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  July 8, 2016
It is All About Trade-Offs..

 


Progress is impossible without change, and those who cannot change their minds cannot change anything. 

                               ~ George Bernard Shaw


It’s an election year in the United States...

Although I generally don’t like to discuss the subject of politics, I’ve very recently found myself engaged in multiple conversations with numerous friends and acquaintances with regards to the upcoming elections... specifically the election of our next president.

I guess it’s hard not to have some kind of opinion... considering how coverage of the various campaigns seem to dominate all news... with a brief intermission to sensationalize specific terrorist acts here in the U.S. and around the world.

Clinton-TrumpFrankly I’m disappointed that out of 350 million United States citizens, we are left with candidates who are considered by a great majority as "the lesser evil".

There is a great divide in the philosophical thinking of most Americans at this moment of time.

There are the "social conservatives" who seem to want a lot of freedoms for Americans when it comes to guns, certain religious practices, governmental regulations, schools, and less taxes... but who also want a lot less freedoms when it comes to pro-choice policies, gay-marriage, voter registration, certain religious practices, and legalization of recreational drugs.

Then there are the "socials progressives" who believe that more government is better, that there should be no winners and losers... just participants, that no one is responsible for their own actions because the deck is stacked against the 99% so the ends justify the means, that more education, medical care, housing, transportation, non-GMO food and technology is good... just so long as it’s free.

From what I’ve ascertained listening to all the rhetoric is that Americans are becoming more and more polarized as the chasm of mistrust deepens.  The center no longer exists... you’re either for "us" or against "us"... it’s the civil war revisited.

So with that backdrop... is there actually any one issue that both sides can agree on?

Well... as it turns out there is...

Globalization

International trade is universally despised no matter if you find yourself on the right or the left of American politics.

The vast majority of American look at free-trade and think of one thing... the loss of high-paying manufacturing jobs.

...but here is the interesting thing... while certain manufacturing segments have been virtually eliminated in the U.S. (i.e. textiles/apparel and furniture), the overall manufacturing output in U.S. over the past 25 years has actually grown significantly overall.

According to the U.S. Census Bureau, in 1991, the manufacturing sector accounted for approximately $6.45 trillion of the total GDP, while in 2015 it accounted for $15.64 trillion.

In 1991, 13.5 million cars and light trucks were produced in the U.S accounting for $229 billion in sales by 2015, 17.5 million cars and light trucks accounting for $570 billion in sales.

Simply put, the manufacturing output in America is strong and is in fact still the number one manufacturing economy in the world (just slightly above China).

So if it is true that manufacturing is actually up significantly in the past 25 years, why does there seem to be so much angst among population?

The answer, in my opinion, lies in how manufacturing (as well as a slew of other industries) is being done today.

Globalization hasn’t necessarily killed off American manufacturing jobs... the real culprit is technology.

The CNC mill works three shifts a day, doesn’t require healthcare and pension benefits, and never calls in <sick (although it does need periodic maintenance).

 

Easily programmable robots can be taught to spray paint car parts...

Fully automated assembly lines can be designed to populate, solder, and optically test electronic printed circuit boards.

Whereas once it maybe took an assembly line of 50 people to complete a widget... now that same widget can be manufactured with only 5 people.

In this scenario, there will be 45 people who will need to find a new job. 

They have become victims of technology... it is the cost of progress.

So what happens to the 45 people, no longer required to manufacture the widget?

Some of them simply wait around hoping that their old job comes back.

Some of them decide to re-educate themselves so that they can now become employable highly-skilled CNC or robotics programmers.

Some of them leave the manufacturing sector and move into the growing service economy.

Some of them to decide to start their own business, making products or providing services to customers who want to buy what they are producing.

For the 45 people... it’s a really scary time...

Most people are inherently afraid of change.  They have spent most of their working lives selling their particular skills... but the market for those particular skills no longer exists.

This happened to the family farmers... to shoe cobblers... stage coach manufacturers... the secretarial pools... the travel agent... TV repairman... or the 100’s of other noble professions that once found a willing market for their highly trained skills.

Trade deals didn’t kill these jobs... and organized labor unions can’t save them...

What trade between countries does do is to increase the customer base for U.S. goods and services 20 times... from 350 million to 7 billion.

Free trade opens up markets for U.S. companies, big and small, to peddle their goods and services without paying high tariffs (taxes). 

It allows Boeing to sell planes to Korea and Japan... Harley-Davison motorcycles to China... Apple iMacs to Poland... Marlboro cigarettes to France...

In the same way, it allows Americans to purchase products made in other countries at a lower cost due to the mutually agreed upon tariffs in those trade pacts.

Trade becomes a win-win...

Now that’s not to say that there are not problems... there are some places and industries that are not playing by the rules of the agreements...

In those instances, governments are providing subsidies either directly, through tax incentives, or through currency controls that no longer represent the best interests of free-trade. 

Free-trade is no longer fair-trade.

The other significant issue is that with all of the turmoil in the financial markets and social unrest... people around the world have decided that the U.S. dollar is the safest and most stable currency.

Through simple supply and demand... the value of the U.S. dollar has allowed Americans to purchase more foreign goods and services for less money.

This is simple economics...

Unfortunately there are no easy answers. 

Our politicians would like us to believe that if they speak in simple monosyllable sentences and use political slogans, that all of our problems will be solved...

...but unfortunately that’s not the case.

Those 45 displaced workers need to be retrained with new skills that allow them to productive once again...

We need to continue to create... using new ideas, processes, and methodologies...

It’s not American labor that made this country great... it’s American ingenuity, imagination and inventiveness...

...and it’s these qualities that will allow America to continue to lead the world.

Thank you for your support of OptiFuse as we continue to support the ideals of what makes America a truly great world leader.

Jim Kalb  

President
 
Email    -  jimk@optifuse.com
Website - www.optifuse.com
Twitter  -  @OptiFuse

 

 

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