This is one of the most deeply impressive articles I’ve read, on any subject, in a long time. To borrow a shipping mataphor, this article is an aircraft carrier compared to the paper boats of today’s modern media.
As an Industrial Organization economist, the piece was fascinating to me. It does, however, document points of interest in several ongoing professional controversies.
The failings of American shipbuilding appear to be an example of path dependence. American shipbuilders clung to a well established technology where the possessed comparative advantage. They were also bolstered by a huge domestic market effectively shielded from foreign competition.
The hard lesson of history is that comparative advantage is not a sprint. Instead, it resembles the Red Queen's race. As technology evolves, comparative advantage shifts along with it. Early adopters of emerging technology can gain persistent first mover advantages. Laggards, to the contrary are caught in a doom loop deteriorating competitiveness.
The other controversy which is touched upon is the question of industrial policy. Noah is a proponent of industrial policy. He is particularly concerned about manufacturing of goods needed to meet the problem of aggressive Chinese expansionism. In principal, I agree with his concerns. However, this essay illustrates the historical incompetence of the US government in tits industrial policies for this sector.
>However, this essay illustrates the historical incompetence of the US government in its industrial policies for this sector.
That wasn't my takeaway at all. Government intervention, as portrayed in this article, seemed very successful both during WWI, WW2, and at least partially successful during the 1970s until demand for ships collapsed internationally. At least if your metric is ships built. If your measure of success is creating a self-sustaining industry that doesn't require large subsidies to maintain, then you're right. But is that what we want/need?
If one reads only headlines and then jumps immediately to the comments section, remarks like this should be expected in the current age of boundless cynicism and political derangement.
Agreed. And I would add that late adopting nations have an inherent labor-cost advantage. If they can learn to adopt the most productive manufacturing techniques, they can make rapid gains in market share against early adopters. This is clearly true for Japan, South Korea and China.
But for nations with high labor costs, like the USA, it is very difficult to make similar gains. They need to find some edge that no one else has yet discovered, and it is not clear the government subsidies are enough.
As we’ve seen with the IRA, the first thing the unions did after seeing the subsidies roll in was to go on strike for higher wages. Keeping wages and employment high amongst key donor groups and activist supporters seems to be one of the primary aims of government handouts- whether to industry or in education.
It is almost as if the end product result doesn’t matter.
Naval shipbuilding is twofold. US inputs cost more, and the Pentagon Procurement systems are being funded by CRs. We don’t do long-term budgeting.
Sure, there is a plan, but then the plan has to be funded. We actually have a plan to house detainees at the border. It is in the books, what’s not on the books are monies to build the detention facilities.
We need about 40 new attack submarines to replace those that have reached the end of their life span. We only fund two a year or so. No company is going to hire for 40 when they are only building 2 a year.
When asked how he wished to be remembered, William Edwards Demming replied, "I probably won't even be remembered” but then added, "Well, maybe as someone who spent his life trying to keep America from committing suicide."
I attended a Naval Institute WEST conference in San Diego about twenty years ago. At that conference an official with NASSCO Shipbuilding (president or CEO, I believe) said that the real problem at the time was that South Korean companies were just better at building ships. Korean workers had reached roughly parity with American shipbuilding workers, but because of better engineering and construction techniques, they were far more productive. American shipbuilders needed to up their game to compete.
The Korean history is fascinating in its own right. They insisted they would have a shipbuilding industry and studied it and continued to fail for years, then eventually brought over the best experts from Scotland to watch everything they did, studying the techniques wasn't enough.
A lot of IP is held up in watching how people work instead of reading about it.
This is a fascinating post. Thank you for running it. And, by the way, doesn't it "suggest" that the sort of industrial policy protectionism you've been suggesting as the cure-all for America's supposed manufacturing woes, is precisely the WRONG WAY TO GO? That we should be concentrating our energies on making our products internationally competitive, rather than, you know, not internationally competitive?
Except they're not "our" products; they're the private investment ventures of free and independent people seeking a positive return on that investment in a relatively short time frame. As you remove the protectionism that (currently) seeks to encourage or maintain such investment, you invite foreign producers into the newly opened market, driving the investors in your nascent industry away to less risky ventures with quicker ROIs. Free trade is free for all; fair trade is simply protectionism under a different name.
There may be a quasi-solution in pushing comparative advantage to its logical limits. Good enough (but perhaps not the absolute best) products of all kinds, including military, are made available by the most efficient producers to all comers regardless of geopolitical considerations.
I often worry, since our aircraft carriers are such big floating (but not defenceless) targets, in a shooting war how long would it take to repair a damaged one. i figure years. It's like buying a car for one long trip across the country and then figuring on leaving it there.
This is a huge issue. Think there has been some new investment recently (up to $1 billion) but dry dock and repair facilities are in bad shape, plagued with delays, and don’t have enough spare parts (so these are cannibalized from other ship)
What an amazing blog! It explains so much. The takeaway for me was that unlike Japan, South Korea, and China, America has never had the motivation and desire to be a leader in this and many other industries. There is no burning desire to produce as efficiently and productively as possible unlike those other nations.
Moreover, we Americans are, generally, lazy, complacent and arrogant (thinking we're the best just because we are Americans) relative to our East Asian competition. I don't see a way around this absent a sea change in our culture and mentality.
This just isn't so. Did the US government make some concerted effort to be the best at AI development? Self driving cars? Semiconductor design? No, and yet the US leads in all 3 areas.
I think there are other factors going on here, like the cost of inputs, prestige of the industry, education in specific engineering fields, etc. Subsidies and govt focus is only a small part of the whole enchilada.
My argument wasn't about subsidies, etc. It was simply that, as you say, for whatever reason, maybe a lack of prestige or whatever, Americans do not have the same level of motivation to manufacture goods like steel, ships, etc. in the most productive and efficient ways. We simply don't seem to care enough about doing that relative to the competitors mentioned in the blog. The takeaway is if you want it bad enough, you'll find the best way to do it. We don't want it that bad. Actions always speak louder than words.
Maybe my use of the word "lazy" was a poor choice. I simply meant that excelling in these particular industries does not seem to be a high priority for America as compared to the nations that dominate them.
Not sure one way or the other re the factual accuracy of that argument, but I can understand why you're uncomfortable with it: it's basically the flipside of the argument that (for example) black people are inherently lazy.
That was one scary, yet sobering article! It'd be great to see something by the same author on modern US naval shipbuilding...which apparently produces quality products; but almost always late and over budget.
Interesting, thanks. I am fine with commercial shipping being built by S Korea or Japan. We should outsource some Naval ship building to S Korea as well, though obviously the US wants to give its own naval shipbuilders lots of business. A key area that needs investment is ship repair and dry dock facilities where America’s ability to keep damaged naval vessels afloat in a time of war would be severely limited.
All in rally, rather than the near impossibility of rolling back union wages and work rules or combatting the paucity of skilled designers, fabricators and foremen, it is probably more efficient for the US Navy to be focused on stealing all the commercial ships of other countries in the event of war.
Excellent post. The decline of American manufacturing, particularly in shipbuilding, is indeed alarming. The stark contrast between the U.S. and countries like China and South Korea in terms of shipbuilding capacity highlights a significant competitive disadvantage. The reliance on protectionist laws like the Jones Act underscores the challenges faced by U.S. shipbuilders in the global market. This situation not only impacts the economy but also raises concerns about national security and self-sufficiency. Addressing these issues requires a multifaceted approach, including investment in modernizing shipyards, workforce development, and strategic economic policies to revitalize the industry.
WE are certainly d feeling that here in the Pacific Northwest where our ferry system needs to replace its aging fleet. The cost and the time it t will take to do this means we are facing years of inadequate and unreliable ferry service - which has a real impact for those of us living on islands. We won't be restoring service to Vancouver Island until 2030. It is eight miles away but it takes much of day to get there now with a vehicle.
This is one of the most deeply impressive articles I’ve read, on any subject, in a long time. To borrow a shipping mataphor, this article is an aircraft carrier compared to the paper boats of today’s modern media.
All of his articles are like that! His blog is great.
Yes, Brian Potter's Substack column is one of the best in the Progress Studies community. Always interesting and thorough.
There are also plenty other Progress-related Substacks that you can subscribe to with similar content:
https://frompovertytoprogress.substack.com/p/subscribe-to-progress-related-substacks
As an Industrial Organization economist, the piece was fascinating to me. It does, however, document points of interest in several ongoing professional controversies.
The failings of American shipbuilding appear to be an example of path dependence. American shipbuilders clung to a well established technology where the possessed comparative advantage. They were also bolstered by a huge domestic market effectively shielded from foreign competition.
The hard lesson of history is that comparative advantage is not a sprint. Instead, it resembles the Red Queen's race. As technology evolves, comparative advantage shifts along with it. Early adopters of emerging technology can gain persistent first mover advantages. Laggards, to the contrary are caught in a doom loop deteriorating competitiveness.
The other controversy which is touched upon is the question of industrial policy. Noah is a proponent of industrial policy. He is particularly concerned about manufacturing of goods needed to meet the problem of aggressive Chinese expansionism. In principal, I agree with his concerns. However, this essay illustrates the historical incompetence of the US government in tits industrial policies for this sector.
>However, this essay illustrates the historical incompetence of the US government in its industrial policies for this sector.
That wasn't my takeaway at all. Government intervention, as portrayed in this article, seemed very successful both during WWI, WW2, and at least partially successful during the 1970s until demand for ships collapsed internationally. At least if your metric is ships built. If your measure of success is creating a self-sustaining industry that doesn't require large subsidies to maintain, then you're right. But is that what we want/need?
If one reads only headlines and then jumps immediately to the comments section, remarks like this should be expected in the current age of boundless cynicism and political derangement.
Agreed. And I would add that late adopting nations have an inherent labor-cost advantage. If they can learn to adopt the most productive manufacturing techniques, they can make rapid gains in market share against early adopters. This is clearly true for Japan, South Korea and China.
But for nations with high labor costs, like the USA, it is very difficult to make similar gains. They need to find some edge that no one else has yet discovered, and it is not clear the government subsidies are enough.
As we’ve seen with the IRA, the first thing the unions did after seeing the subsidies roll in was to go on strike for higher wages. Keeping wages and employment high amongst key donor groups and activist supporters seems to be one of the primary aims of government handouts- whether to industry or in education.
It is almost as if the end product result doesn’t matter.
Do you have a source for the strikes after the IRA was passed? Curious to read more.
Naval shipbuilding is twofold. US inputs cost more, and the Pentagon Procurement systems are being funded by CRs. We don’t do long-term budgeting.
Sure, there is a plan, but then the plan has to be funded. We actually have a plan to house detainees at the border. It is in the books, what’s not on the books are monies to build the detention facilities.
We need about 40 new attack submarines to replace those that have reached the end of their life span. We only fund two a year or so. No company is going to hire for 40 when they are only building 2 a year.
We have met the enemy and he is us.
To be honest, at this point maybe America should just settle for a Navy whose members know how to mount rifle scopes.
😂. Very good, though if we have to rely on the Navy’s rifles things have gone pear-shaped
When asked how he wished to be remembered, William Edwards Demming replied, "I probably won't even be remembered” but then added, "Well, maybe as someone who spent his life trying to keep America from committing suicide."
I attended a Naval Institute WEST conference in San Diego about twenty years ago. At that conference an official with NASSCO Shipbuilding (president or CEO, I believe) said that the real problem at the time was that South Korean companies were just better at building ships. Korean workers had reached roughly parity with American shipbuilding workers, but because of better engineering and construction techniques, they were far more productive. American shipbuilders needed to up their game to compete.
The Korean history is fascinating in its own right. They insisted they would have a shipbuilding industry and studied it and continued to fail for years, then eventually brought over the best experts from Scotland to watch everything they did, studying the techniques wasn't enough.
A lot of IP is held up in watching how people work instead of reading about it.
Abolish the Jones Act!
https://boydinstitute.org/p/abolish-the-jones-act
This is a fascinating post. Thank you for running it. And, by the way, doesn't it "suggest" that the sort of industrial policy protectionism you've been suggesting as the cure-all for America's supposed manufacturing woes, is precisely the WRONG WAY TO GO? That we should be concentrating our energies on making our products internationally competitive, rather than, you know, not internationally competitive?
Except they're not "our" products; they're the private investment ventures of free and independent people seeking a positive return on that investment in a relatively short time frame. As you remove the protectionism that (currently) seeks to encourage or maintain such investment, you invite foreign producers into the newly opened market, driving the investors in your nascent industry away to less risky ventures with quicker ROIs. Free trade is free for all; fair trade is simply protectionism under a different name.
There may be a quasi-solution in pushing comparative advantage to its logical limits. Good enough (but perhaps not the absolute best) products of all kinds, including military, are made available by the most efficient producers to all comers regardless of geopolitical considerations.
I often worry, since our aircraft carriers are such big floating (but not defenceless) targets, in a shooting war how long would it take to repair a damaged one. i figure years. It's like buying a car for one long trip across the country and then figuring on leaving it there.
This is a huge issue. Think there has been some new investment recently (up to $1 billion) but dry dock and repair facilities are in bad shape, plagued with delays, and don’t have enough spare parts (so these are cannibalized from other ship)
https://www.stripes.com/theaters/us/2023-05-03/navy-maintenance-shipyard-problems-gao-10005908.html
What an amazing blog! It explains so much. The takeaway for me was that unlike Japan, South Korea, and China, America has never had the motivation and desire to be a leader in this and many other industries. There is no burning desire to produce as efficiently and productively as possible unlike those other nations.
Moreover, we Americans are, generally, lazy, complacent and arrogant (thinking we're the best just because we are Americans) relative to our East Asian competition. I don't see a way around this absent a sea change in our culture and mentality.
This just isn't so. Did the US government make some concerted effort to be the best at AI development? Self driving cars? Semiconductor design? No, and yet the US leads in all 3 areas.
I think there are other factors going on here, like the cost of inputs, prestige of the industry, education in specific engineering fields, etc. Subsidies and govt focus is only a small part of the whole enchilada.
My argument wasn't about subsidies, etc. It was simply that, as you say, for whatever reason, maybe a lack of prestige or whatever, Americans do not have the same level of motivation to manufacture goods like steel, ships, etc. in the most productive and efficient ways. We simply don't seem to care enough about doing that relative to the competitors mentioned in the blog. The takeaway is if you want it bad enough, you'll find the best way to do it. We don't want it that bad. Actions always speak louder than words.
I would dispute your takeaway.
Americans chase the most profitable opportunities. Nothing lazy about that.
Maybe my use of the word "lazy" was a poor choice. I simply meant that excelling in these particular industries does not seem to be a high priority for America as compared to the nations that dominate them.
What do you think of the argument that East Asian cultures where rice is the staple food are inherently suited to fostering extreme industriousness?
And Arkansas produces more rice than the next five states combined…
I don't buy that. Doesn't make sense to me. Any argument that a group is "inherently" this or that doesn't hold water with me.
Not sure one way or the other re the factual accuracy of that argument, but I can understand why you're uncomfortable with it: it's basically the flipside of the argument that (for example) black people are inherently lazy.
Not many success stories of industrial policy in U.S. shipbuilding history.
That was one scary, yet sobering article! It'd be great to see something by the same author on modern US naval shipbuilding...which apparently produces quality products; but almost always late and over budget.
Interesting, thanks. I am fine with commercial shipping being built by S Korea or Japan. We should outsource some Naval ship building to S Korea as well, though obviously the US wants to give its own naval shipbuilders lots of business. A key area that needs investment is ship repair and dry dock facilities where America’s ability to keep damaged naval vessels afloat in a time of war would be severely limited.
All in rally, rather than the near impossibility of rolling back union wages and work rules or combatting the paucity of skilled designers, fabricators and foremen, it is probably more efficient for the US Navy to be focused on stealing all the commercial ships of other countries in the event of war.
Thanks for building them, everyone!
I'm not against outsourcing it, but I would prefer somewhere outside Chinese missile range.
Excellent post. The decline of American manufacturing, particularly in shipbuilding, is indeed alarming. The stark contrast between the U.S. and countries like China and South Korea in terms of shipbuilding capacity highlights a significant competitive disadvantage. The reliance on protectionist laws like the Jones Act underscores the challenges faced by U.S. shipbuilders in the global market. This situation not only impacts the economy but also raises concerns about national security and self-sufficiency. Addressing these issues requires a multifaceted approach, including investment in modernizing shipyards, workforce development, and strategic economic policies to revitalize the industry.
Easy answer: Democrats and unions. Unions forced manufacturing elsewhere. Regulations/EPA nipping at those heels.
Also an incomplete and narrow minded answer.
WE are certainly d feeling that here in the Pacific Northwest where our ferry system needs to replace its aging fleet. The cost and the time it t will take to do this means we are facing years of inadequate and unreliable ferry service - which has a real impact for those of us living on islands. We won't be restoring service to Vancouver Island until 2030. It is eight miles away but it takes much of day to get there now with a vehicle.