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.
Without the financial support that many white families can provide, minority young people have to continually make sacrifices that set them back.
The year after my father died, I graduated from grad school, got a new job, and looked forward to saving for a down payment on my first home, a dream I had always had, but found lofty. I pulled up a blank spreadsheet and made a line item called “House Fund.”
That same week I got a call from my mom—she was struggling to pay off my dad’s funeral expenses. I looked at my “House Fund” and sighed. Then I deleted it and typed the words “Funeral Fund” instead.
My father’s passing was unexpected. And so was the financial burden that came with it.
For many Millennials of color, these sorts of trade-offs aren’t an anomaly. During key times in their lives when they should be building assets, they’re spending money on basic necessities and often helping out family. Their financial future is a rocky one, and much of it comes down to how much—or how little—assistance they receive.
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.
The generation has been called lazy, entitled, and narcissistic. Their bosses beg to differ.
Yes, many Millennials are still crashing on their parent’s couches. And there’s data to support the claim that they generally want more perks but less face time, and that they hope to rise quickly but don’t stick around for very long. Millennials have also been pretty vocal about their desire to have more flexible jobs and more leave time.
But does all of this mean that all Millennials are actually worse workers?
Laura Olin, a digital campaigner who ran social-media strategy for President Obama’s 2012 campaign, says that’s not been her experience. “You always hear about Millennials supposedly being entitled and needing coddling, but the ones I’ve encountered have been incredibly hard-working and recognize that they need to pay their dues.”
Jeb Bush, John Kasich, and other presidential contenders appease Donald Trump at their own peril.
Give Donald Trump this: He has taught Americans something about the candidates he’s running against. He has exposed many of them as political cowards.
In August, after Trump called undocumented Mexican immigrants “rapists” and vowed to build a wall along America’s southern border, Jeb Bush traveled to South Texas to respond. Bush’s wife is Mexican American; he has said he’s “immersed in the immigrant experience”; he has even claimed to be Hispanic himself. Yet he didn’t call Trump’s proposals immoral or bigoted, since that might offend Trump’s nativist base. Instead, Bush declared: “Mr. Trump’s plans are not grounded in conservative principles. His proposal is unrealistic. It would cost hundreds of billions of dollars.” In other words, demonizing and rounding up undocumented Mexican immigrants is fine, so long as it’s done cheap.
Places like St. Louis and New York City were once similarly prosperous. Then, 30 years ago, the United States turned its back on the policies that had been encouraging parity.
Despite all the attention focused these days on the fortunes of the “1 percent,” debates over inequality still tend to ignore one of its most politically destabilizing and economically destructive forms. This is the growing, and historically unprecedented, economic divide that has emerged in recent decades among the different regions of the United States.
Until the early 1980s, a long-running feature of American history was the gradual convergence of income across regions. The trend goes back to at least the 1840s, but grew particularly strong during the middle decades of the 20th century. This was, in part, a result of the South catching up with the North in its economic development. As late as 1940, per-capita income in Mississippi, for example, was still less than one-quarter that of Connecticut. Over the next 40 years, Mississippians saw their incomes rise much faster than did residents of Connecticut, until by 1980 the gap in income had shrunk to 58 percent.
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.
Why are so many kids with bright prospects killing themselves in Palo Alto?
The air shrieks, and life stops. First, from far away, comes a high whine like angry insects swarming, and then a trampling, like a herd moving through. The kids on their bikes who pass by the Caltrain crossing are eager to get home from school, but they know the drill. Brake. Wait for the train to pass. Five cars, double-decker, tearing past at 50 miles an hour. Too fast to see the faces of the Silicon Valley commuters on board, only a long silver thing with black teeth. A Caltrain coming into a station slows, invites you in. But a Caltrain at a crossing registers more like an ambulance, warning you fiercely out of its way.
The kids wait until the passing train forces a gust you can feel on your skin. The alarms ring and the red lights flash for a few seconds more, just in case. Then the gate lifts up, signaling that it’s safe to cross. All at once life revives: a rush of bikes, skateboards, helmets, backpacks, basketball shorts, boisterous conversation. “Ew, how old is that gum?” “The quiz is next week, dipshit.” On the road, a minivan makes a left a little too fast—nothing ominous, just a mom late for pickup. The air is again still, like it usually is in spring in Palo Alto. A woodpecker does its work nearby. A bee goes in search of jasmine, stinging no one.
To solve climate change, we need to reimagine our entire relationship to the nonhuman world.
Humans were once a fairly average species of large mammals, living off the land with little effect on it. But in recent millennia, our relationship with the natural world has changed as dramatically as our perception of it.
There are now more than 7 billion people on this planet, drinking its water, eating its plants and animals, and mining its raw materials to build and power our tools. These everyday activities might seem trivial from the perspective of any one individual, but aggregated together they promise to leave lasting imprints on the Earth. Human power is now geological in scope—and if we are to avoid making a mess of this, our only home, our politics must catch up.
Making this shift will require a radical change in how we think about our relationship to the natural world. That may sound like cause for despair. After all, many people refuse to admit that environmental crises like climate change exist at all. But as Jedediah Purdy reminds us in his dazzling new book, After Nature, our relationship with the nonhuman world has proved flexible over time. People have imagined nature in a great many ways across history.
While Saint Nicholas may bring gifts to good boys and girls, ancient folklore in Europe's Alpine region also tells of Krampus, a frightening beast-like creature who emerges during the Yule season, looking for naughty children to punish in horrible ways—or possibly to drag back to his lair in a sack.
While Saint Nicholas may bring gifts to good boys and girls, ancient folklore in Europe's Alpine region also tells of Krampus, a frightening beast-like creature who emerges during the Yule season, looking for naughty children to punish in horrible ways—or possibly to drag back to his lair in a sack. In keeping with pre-Germanic Pagan traditions, men dressed as these demons have been frightening children on Krampusnacht for centuries, chasing them and hitting them with sticks, on an (often alcohol-fueled) run through the dark streets.
The Republican frontrunner’s abrupt cancellation of a press conference with 100 black pastors is symptomatic of his struggles with African American voters.
“I have a great relationship with the blacks. I’ve always had a great relationship with the blacks.”
So Donald Trump claimed back in 2011. But his bravado induces renewed skepticism this week. Last Wednesday, Trump announced that he’d hold a press conference on Monday to announce his endorsement by a coalition of about 100 black religious leaders. It turns out that wasn’t quite what the black religious leaders had in mind. On Sunday, Trump abruptly canceled the press conference, though the meeting was still on.
Never one to avoid throwing gasoline on a fire when there’s a jerrycan handy, Trump didn’t just chalk the reversal up to a miscommunication, as Darrell Scott, an Ohio pastor who helped arrange the meeting, did. Instead, Trump suggested that the ministers had been subverted. “Probably some of the Black Lives Matter folks called them up, said ‘Oh, you shouldn’t be meeting with Trump because he believes that all lives matter,’” he said.