports. We will go through much the same scenario that Great Britain went through when they devalued their currency in the mid seventies.

As energy becomes more expensive local manufacture ( domestic) of goods will become a necessity. However, we have lost the ability to scale up many kinds of production because we let those industries go overseas. That decision will come back to bite us.

The US consumer will not lead us out of this recession. Any effect of stimulus will be temporary. However, austerity programs, though necessary, should be phased in slowly as they tend to shrink the economy further. The growth in consumer demand is coming from the emerging economies. We will have to engage those foreign markets through a stronger export program.

When it is all said and done, charts or no charts, there is no substitute for a positive balance of trade if prosperity is your goal.

regards,
Waddie

[johnw]

Any country with its own currency can print its own money, so I'm not sure what you're driving at. And balance of trade can change pretty quickly as currency values change. The dollar is the reserve currency for the world, looks like the Euro won't be replacing it, so in times of trouble it gets overvalued. Right now China is manipulating things to keep its currency undervalued, which should be great for us, we get to consume more than we make, and terrible for Chinese working stiffs who have to produce more than they consume.

[genglandoh]

Yeah, very likely. The jobs that can't be automated to some degree (i.e. you can't increase output per worker) have gone to poor countries. China is losing garment manufacturing jobs to places lie Bangladesh and the poorer parts of Africa. Sewing is one of the most difficult jobs to reduce the amount of hand work, (at least since the invention of the sewing machine) which is the same as increasing productivity.

I wonder if the chart in the first post is really accurate, though; I've seen this chart using data from the Federal Reserve and the BLS. It's from the Cleveland Fed's website;






Here's a similar chart for Agriculture:

Does anyone understand the output lines on these charts.
I do not.

The output for manufacturing is constant at 15%.
But I can not find out what this means, 15% of what output.

The chart i posted was a % of GDP but these charts are a % of what?
If anyone knows please post.

[wardd]

takes fewer people for the same output

[S.V. Airlie]

A one liner answers all questions...

[genglandoh]

takes fewer people for the same output

I understand the point of the chart but what is the 15% output number?

[B_B]

Does anyone understand the output lines on these charts.
I do not.

The output for manufacturing is constant at 15%.
But I can not find out what this means, 15% of what output.

The chart i posted was a % of GDP but these charts are a % of what?
If anyone knows please post.

follow the link in the original post

Although the share of manufacturing employment has steadily fallen over time, the share of manufacturing output (to total output) has been remarkably stable over the same period. Labor productivity growth in manufacturing over this period can explain the falling employment share and the constant output share.

[Waddie]

Any country with its own currency can print its own money, so I'm not sure what you're driving at. And balance of trade can change pretty quickly as currency values change. The dollar is the reserve currency for the world, looks like the Euro won't be replacing it, so in times of trouble it gets overvalued. Right now China is manipulating things to keep its currency undervalued, which should be great for us, we get to consume more than we make, and terrible for Chinese working stiffs who have to produce more than they consume.

Right now China is manipulating things to keep its currency undervalued
Since the Yuan is undervalued the Chinese don't care what it costs to buy the raw material futures contracts it wants for use down the road. That's how they've kept the price of copper so high. They are using cheap, easy to print currency, to purchase real assets. Not a bad strategy. If you can control inflation at home.

Any country with its own currency can print its own money, so I'm not sure what you're driving at
All oil and most commodities are priced in dollars. So if Japan wants to buy oil from Saudi Arabia, they use an exchange to buy Dollars with Yen, and pay the Saudis in Dollars. Nixon destroyed the Bretton Woods agreement in 1971, and made every currency in the world a fiat currency (it's money because we say its money), with only the promise by other countries that they wouldn't print unlimited amounts of money--however, that is exactly what most countries are doing in order to finance their government debt and/or create stimulus programs. This is called monetizing the debt. When the Fed prints billions and billions of dollars out of thin air which is what QE1 and QE2 were, that is monetizing the debt--exactly what we promised not to do. This causes other nations to question the soundness of using the dollar as the world's reserve currency.
Being the world's reserve currency has made it possible for Americans to have a much higher standard of living than they would otherwise, or will have if the dollar is rejected as the reserve currency. Being able to print billions of extra dollars is how we have been able to have cheap oil (compared to the rest of the world), and run a huge trade deficit year after year with other nations.

regards,
Waddie

[genglandoh]

follow the link in the original post

I did it talks about 15% of total output.

But what is total output?

[johnw]

Right now China is manipulating things to keep its currency undervalued
Since the Yuan is undervalued the Chinese don't care what it costs to buy the raw material futures contracts it wants for use down the road. That's how they've kept the price of copper so high. They are using cheap, easy to print currency, to purchase real assets. Not a bad strategy. If you can control inflation at home.

Any country with its own currency can print its own money, so I'm not sure what you're driving at
All oil and most commodities are priced in dollars. So if Japan wants to buy oil from Saudi Arabia, they use an exchange to buy Dollars with Yen, and pay the Saudis in Dollars. Nixon destroyed the Bretton Woods agreement in 1971, and made every currency in the world a fiat currency (it's money because we say its money), with only the promise by other countries that they wouldn't print unlimited amounts of money--however, that is exactly what most countries are doing in order to finance their government debt and/or create stimulus programs. This is called monetizing the debt. When the Fed prints billions and billions of dollars out of thin air which is what QE1 and QE2 were, that is monetizing the debt--exactly what we promised not to do. This causes other nations to question the soundness of using the dollar as the world's reserve currency.
Being the world's reserve currency has made it possible for Americans to have a much higher standard of living than they would otherwise, or will have if the dollar is rejected as the reserve currency. Being able to print billions of extra dollars is how we have been able to have cheap oil (compared to the rest of the world), and run a huge trade deficit year after year with other nations.

regards,
Waddie

Pretty much everybody was already on fiat currency by the end of the 1930s. And a good thing, too, the quicker they were to give up the gold standard, the quicker they recovered from the Depression.

Via Matthew Yglesias:



As for Nixon, the world changed, should he not have admitted it? While it's true that economics is a science of values, it is not a morality play.

[johnw]

Yeah, very likely. The jobs that can't be automated to some degree (i.e. you can't increase output per worker) have gone to poor countries. China is losing garment manufacturing jobs to places lie Bangladesh and the poorer parts of Africa. Sewing is one of the most difficult jobs to reduce the amount of hand work, (at least since the invention of the sewing machine) which is the same as increasing productivity.

I wonder if the chart in the first post is really accurate, though; I've seen this chart using data from the Federal Reserve and the BLS. It's from the Cleveland Fed's website;






Here's a similar chart for Agriculture:

[Tylerdurden]

It might be safe, but it's dead wrong.



Smoot-Hawley, 1930, the classic case of cutting off your nose to spite your face.

Not inflation corrected. Your Just as bad a The Clinton admin changing all the formulas so 23% unemployment comes out to 9%.

[Keith Wilson]

Not inflation corrected.

Dead wrong. Read the chart. "Real 2005 dollars", i.e. constant dollars, inflation-corrected.

[Tylerdurden]

Dead wrong. Read the chart. "Real 2005 dollars", i.e. constant dollars, inflation-corrected.

Fool? Every thing changed with Clinton. If that wasn't factored in its a fraud. How many times does on have to repeat that before you grasp it?

[RonW]

Interesting thread with some obviously controversial opinions.
Waddie's posts #31 and #38 I think are on the mark. But then Johnw post # 40 proclaims that the increase of manufacturing
has been due to FDR (supposedly)removing us from the gold standard and creating the fiat currency. His link to a progressive website states--

Governments don’t control the economy, and Presidents don’t fully control the government, but the Great Depression wasn’t just about a “bottoming-up” followed by a “rebound” policy choices mattered. In particular, soon after taking office FDR took the United States off the gold standard thus initiating a round of expansionary monetary policy. Then in 1937, he initiated fiscal retrenchment and the Fed initiated monetary contraction—the economy fell back into recession. Then in 1939-41 monetary conditions reversed again and the US began a fiscal ramp-up to prepare for war and the economy grew again.

Which is one hell of a statement, and gee I thought FDR Illegally confiscated gold and put it gov. vaults.
But it actually was Nixon that removed the dollar from the gold standard in 1971 and let the dollar float, and floating it is.
So there was no fiat currency till it was removed from being gold backed in 1971 which allows the federal reserve to print as they wish
and expand the credit markets which allen greenspan did a lot of which created the inflation and now the deflation period we are in.

[peb]

It has been noted, I have been stating it for a long time, the trend in manufacturing is the same as it was in agriculture. As technology improves we will need fewer and fewer people to produce the goods we use. The graphs originally posted by Keith are good and illustrate this very well. But they don't tell all of the story. Although agricultural workers (actual farmers and those who work on farms) is well below 5% of the population, many more people are now employed in agribusiness fields. These are mainly service industries (think fertilizer, etc) which support farmers and are often jobs of similar quality as manufacturing jobs.
As manufacturing continues to be more and more automated, the advantages of having manufacturing overseas (due to labor as opposed)to in this country will be reduced. So more and more manufacturing output will move back to the US. This trend has actually already started, look at how many auto plants have been built in the US by foriegn car companies. But, and this is important, the jobs will NOT come back. In effect, they are not being moved overseas, they are being made obsolete.

Also, the complaints are the same as before. As agricultural jobs decreased in the first half of the 20th century, people lamented the fact that everyone was havng to take manufacturing jobs in the city, which paid so poorly.

So we are going to reach a point where it takes 5% of the people to work directly in manufacturing producing all of the goods we need.

And of course the same trend is happening in the service industry, especially in low-end service jobs. For example, the automated check out lines. And in not-so-low end service jobs: how many of us use full service stock brokers any more?

Now, even though there will continue to be quite a few people providing high end services to automated manufacturing plants (apparently Keith is one of them now), this will not make up for the decrease in manufacturing jobs.

It is not necessarily bad, but it provides some definite challenges: due to automation, a small subset of the populatino will be providing most of the goods and serives needed for everyone (againg, think food today as an example). But, wealth distribution is primarily labor based (I know this is obvious), so how does it happen in the future?

My thoughts: first of all, education and skills become very important. This is already the case, if you look at income growth or unemployment based on education levels they are quite revealing. The problem we have seen the last 10 years or so with more pronounced uneven distribution of income is primarily education driven.

Many more people will end up providing local services as independent business, eg plumbers, carpenters, web-site designers, accountants, etc. I am just naming these as examples, the actual types will be different. Our society is not really set up to handle this on a large scale. Perhaps we need some type of return of something analogus to medival guilds to help support this.


The demographic changes will help with the transition, as many more people will be needed in healthcare services for the next 50 years or so.

Finally, it is unpredictable the type of jobs that will be needed 10, 20, 30 years from now.

All of these points point back to educatoin. And we have not figured out how to solve this problem.

[peb]

Pretty much everybody was already on fiat currency by the end of the 1930s. And a good thing, too, the quicker they were to give up the gold standard, the quicker they recovered from the Depression.

Via Matthew Yglesias:



As for Nixon, the world changed, should he not have admitted it? While it's true that economics is a science of values, it is not a morality play.

I see the corelation, but not the causation at all. Too small of data set. Germany and Japan growth trajectory direcly aligns with huge increases in military expenditures. These expenditures could not have been done as easily on the gold standard, but it was likely the military buildup with caused their GDP to grow faster.

That leaves us with a data set of three: Britain, France, and US. Well, that is really a small data set to draw any conclusion from.

You have posted it before. It is quite unconvincing. At most, it shows that a flexible monetary policy is needed in order to effectively implement keysian solutions during that particular type of depression. Lots of ways to argue against a gold standard, that graph is not one of them.

[johnw]

Interesting thread with some obviously controversial opinions.
Waddie's posts #31 and #38 I think are on the mark. But then Johnw post # 40 proclaims that the increase of manufacturing
has been due to FDR (supposedly)removing us from the gold standard and creating the fiat currency. His link to a progressive website states--



Which is one hell of a statement, and gee I thought FDR Illegally confiscated gold and put it gov. vaults.
But it actually was Nixon that removed the dollar from the gold standard in 1971 and let the dollar float, and floating it is.
So there was no fiat currency till it was removed from being gold backed in 1971 which allows the federal reserve to print as they wish
and expand the credit markets which allen greenspan did a lot of which created the inflation and now the deflation period we are in.

What FDR did was take us off the gold standard domestically, and devalue the dollar against gold internationally, as believe I explained to you on another thread. What this means is that you had to be a foreign country to exchange dollars for gold, and you didn't get as many dollars as you did before. Perhaps, had FDR taken us completely off the gold standard, the stimulative effect would have been greater. In any case, keeping the price of gold fixed at $35 an ounce until 1971 was probably a bad idea. We should have floated the dollar sooner.

[johnw]

I see the corelation, but not the causation at all. Too small of data set. Germany and Japan growth trajectory direcly aligns with huge increases in military expenditures. These expenditures could not have been done as easily on the gold standard, but it was likely the military buildup with caused their GDP to grow faster.

That leaves us with a data set of three: Britain, France, and US. Well, that is really a small data set to draw any conclusion from.

You have posted it before. It is quite unconvincing. At most, it shows that a flexible monetary policy is needed in order to effectively implement keysian solutions during that particular type of depression. Lots of ways to argue against a gold standard, that graph is not one of them.

Milton Friedman was also a fan of flexible monetary policy, and in fact thought the right monetary policy would have prevented the Depression. Thus the term, "monetarism." FDR employed flexible monetary policy in 1933. Keynes didn't publish the General Theory of Money, Interest and Employment until 1933. FDR never bought into Keynes's ideas, and therefore didn't use a Keynesian approach until World War II forced his hand, which is why we didn't fully recover until WW II.

Although FDR instituted a policy of public works, he made sure they were largely paid for so that the country's debt wouldn't be too crushing.

As for the German and Japanese economic recoveries tracking vast increases in military spending, that would be a Keynesian effect, wouldn't it? I'm not as sure as you are that they did this with debt. They certainly employed flexible monetary policy, and I'm not sure why you want to prove that monetarism is wrong by claiming flexible monetary policy didn't help them recover.

Perhaps, like a lot of people, your ideas about what Keynesian policies are may be a little unformed. Not all policies designed to end the Depression were Keynesian; until World War II most policy makers were working with the tools people like Irving Fisher has given them. Fisher is generally considered a neoclassical economist. The neoclassical school was not bereft of ideas for dealing with the crisis, so give them some credit.

My own view is that Keynes was onto something, but his policies usually prove politically unworkable, so monetary policies should be used whenever possible.

[RonW]

John W-

What FDR did was take us off the gold standard domestically, and devalue the dollar against gold
internationally, as believe I explained to you on another thread. What this means is that you had to be a foreign country to
exchange dollars for gold, and you didn't get as many dollars as you did before. Perhaps, had FDR taken us completely off the
gold standard, the stimulative effect would have been greater. In any case, keeping the price of gold fixed at $35 an ounce
until 1971 was probably a bad idea. We should have floated the dollar sooner.

Interesting answer there John...obviously I disagree with it...Some of our leading economists are saying that we
will be back on the gold standard within 5 years and so will most other countries...
What is really backing our dollar up right now is nothing more then the military,.... power.
Very shortly oil will be sold for other currencies or a basket full of various currencies.
That doesn't mean we won't still have the world's reserve currency and will as long as we are the
world's super power, but when that is over so will the reserve currency thing. IMF is already trying
to subvert this with basket of various currencies.