[Newgy]

America's "decline" is mostly a function of bad government policy the past 15 years or so that lead to massively wasteful over-investment of people and capital into finance and real estate.

Break up the banks, let the market (not the Fed) set interest rates, deregulate health care markets, and balance the budget.

[TomOfTTB]

I think you’re projecting what you want the problem to be on top of what the problem actually is (apologies in advance for the tl;dr factor below)

The economic crisis of the last couple years is not America’s problem. America’s problem is we became very successful a few decades ago and got very rich because of it. That wealth led us to create more and more jobs that “serviced” us. So our economy became service oriented while poor countries (primarily in Asia) were happy to take our manufacturing jobs.

As the article says “Designed by Apple in California, Manufactured in China”

The U.S. still leads in designing things but almost everything we design is manufactured elsewhere and the people in those other countries are putting together just enough wealth to send their kids to college. Meaning eventually we’ll start to see more design work out of Asia at which point we’re going to start losing a lot of our wealth and we’ll be left with a service economy that no longer has enough wealth to support itself.

Fixing this problem means competing on every level with countries like China. But we can’t do that because we don’t want to be like China. Foxconn could open a factory in Texas tomorrow and get enough Mexicans to staff it by the end of the week but our laws won’t allow them to pay the low wages they pay in China. These laws are based on a good instinct on our part but it’s an instinct born out of Arrogance.

“We are Americans so we can dictate what something is worth even if someone else is willing to manufacture it for less”

But the problem is we can’t dictate what something is worth. So China, who is willing to allow their people to be treated far more ruthlessly, always wins out. Until we come to terms with that and find some way to fix it we’ll still have a problem

(For the record I think automation through robotics might be the key to fixing this to a certain extent but that’s a whole different conversation)

[Turing_Machine]

"The U.S. still leads in designing things but almost everything we design is manufactured elsewhere"

Not in terms of value. Depending on which estimate you believe, the U.S. is either slightly behind China in manufacturing (19.4% of world output compared to 19.8%) or slightly ahead.

http://www.ft.com/intl/cms/s/0/002fd8f0-4d96-11e0-85e4-00144...

http://shopfloor.org/2011/03/u-s-manufacturing-remains-world...

[yummyfajitas]

Foxconn could open a factory in Texas tomorrow and get enough Mexicans to staff it by the end of the week but our laws won’t allow them to pay the low wages they pay in China.

This is unlikely. Mexico is more than twice as rich (per capita) as China ($9k vs $4k gdp per capita). Why would people leave Mexico just to earn lower wages in Texas?

[TomOfTTB]

But Foxconn wouldn't have to pay all the fees and middle men involved with getting products from China to here. So they could afford to pay more because their product would need nothing more than a truck.

[yummyfajitas]

There are certainly niches where this might make sense. But the general trend has been for low wage jobs to leave Mexico and go to China. Mexico is a middle income country, closer to Greece or Poland than to China.

Don't get me wrong - I think there are great benefits to North American economic integration. It was only very recently that China supplanted Mexico as our #2 trading partner. I just don't think it's reasonable to expect Mexico to occupy the same niche as China.

[josefresco]

Inviting Chinese companies to the US to employ Mexicans at Chinese rates is the way to 'save America'?

[TomOfTTB]

I just defined the problem I didn't put forth a solution. But your indignation shows exactly why the problem is so significant.

Having said that I'm not saying it isn't the way to save America either. The problem right now is while Chinese adults are making low wages they're managing to put away enough money to send their kids to University. Which in turn is causing Universities to spring up in China. If those graduates stay in China they'll innovate there and almost inevitably steal some of the high level work done by Americans (such as technology design and engineering). Then we start to lose those jobs and the wealth starts flowing into Asia.

So the question is: Isn't it better for the U.S. to have the Mexican adult pay for his child to go to a U.S. University and innovate here?

[polymatter]

I think its worth being aware that you are talking about Chinese adults working for low wages and _pulling_ _themselves_ _and_ _their_ _families_ _out_ _of_ _extreme_ _poverty_. And that is a good thing.

[TomOfTTB]

I'm not saying it's not a good thing. But it's an equally good thing if a Mexican family pulls_themselves_and_their_families_out_of_extreme_poverty. If you thought through my point rather than just emoting you would have realized that.

[yummyfajitas]

It's an equally good thing if a Mexican family escapes from extreme poverty, but there are far fewer Mexicans actually living in extreme poverty.

1-2% of Mexico lives on $1.25/day (PPP adjusted) compared to 16% of China. For $2/day, the numbers are 9% and 36%. 15% of Mexico and 45% of China lacks improved sanitation, 6% vs 11% for improved water supply.

All data taken from this crappy web form: http://databank.worldbank.org/ddp/home.do

[rbanffy]

Probably not, but you have to accept the fact you can't go back to the time when American manufactured goods could compete in price with their Chinese counterparts while employing a similarly sized workforce.

And I wouldn't blame your past few federal governments either. This is a problem that has been steadily developing for more than half a century.

[matwood]

The U.S. still leads in designing things but almost everything we design is manufactured elsewhere and the people in those other countries are putting together just enough wealth to send their kids to college.

It's possible that China got ahead of the US recently, but it hasn't been true. US manufacturing output still leads the world or is very close to it. What has happened is that jobs have disappeared because of automation. The robotics you talk of is exactly what has put the US manufacturing worker out of work.

[Gustomaximus]

People should be as keen to join the race to the lowest wages and most economically efficient conditions as they should be for trickle down economics. Countries like Germany and Japan compete on a manufacturing level without workers having to accept Chinese wages and conditions. So it is possible, it's just not the easy path to take.

[mtoddh]

Honest question - how do they achieve this? How is it they (Germany and Japan) are able to "compete on a manufacturing level without workers having to accept Chinese wages and conditions". Because it's generally framed as Americans needing to lower their standard of living / expectations in order to be able to compete. So how is it German and Japan are the exception? What are they doing differently?

[freemarketteddy]

The automation through robotics is causing technological unemployment and a further loss of jobs for the manufacturing class.

I can see how things will get more and more automated but I dont get how it can alleviate the plight of the american middle class.

[shareme]

Its more complex than you give credit for..

And it snot just a USA trend..Europe faces this as well..

Basically, industries went horizontal rather than continue vertical integration. Horizontal promotes outsourcing whereas vertical does not.

Look at SpaceX as an example of vertical integration delivering lower costs satellite payload flights than NASA contractors with USA workers. Note you could replace USA with Europe, India, Russia, etc.

But we are facing a business culture fallacy and change setup. Its not gov policy as that will always be somewhat broken. Its business culture that needs to change and we as startup people have the power to change it.

When is the last time any YCombinator company submitted a startup idea whereas it was vertically integrated rather than horizontal?

[shibboleth]

Would you mind expanding upon your views regarding the deregulation of health care? More specifically, do you believe that provider-related antitrust laws have harmed the public since their emergence in the 1970s?

[steve-howard]

I don't think there's a single level of government where I live ('burbs of Chicago) that has a balanced budget. Perhaps I'm overly pessimistic, but I especially don't think the federal government ever will again.