Tuesday, August 3, 2010


If there is anyone out there still reading, I apologize for the long silence. Since I last posted, the issues I raised in The China Price have become headline news internationally. I’ve been traveling for most of that time, mostly in China and the US. I have become increasingly worried, in my travels back and forth to the US, about the lack of debate about one of the consequences of China’s rise for the rest of the world: the increasing difficulty developed countries will have creating jobs.

A brief conversation I had yesterday with two business types – one an investor, the other the CFO of a coal company heavily involved in China – underscores the point. I said I was worried about the way that China’s economic growth, the flypaper nature of manufacturing and technology combined to make creating jobs for ordinary Americans substantially more difficult. They swiftly changed the subject.

What I was talking about is not just “Chimerica”, but “Techimerica”, or China + America + technology. I haven’t drawn any grand conclusions on this subject, but it seems to me that as China’s manufacturing engine draws in more (not less, ye “rising wage rates will drive factories out of China” enthusiasts) jobs, the Chinese consumer becomes more important to the global economy, and American companies become ever more focused on cutting costs by eliminating jobs at home, there will be less and less for Americans to do. Technology accelerates this trend, in part because so much of manufacturing is related to technology, and so much of that manufacturing now happens in China, but also because technology makes the economy more efficient. We no longer need as many people to get the same job done (that’s the old “increasing productivity” chestnut-argument about US manufacturing, but it applies more broadly to things like the iPod, which has created more jobs in China than in the US.)

What I’m describing on the cost-cutting side is the same kind of full-throated capitalism that daily leads to the excesses of “the China price” for Chinese people. But despite all the rhetoric about creating “green jobs”, the larger problem is that there is not a greater sense of urgency about the long-term consequences of these factors for American job creation, and therefore for the standard of living for many Americans. Anyone who wants a preview of what this will look like can visit the people I talk to in Japan, who, after years of standing elbow-to-elbow with mainland Chinese on factory lines in Chiba (competing with the Chinese factory worker in their own country), are giving up hope of ever making a living above the poverty line. Or talk to some of the ordinary Americans who already have little choice but to work at Wal-Mart in order to be able to shop at Wal-Mart.

Andy Grove wrote eloquently of this problem in Bloomberg BusinessWeek last month, describing how Silicon Valley start-ups don't create American jobs the way they used to, how that mechanism is broken, and thus how this blind faith that innovation will save the US economy is a fallacy. Grove asks: “what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?” The US has become “wildly inefficient” at creating technology jobs, he says, citing compelling calculations. Bob Herbert also wrote passionately about this subject in the New York Times last week.

One luxury of blogging, as opposed to writing papers, books or newspaper articles, is that you don’t have to strain for policy recommendations. Commentary suffices. Though I have no grand plan for creating American jobs, I will say that while I agree with the arguments that both Grove and Herbert make, I am interested in the arguments Matthew B. Crawford makes in Shop Class as Soulcraft. I worry about the policies Grove and Herbert propose. Grove wants to tax American companies that rely on offshore labor (good luck with that protectionist gambit). Herbert, in an outro so vague that if written by an external contributor it would never pass the New York Times op-ed editors’ muster, suggests that we follow the examples of Germany and Japan and “value our workers”. Anyone who has spent any time in Japan in the last few years can tell you Japanese workers don't feel valued.

I don’t know what the solution is, but to return to my discussion with the investor and the coal man, I can say that very few people want to talk about it. It’s a lot more fashionable to opine about the US deficit and the Krugman-Ferguson spat.

American companies and investors (not workers) are benefiting so hugely from Techimerica in the short and medium term (and who really wants to think about the long term?) that it will require discussions as painful as the ones we had about “death panels” in the health care reform discussion to address it. But, as I meet American aerospace engineers helping the Chinese design airplanes and talk to my brother, a talented industrial designer whose work is increasingly being outsourced to Chinese engineers at a fraction of the cost, I know that this is a debate we must have, and soon.

1 comment:

Eric B. Schultz said...

Great post. No answer, except I wonder what impact declining birthrates will have? If there are less jobs that's bad; if there are less people to fill less jobs that's complicated; if there are more aged people requiring more support from less people doing less jobs. . .We always look to technology to save us, and it generally comes through (at least for the last century or so). Maybe that's why we're so blase? Or maybe, if there are less people with less jobs sitting around in 125degreeF global warming, nobody will worry much about unemployment. :)