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842 points putzdown | 4 comments | | HN request time: 0.837s | source
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pjc50 ◴[] No.43692988[source]
> China generates over twice as much electricity per person today as the United States. Why?

This appears to be completely wrong? All the stats I can find say that the US has about 4x the per capita electricity generation of China.

Other than that it seems to be mostly good points, especially the overall one: you cannot do this overnight.

> If you’re building a new factory in the United States, your investment will alternate between maybe it will work, and catastrophic loss according to which way the tariffs and the wind blows. No one is building factories right now, and no one is renting them, because there is no certainty that any of these tariffs will last

Policy by amphetamine-driven tweeting is a disaster.

> 12. Enforcement of the tariffs will be uneven and manipulated

Yup. The 145% level seems designed to create smuggling, and the wild variations between countries to create re-labelling. It's chicken tax trucks all over again.

> This is probably the worst economic policy I’ve ever seen

Per Simpsons: this is the worst economic policy you've seen so far. The budget is yet to come.

> If American companies want to sell in China, they must incorporate there, register capital, and name a person to be a legal representative. To sell in Europe, we must register for their tax system and nominate a legal representative. For Europeans and Chinese to sell in the United States, none of this is needed, nor do federal taxes need to be paid.

This is .. not a bad idea, really. It would probably be annoying for small EU and UK exporters but less so than 10% tariffs and even less so than random day of the week tariffs. Maybe one day it could harmonise with the EU VAT system or something.

(also I think the author is imagining that sub-par workers, crime, and drugs don't exist in China, when they almost certainly do, but somewhere out of sight. Possibly due to the internal migration control of hukou combined with media control?)

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like_any_other ◴[] No.43693410[source]
> Other than that it seems to be mostly good points, especially the overall one: you cannot do this overnight.

It's annoying Americans were given only two choices - offshoring is great and let's keep doing it, and, as you say, the opposite, meth-fueled let's bring back manufacturing overnight. The kind of slow and steady protection and promotion of home-grown industry that China and most of Asia so successfully used to grow their economies was completely absent as even a talking point.

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rickdeckard ◴[] No.43693767[source]
The weird part for me is this: While the economy was evolving, Production was offshored from US for cost-reasons, but also in part to focus on higher-skill labor in US, delegating the low-skill mass-production to China.

Over time, China also developed mid/high level skills, complemented their low-skill production offering with it and now competes in new industries, new tech, etc.

So...to compete with China, the country with 4x the US-population, the solution is that low-skill labor needs to return to US....?

Shouldn't instead the focus be to again foster mid/high-skill labor, moving the part that is offshored again towards low-skill labor...?

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digikata ◴[] No.43694006[source]
I think the mistake here is the model of low-skill/high-skill labor is not a useful distinction. Manufacturing is high skill period, however there are low-infrastructure and high-infrastructure products and factories. The labor wages themselves are a factor, but an increasingly minor factor in product costs. By bypassing investment in US manufacturing skills and infra, the US sat itself on the sidelines for the ability to build, staff, and supply modern low, medium and high infrastructure factories.

It's not impossible to build back, but it would require long term stable policies to favor it at more levels than just tariffs.

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rickdeckard ◴[] No.43694323[source]
Not disagreeing with you, but isn't the issue that the US stopped investing in the skills and infra which made mass-production low-skill in the first place?

Instead, the offshore-destinations kept offering more and more services in the value-chain, until the entire skillset to actually create the low-skill labor processes to offshore was replaced with "let the offshore company manage".

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digikata ◴[] No.43694670[source]
Yes climbing the value chain was a necessity for nations like China. But in the US popularized in the 90's, was a business strategy trend that strongly discounted the value of long term capital investments - particularly for this discussion, investment in factories. They do require extra management attention and they do tie companies to strategies in longer time frames at lower margins - but they deliver long term value and long term synergistic growth benefits (in the vein of go slow to go fast). Many US business elected to chase short term growth, and short term and higher margins and minimize long term investments.

See a list of leading US companies that are off of being king of the hill - Boeing, GE, Intel, ... leading industrial US companies continually divested from manufacturing, or shorted long term investment, not because it wasn't profitable, but because it wasn't profitable enough in the moment. It took decades, and many dividends and stock growth was taken in the middle, but the shortfall manifests in time.

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roenxi ◴[] No.43704142[source]
You make that sound like it was emanating from the business community - the US has had a pretty significant period in there of 0% interest rates determined by a central committee. Return on capital doesn't really matter in a low interest rate environment, the important thing is access to the lending markets. Investors making sensible investments would have been eaten alive by those focusing on companies that were living off credit in ill-advised ways.

Uber still hasn't managed to make a net profit over its lifetime as a company, by the way.

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1. digikata ◴[] No.43706449[source]
Maybe, but 0% interest should have make it easy to invest in capital intensive endeavors that would have turned into great protective moats when the interest rates inevitably bumped up. Did that happen with factories and manufacturing?

I also think a significant influence on the Fed was a financialized business community demanding 0% interest.

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2. kevin_thibedeau ◴[] No.43707292[source]
> I also think a significant influence on the Fed was a financialized business community demanding 0% interest.

This is the one upside of chaos monkey crashing the economy. They aren't going to be able to drive rates back to zero in the next four years.

3. roenxi ◴[] No.43711653[source]
> Maybe, but 0% interest should have make it easy to invest in capital intensive endeavors that would have turned into great protective moats when the interest rates inevitably bumped up.

It doesn't - if you look at the situation in real terms, the amount of resources available to invest is about the same (probably shrinking because some are diverted to people who aren't creditworthy and consume them). So the major effect of artificially low interest rates is to add a whole heap of artificially supported highly wasteful companies to the mix.

All that changes is the market started rewarding people with access to credit instead of people who were responsible and effective. The credit people aren't particularly capable and it'd be better if they had been forced out.

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4. digikata ◴[] No.43719475[source]
China invested their low interest fiscal capacity into developing over decades via coordinated policy of their central bank / industrial strategy nudges to their businesses. China's factory ecosystem and the ability to build stuff meets my definition of a protective moat. Its very hard to replace and one can only contemplate it over relatively long time frames.

US businesses were free to do the same over the past low interest environment, but we did not have the same incentives, not inclinations in terms of prevailing business strategic appetite for factories. In contrast, for big tech, there was interest and appetite for it and significant capability with protective moats were built - but one could argue that software based tech moats may be faster to bypass.