At this point a good heuristic might be to do the absolute opposite of whatever the prevailing economic sentiment is in the UK. We really have our head up our arse over here
Issues with Noah's unwavering faith in the US' (inconsistent) trade and industry policies aside, there are multiple mistakes in the piece that go on to inform illogical angles.
As @coKeynesian points out on twitter/x (https://x.com/CoKeynesian/status/1792914659520966824) the 'UK had a higher workforce % in manufacturing than any other country in the world until the 1950s. It shifted to protectionism in the 1930s ("imperial preference"), and British industry was just as productive as Germany's until the 1950s too'. If anything even this undersells British productivity during the war considering Britain’s industrial base outproduced Germany’s in WW2 in the crucial years of 1940-1941 where it built thousands more combat aircraft despite a smaller population/overall GDP.
Noah's belief that Britain's industry and science couldn't keep up with Germany during WW2 is one that has been thoroughly debunked by Adam Tooze and others. I recommend reading Wages of Destruction by Tooze, or anything by David Edgerton, on this topic. Edit: His hastily added footnote in response to either this comment or elsewhere is a wholly insufficient argument I'm afraid.
There is no argument that Britain is not the current example to follow on numerous issues. But the deserved pessimism about the UK's current prospects should not color analysis on other areas of its history.
A recurring theme from Noah is very peculiar anti-british bias when it comes to recent British history, and frankly ignorance when it comes to less recent British history. I have no idea where these weaknesses come from but they shine through on many of his pieces. Having such a large blind spot is a shame as some of his other thoughts and frameworks for how the world works are enjoyable.
Whether British industry could keep up in WW2 is hotly contested (indeed Tooze’s book received much controversy when it was published), doesn’t negate the point he is trying to address: you need industry for national defense.
Noah doesn’t have an unwavering faith in the US’ trade policies (he explicitly says he doesn’t know if they’ll work!) but rather that the US has to try to maintain industrial capacity (never mind a whole host of economic circumstances around China’s overcapacity and the unbalanced nature of current global trade).
I don’t think there is “anti-British” bias so much as British policy has been batshit crazy for 30 years. And it seems British economic writers struggle to answer the question of national security, much less Britain’s malaise
The economist largely apes the American media narratives when it comes to US politics and employs many American writers (the reason I no longer subscribe - MSNBC is free, and the Economists foreign coverage is excellent but usually stale). Luce is the DC correspondent for the FT and has lived in the US (I think) maybe for 15 years. He normally regurgitates narratives from mainstream Dems, so it’s interesting to see him bucking his party line in this instance. Sometimes even a hack can recognize a futile election year stunt.
If we're to take the 'national security' argument seriously then that demands something beyond assertion. Does protectionism _actually_ yield an industrial base ready to fight a war?
The US has a de facto system of protectionism for basically all armaments, in that the US doesn't purchase ships, shells, tanks, rifles, etc which are produced in foreign countries. And yet this 'arsenal of democracy' is slow, plagued with quality issues and outrageously expensive.
Noah's position seems to be that by creating a bigger civilian industrial base that this can be quickly re-tooled for national security. Essentially this is an argument to solve protectionism (military industry) with more protectionism (civilian industry).
Having a civilian capability to produce low volumes of low quality cars at high prices doesn't a military capability make.
(1) The Model T Ford was produced in large volumes at mid-quality and low prices (note the difference from my comment). It was produced from 1908 to 1927 meaning that it covers both periods of low tariffs (1913-1922) and high tariffs either side. Most importantly though they were too expensive to ship so international tariffs just weren't that impactful. The more useful comparison today is the domestic market - the US had over 253 car manufacturers in 1908 and even after significant consolidation there were 44 in 1929 (https://www.history.com/topics/inventions/automobiles). Free trade within the US (a land area not dissimilar to Europe) is what gave us Ford.
(2) The B-17 was manufactured by Boeing, Douglas (later Boeing) and Vega (later Lockheed). Furthermore only the Boeing plant predated the war - and then only by a couple of years (https://www.aerovintage.com/b-17-production-list/) so this isn't a case of a civilian production line being re-purposed to military use.
I'm not saying that the US wasn't able to build armaments in massive quantities during WWII, what I'm saying is that it's unclear how protectionism had anything to do with this. Let alone that we could somehow recreate it today with the right set of technocratic measures.
It makes sense that having a high number of people trained in machining etc. will translate to those same people being able to scale up war time production (whether or not the same actual production lines are used).
Agreed - human capital was incredibly important. To be frank though this time around the numbers aren't on our side for that. We don't have 1 billion Americans. Production lines would need to be heavily automated - so in a sense the real human capital that matters is the ability to design armaments, design manufacturing processes and design/manage the robots which build the armaments (or indeed use the armaments).
In other pieces, Noah has stated the US should look to double down on friend shoring and integrating the market with America’s allies; think NAFTA + EU + JAPAN + S. Korea + Brazil
Actually it does. Even if you’re making shitty cars - those workers now have the skill sets necessary to quickly switch to wartime production.
The specific type of manufacturing is what matters when it comes to building a defense industry. Countries need skilled workers who can bend and manipulate metal, such as tool and die makers, machinists, programmers (G-code, not software), and welders. These are all line-level workers, not engineers. Even if they're making cars that aren't the best, they're still acquiring the fundamental skills that can be easily transferred to producing military equipment like bombs with minimal additional training. Developing a skilled tool and die maker, for example, can take up to a decade.
I used to work on Wall Street and now I own two manufacturing companies, so I know a bit about this. My machinery company could switch over to producing goods for the Department of Defense within a few months. My other company, which makes natural cosmetic products, lacks the metalworking and engineering skills necessary to do anything productive for defense.
The automotive sector is crucial because it is the largest manufacturing industry that can easily pivot to wartime production. The US makes great cars, largely thanks to competitive pressure from Japanese companies to improve in the 80s, but even if we were just making shitty vehicles, it still has a workforce with the essential skill sets that can be transferred to the defense industry. Without these core skills, it would take 5-10 years to train people to the required level, then a few more years to scale up the system.
"Even if they're making cars that aren't the best, they're still acquiring the fundamental skills that can be easily transferred to producing military equipment like bombs with minimal additional training."
Are they? My understanding is that building a modern PGM or cruise missile requires very specialized training and equipment, very different from building a car. Even if they were just building old fashioned dumb bombs, the bottleneck there is tge explosive filling, not the metal shell. It seems like youd need another 10 years to turn a consumer auto factory into a military plant. Even more for a shipyard or aerospace plant.
No? The stuff he's talking about are the fundamental skills required to operate and create the tools that are used to manufacture *anything.* You still absolutely need die cutters and machine programmers and factory ergonomics specialists to manufacture stuff effectively, it doesn't really matter what it is.
No - most automation requires the complete elimination of workpiece variance which can’t be done in a lot of situations. Helpful in some areas but not in others. Last time I checked, they’re not using robotic welders at SpaceX because the variance between the steel panels is too high. You can’t get around the need for skilled line level workers. Engineers and automation can’t fix that.
American manufacturing has loads of automation, which is precisely why our workers need lots of training. I swear actually go to a factory and just observe what your average worker in tenessee does for 15 dollars an hour and get some perspective on life.
I own two manufacturing companies….I know what the average manufacturer does.
My natural cosmetic company can be partially automated, the machine company could not. I’m not saying automation isn’t useful I’m saying there are specific situations where it can be useful that aren’t as common as people think. The highest level of automation in manufacturing is the auto industry - because there is massive volumes and low variance. There are still a shitload of people working in the auto sector
Btw - my lowest paid worker is at $23 per hour and the highest is around $45. Non of these people have college degrees. No one makes 15 per hour in manufacturing unless it’s some tiny crap company that’s not making money.
Lot's of people make $15/hour in manufacturing. If you are paying $23, then presumably, a company with 10,000 times your volume could automate and simplify the tasks enough (and possibly move their factory) so as to get that wage down. Just hire 75 managers and make their livelihood dependent on shaving $8 off the hourly pay of 5,000 employees. They will find a way.
[edit: It's not the tiny crap company but the massive lucrative one that can push the wages down to rock bottom.]
That’s not true. Look at the average wages in auto plants or at Boeing. People make a lot in **skilled** manufacturing. Which also happens to be everything associated with defense production. Wages are lower for manufacturing plastic cups or food, because those don’t require the skills of forming and bending metal.
Also - larger companies pay higher wages than smaller ones across almost all industries. Tyler Cowan has a lot of good research on this but thinking big companies pay less is a commonly held misconception that’s objectively not true.
The answer is that we choose Butter over Guns. The Soviets always had more men, more guns, and more tanks in Central Europe than us. Military planners thought there was a really good chance that a conventional conflict with the Warsaw Pact would end with them breaking through the Fulda Gap and making their way to the Rhine.
You know what the plan was? We were going to nuke them. We were going to use tactical nukes to blunt the attack and then try to negotiate a return to the status quo ante bellum. Escalate to de-escalate.
There were a lot of drawbacks to this. It made nuclear war more likely, and our allies in west Germany and Europe more broadly were going to bear the brunt of hopefully limited nuclear war.
But it also meant we didn't have to have a peacetime draft for decades. We didn't have to pour lots and lots of our GDP into weapons that sat there doing nothing rather then investing in our civilian economy. In addition to making life better for our citizens, the long run growth effect of these change helped us overtake the economies of the Warsaw Pact.
And so we face the same problem now with China. We could try to match China missile for missile and ship for ship across the Taiwan straight. We could also prevent Taiwan from being conquered by just nuking Chinese ships in the straight or any landing bridgeheads they might make. It's fundamentally impossible for them to conquer Taiwan if we don't want them too, even if we had no conventional force at all.
There are risks to that, but there are also risks to trade wars and a military industrial complex. Eisenhower, probably the supreme Cold Warrior, was the author of the Butter over Guns strategy of NATO in Europe.
there was absolutely no point at which the USSR had more manufacturing capacity than the first world, nor more people. They compensated for this by having more active military, AND having more nukes than us, which was very costly.
Currently with respect to china, our position is inverted. We have a larger/heavier fleet, more vert launches, more fighters, etc. But they have more people and more manufacturing capacity.
The USSR spent a larger % of its economy on the military and had a peacetime draft. It allocated more of its military budget to land forces in Europe rather then and USA which dedicated more to naval and air around the world. You can look up troop counts, tank counts, artillery, etc. the Warsaw pact outgunned nato in Central Europe often a few times over in these categories.
The Soviets didnt have more nukes until the 1980s. Throughout the heart of the Cold War the USA had vast superiority in nuclear weapons. One reason the Soviets backed down in cases like Cuba is that they would lose a nuclear conflict as we had several times more nuclear weapons than them.
Tariffs need to be paired with strong industrial policy.
I do think tariffs make sense a temporary moat to allow for industrial policy to be effective, and then you can scale down tariffs once industry has the scale to compete with(and benefit from) international competition.
I do find the complaints about tariffs without the proposal of a better alternative a bit of a frustrating argument.
It’s pretty clear from the past 20 years that if China pursues industrial policy heavily and the US does barely, more and more manufacturing will naturally move to China.
While somewhat contested, this is a heavily researched question. US aircraft production during the war is instructive, the post below is a great summary from someone with no dog in this particular flight. The reality is that the volumes required will be orders of magnitude larger than our current production, and that is going to require mostly greenfield. Similarly, the overwhelming majority of the workers will be very different from current workers, because building greenfield and scaling up quickly means you will have to use unskilled workers. So you are going to be redesigning production processes. Certainly you would not want zero manufacturing in allied countries as some people have to know something about machine tooling etc. But it's very unclear to me why most particular industries matter that much, or why the overall volume is necessarily that important. The key factor is more likely to be societal mobilization. Obviously there are some exceptions here like shipyards, but that isn't the same and the real issue there is that we are already crazy protectionist and it's killing us relative to profitable commercial production in Korea and Japan.
Our tariffs on SUVs have incented BMW and Mercedes to open assembly plants in the US (decades ago). I certainly have noticed that, as a result, GM is now able to build a BMW. 😂🤪
I mean, subsidies have actually tripled manufacturing investment, so it sort of seems self-evident that at least on the volume front its moving in the right direction. Export controls are about damaging rival industries, and those have succeeded as well. The question that remains are tariffs, and again I think its pretty straightforward: China's doing a massive amount of subsidies to their manufacturing, and its hard to argue that they're not directly trying to outcompete manufacturers in the domain of their domestic rivals. It's a crude method, but short of having massive massive stimulus package I don't see what the plan is.
I also wouldn't characterize american military hardware as plagued with quality issues. Our shit actually does work very well.
It’s almost incredible how open Chinese government/military officials are about expecting a war with us even as they build out production lines for vehicles and ships with far more capacity than they need for peacetime production. The fact we aren’t treating it as a five alarm fire is alarming.
That is why it is so important that we pay exorbitant subsidies to have our skilled labor assemble foreign components for vehicles we have to pay people to buy, rather than having those workers available to work in defense, shipping, electronics, etc 😊
In the 70s America imposed tariffs and quotes on Korean textile exports, motivating Korean businesses to transfer technology and managerial knowhow to Bangladesh. This resulted in the creation of our textile export industry.
My hope is that the trade war between America and China might enable Vietnam and Bangladesh to get access to Chinese EV technology through joint ventures so they can sell EVs to the American and Indian markets.
These measures seem to me to be protectionism pretending to be a security issue. If you include solar panels and electric vehicles as industries required for security, is there anything you are not including? Even as a security issue, for Europe cheap imported electric vehicles and solar panels reduce dependence on imported oil and natural gas. Vehicles and panels do not have to be renewed so even in the case of a war with China dependence on them is a smaller risk than dependence on fossil fuels. If every country follows the logic of trying to ensure that it has sufficient manufacturing capacity on everything, the result will be a collapse in trade and prosperity.
Don't be absurd. Everybody knows Canadian softwoods are a dire threat to Freedumb. And I wouldn't put it past the Japanese to form an alliance the moment they take over US steel. And don't even get me started on the Chinese solar panels that will convert to killer drones the moment Xi pushes a button.
The national defense argument comes in two versions:
1) risk that in an armed conflict, China could cut off supplies of key items and components either by not exporting them or interdicting their export by regional countries
2) risk that general low level of manufacturing capacity would weaken war-making capacity
For the first, narrowly targeted tariffs or even bans on imports from China/China interdict able countries, but not from others, makes sense. This might include EV drones, but not EV's in general
For the second production subsidies are more efficient. A tariff is a combination of a subsidy to domestic sales financed by an excise tax on consumption of the item. This creates two inefficiencies.
a) it creates a relative disincentive to export, especially harmful if economies of scale are important
b) an excise on one item is less efficient (greater deadweight loss) than a broad based tax that does not distort consumption between the promoted item and others.
Part of this promotion of manufacturing in general should also come in the form of increased national savings, mainly through changes in the tax structure and level of collections to reverse net capital inflow that overvalues the dollar and makes imports cheaper and exports more expensive. I have not checked the numbers but my impressionist that the US had a net capital outflow and export surplus during the build-up to WW2.
The same tax and production subsidy approach to rebuilding the "arsenal of democracy" applies to industrial policy in items for which we are confident that politicians can better identify long term comparative advantage then private firms.
These are not novel concepts. They are covered in standard trade theory and international development courses. [At lease they were back in the '60's when I was taking them.] I know we are not living in a neoliberal paradise in which politics is kept focused on redistribution, but I wish that Noah would address the efficiency issues directly in his benign analysis of tariffs.
Well, the Economist doesn't speak for Britain or the British. They're intellectuals looking for an angle. Brexit was pitched by the establishment as "free trade with Europe matters more than literally anything else including democracy" and the voters rejected that position. Indeed a part of the argument for leaving was the EU's obsession with creating an EU Army, something it was pointed out would undermine NATO and certainly be a general screwup, if it ever happened at all.
> ... general aversion to industrial policy
Yes but consider the history. The UK deindustrialized thanks to the socialism prevalent between WW2 and the start of the 1980s that prevented a strong rebuild after WW2 and systematically wrecked what was left of its manufacturing base, then thanks to unfair Chinese competition in the 90s (free trade works great if other governments aren't also implementing industrial policy at the same time). But the core problem was way too much industrial policy, and the UK only started thriving again after Thatcher came in and abolished it. Huge parts of the British workforce were allocated to loss-making uncompetitive industries with no future kept alive only through massive tariffs and subsidies (e.g. coal mining), or things like car making where mismanagement and union hostility had killed productivity relative to Europe. It's this history that explains the British establishment's aversion to such things.
The history in the US is rather different. US industry was hollowed out more or less exclusively by foreign competition, not economic self-sabotage by the left. And the US military has for a very long time been culturally accepted as a kind of welfare or jobs programme, in which it's kept at a vastly larger size than would apparently be needed given the basics of geography and America's natural defensive advantages. The military just has a central place in American hearts that is unique and not found elsewhere (Britain isn't alone in treating its military more normally). So the idea of using tariffs to protect the military specifically is neither new nor scary to Americans, whereas a return of generalized industrial policy is pretty scary to British liberals because there's a Labour government in waiting there who might be quite happy to use a retrenchment from free trade to bring back the dead-end policies of earlier eras.
You make good points about the dysfunctional nature of the post-WWII British economy but you oversimplify it when you describe it as "socialism".
The restriction of housebuilding (though the Green Belts and discretionary planning system instituted in 1947) likely shared a common motivation with the industrial "lemon socialism" you described, of keeping northerners in the north and reducing migration to London and the south east, and was at least as popular with rural shire Tories as it was for the workers in those uncompetitive industries.
In fact this regional imbalance has probably been as much a factor in UK housing dysfunction, as racism has been in US housing dysfunction.
Northern Britain has multiple disadvantages in today's world (few relevant resources, location on the outer periphery of Europe, little urban agglomeration) that have proven almost impossible for successive British governments to deal with. Since the last century the percentage of England's population located in the North has fallen roughly 1% per decade, regardless of the economic orthodoxy of the day (from Free Trade to Imperial Preference to Old Labour to Thatcherism to Blairism to post-2010 austerity).
>The UK deindustrialized thanks to the socialism prevalent between WW2<
Every rich country "deindustrialized" over time after the war in that their services sectors grew faster than manufacturing (or agriculture). I'd be very surprised if there are any noteworthy exceptions. Fortunately, in nearly all cases this does not imply an absolute drop in the value of manufacturing output over the long term, but is simply an artifact of what economies tend to do as they grow richer.
This, of course, is a different issue from whether or not a country can supply its own needs for armaments. Many seem to be convinced that guaranteeing the latter requires massive government interventions on behalf of favored industries like cars, computer chips and solar panels.
He seems to think that the best thing for climate issues is current swift adoption of EVs. But to me it seems more important for long-run climate issues to build EV industries around the world, rather than accelerate their adoption by a couple years.
The politics dictates accelerating adoption using current tech, even though we lack the infrastructure to do this, current tech is resource-intensive and not impressively efficient. and there are probably smarter ways to invest trillions. Green politics has always been as much about sticking a finger in the eye of the fossil fuel companies as it has been about sensible solutions - because the idea that Joe Biden (or any pol) and their activists and donors are capable of micromanaging the timing and means of our transition in a sensible and prescient way is absolute insanity.
Tax carbon (domestically and at that border) if you believe CO2 is an existential threat, and then wait 50 years. The market will figure it out.
“When Britain deindustrialized, it could rely on America’s mighty factories for its defense; if and when American deindustrializes, what protector can we turn to? There is none. The advocates of dogmatic, Econ 101-style unilateral free trade have no plan.”
Great way to end the piece. As you say, I think this national defense argument trumps all unfortunately
india if america helps us build it up. as well as korea and japan for things like ships and submarines. india(we) can easily outbuild entire west in things like 155mm artillery shells and that too for 25 to 30 percent of the cost.
I'm retired now, but I ran a contracting business for forty years. It was a small shop, with an average of five people in the shop. But you learn a few things, even at that scale. Way back when, more than one person advised me, "Do not have a customer, employee, or supplier that you can't afford to lose because, sooner or later, you will lose them. I've seen established businesses collapse when they lost a key customer, employer or supplier. In forty years, I did lose all of the above, but I always spread my resources around and no single loss was debilitating.
And you don't have to lose the resource. If they know you can't exist without them, they make the decisions, not you, even in your own business.
This all scales up to international trade. There should be no country's business that we can't do without. Otherwise, THEY call the shots in our own economy. THEY should be worried about US.
I work in the US textile industry. It is failing fast. 17 plants have closed so far this year. Without a US textile industry we cannot clothe our military. It is important for the Biden administration to support the industrial base for defense purposes, but textiles are being forgotten. The US textile industrial base urgently needs assistance to stay alive.
I work in the great American ear-plug industry, and all of it has moved to China. How can our brave young (and soon naked, I guess) fighting men and women face the great eastern hoards without ear protection? Just think about that.
The future is automated production for low value products like textiles. We should be investing in robotics and machine tools- not textile mills (which have been disappearing for many decades). Or invest in a Navy so we can be assured of textile imports from Bangladesh and Latam
Fully automated is proving extremely difficult to achieve in the production of garments. I am involved in seamless 3D knitting for the US Navy, which has major automation capabilities, but that can't make dress uniforms or combat uniforms let alone boots or gloves (one of the hardest things to make). Bangladesh and Latam do not have the industrial base for the high tech textiles needed. And I'm not a fan of further exploitation of low income women. Plus there is a law that requires use of US made products, fiber forward (e.g. if wool the sheep must have eaten US grown grass) in purchases by the Department of Defense. Enacted after shortages in prior wars.
I would also raise issue with your characterization of textiles being"low value". Protection against burn injuries and bullets requires high value complex textiles and garments - and protects human assets of immense value - think of the costs of training a Navy SEAL.
> Plus there is a law that requires use of US made products, fiber forward (e.g. if wool the sheep must have eaten US grown grass) in purchases by the Department of Defense. Enacted after shortages in prior wars.
This sounds like something we should eliminate if we want to improve domestic availability of military outfits! We're shooting ourselves in the foot if we ban the use of wool from New Zealand or England or textiles woven in Latin America or Bangladesh - it definitely doesn't help our domestic production of the end products that actually matter.
While you are right about the semiconductor restrictions and subsidies (which were a bipartisan idea that preceded Biden, even if the bill passed during his term),
Biden’s EV tariffs are about pleasing his donors in an election year- union jobs and the green industry benefiting from his handouts.
Biden is all about “local content”- ie union assembly jobs of overseas components, not really about domestic industrial capacity. If we wanted to be a leader we’d invest in battery R&D rather than paying someone to open a battery plant that uses Chinese IP and Chinese components.
Put your money where your mouth is/ buy only Ford or GM, only shop at unionized grocery stores (the big chains) and never use FedEx. Also hire union labor for all of your home improvement projects. There are lots of ways to help unions with your own money.
I notice many of the articles you're pointing at are in The Economist: how significant is it that this magazine was founded in 1843 for the express purpose of promoting free-trade liberalism (specifically the repeal of the Corn Laws) and may have maintained such a bias for its entire existence?
And as for the stalling of UK incomes and living standards circa 2008, how much of that was down not just to the financial crisis, but also to the fact that North Sea oil (which during the Thatcher and Blair eras had exacerbated deindustrialization via Dutch disease) was beginning to run out?
One of my biggest issues with Noah is how he projects his opinions as an American onto the British economy.
He correctly identies the UK as being held back by Nimbyism, but often overstates this. Going off a recent podcast he did he identified the UKs biggest issues as being around our inability to build and our apparent attachment to degrowthism.
Yes, the UK has a poor recent history of housebuilding. Conversely we have had one of the most successful deployments of offshore wind. Unlike the US we have actually been able to start on a high speed rail system and we just built a new world class underground line for London (far faster and cheaper than smaller projects in NYC). We are more capsble of building that he thinks. Degrowthism isn't a big ideology in the UK - and is athema to both the ruling conservative party and Starma's Labour. Methinks Noah spends too much time arguing with Jason Hickles on Twitter.
His American perspective is most clearly seen from the fact that the US generally does well he ignores, because it doesn't really enter his worldview. On the weakness side, he misses the key story of Britain's inability to turn our very dynamic small tech firms into national champions because of our weak capital markets. He misses the fact that our service sector economy - which did very well before 2007 - just wasn't specialised in a manner that would thrive in the 2010s. He rarely mentions Brexit, or any aspects of the UKs political chaos of the past decade. On the strengths, he misses our educational institutions, our entrepreneurship, the fact we do have a very strong service sector and our ability to draw in immigrants. There is a reason we have generally outgrown France and Germany in GDP and GDP per capita since 2014, despite all the crap we've pulled.
The UK is a status quo country where the establishment do not want to rock the boat. They were dragged out of the EU kicking and screaming and definitely do not want to make it work. The reason for a lack of growth in the UK is because there has been no national investment in productivity. None of the parties have a clue and are themselves all conservative, especially after the Truss debacle. I don’t see much changing post election- definetly not meaningful growth.
My point isn't that the UK is a country that is good at building things - I agree that the UK is bad at building things. My point is that Noah overstates how bad the UK is at building relative to the US. In a recent Econ 102 episode, Noah refers to the UK as the 'ultimate build nothing country'. I think that the UK is much better compared to Blue States in terms of developmental ease rather than off-the-scale worse than the US. Our overly expensive badly-cut down high speed rail line is less overly cut than it's American (Californian) equivalent, and our bloated and slow nuclear project at Hinckley point appears only slightly more bloated and slow than the last two reactors built in the US. Our housing is very expensive, but it's only as expensive as the more costly US states - but our median income to median house price ratio is around 1:6.5, as much as Florida, whereas the highest US states are over 10.
Isn't the NIMBYism also a factor in our problems with financing industry: that banks don't want to make risky bets on capital investment because it's easier to make money from property (real estate) speculation?
Mmm High Speed Train? That wasn’t the one that Sunak has to cancel, so the line that will be completed won’t serve the original purpose to reach Manchester? UK is One of the countries with the highest cost of construction per kilometer due to NIMBY. So expensive that the train won’t be profitable because its intended population won’t be able to use it.
“He correctly identies the UK as being held back by Nimbyism, but often overstates this.”
I was just was looking at some data for comparative house prices vs income across countries and i don’t think he overstates it. It’s pretty horrific in the UK.
I think every country can point out successes that they have, but the reality is pretty clear: the UK has structural issues and there doesn’t seem to be any clear desire from the British political class to address them
The graph plots productivity, not incomes or living standards, and the graph looks the same if you exclude the oil industry. But you have to be quite careful with such figures. Irish "productivity" is off the charts for example but it's an accounting issue.
It's possible there are accounting issues in the UK data too. GDP/productivity rely heavily on accurate understanding of the population size and activity. The UK has neither, due to relentlessly pro-migration ideology amongst the ruling classes in the past 20 years the British government stopped accurately tracking basic stats. Even the most basic stat of population size was being advertised as "experimental" by the ONS a few years ago! Of course fixing this would make the numbers even worse, as if you increase the population with the same amount of measured activity then productivity goes even lower. But it does lead to the question of whether the ONS really has any idea of what's going on in the country, if it can't even be confident about how many people are there.
Another part of it is probably the reduction in government spending. The post-2008 era in the UK saw a retrenchment in public spending as the coalition tried to get the deficit more under control. They largely failed at that but there were still big reductions in costs, whilst satisfaction with services actually went up. Bear in mind what it means: before 2008 a significant chunk of GDP was either misallocated by the private sector (hence the recession) or misallocated by the public sector (wasteful government spending that didn't improve service levels). If you fix both simultaneously then you're going to have a long period where the economy tries to right itself.
In the USA there was no austerity. US government debt is vastly higher than in the UK (127% vs 88%). This is because the Fed flooded the markets for years with free money, which combined with US VC culture to create an explosion of no-hope billion dollar+ "startups" that just purchased market share. Think Uber. That sort of thing forces GDP from everywhere else into your own country, because other companies can't compete with rampant market dumping that's being enabled by a central bank with a reserve currency. But it's not sustainable.
Oh, and it'd be remiss not to note the most obvious cause: massive levels of inward migration of skilled min-wage-or-lower workers from eastern EU in the post 2004 era. Productivity is basically a measure of investment in automation, but you can't justify investing in productivity if your wage costs are pinned to the floor by a nearly unlimited labour pool of people willing to work for nearly nothing. Note that this does not automatically mean lower standards of living in the short run, as after all, the work is still getting done. It may even mean higher standards of living are possible because some jobs important for QoL are stubbornly hard to automate and much more sensitive to labour costs than productivity e.g. care homes.
Still, the result of being the English speaking economy that was first to remove migration controls was predictable: wages didn't grow for many years but employment did grow strongly. All the classic signs of a labour glut.
The British knew this was a big problem. For years they were told there was no possible solution due to the EU not letting them control their borders .... so they left the EU. But then they discovered that decades of EU control had hollowed out politics, filling it with pliant yes men who were ideologically committed to continuing the status quo. The Conservatives have destroyed their base and electoral chances by massively OPENING the already wide open borders, yielding immigration levels that have blown right through previous records, much of which is driven by people fleeing Ukraine and Hong Kong.
There is just no chance of productivity improvements in the UK any time soon, given the basic fact that it has been absorbing such huge numbers of working age people fleeing wrecked countries for so long now. To what extent this matters for living standards is unclear. The UK has a relatively high minimum wage and a generous welfare state that has got millions of people on it. Any living standard dependent on labour can be improved immediately by simply lowering the minimum wage combined with changing the benefits system to push more people into work. Any living standard that's fundamentally dependent on automation on the other hand, will lag years behind.
I think there's a lot to the thesis of this piece, and the Ukraine war does a lot to illustrate the point. Commentators like to point out that Russia has a relatively small GDP (the size of Italy's they always say) compared to western powers. Nevertheless the Ukrainians are far behind in ammunition supplies because Russia is producing shells at a faster rate than the US and Europe combined. When the west is losing on the manufacturing front of a war with Russia, the thought of trying to play the same game against China is very frightening.
See this Economist piece for some figures on arms manufacturing for Ukraine -
At this point a good heuristic might be to do the absolute opposite of whatever the prevailing economic sentiment is in the UK. We really have our head up our arse over here
Issues with Noah's unwavering faith in the US' (inconsistent) trade and industry policies aside, there are multiple mistakes in the piece that go on to inform illogical angles.
As @coKeynesian points out on twitter/x (https://x.com/CoKeynesian/status/1792914659520966824) the 'UK had a higher workforce % in manufacturing than any other country in the world until the 1950s. It shifted to protectionism in the 1930s ("imperial preference"), and British industry was just as productive as Germany's until the 1950s too'. If anything even this undersells British productivity during the war considering Britain’s industrial base outproduced Germany’s in WW2 in the crucial years of 1940-1941 where it built thousands more combat aircraft despite a smaller population/overall GDP.
Noah's belief that Britain's industry and science couldn't keep up with Germany during WW2 is one that has been thoroughly debunked by Adam Tooze and others. I recommend reading Wages of Destruction by Tooze, or anything by David Edgerton, on this topic. Edit: His hastily added footnote in response to either this comment or elsewhere is a wholly insufficient argument I'm afraid.
There is no argument that Britain is not the current example to follow on numerous issues. But the deserved pessimism about the UK's current prospects should not color analysis on other areas of its history.
A recurring theme from Noah is very peculiar anti-british bias when it comes to recent British history, and frankly ignorance when it comes to less recent British history. I have no idea where these weaknesses come from but they shine through on many of his pieces. Having such a large blind spot is a shame as some of his other thoughts and frameworks for how the world works are enjoyable.
Whether British industry could keep up in WW2 is hotly contested (indeed Tooze’s book received much controversy when it was published), doesn’t negate the point he is trying to address: you need industry for national defense.
Noah doesn’t have an unwavering faith in the US’ trade policies (he explicitly says he doesn’t know if they’ll work!) but rather that the US has to try to maintain industrial capacity (never mind a whole host of economic circumstances around China’s overcapacity and the unbalanced nature of current global trade).
I don’t think there is “anti-British” bias so much as British policy has been batshit crazy for 30 years. And it seems British economic writers struggle to answer the question of national security, much less Britain’s malaise
The economist largely apes the American media narratives when it comes to US politics and employs many American writers (the reason I no longer subscribe - MSNBC is free, and the Economists foreign coverage is excellent but usually stale). Luce is the DC correspondent for the FT and has lived in the US (I think) maybe for 15 years. He normally regurgitates narratives from mainstream Dems, so it’s interesting to see him bucking his party line in this instance. Sometimes even a hack can recognize a futile election year stunt.
If we're to take the 'national security' argument seriously then that demands something beyond assertion. Does protectionism _actually_ yield an industrial base ready to fight a war?
The US has a de facto system of protectionism for basically all armaments, in that the US doesn't purchase ships, shells, tanks, rifles, etc which are produced in foreign countries. And yet this 'arsenal of democracy' is slow, plagued with quality issues and outrageously expensive.
Noah's position seems to be that by creating a bigger civilian industrial base that this can be quickly re-tooled for national security. Essentially this is an argument to solve protectionism (military industry) with more protectionism (civilian industry).
Having a civilian capability to produce low volumes of low quality cars at high prices doesn't a military capability make.
>>Having a large domestic ability to produce low volumes of low quality cars at high prices doesn't a military capability make.
This is, literally, how the US built it ww2 military manufacturing capability. *B-17s were produced by the thousand in Michigan.
Ford, GM, and Tesla are top 10 automakers globally. History and math don't seem to agree with your assertion here.
This isn't quite true.
(1) The Model T Ford was produced in large volumes at mid-quality and low prices (note the difference from my comment). It was produced from 1908 to 1927 meaning that it covers both periods of low tariffs (1913-1922) and high tariffs either side. Most importantly though they were too expensive to ship so international tariffs just weren't that impactful. The more useful comparison today is the domestic market - the US had over 253 car manufacturers in 1908 and even after significant consolidation there were 44 in 1929 (https://www.history.com/topics/inventions/automobiles). Free trade within the US (a land area not dissimilar to Europe) is what gave us Ford.
(2) The B-17 was manufactured by Boeing, Douglas (later Boeing) and Vega (later Lockheed). Furthermore only the Boeing plant predated the war - and then only by a couple of years (https://www.aerovintage.com/b-17-production-list/) so this isn't a case of a civilian production line being re-purposed to military use.
(3) The B-24 was manufactured in large volumes by Ford, however this was at a purpose-built plant after Ford essentially reverse engineered the whole plane (https://www.assemblymag.com/articles/94614-how-fords-willow-run-assembly-plant-helped-win-world-war-ii). So again not a case of a civilian production line being repurposed for military use.
I'm not saying that the US wasn't able to build armaments in massive quantities during WWII, what I'm saying is that it's unclear how protectionism had anything to do with this. Let alone that we could somehow recreate it today with the right set of technocratic measures.
It makes sense that having a high number of people trained in machining etc. will translate to those same people being able to scale up war time production (whether or not the same actual production lines are used).
Agreed - human capital was incredibly important. To be frank though this time around the numbers aren't on our side for that. We don't have 1 billion Americans. Production lines would need to be heavily automated - so in a sense the real human capital that matters is the ability to design armaments, design manufacturing processes and design/manage the robots which build the armaments (or indeed use the armaments).
> We don't have 1 billion Americans.
We do if we count Canadians and Latin Americans!
In other pieces, Noah has stated the US should look to double down on friend shoring and integrating the market with America’s allies; think NAFTA + EU + JAPAN + S. Korea + Brazil
51% of Tesla cars are made in China. Does their Shanghai factory help our military manufacturing capability or China’s?
(Message reporting error in p b's post removed, as the error has now been corrected.)
Correct sorry!
Actually it does. Even if you’re making shitty cars - those workers now have the skill sets necessary to quickly switch to wartime production.
The specific type of manufacturing is what matters when it comes to building a defense industry. Countries need skilled workers who can bend and manipulate metal, such as tool and die makers, machinists, programmers (G-code, not software), and welders. These are all line-level workers, not engineers. Even if they're making cars that aren't the best, they're still acquiring the fundamental skills that can be easily transferred to producing military equipment like bombs with minimal additional training. Developing a skilled tool and die maker, for example, can take up to a decade.
I used to work on Wall Street and now I own two manufacturing companies, so I know a bit about this. My machinery company could switch over to producing goods for the Department of Defense within a few months. My other company, which makes natural cosmetic products, lacks the metalworking and engineering skills necessary to do anything productive for defense.
The automotive sector is crucial because it is the largest manufacturing industry that can easily pivot to wartime production. The US makes great cars, largely thanks to competitive pressure from Japanese companies to improve in the 80s, but even if we were just making shitty vehicles, it still has a workforce with the essential skill sets that can be transferred to the defense industry. Without these core skills, it would take 5-10 years to train people to the required level, then a few more years to scale up the system.
"Even if they're making cars that aren't the best, they're still acquiring the fundamental skills that can be easily transferred to producing military equipment like bombs with minimal additional training."
Are they? My understanding is that building a modern PGM or cruise missile requires very specialized training and equipment, very different from building a car. Even if they were just building old fashioned dumb bombs, the bottleneck there is tge explosive filling, not the metal shell. It seems like youd need another 10 years to turn a consumer auto factory into a military plant. Even more for a shipyard or aerospace plant.
No? The stuff he's talking about are the fundamental skills required to operate and create the tools that are used to manufacture *anything.* You still absolutely need die cutters and machine programmers and factory ergonomics specialists to manufacture stuff effectively, it doesn't really matter what it is.
Can’t we automate most of those line level jobs that take that long to train?
No - most automation requires the complete elimination of workpiece variance which can’t be done in a lot of situations. Helpful in some areas but not in others. Last time I checked, they’re not using robotic welders at SpaceX because the variance between the steel panels is too high. You can’t get around the need for skilled line level workers. Engineers and automation can’t fix that.
American manufacturing has loads of automation, which is precisely why our workers need lots of training. I swear actually go to a factory and just observe what your average worker in tenessee does for 15 dollars an hour and get some perspective on life.
I own two manufacturing companies….I know what the average manufacturer does.
My natural cosmetic company can be partially automated, the machine company could not. I’m not saying automation isn’t useful I’m saying there are specific situations where it can be useful that aren’t as common as people think. The highest level of automation in manufacturing is the auto industry - because there is massive volumes and low variance. There are still a shitload of people working in the auto sector
Btw - my lowest paid worker is at $23 per hour and the highest is around $45. Non of these people have college degrees. No one makes 15 per hour in manufacturing unless it’s some tiny crap company that’s not making money.
Lot's of people make $15/hour in manufacturing. If you are paying $23, then presumably, a company with 10,000 times your volume could automate and simplify the tasks enough (and possibly move their factory) so as to get that wage down. Just hire 75 managers and make their livelihood dependent on shaving $8 off the hourly pay of 5,000 employees. They will find a way.
[edit: It's not the tiny crap company but the massive lucrative one that can push the wages down to rock bottom.]
That’s not true. Look at the average wages in auto plants or at Boeing. People make a lot in **skilled** manufacturing. Which also happens to be everything associated with defense production. Wages are lower for manufacturing plastic cups or food, because those don’t require the skills of forming and bending metal.
Also - larger companies pay higher wages than smaller ones across almost all industries. Tyler Cowan has a lot of good research on this but thinking big companies pay less is a commonly held misconception that’s objectively not true.
What did we actually do during Cold War I?
The answer is that we choose Butter over Guns. The Soviets always had more men, more guns, and more tanks in Central Europe than us. Military planners thought there was a really good chance that a conventional conflict with the Warsaw Pact would end with them breaking through the Fulda Gap and making their way to the Rhine.
You know what the plan was? We were going to nuke them. We were going to use tactical nukes to blunt the attack and then try to negotiate a return to the status quo ante bellum. Escalate to de-escalate.
There were a lot of drawbacks to this. It made nuclear war more likely, and our allies in west Germany and Europe more broadly were going to bear the brunt of hopefully limited nuclear war.
But it also meant we didn't have to have a peacetime draft for decades. We didn't have to pour lots and lots of our GDP into weapons that sat there doing nothing rather then investing in our civilian economy. In addition to making life better for our citizens, the long run growth effect of these change helped us overtake the economies of the Warsaw Pact.
And so we face the same problem now with China. We could try to match China missile for missile and ship for ship across the Taiwan straight. We could also prevent Taiwan from being conquered by just nuking Chinese ships in the straight or any landing bridgeheads they might make. It's fundamentally impossible for them to conquer Taiwan if we don't want them too, even if we had no conventional force at all.
There are risks to that, but there are also risks to trade wars and a military industrial complex. Eisenhower, probably the supreme Cold Warrior, was the author of the Butter over Guns strategy of NATO in Europe.
there was absolutely no point at which the USSR had more manufacturing capacity than the first world, nor more people. They compensated for this by having more active military, AND having more nukes than us, which was very costly.
Currently with respect to china, our position is inverted. We have a larger/heavier fleet, more vert launches, more fighters, etc. But they have more people and more manufacturing capacity.
The USSR spent a larger % of its economy on the military and had a peacetime draft. It allocated more of its military budget to land forces in Europe rather then and USA which dedicated more to naval and air around the world. You can look up troop counts, tank counts, artillery, etc. the Warsaw pact outgunned nato in Central Europe often a few times over in these categories.
The Soviets didnt have more nukes until the 1980s. Throughout the heart of the Cold War the USA had vast superiority in nuclear weapons. One reason the Soviets backed down in cases like Cuba is that they would lose a nuclear conflict as we had several times more nuclear weapons than them.
Tariffs need to be paired with strong industrial policy.
I do think tariffs make sense a temporary moat to allow for industrial policy to be effective, and then you can scale down tariffs once industry has the scale to compete with(and benefit from) international competition.
I do find the complaints about tariffs without the proposal of a better alternative a bit of a frustrating argument.
It’s pretty clear from the past 20 years that if China pursues industrial policy heavily and the US does barely, more and more manufacturing will naturally move to China.
A good and important question!
While somewhat contested, this is a heavily researched question. US aircraft production during the war is instructive, the post below is a great summary from someone with no dog in this particular flight. The reality is that the volumes required will be orders of magnitude larger than our current production, and that is going to require mostly greenfield. Similarly, the overwhelming majority of the workers will be very different from current workers, because building greenfield and scaling up quickly means you will have to use unskilled workers. So you are going to be redesigning production processes. Certainly you would not want zero manufacturing in allied countries as some people have to know something about machine tooling etc. But it's very unclear to me why most particular industries matter that much, or why the overall volume is necessarily that important. The key factor is more likely to be societal mobilization. Obviously there are some exceptions here like shipyards, but that isn't the same and the real issue there is that we are already crazy protectionist and it's killing us relative to profitable commercial production in Korea and Japan.
https://www.construction-physics.com/p/how-to-build-300000-airplanes-in?utm_source=post-email-title&publication_id=104058&post_id=144851894&utm_campaign=email-post-title&isFreemail=true&r=8kfge&triedRedirect=true&utm_medium=email
Space for a follow up on procurement reform and American SEZs.
Who needs rigor and numbers when they've got 'China emergency' vibes?
You need both
Our tariffs on SUVs have incented BMW and Mercedes to open assembly plants in the US (decades ago). I certainly have noticed that, as a result, GM is now able to build a BMW. 😂🤪
I mean, subsidies have actually tripled manufacturing investment, so it sort of seems self-evident that at least on the volume front its moving in the right direction. Export controls are about damaging rival industries, and those have succeeded as well. The question that remains are tariffs, and again I think its pretty straightforward: China's doing a massive amount of subsidies to their manufacturing, and its hard to argue that they're not directly trying to outcompete manufacturers in the domain of their domestic rivals. It's a crude method, but short of having massive massive stimulus package I don't see what the plan is.
I also wouldn't characterize american military hardware as plagued with quality issues. Our shit actually does work very well.
It’s almost incredible how open Chinese government/military officials are about expecting a war with us even as they build out production lines for vehicles and ships with far more capacity than they need for peacetime production. The fact we aren’t treating it as a five alarm fire is alarming.
That is why it is so important that we pay exorbitant subsidies to have our skilled labor assemble foreign components for vehicles we have to pay people to buy, rather than having those workers available to work in defense, shipping, electronics, etc 😊
In the 70s America imposed tariffs and quotes on Korean textile exports, motivating Korean businesses to transfer technology and managerial knowhow to Bangladesh. This resulted in the creation of our textile export industry.
My hope is that the trade war between America and China might enable Vietnam and Bangladesh to get access to Chinese EV technology through joint ventures so they can sell EVs to the American and Indian markets.
That actually would be a good side effect.
Spam
These measures seem to me to be protectionism pretending to be a security issue. If you include solar panels and electric vehicles as industries required for security, is there anything you are not including? Even as a security issue, for Europe cheap imported electric vehicles and solar panels reduce dependence on imported oil and natural gas. Vehicles and panels do not have to be renewed so even in the case of a war with China dependence on them is a smaller risk than dependence on fossil fuels. If every country follows the logic of trying to ensure that it has sufficient manufacturing capacity on everything, the result will be a collapse in trade and prosperity.
Don't be absurd. Everybody knows Canadian softwoods are a dire threat to Freedumb. And I wouldn't put it past the Japanese to form an alliance the moment they take over US steel. And don't even get me started on the Chinese solar panels that will convert to killer drones the moment Xi pushes a button.
The national defense argument comes in two versions:
1) risk that in an armed conflict, China could cut off supplies of key items and components either by not exporting them or interdicting their export by regional countries
2) risk that general low level of manufacturing capacity would weaken war-making capacity
For the first, narrowly targeted tariffs or even bans on imports from China/China interdict able countries, but not from others, makes sense. This might include EV drones, but not EV's in general
For the second production subsidies are more efficient. A tariff is a combination of a subsidy to domestic sales financed by an excise tax on consumption of the item. This creates two inefficiencies.
a) it creates a relative disincentive to export, especially harmful if economies of scale are important
b) an excise on one item is less efficient (greater deadweight loss) than a broad based tax that does not distort consumption between the promoted item and others.
Part of this promotion of manufacturing in general should also come in the form of increased national savings, mainly through changes in the tax structure and level of collections to reverse net capital inflow that overvalues the dollar and makes imports cheaper and exports more expensive. I have not checked the numbers but my impressionist that the US had a net capital outflow and export surplus during the build-up to WW2.
The same tax and production subsidy approach to rebuilding the "arsenal of democracy" applies to industrial policy in items for which we are confident that politicians can better identify long term comparative advantage then private firms.
These are not novel concepts. They are covered in standard trade theory and international development courses. [At lease they were back in the '60's when I was taking them.] I know we are not living in a neoliberal paradise in which politics is kept focused on redistribution, but I wish that Noah would address the efficiency issues directly in his benign analysis of tariffs.
Well, the Economist doesn't speak for Britain or the British. They're intellectuals looking for an angle. Brexit was pitched by the establishment as "free trade with Europe matters more than literally anything else including democracy" and the voters rejected that position. Indeed a part of the argument for leaving was the EU's obsession with creating an EU Army, something it was pointed out would undermine NATO and certainly be a general screwup, if it ever happened at all.
> ... general aversion to industrial policy
Yes but consider the history. The UK deindustrialized thanks to the socialism prevalent between WW2 and the start of the 1980s that prevented a strong rebuild after WW2 and systematically wrecked what was left of its manufacturing base, then thanks to unfair Chinese competition in the 90s (free trade works great if other governments aren't also implementing industrial policy at the same time). But the core problem was way too much industrial policy, and the UK only started thriving again after Thatcher came in and abolished it. Huge parts of the British workforce were allocated to loss-making uncompetitive industries with no future kept alive only through massive tariffs and subsidies (e.g. coal mining), or things like car making where mismanagement and union hostility had killed productivity relative to Europe. It's this history that explains the British establishment's aversion to such things.
The history in the US is rather different. US industry was hollowed out more or less exclusively by foreign competition, not economic self-sabotage by the left. And the US military has for a very long time been culturally accepted as a kind of welfare or jobs programme, in which it's kept at a vastly larger size than would apparently be needed given the basics of geography and America's natural defensive advantages. The military just has a central place in American hearts that is unique and not found elsewhere (Britain isn't alone in treating its military more normally). So the idea of using tariffs to protect the military specifically is neither new nor scary to Americans, whereas a return of generalized industrial policy is pretty scary to British liberals because there's a Labour government in waiting there who might be quite happy to use a retrenchment from free trade to bring back the dead-end policies of earlier eras.
You make good points about the dysfunctional nature of the post-WWII British economy but you oversimplify it when you describe it as "socialism".
The restriction of housebuilding (though the Green Belts and discretionary planning system instituted in 1947) likely shared a common motivation with the industrial "lemon socialism" you described, of keeping northerners in the north and reducing migration to London and the south east, and was at least as popular with rural shire Tories as it was for the workers in those uncompetitive industries.
In fact this regional imbalance has probably been as much a factor in UK housing dysfunction, as racism has been in US housing dysfunction.
Northern Britain has multiple disadvantages in today's world (few relevant resources, location on the outer periphery of Europe, little urban agglomeration) that have proven almost impossible for successive British governments to deal with. Since the last century the percentage of England's population located in the North has fallen roughly 1% per decade, regardless of the economic orthodoxy of the day (from Free Trade to Imperial Preference to Old Labour to Thatcherism to Blairism to post-2010 austerity).
>The UK deindustrialized thanks to the socialism prevalent between WW2<
Every rich country "deindustrialized" over time after the war in that their services sectors grew faster than manufacturing (or agriculture). I'd be very surprised if there are any noteworthy exceptions. Fortunately, in nearly all cases this does not imply an absolute drop in the value of manufacturing output over the long term, but is simply an artifact of what economies tend to do as they grow richer.
This, of course, is a different issue from whether or not a country can supply its own needs for armaments. Many seem to be convinced that guaranteeing the latter requires massive government interventions on behalf of favored industries like cars, computer chips and solar panels.
I generally like Dylan Matthews' work, but his most recent piece complaining about Biden's tariffs on Chinese EVs bothered me: https://www.vox.com/climate/2024/3/4/24087919/biden-tariff-chinese-ev-byd-battery-detroit
He seems to think that the best thing for climate issues is current swift adoption of EVs. But to me it seems more important for long-run climate issues to build EV industries around the world, rather than accelerate their adoption by a couple years.
I think you're probably right, and I'll write more about that.
The politics dictates accelerating adoption using current tech, even though we lack the infrastructure to do this, current tech is resource-intensive and not impressively efficient. and there are probably smarter ways to invest trillions. Green politics has always been as much about sticking a finger in the eye of the fossil fuel companies as it has been about sensible solutions - because the idea that Joe Biden (or any pol) and their activists and donors are capable of micromanaging the timing and means of our transition in a sensible and prescient way is absolute insanity.
Tax carbon (domestically and at that border) if you believe CO2 is an existential threat, and then wait 50 years. The market will figure it out.
“When Britain deindustrialized, it could rely on America’s mighty factories for its defense; if and when American deindustrializes, what protector can we turn to? There is none. The advocates of dogmatic, Econ 101-style unilateral free trade have no plan.”
Great way to end the piece. As you say, I think this national defense argument trumps all unfortunately
india if america helps us build it up. as well as korea and japan for things like ships and submarines. india(we) can easily outbuild entire west in things like 155mm artillery shells and that too for 25 to 30 percent of the cost.
I hope that does happen. India is clearly a great ally to have as they develop into a world power.
I'm retired now, but I ran a contracting business for forty years. It was a small shop, with an average of five people in the shop. But you learn a few things, even at that scale. Way back when, more than one person advised me, "Do not have a customer, employee, or supplier that you can't afford to lose because, sooner or later, you will lose them. I've seen established businesses collapse when they lost a key customer, employer or supplier. In forty years, I did lose all of the above, but I always spread my resources around and no single loss was debilitating.
And you don't have to lose the resource. If they know you can't exist without them, they make the decisions, not you, even in your own business.
This all scales up to international trade. There should be no country's business that we can't do without. Otherwise, THEY call the shots in our own economy. THEY should be worried about US.
I work in the US textile industry. It is failing fast. 17 plants have closed so far this year. Without a US textile industry we cannot clothe our military. It is important for the Biden administration to support the industrial base for defense purposes, but textiles are being forgotten. The US textile industrial base urgently needs assistance to stay alive.
I work in the great American ear-plug industry, and all of it has moved to China. How can our brave young (and soon naked, I guess) fighting men and women face the great eastern hoards without ear protection? Just think about that.
The future is automated production for low value products like textiles. We should be investing in robotics and machine tools- not textile mills (which have been disappearing for many decades). Or invest in a Navy so we can be assured of textile imports from Bangladesh and Latam
Fully automated is proving extremely difficult to achieve in the production of garments. I am involved in seamless 3D knitting for the US Navy, which has major automation capabilities, but that can't make dress uniforms or combat uniforms let alone boots or gloves (one of the hardest things to make). Bangladesh and Latam do not have the industrial base for the high tech textiles needed. And I'm not a fan of further exploitation of low income women. Plus there is a law that requires use of US made products, fiber forward (e.g. if wool the sheep must have eaten US grown grass) in purchases by the Department of Defense. Enacted after shortages in prior wars.
I would also raise issue with your characterization of textiles being"low value". Protection against burn injuries and bullets requires high value complex textiles and garments - and protects human assets of immense value - think of the costs of training a Navy SEAL.
I'm guessing the characterization of textiles as "low value" is based on civilian rather than military clothing.
> Plus there is a law that requires use of US made products, fiber forward (e.g. if wool the sheep must have eaten US grown grass) in purchases by the Department of Defense. Enacted after shortages in prior wars.
This sounds like something we should eliminate if we want to improve domestic availability of military outfits! We're shooting ourselves in the foot if we ban the use of wool from New Zealand or England or textiles woven in Latin America or Bangladesh - it definitely doesn't help our domestic production of the end products that actually matter.
Good post Noah. Completely agree.
It would be nice to have some supply side investment over the long term in the US as well.
CHIPS is nice, but what’s next?
You mean the guy who wants to unify the Reich?
While you are right about the semiconductor restrictions and subsidies (which were a bipartisan idea that preceded Biden, even if the bill passed during his term),
Biden’s EV tariffs are about pleasing his donors in an election year- union jobs and the green industry benefiting from his handouts.
Biden is all about “local content”- ie union assembly jobs of overseas components, not really about domestic industrial capacity. If we wanted to be a leader we’d invest in battery R&D rather than paying someone to open a battery plant that uses Chinese IP and Chinese components.
https://spectrum.ieee.org/the-top-10-ev-battery-makers
Biden’s steel tariffs are also a payoff to donors.. So were Trump’s ag tariffs
Not every tariff has to fall into the category of national security or handout to donors. Pols are happy to mix and match.
The No. 1 EV in the U.S. is still Tesla. It's non-union and Elon Musk is alt-right.
Biden did try to limit subsidies to companies employing union labour
[Congress has entered the chat.]
If policies do end up benefitting union members, I say: Good.
Put your money where your mouth is/ buy only Ford or GM, only shop at unionized grocery stores (the big chains) and never use FedEx. Also hire union labor for all of your home improvement projects. There are lots of ways to help unions with your own money.
What a coincidence! I already do that! And I'm fine with it.
😀
I notice many of the articles you're pointing at are in The Economist: how significant is it that this magazine was founded in 1843 for the express purpose of promoting free-trade liberalism (specifically the repeal of the Corn Laws) and may have maintained such a bias for its entire existence?
And as for the stalling of UK incomes and living standards circa 2008, how much of that was down not just to the financial crisis, but also to the fact that North Sea oil (which during the Thatcher and Blair eras had exacerbated deindustrialization via Dutch disease) was beginning to run out?
One of my biggest issues with Noah is how he projects his opinions as an American onto the British economy.
He correctly identies the UK as being held back by Nimbyism, but often overstates this. Going off a recent podcast he did he identified the UKs biggest issues as being around our inability to build and our apparent attachment to degrowthism.
Yes, the UK has a poor recent history of housebuilding. Conversely we have had one of the most successful deployments of offshore wind. Unlike the US we have actually been able to start on a high speed rail system and we just built a new world class underground line for London (far faster and cheaper than smaller projects in NYC). We are more capsble of building that he thinks. Degrowthism isn't a big ideology in the UK - and is athema to both the ruling conservative party and Starma's Labour. Methinks Noah spends too much time arguing with Jason Hickles on Twitter.
His American perspective is most clearly seen from the fact that the US generally does well he ignores, because it doesn't really enter his worldview. On the weakness side, he misses the key story of Britain's inability to turn our very dynamic small tech firms into national champions because of our weak capital markets. He misses the fact that our service sector economy - which did very well before 2007 - just wasn't specialised in a manner that would thrive in the 2010s. He rarely mentions Brexit, or any aspects of the UKs political chaos of the past decade. On the strengths, he misses our educational institutions, our entrepreneurship, the fact we do have a very strong service sector and our ability to draw in immigrants. There is a reason we have generally outgrown France and Germany in GDP and GDP per capita since 2014, despite all the crap we've pulled.
The UK is a status quo country where the establishment do not want to rock the boat. They were dragged out of the EU kicking and screaming and definitely do not want to make it work. The reason for a lack of growth in the UK is because there has been no national investment in productivity. None of the parties have a clue and are themselves all conservative, especially after the Truss debacle. I don’t see much changing post election- definetly not meaningful growth.
Not sure i'd use high speed rail as an example of Britain being able to build given the state of the HS2 project.
Agree with you on the degrowth point though, that's very much a fringe idea in the UK as elsewhere.
My point isn't that the UK is a country that is good at building things - I agree that the UK is bad at building things. My point is that Noah overstates how bad the UK is at building relative to the US. In a recent Econ 102 episode, Noah refers to the UK as the 'ultimate build nothing country'. I think that the UK is much better compared to Blue States in terms of developmental ease rather than off-the-scale worse than the US. Our overly expensive badly-cut down high speed rail line is less overly cut than it's American (Californian) equivalent, and our bloated and slow nuclear project at Hinckley point appears only slightly more bloated and slow than the last two reactors built in the US. Our housing is very expensive, but it's only as expensive as the more costly US states - but our median income to median house price ratio is around 1:6.5, as much as Florida, whereas the highest US states are over 10.
Ok that's fair, your point is well made
Isn't the NIMBYism also a factor in our problems with financing industry: that banks don't want to make risky bets on capital investment because it's easier to make money from property (real estate) speculation?
Mmm High Speed Train? That wasn’t the one that Sunak has to cancel, so the line that will be completed won’t serve the original purpose to reach Manchester? UK is One of the countries with the highest cost of construction per kilometer due to NIMBY. So expensive that the train won’t be profitable because its intended population won’t be able to use it.
“He correctly identies the UK as being held back by Nimbyism, but often overstates this.”
I was just was looking at some data for comparative house prices vs income across countries and i don’t think he overstates it. It’s pretty horrific in the UK.
I think every country can point out successes that they have, but the reality is pretty clear: the UK has structural issues and there doesn’t seem to be any clear desire from the British political class to address them
The graph plots productivity, not incomes or living standards, and the graph looks the same if you exclude the oil industry. But you have to be quite careful with such figures. Irish "productivity" is off the charts for example but it's an accounting issue.
It's possible there are accounting issues in the UK data too. GDP/productivity rely heavily on accurate understanding of the population size and activity. The UK has neither, due to relentlessly pro-migration ideology amongst the ruling classes in the past 20 years the British government stopped accurately tracking basic stats. Even the most basic stat of population size was being advertised as "experimental" by the ONS a few years ago! Of course fixing this would make the numbers even worse, as if you increase the population with the same amount of measured activity then productivity goes even lower. But it does lead to the question of whether the ONS really has any idea of what's going on in the country, if it can't even be confident about how many people are there.
Another part of it is probably the reduction in government spending. The post-2008 era in the UK saw a retrenchment in public spending as the coalition tried to get the deficit more under control. They largely failed at that but there were still big reductions in costs, whilst satisfaction with services actually went up. Bear in mind what it means: before 2008 a significant chunk of GDP was either misallocated by the private sector (hence the recession) or misallocated by the public sector (wasteful government spending that didn't improve service levels). If you fix both simultaneously then you're going to have a long period where the economy tries to right itself.
In the USA there was no austerity. US government debt is vastly higher than in the UK (127% vs 88%). This is because the Fed flooded the markets for years with free money, which combined with US VC culture to create an explosion of no-hope billion dollar+ "startups" that just purchased market share. Think Uber. That sort of thing forces GDP from everywhere else into your own country, because other companies can't compete with rampant market dumping that's being enabled by a central bank with a reserve currency. But it's not sustainable.
Oh, and it'd be remiss not to note the most obvious cause: massive levels of inward migration of skilled min-wage-or-lower workers from eastern EU in the post 2004 era. Productivity is basically a measure of investment in automation, but you can't justify investing in productivity if your wage costs are pinned to the floor by a nearly unlimited labour pool of people willing to work for nearly nothing. Note that this does not automatically mean lower standards of living in the short run, as after all, the work is still getting done. It may even mean higher standards of living are possible because some jobs important for QoL are stubbornly hard to automate and much more sensitive to labour costs than productivity e.g. care homes.
Still, the result of being the English speaking economy that was first to remove migration controls was predictable: wages didn't grow for many years but employment did grow strongly. All the classic signs of a labour glut.
The British knew this was a big problem. For years they were told there was no possible solution due to the EU not letting them control their borders .... so they left the EU. But then they discovered that decades of EU control had hollowed out politics, filling it with pliant yes men who were ideologically committed to continuing the status quo. The Conservatives have destroyed their base and electoral chances by massively OPENING the already wide open borders, yielding immigration levels that have blown right through previous records, much of which is driven by people fleeing Ukraine and Hong Kong.
There is just no chance of productivity improvements in the UK any time soon, given the basic fact that it has been absorbing such huge numbers of working age people fleeing wrecked countries for so long now. To what extent this matters for living standards is unclear. The UK has a relatively high minimum wage and a generous welfare state that has got millions of people on it. Any living standard dependent on labour can be improved immediately by simply lowering the minimum wage combined with changing the benefits system to push more people into work. Any living standard that's fundamentally dependent on automation on the other hand, will lag years behind.
I think there's a lot to the thesis of this piece, and the Ukraine war does a lot to illustrate the point. Commentators like to point out that Russia has a relatively small GDP (the size of Italy's they always say) compared to western powers. Nevertheless the Ukrainians are far behind in ammunition supplies because Russia is producing shells at a faster rate than the US and Europe combined. When the west is losing on the manufacturing front of a war with Russia, the thought of trying to play the same game against China is very frightening.
See this Economist piece for some figures on arms manufacturing for Ukraine -
https://www.economist.com/europe/2024/01/14/can-europe-arm-ukraine-or-even-itself