The current issue of our magazine (a subscription makes a perfect gift!™) has a two-part cover-story package. One is Charles Fishman's "The Insourcing Boom," which concentrates on GE and argues that U.S.-based manufacturing companies are finding it more attractive to do more of their work within our borders. The other is my "Mr. China Comes to America," which says that increasing costs and friction of doing business in China, and shifts in technology that allow very rapid-cycle production close to the market inside the United States, will encourage new companies to do more of their manufacturing work here rather than outsourcing it to China.
Alan Tonelson, of the US Business & Industry Council, is a long-time friend with whom I have often agreed on questions of U.S.-Japanese trade frictions. He completely disagrees with the premise of these two articles. In the spirit of free-and-full discussion, I turn the floor over to him. I have a brief response at the end.
The Insourcing Boom that Isn't
By Alan Tonelson [right]
According to the two feature articles in December's Atlantic, manufacturing in the United States is making an historic comeback. In particular, changes in wages, energy costs, and technology around the world mean that China and other Asian locations no longer hold all the cards as manufacturing locations. Even better, large and small American businesses increasingly are recognizing that producing - and innovating - back in the United States has become their most lucrative option.
Moreover, both "The Insourcing Boom," by Charles Fishman and "Mr. China Comes to America" by James Fallows state that much more is involved than domestic manufacturing's cyclical rebound from an historically painful recession. As the former contends, the manufacturing revival "cannot be explained merely by the ebbing of the Great Recession, and with it the cyclical return of recently laid-off workers." In the latter's words, domestic industry's outlook is better today "than at any other time since Rust Belt desolation and the hollowing-out of the American working class came to seem the grim inevitabilities of the globalized industrial age."
Both authors provide numerous and seemingly impressive examples of insourcing and corporate start-ups that support these claims. They also present statistics on energy prices, U.S. and Chinese wages, and the post-2010 rise in American manufacturing employment. But neither gives their readers the most important information they need to know about domestic industry's current circumstances and future prospects - that virtually no national- or global-level data show that American manufacturing is even continuing its recovery from recession, much less stealing the march on Chinese and other foreign rivals. Indeed, nearly all of the most comprehensive statistics portray U.S. industry as still slipping further down the international ranks.
For example, during an historically sluggish American recovery, a U.S. manufacturing sector in renaissance mode should be growing faster than the rest of the economy. That was true in 2010 and 2011. But the out-performance is already over. This year, the entire U.S. economy has expanded by only 2.06 percent after inflation. Manufacturing output, however, has actually fallen - by 0.54 percent.
A manufacturing sector engineering a big secular rebound should be gaining share in its own home market - the world's largest single national market, and the one its companies should know best. Yet new government data analyzed by the U.S. Business and Industry Council show that more than 100 advanced domestic manufacturing industries collectively lost American customers to imports worldwide last year.
In 2011, foreign-based producers supplied a record total of 37.57 percent of total American purchases in industries ranging from semiconductors to pharmaceuticals to ball bearings to machine tools and dozens of other capital-and technology-intensive sectors. In 2010, when the industrial renaissance supposedly was stirring, the import penetration rate was 37.07 percent and in 1997 - the earliest data year - only 24.49 percent. In fact, imports accounted for half or more of everything Americans bought in nearly a third of these industries, including construction equipment, metal-cutting machine tools, laboratory equipment, turbines and turbine generator sets, and of course autos and heavy-duty trucks alike.
Companies losing market share rightly are almost never described as winners or viewed as promising. Do industries losing market share deserve better reviews?
Nor is the growth of exports compensating for these losses. Since plummeting during the Great Recession as American economic demand nosedived across the board, America's manufacturing trade deficit has rebounded much faster than the economy as a whole, and indeed hit a monthly record earlier this year. This shortfall's strong comeback is an especially important and bearish indicator of U.S. industry's global competitiveness, since mainstream economic theory teaches that trade flows are the means by which market forces create the optimal global division of labor. In other words, the countries that trade a given product most successfully are those that eventually will produce it most successfully, and vice versa.
The China story told by these data also clash with that told in the December Atlantic articles. As fast as imports worldwide have been grabbing share of U.S. advanced manufactures' markets, the inroads being made by imports from China have been much faster. And although these shipments started from a considerably lower base, they supplied more than six percent of all American purchases of these capital- and technology-intensive products last year.
As robustly as the overall U.S. manufacturing trade deficit has risen recently, the China deficit has recovered just as dramatically, and from a much shallower trough. In fact, so far this year, the manufacturing trade gap with China has increased more four times faster than America's global trade gap.
Signs of American industry's weakness also emerge from comparing its growth rate with those of leading competitor countries. Last week, the U.S. Labor Department reported that between 2009 and 2011, American manufacturing output expanded more slowly than industry in Germany, Sweden, Korea, Taiwan, and Singapore, and only slightly faster than manufacturing in Japan, whose industry is widely described as hemorrhaging competitiveness. These years of course cover the period when the U.S. manufacturing renaissance allegedly was well underway.
Data for China were not provided in this survey of high-income countries. Yet the consulting firm IHS reported this earlier year that in 2010 and 2011, America's share of world industrial output not only has fallen behind not only China's, but has been falling faster than that of the 27-nation European Union, whose economic problems are by now all too well known.
Other major problems with the articles revolve around insourcing claims themselves. Do the new investments in U.S. manufacturing mean that outsourcing has stopped or has slowed significantly? None of this essential context is presented. But last July, a major Bloomberg News investigation spotlighted a study reporting that continuing outsourcing neglected by the news media has entirely offset the job creation credited to insourcing.
In addition, improved American competitiveness is far from the only reason for insourcing. Scratch an instance of reshored manufacturing, and significant federal, state, and local government subsidies can often be found beneath the surface. For example, according to GE official Kim Freeman, the $800 million Louisville appliance investment detailed in "The Insourcing Boom" was keyed by $100 million in such supports. Over the last year, two New York Times articles have made clear that subsidies have been "increasingly important" spurs to new and retained domestic manufacturing investments.
Using taxpayer dollars to pay manufacturing companies to move or stay may make perfect sense in many cases. And certainly most of America's major trade competitors engage in such practices pervasively. But relying substantially on government inducements is likely a losing proposition for domestic manufacturing advocates. After all, industrial rivals like China, Germany, and Japan are financially strong. The United States remains saddled with enormous debts - many owed to these very countries, and is unlikely to win a worldwide subsidy competition.
American manufacturing still retains many strengths. Some of it, moreover, may boast considerable growth potential. But no one should underestimate the continuing weaknesses and challenges made clear by the most comprehensive, most detailed data. Without presenting this readily available big-picture evidence, accurately describing domestic manufacturing's present circumstances and realistically assessing its prospects simply is not possible.
Alan Tonelson is a Research Fellow at the U.S. Business and Industry Council, which represents nearly 2,000 small and medium-sized domestic U.S. manufacturers. The author of The Race to the Bottom (Westview Press, 2002), Tonelson contributes to the Council's AmericanEconomicAlert.org website, and can be followed on Twitter @AlanTonelson and on Facebook at Tonelsonontheeconomy.
I will leave to Charles Fishman any response to the specifics in his article. For my part I will say that I don't think Alan Tonelson engages the main point I was making.
As my article said, we have been through a relentless decades-long period in which every observable trend seemed to be, and was, working against the feasibility of manufacturing within the United States. Alan Tonelson and his USBIC have been in the vanguard in chronicling those pressures. But, I explained, people close to the factory-floor realities in both the United States and China told me that changes beginning to be visible now seemed likely to alter those pressures. I wrote the story because people whose track record and judgment about technological trends I have learned to trust, over the years, told me these changes were worth noticing. Since they were talking about shifts that are just getting underway, the early trends they were talking about would not be captured in past manufacturing statistics, even those from 2011.
If the pattern of decline that Alan Tonelson lays out still prevails in 2015 or 2018, then the people I quoted will prove to have been wrong. If the pattern changes, their explanations will be part of the reason why. Thanks to Alan Tonelson for laying out his case.
James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne.
Thicker ink, fewer smudges, and more strained hands: an Object Lesson
Recently, Bic launched acampaign to “save handwriting.” Named “Fight for Your Write,” it includes a pledge to “encourage the act of handwriting” in the pledge-taker’s home and community, and emphasizes putting more of the company’s ballpoints into classrooms.
As a teacher, I couldn’t help but wonder how anyone could think there’s a shortage. I find ballpoint pens all over the place: on classroom floors, behind desks. Dozens of castaways collect in cups on every teacher’s desk. They’re so ubiquitous that the word “ballpoint” is rarely used; they’re just “pens.” But despite its popularity, the ballpoint pen is relatively new in the history of handwriting, and its influence on popular handwriting is more complicated than the Bic campaign would imply.
The neurologist leaves behind a body of work that reveals a lifetime of asking difficult questions with empathy.
Oliver Sacks always seemed propelled by joyful curiosity. The neurologist’s writing is infused with this quality—equal parts buoyancy and diligence, the exuberant asking of difficult questions.
More specifically, Sacks had a fascination with ways of seeing and hearing and thinking. Which is another way of exploring experiences of living. He focused on modes of perception that are delightful not only because they are subjective, but precisely because they are very often faulty.
To say Sacks had a gift for this method of exploration is an understatement. He was a master at connecting curiosity to observation, and observation to emotion. Sacks died on Sunday after receiving a terminal cancer diagnosis earlier this year. He was 82.
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
Wine snobs, string quartets, and the limits of intuition
Several months ago, this author sat at a classical music concert, trying to convince himself that wine is not bullshit.
That may seem like a strange thought to have while listening to Beethoven’s Symphony No. 7 in A major. But Priceonomics had recently posted an article investigating The Price of Wine, part of which reviewed research that cast doubt on both consumers’ and wine experts’ ability to distinguish between quality wine and table wine or identify different wines and their flavors. It seemed a slippery slope to the conclusion that wine culture is nothing more than actors performing a snobbish play.
Listening to an accomplished musician while lacking any musical experience resulted in a feeling familiar to casual wine drinkers imbibing an expensive bottle: Feeling somewhat ambivalent and wondering whether you are convincing yourself that you enjoy it so as not to appear uncultured.
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
Nervous Democrats are looking for alternatives as Hillary Clinton falters. But is the VP the right person for the job?
“I think panic is the operative mode for the Democratic Party,” David Axelrod, who has been on the receiving end of panic mode many times over the years, told me this week. I had asked Obama’s political guru how bad the current panic was for Hillary Clinton—bad enough for the party to seek an alternative? Bad enough, perhaps, to create an opening for Joe Biden?
Axelrod didn’t think so. “I think it’s indisputable she’s had a rocky few months,” he said. “But if you look at her support among Democrats, and the resources she brings, she’s still very strong—I think she’s going to be the nominee.”
Not everyone is so sure. Public opinion has turned starkly negative on Clinton in recent months, as she has struggled to put the scandal over her use of email as secretary of state to rest. In a poll released this week, the word most commonly summoned when people were asked about her was “liar.”
Trying to find clarity in a world muddied by differing opinions and too much information
The deadlock began around week 20 of my pregnancy, when my mom casually asked about when and where our son would be circumcised. I presumptuously told her we weren’t going to do that. Then I saw the surprised look on my husbands face.
“We’re not?” he asked.
Sensing an opportunity to mount an offensive, my mom backed him with the full force of the guilt-inducing tone she’d perfected over the years. “But honey, it’s not natural to leave your son uncircumcised,” she said. “You don’t want to do that to him, do you?”
Quickly realizing that I would never win a drawn-out argument, I decided to end the conversation. To do this, I summoned the petulant teenager lying dormant inside me—something that only a mom can awaken in a 33-year-old woman—and said, “Actually mom, circumcision is the exact opposite of natural. That’s the whole point, to do away with the ‘natural’.” Then I gave my husband the ‘you’d like to have sex with me again, right?’ look and said to him, “We’ll talk about this later.”
Dealing with misinformation, feeling powerless, and slowly getting better together
I thought the article would validate my husband’s experience. That’s why I emailed him the link to the decade-old New York magazine article about his alma mater, the American Boychoir School for vocal prodigies, where alumni from as late as the 1990s estimate that one in five boys were molested. Boys like Travis.
“It used to feel like an isolated incident that affected just me," Trav said.
It was the end of my workday on an October afternoon; I had just set my keys on the kitchen table. My coat was still buttoned.
“Now I know I spent nearly three years of my childhood at a boarding school not just with random pedophiles, but in a culture that allowed it.”
As his wife, how do I respond? That he survived? That he’s brave? That he’s a hero for letting me talk about it? That I will stand beside him with a personal mission and public vow that nobody will ever hurt him, physically or emotionally, again, the way they did during his 30 months as a choirboy from 1988 to 1990?.
On the desperation behind the migrant tragedy in Austria
On Thursday, as Krishnadev Calamur has been tracking in The Atlantic’s new Notes section, Austrian authorities made a ghastly discovery: a truck abandoned in the emergency lane of a highway near the Hungarian border, packed with the decomposing bodies of 59 men, eight women, and four children. They are thoughtto be the corpses of migrants who suffocated to death, perhaps two days earlier, in the bowels of a vehicle whose back door was locked shut and refrigeration and ventilation systems weren’t functional. Stray identity documents suggest that at least some of the victims were Syrian—refugees from that country’s brutal civil war. The truck featured an image of a chicken and a slogan from the Slovakian poultry company that the lorry once belonged to: “I taste so good because they feed me so well.”