OMG! Somebody finally gets it!

[rb336]

One, tariffs have been show to hurt the economies of both countries involved. They're not a solution unless you're looking to pick a few winners [[the protected companies/workers)at the expense of a bunch of losers [[everyone else).

far from a universal truth. Our economy flourished under fairly heavy tarrifs for almost two centuries. If the playing field is level, tariffs get in the way, but when one country offers to build products with virtual slave-labor or poverty-level wages, then tarriffs are extremely beneficial to the working people of OUR country

farmers found work in industry.

That's the challenge today, how do displaced manufacturing employees find work in non-manufacturing sectors? The key difference between now and the earlier farm--->factory shift is that more knowledge is required in the non-manufacturing jobs.

actually, people left farms because industry offered a better standard of living. quite the opposite of the McWalMart jobs replacing manufacturing

Looking to some ill-defined "industrial policy" involving tariffs won't help.

ill-defined? yes, an ill-defined industrial policy would be a mistake. a well defined industrial policy, including targeted tariffs, would be a boon

[PeachLaser]

Very interesting article. Personally, I think Detroit has a huge opportunity to re-invent itself. It's going to take market-leading products that are well-engineered, efficient, reliable and affordable. I'm seeing a lot of progress in the designs and the ads on TV.

Start building today what the kids of today want to be driving tomorrow. There is a paradigm shift going on. Build as green as you can and make Detroit the leader in the world in efficient, well-designed and cool cars.

In all that vacant area downtown, build demonstration tracks for electric and alternative vehicles like the one that was built in the basement of Cobo Hall at this year's Auto Show. Add some greenery and landscaping along the way and before long you'll have a whole new park in that unused space. Turn it into a Detroit experience. Showcase the technology and the city at the same time.

Just dreaming and adding my 2¢ worth.

[Det_ard]

Maybe I'm not as knowledgeable as you are on this, but didn't the United States become an industrial powerhouse with the aid of tariffs [[late 19th, early 20th Centuries)? All the while that the declining Great Britain was espousing "Free Trade"? Perhaps you could provide where the contrary "has been shown".

Virtually any Econ book you care to read will show you how tariffs affect the economies of both countries involved negatively.

As for picking winners: Yes, I would like to pick the United States as a winner. Is that allowed, or do we need to get approval from "the international community"?

Picking winners refers to favoring, for example, the steel industry with a tariff that helps the steel industry but raises costs for all users of steel [[autos, appliances, tools) and everyone who buys these now more costly products. The benefit to the steel industry and it's workers is borne by everyone else, and the result is a net negative to the country [[see Econ books for more examples and underlying theoretical discussion).

And I suppose you think it would be impossible for foreign countries to put our remaining manufacturing industries out of business? This is the same illusion that America had when we first embraced Free Trade.

Yes. We have numerous advantages. We also benefit when we can buy things for less than otherwise. It increases our standard of living akin to an increase in income.

You do realize that American agriculture is heavily subsidized? A subsidy is nothing more than a tariff by another name.

Farm subsidies [[which I oppose) are not the reason the US can produce vast quantities of food with just a few million people involved in agriculture. Did you understand my point?

And I suppose you think that Americans are "more knowledgeable" than Asians?

Certainly more so generally than in the low-cost manufacturing countries like China.

And your solution is...

Education and hard [[smart) work.

[Det_ard]

far from a universal truth. Our economy flourished under fairly heavy tarrifs for almost two centuries. If the playing field is level, tariffs get in the way, but when one country offers to build products with virtual slave-labor or poverty-level wages, then tarriffs are extremely beneficial to the working people of OUR country

Not to all the working people, just to the working people protected from competition by the tariff on, for example, steel. All non-steelworkers pay the price in the form of higher prices on cars, appliances, tools, etc. Also, the products the other workers make using the now higher-priced steel are more expensive. This hurts their industry [[autos, appliances, tools, etc.) and the workers in those industries. The benefit to the steel industry is direct and the cost to others is diffuse but the net result is negative in the economic studies I've read.

actually, people left farms because industry offered a better standard of living. quite the opposite of the McWalMart jobs replacing manufacturing

High-pay low-skill manufacturing jobs will not be replaced with high-pay low-skill service jobs, that's true. But why should we aspire to be a nation relying on low-skill jobs anyway? We have a great educational system, right? Think of all the high-paying jobs in the service sector. This is the direction to head. No try to hang on to what was a 19th century abberation, high pay for low skills.

ill-defined? yes, an ill-defined industrial policy would be a mistake. a well defined industrial policy, including targeted tariffs, would be a boon

What else? All I've heard is "tariffs" which no one, Obama included, is seriously proposing [[for good reason).

[Bearinabox]

We have a great educational system, right?

This is news to me.

[Det_ard]

It must be good, it's expensive as hell, and unionized.

[EastsideAl]

We have a great educational system, right?

Read: "upper middle class suburbanites have a great educational system, right?" Basically the same people who honestly think we have "the greatest health care system in the world."

Really Det-ard's posts sound a whole lot like a post-neo-classical consensus econ 101 textbook. Like someone whose read Friedman and his acolytes and believes that their ideologically-driven "free" market modeling tells one all they need to know about the real world economy.

There's a only one small problem with that: the system in question just damn near collapsed of its own contradictions in this past year. In fact that's only the endgame, its been robbing people of their livlihoods, creating ever growing inequalities, and progressively impoverishing our cities, families, and communities for at least the past 30 years. The subject of this thread, the City of Detroit and the Detroit area, stands as stark a testimony to the failure of those policies as one could ever see. Only those in deep denial or blinded by the promise of heedless self-interest could possibly still be true believers within the sight of what has happened, and is still happening, here.

[Retroit]

The United States went from an agrarian society to an industrial superpower thanks to tariffs:

• "...after the [Civil] war, tariffs stayed at wartime levels or above. Tariffs on manufactured imports remained at 40-50% until the First World War, and were the highest of any country in the world.
• "In 1913, following the Democratic electoral victory, the Underwood Tariff bill was passed, reducing the average tariff on manufactured goods from 44% to 25%. But tariffs were raised again very soon afterwards, thanks to American participation in the First World War. After the Republican return to power in 1921, tariffs went up again, although they did not go back to the heights of the 1861-1913 period. By 1925, the average manufacturing tariff had climbed back up to 37%. Following the onset of the Great Depression, there came the 1930 Smooth-Hawley tariff, which raised tariffs even higher.
• "...Following the [Smooth-Hawley] bill, the average industrial tariff rate rose to 48%."
• [[source: Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, pp. 54-55, by Ha-Joon Chang

Now perhaps you can tell me how these tariffs hurt the U.S. during this period or provide your own example of how a country was "negatively affected" by imposing tariffs.

Your use of steel tariffs reveals a misunderstanding of how the tariff would be applied. You would not only raise a steel tariff only enough to favor U.S. steel, but you would also raise a tariff on the finished steel products [[autos, appliances, tools, etc.) to favor their domestic counterparts. You don't simply arbitrarily impose tariffs on random industries.

The standard of living of a country is not increased by the ability of its residents to buy more cheaply made foreign products; it is increased by giving the residents a greater ability to generate wealth [[manufacturing) for themselves.

Farm susidies are very much the reason why certain farm products are profitable [[or even exist) in the U.S.

If you think that America has an advantage in education, tell that to the Asian kids who go to school 240 [[Japan) to 250 [[South Korean) days a year. Compare that to the education system in Detroit with a 75% dropout rate and ask yourself who is winning in the knowledge department.

The U.S. needs high skill and low skill jobs. In fact, because of our abysmal inner city education systems, it could be argued that we need lower skill jobs more than foreign countries.

And as for no one [[including Obama !!!) proposing tariffs: is it any wonder we are in the shape we are with continuous record trade and federal deficits?

[rb336]

It must be good, it's expensive as hell, and unionized.

we spend a lower percentage of our GDP on education than any other industrialized country

[rb336]

Not to all the working people, just to the working people protected from competition by the tariff on, for example, steel....and the workers in those industries. The benefit to the steel industry is direct and the cost to others is diffuse but the net result is negative in the economic studies I've read.

which studies? tariffs in one sector actually put upward pressure on wages in other sectors

Think of all the high-paying jobs in the service sector. This is the direction to head. No try to hang on to what was a 19th century abberation, high pay for low skills.

such as???

What else? All I've heard is "tariffs" which no one, Obama included, is seriously proposing [[for good reason).

no, for bad reason -- lack of tariffs and true FAIR trade policies raise profits for the top 1% at the expense of virtually everyone else. Tariffs should focus on wage parity, pollution, etc. good for us, good for the middle class

[Sstashmoo]

We get it. The question is: what do they plan on doing about it?

That is the scary part. It's easy to diagnose but our government is shying away from the cure. I have to ask why. Why did our current President make it the flagship of his rhetoric, and now that he is on office, it is swept under the rug? Can they not see where we are headed? Do they no longer have any control of it? Something is up, and it ain't good.

[Det_ard]

Retroit, tariffs suppress economic growth. The fact that the US grew while employing tariffs doesn't mean tariffs caused the growth. There was growth despite the tariffs. Growth would be larger sans tariffs.

Your solution of tariffs across our economy seems to ignore the fact that tariffs increase costs, and tariffs invite retaliation by other countries. It's a recipe for economic decline. What happens when our exports shrink because we've initiated a trade war? When input costs rise compared to other countries our exports become less competitive. When other countries impose tariffs on our goods they become even less competitive. When goods produced here are less competitive, factories here close and move overseas. That's what tariffs will get you.

rb, the "such as?" was referring to high paying service sector jobs, I presume? Think about anyone you know who makes a lot of money. They're in the service sector, aren't they?
How about

Doctor
Nurse
Finance Director
Accountant
Actuary
Attorney
Chemist
Pharmicist
National Sales Manager
Director of Operations
Plant Manager
Management Consultant
Investment Manager
you get the idea...

Of course they all require high skills, most require a college education. The days of low skill/education and high pay are over.

[PeachLaser]

I continue to look at this from the point of the international leaders in automotive design and engineering. I know this may sound like a broken record to many, but the American Le Mans Series has brought together the leading automotive countries. At the top level, there is Germany, France, Japan and England competing. The U.S. does not have a representative at the top level.

Corvette and Compuware understand what I am talking about and they have made a heroic bid to represent America but are still not at the top rung. In the ALMS, manufacturers are trying new powerplant systems and new fuels while trying to be the fastest and most efficient. There's a whole of testing for the future going on.

That's where the automotive bar has been raised, in my opinion. I think if everyone focused on how to get there and engineer our way back to the top, the world would start buying Detroit's products again and many problems would solve themselves.

[Bearinabox]

rb, the "such as?" was referring to high paying service sector jobs, I presume? Think about anyone you know who makes a lot of money. They're in the service sector, aren't they?
How about

Doctor
Nurse
Finance Director
Accountant
Actuary
Attorney
Chemist
Pharmicist
National Sales Manager
Director of Operations
Plant Manager
Management Consultant
Investment Manager
you get the idea...

Of course they all require high skills, most require a college education. The days of low skill/education and high pay are over.

Even if everyone in America were qualified for these jobs, there wouldn't be enough of them to go around. You can't build a whole economy on doctors and plant managers, especially when nobody can afford health care and all the plants are overseas.

[EastsideAl]

Think about anyone you know who makes a lot of money. They're in the service sector, aren't they?
How about

Doctor
Nurse
Finance Director
Accountant
Actuary
Attorney
Chemist
Pharmicist
National Sales Manager
Director of Operations
Plant Manager
Management Consultant
Investment Manager
you get the idea...

Of course they all require high skills, most require a college education. The days of low skill/education and high pay are over.

What percentage of the population are, or even could be, holding those jobs? Even if we had the best education system in the world, there is only so much room in those professions. You just aren't going to be able to employ tens of millions of people in those high-pay service jobs. And just who is going to be paying for all these high-priced services?

What you're really talking about here is just the recipe for the sort of quickly growing massive income-inequality that we're already suffering from. You're not talking about employment that will be available to the majority of the workforce. So everyone else, the great mass of people, will still have low paying McWal-Mart jobs in your wonderful new economy. How has that been, or will that be, and improvement to our society and our lives?

People have mentioned here other countries with better education systems than ours [[which includes pretty much every other modern country). Many of those countries - Germany, France, Japan, Sweden, etc. - have been well-educated enough and smart enough, through state support, protection, and/or subsidy, to preserve a healthy well-paying manufacturing sector as an important part of their economy.

[English]

Even if everyone in America were qualified for these jobs, there wouldn't be enough of them to go around. You can't build a whole economy on doctors and plant managers, especially when nobody can afford health care and all the plants are overseas.

I wish that I could say "Amen" to this quote a thousand times. Why hasn't anyone thought this out? Even if every school in America was cleaned up tomorrow and produced geniuses, there's no way we could employ every American in a service job.

The scariest part is that not even our smartest minds can think up an economic model for the 21st century that has the potential for full employment.

[Sstashmoo]

Quote: "tariffs invite retaliation by other countries."

It's happening anyway. There isn't one country to my knowledge that doesn't ping their residents for buying US goods via duties, customs brokers etc. It isn't a little cost either. Even our so-called friends to the north. Everyone can dump their shit here on our shores unrestricted and unquestioned. We're getting screwed royally.

As I've said before, they need us, we don't them. Our economy would hum along as it should with zero imports.

Quote: "Even if every school in America was cleaned up tomorrow and produced geniuses, there's no way we could employ every American in a service job."

Truth.

[Det_ard]

I wish that I could say "Amen" to this quote a thousand times. Why hasn't anyone thought this out? Even if every school in America was cleaned up tomorrow and produced geniuses, there's no way we could employ every American in a service job.

The scariest part is that not even our smartest minds can think up an economic model for the 21st century that has the potential for full employment.

Save your Amens for Sunday. Y'all look at our economy as something of fixed size, a zero-sum game. Why can't we have tens of millions more highly-educated, high-value-added service jobs? You think it can't be done?

We've already done it. Over time we went from mainly subsistence farming to a society with more wealth for all [[don't deny it, compare like demographics to 50 years ago, 100 years ago, 150 years ago, etc.). I'm sure there were people back then at the general store saying the same things, "there's no way all these people can move from the farm and make things. There's just not that much to make. And people don't have the money to buy that many things. We have to remain a nation of farm jobs, not some manufacturing job society that can't support people like we can with farming." Fast forward to today's lament about manufacturing vs. service sector jobs.

Look at the advances in every facet of life. Technology, health care, mobility, entertainment, science, it's every expanding. Look how many people are gainfully employed, even with all the unemployment from the recession, 140 million. Someone 100 years ago probably echoed English's concern about how could put any more people to work. 100 years ago there were about 30 million jobs, 110 million were added since then. So why exactly can't we grow more prosperous, create more jobs, create new industries, new careers? It's been happening for a long time now, and it's happening today around the world.

This may be DetroitYes but it sure sounds like FutureNo.

[Sstashmoo]

Quote: "We've already done it."

Yes it was called the industrial revolution. Where poor dirt farmers and cobblers left their rural abodes and headed for the cities to partake in an unprecedented revolution of manufacturing.

Service for service to sustain an economy? Where's the meat on that sandwich? Where will these people work to pay for these services? Shine the doctors shoes for a check up?

Quote: " Why can't we have tens of millions more highly-educated, high-value-added service jobs?"

Are you aware that those jobs are being off-shored? Anything we develop and try to manufacture winds up in Asia? You do know that right?

[Retroit]

Retroit, tariffs suppress economic growth. The fact that the US grew while employing tariffs doesn't mean tariffs caused the growth. There was growth despite the tariffs. Growth would be larger sans tariffs.

"The first cost sheets for the Edgar Thomson Works [later named US Steel] that Andrew Carnegie and Alexander Holley brought to Junius Morgan in 1874 projected very high profits. But by the time the plant was up and running, rail prices had fallen and margins were only $4-8 a ton, even including the $28 per ton tariff-based price umbrella. Without the tariff, the ET could never have gotten off the ground.
"Without the tariff, in short, the American industry might have evolved more like that of Great Britain [which was embracing Free Trade], and one of the earliest, and most dramatic examples of the highly mechanized, mass-scale, intensely driven industrial machine that was the hallmark of the American advance might have been delayed too long to make a difference [in ET's establishment and growth]."
[[source: The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J.P. Morgan Invented American Supereconomy, pp. 285-287, by Charles R. Morris)

[EastsideAl]

Y'all look at our economy as something of fixed size, a zero-sum game.

For most folks its been a negative sum game for awhile now.

[dharma4313]

The basic take-away is this: a clique of suits passing money back and forth does not create wealth. Wealth is created from the forests, from the fields, from the mines, from the mills, from the sweat of the working man. And we had the mills, and we had the men. Point? Not sure I have one, but at least it's refreshing to see a clear discrimination between the actual production of wealth, and the cursory skimming of the labor and fruits of others through peripheral maneuverings. I'm no commie, but it seems to me that we should have treated industrial policy the same way we treat agricultural policy. The service-based mentality leads to this: ten laid-off industrial workers delivering pizza to some schmo working the phones at a soon-to-be outsourced [[read India) telemarketer.

[Det_ard]

The basic take-away is this: a clique of suits passing money back and forth does not create wealth. Wealth is created from the forests, from the fields, from the mines, from the mills, from the sweat of the working man. And we had the mills, and we had the men. Point? Not sure I have one, but at least it's refreshing to see a clear discrimination between the actual production of wealth, and the cursory skimming of the labor and fruits of others through peripheral maneuverings. I'm no commie, but it seems to me that we should have treated industrial policy the same way we treat agricultural policy. The service-based mentality leads to this: ten laid-off industrial workers delivering pizza to some schmo working the phones at a soon-to-be outsourced [[read India) telemarketer.

Would you then agree that more value is created by the pill machine operators than by the researchers who discovered the medicines used to fight HIV/AIDS? The folks who created Google, Amazon, Yahoo, Mosaic, Microsoft, et. al. didn't mine it, mill it, harvest it or chop it down, yet they create things of real value. I'm having a hard time getting this Manufacturing = good, service = bad mindset.

Also, where's the dividing line? If I design a new machine tool on a computer and sell that design to a manufacturer then I'm just a service industry worker, right?

[Retroit]

It's not a matter of manufacturing being good and service being bad. It's a matter of taking the most advantage as possible from every sector of the economy. From the iron ore mine to the steel mill to the manufacturing plant to the auto assembly plant to the dealership to the service station, with all the engineering, advertising, and other "industries" along the way. A country should try to optimize every step.

Sure, we could get rid of all our manufacturing. But that means that some other country now has the ability to benefit at our expense. Some countries can't benefit from natural resources [[Japan, for example) and others benefit almost entirely from them [[oil producing countries, for example). But if a country wants to be as wealthy as they can, they should try to maximize their share of every industry and every step of every industry if they possibly can.

And when certain countries have an unfair advantage that will be disadvantageous to our industries, we should impose a tariff. And the tariff must be adjusted over time so that it is high enough to prevent collapse of domestic industry, but not so high that it prevents the industrialization of other countries, because eventually we want to sell them our products and services as well.

In addition to tariffs, I also think we should require all foreign products and services sold in our country to be made in accordance with our laws. That would include minimum wage laws [[adjusted for each country and raised over time till on par with the U.S.), OSHA and EPA laws, labor and unionization laws, etc. The tariffs would be a temporary measure until the foreign country no longer has an advantage in any one of these areas.

[lilpup]

Would you then agree that more value is created by the pill machine operators than by the researchers who discovered the medicines used to fight HIV/AIDS? The folks who created Google, Amazon, Yahoo, Mosaic, Microsoft, et. al. didn't mine it, mill it, harvest it or chop it down, yet they create things of real value. I'm having a hard time getting this Manufacturing = good, service = bad mindset.

Also, where's the dividing line? If I design a new machine tool on a computer and sell that design to a manufacturer then I'm just a service industry worker, right?

It's obvious you don't get it. The researchers who develop medicines are part of the manufacturing chain. All R&D that yields a tangible product is. That's why they have the protection of patents, at least in the cooperative countries.

Where's the dividing line? Two primary things to consider, in my opinion: dependency on disposable income and relation to the underlying foundational agricultural/manufacturing/related transportation system.

Follow the money to its roots - it will always end at the most rudimentary industries.