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Andy Grove: How to Make an American Job Before It's Too Late


Parsad
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Guest longinvestor

 

Great article!

 

Our supersmart conservative newspaper commentators (George Will comes to mind, there are many others..) will quickly point to the fact that all those agricultural jobs transitioned to industrial jobs in the 20th century and therefore all should be well with the transition of manufacturing/industrial jobs to "something else". When something else shows up it will be another day for another set of commentators.

 

The irony I've witnessed in my life within manufacturing industry is that the margin improvement sought by managers with the "China strategy" is driven by percentages. Like 30% cost reduction and such. What is astounding to the village idiots amongst us, the 30% improvement is on a labor cost base of something like 6%. So 30% of 6% labor cost takes it down to 4.2%. The transfer of costs(counted and not counted) to other buckets is left out.. like the cost of moving things across a 30-day body of water between here and there. Ah, well, that is for another day for someone else.  Our supersmart MBA's had since moved on....raging incrementalism at its very best.

 

Of all things Andy Grove mentions, the inability to participate in future growth areas once you stop doing something is the most insidious & numbing effect of such economic stupidity we are witnessing! In human physiological terms it is like atrophy. Use it or lose it. Works each time. Nothing to worry, we have all those financial jobs creating innovations such as  CDO, CDO squared, quants etc. What the @#$%^ does Andy know?

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Andy Grove is talking about the admirable goal of U.S. job creation, but he sounds nostalgic for an era that is long gone and will not come back, unless there is a global military conflict that would kill globalization (and a lot else, too). The notion that the world has lost something because the U.S. unemployment rate is at 10% rather than 5% while tens if not hundreds of millions of people in the emerging world have a chance to come out of abject poverty is quite nationalistic.  Instead of trying to go back to an era where a job created in India or China is a job "lost," Grove should be pushing to accelerate global but fair trade.  The U.S. should insist that emerging economies adopt working conditions that free their workers from de facto slavery while at the same time raising the cost of foreign-produced goods so that U.S. workers can be competitive again.  This would be much healthier and more sustainable policy than trying to reintroduce tariffs on foreign goods.

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I am for Reasonably balanced trade, and consider myself a moderate libertarian. However, free markets can't fix the massive trade imbalances, since rigged currencies and government policies perpetuate the imbalance. Countries with massive populations are pursuing export led growth strategies. The size of the imbalances is so large it creates massive capital allocation distortions, and consequently systemic risk. If we don't fix the imbalances, the next default-induced liquidity event will bring down countries and currencies.

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