Sunday, July 25, 2010

Does happiness affect productivity?

Daniel Sgroi reports on experiments to find out.
Experiments suggest that happiness raises productivity by [increasing] workers' effort. Economists may need to take the emotional state of economic agents seriously.
Apparently the answer is "Yes. Happier people are more productive."

Greed and cowardice

Paul Krugman's column on the failure of a climate bill includes these lines.
It wasn’t the science, the scientists, or the economics that killed action on climate change. What was it?

The answer is, the usual suspects: greed and cowardice. …

The economy as a whole wouldn’t be significantly hurt if we put a price on carbon, but certain industries — above all, the coal and oil industries — would. And those industries have mounted a huge disinformation campaign to protect their bottom lines. …

By itself, however, greed wouldn’t have triumphed. It needed the aid of cowardice — above all, the cowardice of politicians who know how big a threat global warming poses, who supported action in the past, but who deserted their posts at the crucial moment. …

Greed, aided by cowardice, has triumphed. And the whole world will pay the price.

Greed I understand. It will always be with us. Our economic system depends on it in some very important ways. Cowardice seems to be newer. It's not that there weren't cowards before. But these days, very few people seem to have the courage to stand up and tell the truth. Not the politicians, not the public media. It's only people like Krugman who have the guts to tell it like it is. Of course one reason he has the guts is that the has the independence. Financially he is very secure.

Wall Street, the White House, and the weak economy

James Surowiecki's column in The New Yorker talks about how business is trashing Obama.
The U.S. economy is limping along. The job market is in rotten shape, and business investment is hitting historic lows. And, if you’re looking for a culprit for this dismal state of affairs, many businesspeople would be happy to point you to the White House. Companies aren’t hiring or investing, businessmen say, because the combination of Barack Obama’s anti-corporate attitude and a blizzard of new regulations and proposed taxes has created what Ivan Seidenberg, the C.E.O. of Verizon, calls “an increasingly hostile environment for investment and job creation.”
Disappointingly, even Fareed Zakaria, whom I always thought of as quite clear-headed, is jumping on the let's-bash-Obama bandwagon.
In a recent Newsweek column, Fareed Zakaria pointed to the fact that Fortune 500 companies are sitting on a cash hoard of $1.8 trillion, and suggested that a “profound sense of distrust” might be why they weren’t spending it.
Surowiecki goes on to point out how wrong this all is.

What struck me, however, is that Obama is getting the worst of both sides. Business trash talks him, but he isn't getting any applause from people who think business deserves some restraint. I find him peculiarly silent about the evils that business has done perpetrated the past decade. If he is going to earn the enmity of business, at least he should do something to deserve it.

Saturday, July 24, 2010

How Touch Can Influence Judgments

From Harvard Alumni Affairs
The researchers conducted a series of experiments probing how objects’ weight, texture, and hardness can unconsciously influence judgments about unrelated events and situations:

— To test the effects of weight, metaphorically associated with seriousness and importance, subjects used either light or heavy clipboards while evaluating resumes. They judged candidates whose resumes were seen on a heavy clipboard as better qualified and more serious about the position, and rated their own accuracy at the task as more important.

— An experiment testing texture’s effects had participants arrange rough or smooth puzzle pieces before hearing a story about a social interaction. Those who worked with the rough puzzle were likelier to describe the interaction in the story as uncoordinated and harsh.

— In a test of hardness, subjects handled either a soft blanket or a hard wooden block before being told an ambiguous story about a workplace interaction between a supervisor and an employee. Those who touched the block judged the employee as more rigid and strict.

— A second hardness experiment showed that even passive touch can shape interactions. Subjects seated in hard or soft chairs engaged in mock haggling over the price of a new car. Subjects in hard chairs were less

flexible, showing less movement between successive offers. They also judged their adversaries in the negotiations as more stable and less emotional.

The Bush tax cuts won't be extended

As everyone knows, Bush passed what he called temporary tax cuts. They were labeled temporary—and were legally structured as temporary—to minimize the impact they had on the government projections. (It's outrageous that some Republicans now claim that they helped the economy and with it the government's fiscal position. If that were the case, they wouldn't have had to be labeled temporary in the first place. The point if labeling them temporary was that it was known in advance that they would reduce government revenue over both the short and long term!)

The Republicans expected that no one would have the guts to let them expire since in doing so the Republicans could claim that taxes were being raised. If I didn't know better I would say it's unbelievable how dishonest the Republicans are. But I do know better. All I can say is that it's extraordinary that the media and the public let them get away with their dishonesty.

In any event, the Republicans are ramping up their sound machine to make those tax cuts permanent. They are claiming that letting them expire as originally written into law would hurt the economy and cause jobs to be lost. Republican's say that anything they don't like causes jobs to be lost. It's become a reflex with them.

Fortunately, I don't think it will happen. To extend the tax cuts requires that a law be passed that does so. And for that to happen Obama has to sign it. Weak as he has been, it's hard to imagine him doing that. I guess the Republicans can somehow try to blackmail him into signing an extension by including it as an amendment of some must-have legislation. But if Obama has any spine at all—which at this point I'm not so sure about—he won't be rolled.

The best outcome would be that the total amount taken in taxes won't be increased but that the beneficiaries of the tax cuts will be changed from the very rich to the rest of us. Given who Obama is, however, what's more likely is that something will pass that Obama will describe as shifting the benefits, but in fact what passes will keep most of the benefits for the very rich and make only a symbolic gesture at moving some of them over to the rest of us. Obama will praise it as a bi-partisan compromise. You can see how cynical I've become with respect to Obama.

I guess we'll just have to wait and see what happens. Whatever happens, and what Obama does to shape the outcome, will be very significant in revealing more about what kind of person he really is.

The Bush era

Bruce Bartlett, conservative commentator, has a great post: "George W. Bush: Screwup-in-Chief, 2001-2008."

Even better, one of the comments points to a January 17, 2001 [ ! ] issue of The Onion containing this story.

Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'

WASHINGTON, DC–Mere days from assuming the presidency and closing the door on eight years of Bill Clinton,

President-elect Bush vows that "together, we can put the triumphs of the recent past behind us."
president-elect George W. Bush assured the nation in a televised address Tuesday that "our long national nightmare of peace and prosperity is finally over."

"My fellow Americans," Bush said, "at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us."

Bush swore to do "everything in [his] power" to undo the damage wrought by Clinton's two terms in office, including selling off the national parks to developers, going into massive debt to develop expensive and impractical weapons technologies, and passing sweeping budget cuts that drive the mentally ill out of hospitals and onto the street.

During the 40-minute speech, Bush also promised to bring an end to the severe war drought that plagued the nation under Clinton, assuring citizens that the U.S. will engage in at least one Gulf War-level armed conflict in the next four years.

"You better believe we're going to mix it up with somebody at some point during my administration," said Bush, who plans a 250 percent boost in military spending. "Unlike my predecessor, I am fully committed to putting soldiers in battle situations. Otherwise, what is the point of even having a military?" …

An overwhelming 49.9 percent of Americans responded enthusiastically to the Bush speech.

"After eight years of relatively sane fiscal policy under the Democrats, we have reached a point where, just a few weeks ago, President Clinton said that the national debt could be paid off by as early as 2012," Rahway, NJ, machinist and father of three Bud Crandall said. "That's not the kind of world I want my children to grow up in." …

Bush concluded his speech on a note of healing and redemption.

"We as a people must stand united, banding together to tear this nation in two," Bush said. "Much work lies ahead of us: The gap between the rich and the poor may be wide, be there's much more widening left to do. We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent. And, on the foreign front, we must find an enemy and defeat it."

"The insanity is over," Bush said. "After a long, dark night of peace and stability, the sun is finally rising again over America."
We knew even then, before it all started!

I guess not quite; they got the budget cuts wrong. Instead he produced a massive federal debt. The last Bush budget year — FY 2008, which ran from October 1, 2008 to September 30, 2009 — was the first trillion dollar deficit.

Thursday, July 22, 2010

Henry Blodget on they iPad

Henry Blodget is pretty level-headed. Here's his iPad experience.
One month after we got it, my kids are addicted to the darn thing.

We got an iPad because we thought it might provide more peace and quiet during a long trip. And it did. Sometimes. When they weren't fighting over it.

But now that the trip is over, we have to actually have to physically hide it in the house every day.


Because any time the slightest whiff of boredom sets in, the kids start robotically groping for it.

What do they do with it?

-- Games

-- TV shows

-- Movies

-- Comics

-- Books


--Web, weather, maps, Google Earth

You name it. They'll use it for anything. And while one's actually using it, the other will sit there and watch the first one using it. Until, again, they start fighting over it. (And you know what that means. It means I might as well already debit my checking account for a second iPad.)

It's worse than TV ever was--because there's only one TV and because they can't subtly get up and turn on the TV and be using it for 15 minutes before you notice what they're up to. And also because, unlike TV, there's this aura of respectability around the iPad, because it is actually possible to use it for something other than mindless entertainment (not that my kids use it for that).

And it's not only the kids: My wife and my daughter have squabbled over who gets to go to bed reading a book on the iPad and who gets shafted with the limited selection on the paper-based stuff. (So let's go ahead a debit my account for a THIRD iPad.)

Again, a month after we bought it, the iPad has become so central to our household that we have to hide it. And in relatively short order, to preserve my family harmony, I'm probably going to have to buy two more of the damn things.
I don't have an iPad and haven't thought I would want one. But there is SO much positive buzz. I wonder if Google will come out with a better one soon. There seems to be something amazingly powerful about holding the images in your hands.

Sow the Seeds of Long-term Growth

Good piece by Jeffrey Sachs
The striking feature in the current debate about austerity and stimulus has been the lack of attention to investment. Consumers will not provide the engine of recovery, nor should they after overspending for a decade. Instead, the US and Europe should be using the recent corrective boost in saving rates to promote long-term investments in physical and human capital as the proper way back to sustained growth.

Despite the evident need for a rise in national saving after 2008, President Barack Obama tried to prolong the consumption binge by aggressively promoting home and car sales to already exhausted consumers, and by cutting taxes despite an unsustainable budget deficit. The approach has been hyper short term, driven by America's two-year election cycle. It has stalled because US consumers are taking a longer-term view than the politicians.

By contrast, the administration's interest in boosting investment has been haphazard. Mr Obama has shown a strange inability to articulate an operational and forward-looking policy framework in signature areas such as healthcare, energy, climate change, and long-term fiscal policy. At a time when China is building hundreds of miles of subway lines, tens of thousands of miles of highways, a couple of dozen nuclear power plants, and a network of tens of thousands of miles of high-speed intercity rail lines, the US struggles to launch a single substantial project. China saves and invests; the US talks, consumes, borrows, and talks some more.

Tuesday, July 20, 2010

Regarding our beliefs in evolution

(See Americans are Creationists.) Someone pointed out that
The figures for the US are not that shocking: they are close to or even better than Iran, Turkey, Saudi Arabia, Afghanistan, Egypt, Libya, Yemen, Somalia, Sudan, and many tribal regions of Africa and Polynesia.
So I guess we are in good company.

Another place to support Elizabeth Warren

Monday, July 19, 2010

The women's gangs of India

From Slate Magazine.
India is witnessing a rise of vigilante groups, the most sensational of which is the gulabi, or pink gang, operating in the Bundelkhand district of the Uttar Pradesh state. …

The founder of the gulabis is the fearless Sampat Pal Devi. …

Named after their hot-pink sari uniforms, the gang paid visits to abusive husbands and demanded they stop the beatings. When obstinate men refused to listen, the gulabis would return with large bamboo sticks called laathis and "persuade" them to change their ways. "When I go around with a stick, it's to make men fear me. I don't always use it, but it helps change the mind of men who think they are more powerful than me" says Pal. …

Pal has a long list of criminal charges against her, including unlawful assembly, rioting, attacking a government employee, and obstructing an officer in the discharge of duty, and she even had to go into hiding. Her feistiness has secured notable victories for the community, however. In 2008, the group ambushed the local electricity office, which was withholding electricity until members received bribes or sexual favors in return for flicking the switch back on. The stick-wielding gulabi stormed the company grounds and proceeded to rough up the staff inside the building. An hour later, the power was back on in the village.

While the gulabi use a mild level of force, more violent strains of vigilantism have been reported elsewhere in India among dispossessed women. In 2004, a mob of hundreds of women hacked to death the serial rapist and murderer Akku Yadav, after the courts failed to convict him over a period of 10 years. After the deed was done, the women collectively declared their guilt in the murder, frustrating police efforts to charge anyone with the crime.

Sunday, July 18, 2010

What turns on Kurt Godel? by XKCD

Puzzle earth

A neat jigsaw puzzle by Roger Critchlow.

Americans are Creationists; Britons and Canadians Side with Evolution

A new poll found that
While a majority of people in Britain and Canada agree with the theory of evolution, almost half of Americans are in tune with creationism.

How can so many of us be so confused?! It isn't as if everyone else in the world thinks the same thing. It isn't even that this continent is isolated. What is it about the American character that keeps so many of us so backward?

Why strengthening the U.S.-Mexican border leads to more illegal immigration

Peter Shrag has a good piece on illegal immigration.
Most efforts to secure the border result in the unintended consequence of more illegal residents. His bottom line?
The most promising workplace strategy, which has hardly been tried, would be far more rigorous enforcement of labor laws on wages, hours and overtime, and of worker safety laws. That would sharply reduce employer incentives to hire and exploit illegal immigrants.

Bye-Bye, Batteries - Radio Waves as a Low-Power Source

This deserves more attention.
Ambient radio waves can already provide enough energy to substitute for AAA batteries in some calculators, temperature and humidity sensors, and clocks.
The NY Times article discussed one way to harvest ambient energy. Some companies have been doing it for years. See also: Energy Harvesting Journal, Alternative Energy, this Science Daily article, Energy Harvesting Forum, and Wikipedia's Energy Harvesting article.

Tuesday, July 13, 2010

Microbes and us

Sounds pretty gross. From How Microbes Defend and Define Us.
In 2008, Dr. Khoruts, a gastroenterologist at the University of Minnesota, took on a patient suffering from a vicious gut infection of Clostridium difficile. She was crippled by constant diarrhea, which had left her in a wheelchair wearing diapers. Dr. Khoruts treated her with an assortment of antibiotics, but nothing could stop the bacteria. His patient was wasting away, losing 60 pounds over the course of eight months. “She was just dwindling down the drain, and she probably would have died,” Dr. Khoruts said.

Dr. Khoruts decided his patient needed a transplant. But he didn’t give her a piece of someone else’s intestines, or a stomach, or any other organ. Instead, he gave her some of her husband’s bacteria.

Dr. Khoruts mixed a small sample of her husband’s stool with saline solution and delivered it into her colon. Writing in the Journal of Clinical Gastroenterology last month, Dr. Khoruts and his colleagues reported that her diarrhea vanished in a day. Her Clostridium difficile infection disappeared as well and has not returned since.
But the real point is this.
Scientists are regularly blown away by the complexity, power, and sheer number of microbes that live in our bodies. “We have over 10 times more microbes than human cells in our bodies,” said George Weinstock of Washington University in St. Louis. But the microbiome, as it’s known, remains mostly a mystery. “It’s as if we have these other organs, and yet these are parts of our bodies we know nothing about.” …

A number of teams are working together to tackle this problem in a systematic way. Dr. Weinstock is part of the biggest of these initiatives, known as the Human Microbiome Project. The $150 million initiative was started in 2007 by the National Institutes of Health. The project team is gathering samples from 18 different sites on the bodies of 300 volunteers.

To make sense of the genes that they’re gathering, they are sequencing the entire genomes of some 900 species that have been cultivated in the lab. Before the project, scientists had only sequenced about 20 species in the microbiome. In May, the scientists published details on the first 178 genomes. They discovered 29,693 genes that are unlike any known genes. (The entire human genome contains only around 20,000 protein-coding genes.)

Monday, July 12, 2010

Perpetual flight

It's not perpetual motion since it relies on energy from the sun, but according to a solar powered plane stayed in the air for 26 hours. It used energy collected during the day to keep it going at night.

Monday, July 05, 2010

The employment depression

From EconomPicData.

The percentage of men (blue—left axis) and women (red—right axis) who are employed. Note that the axes don't line up. Men are at a post-war low, and women are at a 20 year low.

Only 58.5% of the US working-age population had jobs in June.

Kuttner on Obama

Excellent piece by Robert Kuttner in the Huffington Post. Here's the whole thing.
We in the progressive community have projected our own visions onto Barack Obama ever since we first noticed him as a remarkable political novice. It was clear from the 2008 campaign that he was a basically a centrist and seeker of common ground. But sometimes a crisis makes a presidency. And history has seldom delivered a more graphic, teachable crisis than the one that Obama inherited. So we voted our hopes that events could compel Obama to govern as a progressive.

We are still waiting, and we are a cheap date. Throw us a few bones and we brim over with gratitude:

On health reform: a brave speech to the House Democratic Caucus and some rare hands-on leadership with two outs in the ninth inning -- and hey, we knew he had it in him. Finally, the real Obama! (But it didn't really last.)

Or a seemingly tougher line on BP, and the company meets Obama's demand for $20 billion to pay claims (though the small print reveals that BP limits what it considers fair claims.)

Or a reluctant firing of Gen. Stanley McChrystal (with a denial that it was for insubordination and a preservation of the general's four-star retirement benefits).

And some nice, isolated one-liners about the callous Republican refusal to extend unemployment insurance or support financial reform (oddly divorced from a larger narrative or strategy.)

But even a dire economic crisis and a Republican blockade of needed remedies have not fundamentally altered the temperament, trajectory, or tactical instincts of this surprisingly aloof president. He has not been willing or able to use his office to move public opinion in a direction that favors more activism. Nor has Obama, for the most part, seized partisan and ideological opportunities that hapless Republicans and clueless corporate executives keep lobbing him like so many high, hanging curve balls.

None of this has stopped the progressive community from trying to put words in Obama's mouth. A superb example is William Pfaff's short piece in the current New York Review of Books, "What Obama Should have Said to BP."

It includes these choice lines:
I have...given orders that the American functions of this company be provisionally seized or placed in temporary receivership...In no circumstances will company, proprietary, or stockholder interest be given priority over measures to terminate this emergency and to safeguard the assets or interests of the United States public or government.
Pfaff adds:
He then could have concluded his speech by saying to his political opponents that any Republican or Democrat who wishes to run for office in November as an opponent of these Obama Administration crisis measures - and as a defender of BP corporate and stockholder interests - as against the national interest of the United States and redress of the damage that continues at this moment to be done to the United States and its citizens, would be more than welcome to do so.
Quite so. As Drew Westen keeps observing, the voters admire leadership and toughness, especially in a crisis. They certainly don't admire Obama's feeble trademark, "If someone has a better idea, I'm happy to listen to it." As presidential declarations of resolve go, this is on a par with taping a sign, "Kick Me," to your rear end.

In my imaginary speeches, Obama gets serious about the jobs crisis -- and then dares Republicans to try to block his efforts to put Americans back to work. But Obama and his political advisers have convinced themselves that economically vulnerable people somehow care more about the abstraction of the public debt than the immediate threats to their livelihoods.

Even if relentless conservative propaganda had moved public opinion in that direction, which in fact it has not, the job of a president is to educate. For the definitive refutation of the elite misreading of the public views of the deficits and debts, see the fine testimony of Larry Jacobs and Ben Page, two scrupulously insightful political scientists and public opinion scholars.

But despite our hopes, Barack Obama is unlikely to offer bolder policies or give tougher speeches any time soon, even as threats of a double-dip recession and an electoral blowout in November loom. This is just not who he is. If the worst economic crisis in eight decades were going to change his assumptions about how to govern and how to lead, it would have done so by now.

Come November, as Republicans break out champagne, the usual commentators will offer the usual alibis and silver linings.

The party of the newly elected president always loses Congressional seats. Not always: viz. Roosevelt, 1934, or Bush II, 2002. The two men shared nothing, except resolve in a crisis. That should tell you something. Where's Obama's resolve?

Having a smaller majority will force the Democrats to be more disciplined. This is delusional. Do you really think, with the loss of a working Democratic majority, that corporate New Dems and fiscally hawkish Blue Dog Dems will be more inclined to support their president? If anything, they will be emboldened to freelance at his expense.

Losing one or more house of Congress will compel Obama to realize that he tried to govern too far to the left and to move closer to the Republicans. Too far to the left? Only in Limbaugh-land. And we've seen that there is no compromise with the Republicans. Unless you embrace their whole program, they vote you down.

Even with big losses of House and Senate seats, there is plenty of time for Obama to recoup and win re-election in 2012. Maybe, but at the rate we are going, we face a long period of high unemployment, weakening defense of much that progressives hold dear, and a presidency increasingly under siege. The more protracted the economic slump, the easier it will be for even a lunatic-fringe Republican candidate to beat Obama.

Now, who am I to second guess the cleverest politician to come along in decades? Well, I am old enough to remember the Vietnam era when the Best and the Brightest were just dead wrong, and the kids had a surer sense of American foreign policy than the experts. I have also watched Obama's loyal opposition -- people like Joseph Stiglitz, Paul Krugman, Elizabeth Warren, Sheila Bair -- be proven right by events, again and again. So there are alternative paths, as there always are. But the White House has disdained them.

And I've noticed that it is the populists among Democratic elected officials who are best defended against defeat in November. That tells you something, too. Why should the project of rallying the common people against elites in Washington, on Wall Street, and in the media, be ceded to the far right? But that is what this White House is doing.

Progressives by nature are optimists. We believe that things could be better than they are, and that a decent society is worth fighting for. We're hopeful, sometimes bordering on wishful. A counsel of despair is not our thing. We tend to look for the best in people. That's why we keep playing Charlie Brown to Barack Obama's Lucy.

Obama was consistently underrated during the 2008 campaign. Nothing would make me happier than to say in six months that I was underrating him on July 4th, 2010, and to eat a big helping of crow.

But I reluctantly conclude that whatever progressives might desire in our private visions of who Obama could yet be, he is who he is. It is like watching a needless accident in slow motion. Without a drastic and abrupt course correction, the missed opportunities will continue to accumulate this summer and fall. The whole country, not just the progressive movement, will pay dearly.

Sunday, July 04, 2010

Oil Companies Reap Billions From Subsidies has a story on oil company and taxes.
When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes.

The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes.

At the same time, BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began. …

[An] examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.

According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.

And for many small and midsize oil companies, the tax on capital investments is so low that it is more than eliminated by various credits. These companies’ returns on those investments are often higher after taxes than before.

Saturday, July 03, 2010

Andy Grove on American jobs

He says that it's bad policy to ship "commodity" manufacturing out of the country, that doing so leaves us vulnerable to missing the next step in the process. Manufacturing—and especially the "scaling up" step—are important capabilities that we harm ourselves by losing.
Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter. …

Today, manufacturing employment in the U.S. computer industry is about 166,000 -- lower than it was before the first personal computer, the MITS Altair 2800, was assembled in 1975. Meanwhile, a very effective computer-manufacturing industry has emerged in Asia, employing about 1.5 million workers -- factory employees, engineers and managers.

The largest of these companies is Hon Hai Precision Industry Co., also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenue last year was $62 billion, larger than Apple Inc., Microsoft Corp., Dell Inc. or Intel. Foxconn employs more than 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard Co., Intel and Sony Corp.

10-to-1 Ratio

Until a recent spate of suicides at Foxconn’s giant factory complex in Shenzhen, China, few Americans had heard of the company. But most know the products it makes: computers for Dell and HP, Nokia Oyj cell phones, Microsoft Xbox 360 consoles, Intel motherboards, and countless other familiar gadgets. Some 250,000 Foxconn employees in southern China produce Apple’s products. Apple, meanwhile, has about 25,000 employees in the U.S. -- that means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology, and other U.S. tech companies. …

There’s more at stake than exported jobs. With some technologies, both scaling and innovation take place overseas. Such is the case with advanced batteries. It has taken years and many false starts, but finally we are about to witness mass- produced electric cars and trucks. They all rely on lithium-ion batteries. What microprocessors are to computing, batteries are to electric vehicles. Unlike with microprocessors, the U.S. share of lithium-ion battery production is tiny.

That’s a problem. A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer-electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies didn’t participate in the first phase and consequently weren’t in the running for all that followed. I doubt they will ever catch up. …

Consider this passage by Princeton University economist Alan S. Blinder: “The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became ‘just a commodity,’ their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success.”

I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today’s “commodity” manufacturing can lock you out of tomorrow’s emerging industry.
Mark Thoma publishes Rajiv Sethi's comments.

Thursday, July 01, 2010