A nation of cobblers
ABC’s Jon Karl asked Trump’s Commerce Secretary Howard Lutnick a question:
The president also said there’s going to be a transition cost, transition problems. I mean we are going to see higher prices in America. It’s not like you can open a factory tomorrow to build iPhones or to – to make sneakers, shoes. I mean we – we – we buy a lot of shoes in this country, 99 percent of them are made elsewhere. I mean do you – are we going to become a nation of cobblers again? I mean what – this is going to mean higher prices, isn’t it?
“Cobblers” – love that word. It conjures up visions of Hans Christian Andersen’s father – at least for me. But ask any New Englander over fifty or sixty years old about the shoe industry and what its American demise meant to New England, and you’ll get an answer, and probably no one will use the word “cobblers.” Here’s a 2023 article on attempts to bring shoe manufacturing back to New England, with a little bit of history.
For me the phrase “a nation of cobblers” also conjured up the famous saying “nation of shopkeepers” supposedly uttered by Napoleon and referring to England:
There is reason to doubt that Napoleon ever used the phrase. No contemporaneous French newspaper mentions that he did. The phrase was first used in a derogatory sense by French revolutionary Bertrand Barère on 11 June 1794 in a speech to the National Convention: “Let Pitt then boast of his victory to his nation of shopkeepers”. Barère was referring to the British victory over the French at the Glorious First of June. Later, during the Napoleonic wars, the British press mentioned the phrase, attributing it either to “the French” or to Napoleon himself. …
After the war English newspapers sometimes tried to correct the impression. For example the following article appeared in the Morning Post of 28 May 1832:
“ENGLAND A NATION OF SHOPKEEPERS This complimentary term, for so we must consider it, as applied to a Nation which has derived its principal prosperity from its commercial greatness, has been erroneously attributed, from time to time, to all the leading Revolutionists of France. To our astonishment we now find it applied exclusively to BONAPARTE. Than this nothing can be further from the fact. NAPOLEON was scarcely known at the time, he being merely an Officer of inferior rank, totally unconnected with politics. The occasion on which that splenetic, but at the same time, complimentary observation was made was that of the ever-memorable battle of the 1st of June. The oration delivered on that occasion was by M. BARRERE [sic], in which, after describing our beautiful country as one “on which the sun scarce designs to shed its light”, he described England as a nation of shopkeepers.”
A short while ago I posted a video that contains a good description of Trump’s actual plans and hopes for new industry in the US as a result of his policies. You may have already watched it, but if not here it is again (I doubt Jon Karl is especially interested; he’d rather talk about “cobblers”):
IMO, every dollar we save, as a nation, by buying cheap goods from communist slave-worker countries (even the ones that work reasonably well) is spent nationally on welfare and law enforcement and lost opportunities for citizens entering the work-force, or trying to.
Whenever some “economist” claims that the country is getting wealthier, the total wealth includes the massively rich and the massively poor.
The average does not come out to being a “healthy middle class” society.
“cobblers”…Grok, tell me about the status of automation in apparel manufacturing
https://x.com/i/grok/share/rtioy07kSaIzQMRVrLW9799C1
Note especially:
“3D knitting and weaving machines are another game-changer. Brands like Adidas and Nike have been using these for years to create seamless garments, reducing waste and labor costs. By now, smaller manufacturers are getting in on the action as the tech becomes more affordable. These machines can produce a complete garment from digital designs in hours, bypassing traditional cutting and sewing steps. This is especially big in “on-demand” fashion, where companies produce only what’s ordered, cutting down on overproduction.”
@Aesop Fan:Whenever some “economist” claims that the country is getting wealthier, the total wealth includes the massively rich and the massively poor.
The average does not come out to being a “healthy middle class” society.
By any metric not driven by envy, this nation has objectively been getting wealthier. There are people at the top getting wealthier faster, sure–but to say the rest of us are made poorer because a few gained more is fundamentally envy.
Poor people in the US live like middle-class Americans in the 1950s. And even poor people have access to wonders undreamed of in the 1950s.
“Middle class” has a lot of associated connotations, and I don’t know what private meanings folks have for that, so it would be challenging to point to something quantitative as evidence of a “healthy middle class” without unpacking it. But “healthy middle class” or not, whatever is meant by that, this country has been getting richer at all levels of income.
I’m not saying we live in a utopia. I’m not saying nothing negative has happened. I’m saying that we as a country got objectively richer, and have been doing so for a long time.
cobblers, continue…Grok, please describe the production process in a typical shoe factory, automated to the state of the art but not beyond it
https://x.com/i/grok/share/F4sUcomSYpbnwFYYy3Gw0OyMO
(added to the end of the response to previous link)
How many of those who opine on the ‘hopelessness’ of increased US manufacturing have any real idea about what goes on in a factory…of any kind..or of the possibilities for labor productivity improvement over the next few years?
I mean do you – are we going to become a nation of cobblers again?
This is an indictment of the quality of American journalists, people so ignorant they think modern mass-market shoes are made by “cobblers”. Cobblers of course exist, but in the West they would make only very high-end shoes.
@David Foster:How many of those who opine on the ‘hopelessness’ of increased US manufacturing have any real idea about what goes on in a factory…of any kind.. or of the possibilities for labor productivity improvement over the next few years?
That has been the story of US manufacturing this whole time and I am gobsmacked by the tariff advocates who continue to say that American manufacturing has declined since the supposed heyday of the 1950s. We manufacture more than ever before, with ever fewer people needed, thanks to enormous gains in productivity. We don’t need tariffs to manufacture more.
People who don’t click links, US industrial output today is 7-8 times higher than in 1950. (Been pretty flat since 2008 though–pretty sure Obama-era regulations have a lot to do with that…)
Just like our agriculture is more productive than ever before even though so few of us farm. 40% of us were farmers in 1900 and now it’s less than 2%.
Wow, who knew that a middling successful real estate developer could plan the national economy better than the decisions of millions of consumers and producers? I bet all those libertarians feel pretty stupid now that they see the brilliance of the new economic program.
I work in construction, mostly commercial space. But lots of places are expanding businesses, some first time. Making anything here just takes skilled people and investments.
It is darkly amusing to learn Jon Karl and ABC News think of shoe manufacturing as a little old man bent over a cobbler’s bench.
The word “snob” formerly meant “cobbler.”
[Earlier snob, cobbler, lower-class person, one who aspires to social prominence.]
https://www.thefreedictionary.com/snob
I’ve always been partial to the quality and fit of Made in Ireland Clarks Shoes. Even gifted a pair or two.
The “cobblers” or “nation of shopkeepers” is intended as a not-so-subtle putdown of small business owners by the credentialed class. It reminds me of Hillary Clinton back in 1993, when asked about the effects of her health care plan on small business. “I can’t go our and save every undercapitalized entrepreneur” she sneered,” a strange comment indeed from a woman whose own father was a small businessman. I might add, a small businessman who was prosperous enough that he was able to send her to a not-too-shabby northeastern private women’s college.
Wife is looking at machines for embroidering her art on t-shirts for a manufacture-on-demand concept.
On the hand, we decided not to market her iPhone app because between Apple and the state each taking a big fat cut, I wasn’t worth her time.
Try to find a shoe repair shop.
Niketas…US industrial output today is about 3X that of 1950, in inflation-adjusted terms. If you look at value-added rather than output, it’s about 3.7X, again in inflation adjusted terms.
But it should be a lot higher, from the standpoint of national defense and resilience against natural disasters, as well as expanded employment opportunities and technological advancement. There are a lot of things we need to do to drive this–education and tax policy changes among them…but I do believe that either tariffs or some form of domestic production tax benefit, or both, need to be in the mix.
Hmmm….
Related?
“UAW Boss Sides With Trump On Tariffs, Stuns MSNBC Panel”—
https://www.zerohedge.com/markets/uaw-boss-sides-trump-tariffs-stuns-msnbc-panel
If she hadn’t drunk the Kool-Aid so deeply, neo could learn a lot from a real economist. https://www.grumpy-economist.com/p/tariffs-saving-and-investment?utm_source=post-email-title&publication_id=2178684&post_id=161247906&utm_campaign=email-post-title&isFreemail=true&r=3o9&triedRedirect=true&utm_medium=email
He’s advocating unilateral free trade. No.
a strange comment indeed from a woman whose own father was a small businessman.
==
Not a strange comment. Hellary was always cavalier about people. See her treatment of Billy R. Dale (assisted by the FBI and the U.S. Attorney’s office).
Sad that Karl, who speaks on TV for a living, can’t begin a sentence without “I mean.”
Someone has to pay for all the overhead of import-export. Customs inspectors aren’t free. Management of export of dual use and or military items is also not free.
He usually doesnt know what he means
But its cnn although msnbc is as bad whichever hack they pick does it matter
@ Shirehome – searching today in my area
Colfax Boot & Shoe Repair, Lakewood CO
(wide range of reviews, but apparently still open)
Mucilli’s 1825 Youngfield St, Unit C, Golden, CO 80401
(also did custom orthopedic inserts about 12 years ago, but I haven’t been back)
Generic store name “Shoe Repair” next to defunct Big Lots in Wheat Ridge at 43rd and Wadsworth -picture
https://www.google.com/maps/place/Big+Lots/@39.77377,-105.0802172,3a,75y,90t/data=!3m8!1e2!3m6!1sCIHM0ogKEICAgICk8Jab2QE!2e10!3e12!6shttps:%2F%2Flh3.googleusercontent.com%2Fgps-cs-s%2FAB5caB_M7ceDedRknJBHBuNlRdXeOYBiAxSfeGZ1p7r4QPbT9GcEUO5MLpRgyZmwll71pRzrPb9jd02higc-6mVFNKpg3gNkYVC2dFGqTSmrJlq5InY9JlqkoWFbdubl_FoUXiScI9nVeA%3Dw203-h114-k-no!7i2688!8i1520!4m7!3m6!1s0x876b8652f2ac6579:0x7cc26f2a96185daf!8m2!3d39.77377!4d-105.0802172!10e5!16s%2Fg%2F1thf90zh?authuser=0&entry=ttu&g_ep=EgoyMDI1MDQwOS4wIKXMDSoJLDEwMjExNDU1SAFQAw%3D%3D
There used to be a number of terrific shoe and boot manufacturers in the US, in particular in the northeastern US. Danner, Frye, Bass, etc. Now very few left, and many of the US brands – like Red Wings – make them overseas then import them. Sad.
Y81:
If you choose to be rude and boorish to our hostess, well FOAD, and the horse you rode in on.
AesopFan, we use to have a very good one in Longmont. But they retired. One still in Longmont, but not the best. One in Loveland. I am in the middle. My point though was, there use to be more (OK, I am dating myself – everything used to be better).
y81:
You clearly haven’t read my many posts on Trump’s tariffs.
Or, if you’ve read them, you haven’t understood them.
Lastly, you can get “real economists” to disagree on just about everything, including the present situation.
Cobblers! Has a very different meaning in the UK but doesn’t apply here as there is a lot in what you say. Even famous UK brands like Dr Marten’s, which I totally recommend are now made in Cambodia, Vietnam etc. you can get ones made in the UK but they cost around 25-50% more. However they are better quality. A lot of this is because the offshore ones are automated and traditional method are still used in Northamptonshire where the remaining English production is based.
But it will not return to the UK soon because…
1. Apprenticeships and technical education in this area are long gone. One of the dafter things Thatcher did in the eighties was shut down many of the training boards that oversaw our once excellent vocational education system. Yes it saved a lot of money but the cost is now seen in many areas. Try finding a competent plumber in a rush. I’m no fan of the state but one thing it is good for is education. Pity it has pushed university so much. I used to work in Germany and was stunned by their technical education. I wonder if it remains as good.
2. Even with tariffs and shipping the offshored stuff is cheaper and it seems the UK prices are kept artificially low as a prestige thing. No shoe manufacturer and shoe shop can compete with Amazon funnelling cheap goods from abroad. Amazon is the Japanese knotweed of commerce but it won’t be going anywhere soon. Unfortunately. Its monopolistic tendencies are a big part of this issue.
3. All the supporting industries, tanneries, eyelet makers, lace manufacturers etc are gone. All this would be imported.
4. Consumer culture is for fast fashion at the lowest possible price. People are buying a lot of shoes and binning them before they are even worn out. As for repairing… they just don’t.
5. There is very low unemployment around here and I doubt many would trade their jobs for factory work. I worked in factory based manufacturing many years ago and while I learned a lot I wouldn’t have fancied spending a life on those lines. This is the calculation the young make today. Boring work for low wages…… who is going to do that? Well historically around here immigrant labour often did.
So given all this I am amazed any cobblers remain anywhere. However on our local high street is an old school cobblers who will reheel and resole shoes at a ridiculously low price. You can get keys cut, buy laces, polish cloths etc. he has kept my dog walking boots going for years 🙂
But I will ask him where all his products are sourced. Given the prices I think I can guess.
I imagine this is similar in the US but with different companies – except Amazon of course
Cobbler ? Cordwainer
I prefer peach cobbler.
So, we’ve just learned that David Clayton does not think precisely or dynamically.
Art Deco:
That’s what you get with offshore trolls; high quantity but low quality?
I don’t the “cobblers” remark displayed any ignorance, it was hyperbole meant to frighten viewers. He was intonating that without Chinese goods, the country will fall into ruin, and to get basic necessities like shoes to wear, we will be literally reliant on “old men hunched over workbenches”.
Yeah fall into ruin because people would rather starve than work especially anyone not old and male.
Those arguing that US manufacturing has increased, so no worry about loss of manufacturing jobs in the last 20 years are ignoring the main point.
The loss of manufacturing jobs in the U.S. increased significantly after China was granted permanent MFN status (PNTR) in 2000 and joined the WTO in 2001. From 1990-2000, manufacturing jobs declined by about 400,000 (40,000/year), but from 2000-2010, losses surged to 5.8 million (580,000/year), with 1-2.8 million directly attributed to Chinese import competition. The “China Shock” post-PNTR/WTO accelerated this trend by enabling a flood of low-cost imports and offshoring, though automation and the Great Recession also contributed.
Posters who include naked links that take up line upon line would be advised to use
Tiny URL to shorten the links.
https://tinyurl.com/
@ David Clayton: “4. Consumer culture is for fast fashion at the lowest possible price. People are buying a lot of shoes and binning them before they are even worn out. …”
Perhaps that practice will stop, but right now my wife often claims to pick up really great deals at Goodwill type places — $100 shoes for $5 type of thing. But she does not need any more shoes … !!!!!!
Brian E on April 15, 2025 at 12:50 pm — and as follow up to your comment, others here (perhaps NC?) have also remarked how when you push the mfg expertise out of country, a lot of knowledge about process development gets lost over time, so you no longer know how to create an automated line, refurbish it for another product or product line, control it well, stay on a learning curve to keep costs declining, develop quality and rapid response tooling, etc. Apple claims it can’t find what it needs in mfg capability in the US anymore, vs. the capability they helped establish in China (now perhaps partly moving elsewhere?). Chinese expertise appears to be the draw now, vs. low labor costs previously.
But don’t worry Hollywood still rues the world of motion pictures (Schmoe Woes).
Given dismal ratings for ABC News, Jonathan should consider learning to cobble.
@y81
Says the clown that has drunk the kool aid.
It’s telling that your link is longer than your actual text. You make absolutely zero effort even to try and summarize what we “could learn” from this article, and why we should respect Cochrane’s authoritarah as a “real economist.” Let alone a definition of that term and if that includes the likes of Bob Reich or Paul Krugman.
But it’s been a while since I’ve done a longform post and response to another link. And while I have little in the way of pretenses to being a “real economist” I am a student of economics and above all of history.
Spectacular. Grade school parables in exchange of reality.
This is about the level I was at 20 years ago, before I started to figure out that if unilateral free trade were really the right answer, why is it so rare? Ask your sociologist if unilateral anything is generally a good idea and see how far you get in things like the Prisoners’ Dilemma.
So in other words, Cochrane is being a fucking idiot who has failed to learn the lessons of the past decades since Nixon went to China, and of prior events. That unilateral free trade might only work well if you have a competitive advantage in almost everything, and even then not likely. And in the absence of it it will at best erode the competitive potential and basis for your economy at the benefit of those you are trading with, and at worst literally equip, arm, and fund mortal threats.
It’s not often I have much good to say about the economic wisdom of Vladimir Illych Ulyanov, called Lenin.
He was a tyrannical, micromanaging, power hungry, cruel monster who micromanaged the life out of his country, its economy, and dozens of millions of people obsessing over the exact cut of timber. But he was savvy enough to recognize the flaws with this. Even if the famous attributed quote of “the capitalist will sell us the rope we will use to hang him” is false, he certainly was skilled in simultaneously plotting a new world war while conning foreign powers and private charity out of as many resources as he could, asking for and being granted economic arrangements he would never have accepted at home.
It is worth ruminating that Lenin is recognized as the direct ideological ancestor of the PRC.
We’ll see.
There’s more than a kernel of truth there, and what tends to get ignored is how being the reserve currency – while valuable – is a major driver of inflation. At best there is higher demand for it than there is inflation and so this helps absorb much of the production. But it is not perfect, and it largely runs counter to a lot of the Trump admin’s other positioning about stuff like sanctions undermining the USD’s position.
But what many of the people condemning tariffs the most ignore is that humans are more than economic assets or consumers. And as far as kitchen economics go trade policy is often a matter of balancing the human-as-consumer who benefits from low prices with the human-as-provided who benefits from high prices, at least for their labor. I’m going to go out on a limb and guess Cochrane is never going to mention basic matters like salaries or employment rates in this article, because it undercuts his points.
Indeed. But are we taking the right aesops from the fables of Aesop’s homeland? Have we even learned from Hesiod’s Work and Days?
Had they looked into the records they would have known better. But they did not. In particular they would have recognized the Greek government engaged in massive fraud in order to get its balance sheets up to standards for entering the Eurozone precisely because in Keynesian and Post-Keynesian Europe in a Keynesian and Post-Keynesian global environment, austerity is a dirty word and there was limited interest in saving.
https://news.ycombinator.com/item?id=14255972
But for various reasons – including political incentives, the desire to expand the eurozone to include Greece, and a hunger for “productive investments” – helped squelch interest in checking. And so the Greek Debt Bomb was added on to the Eurozone debt bomb.
Ok. How? Don’t you love how blithely Cochrane says this, as if it were so simple anyone could do it. Except even if anyone can theoretically do it, in practice it is phenomenally difficult, and often outsourced. What Cochrane is probably not going to touch on is how a lot of the people, organizations, and governments that sank wealth into Greek loans probably thought they were engaging in “productive investment” and were left holding the bag. Which goes into the issue of what productive investment is, if it is productive enough for your purposes financially, and how to find, assess, and invest in that while guaranteeing. It is so tricky that we often outsource it to middle men like hedge funds and investment firms, and understandably so but it speaks to the problem there.
“Consumption boom.” Yet another very interesting use of the term. In reality a key part of the “consumption boom” was not on Porsches but on lavish government deficit spending for things such as the pensions. In many ways the Greeks would have been in better conditions had Porsches really been the center of the consumption boom. But in reality it was largely burned trying to service old debt, entitlements, and other matters for a population of incredibly unproductive people (largely pensioners and the unemployed youth) tied into the major government systems with clientelism. And with the Eurozone now making the Greek parties clients of major EU and other international powers.
Which is true, as far as it goes. The issue is that the Greeks were able to leverage their debt in order to renegotiate terms with their creditors, in which the lenders were pressed to take “haircuts” in exchange for getting actual paybacks. The other issue is that for many Greeks, perhaps not most but many, this was a “productive investment.” The Greek spending mania was good while it lasted for those that bought, and arguably Greek GDP is still ahead of where it was near the start of the cycle. It was a decent ride if you knew where to get off, as many insiders and Greeks that died or cashed out in the lead up to the crash did.
[6:04 PM]
This is something Cochrane is not going to touch on in spite of how he really should: fraud can be profitable for the fraudsters and their dependents. Not necessarily but possibly. And if Keynes said “in the long run we are all dead” then that has never been truer than today, with most of the planet heading for a demographic cliff with. Vast funnel like top heavy portion of the old to the young. In an honest democracy one legal citizen gets one vote, pushing the system to prioritize short to medium term payoffs when a majority of the populace is old. In a dishonest democracy, arcane systems of legal citizens, illegals, the dead, and fictional constructs can be mined for votes, generally by administrative systems and political machines that have an investment to expand spending. And in dictatorships, the regime has incentives to keep its populace dependent and pliant for the foreseeable future, as both Bismarck and Putin attest.
PASOK and ND fit firmly into the second category, and it is telling that by and large while the Greek public is angry it has largely pushed that anger against foreign creditors demanding austerity rather than what got it in their own.
Or at least nobody standing in the wings to bail us out on terms that we could stand for. And we’ve been in places like this before, like in the aftermath of the revolutionary war, several 19th century crashes, and the Great Depression. It also ignores that Trump and his team are one of the few people that thane at least discussed structural changes on the level (even if not in the kind) needed to have a hope in hell of salvaging anything. Especially after decades of profligacy and corruption. I don’t expect Cochrane to address this point in much the same you won’t, and I also won’t expect you to address
A few points.
Firstly: Even many of those Chinese that do want more domestic investment have no reason to believe that they or their loved ones will be able to directly benefit from it. This is particularly true due to the One Child Policy that has devastated the Chinese demographic pyramid and a major reason why you see the PRC working so hard (AND WITH SUCH SUCCESS!) to recruit ethnic Han and others abroad. Secondly: Even more that want domestic investment have absolutely no reason to believe the regime will use it effectively, as shown by the ghost cities and rails to nowhere. This is what happens when “productive investment” is not so productive. Thirdly: The regime itself is a push force, given its corruption, brutality, and how little concern it gives to those under it (seriously, look up PRC “Property Laws”, the PRC isn’t QUITE at the area of “You Will Own Nothing and Be Happy” but it’s one of the closest we’ve seen in a while) meaning that one of the few ways people can hope to retain security and control over their assets is offshoring them. Fourth: This ties in with the CCP’s own desire to expand its footprint abroad for a number of reasons, such as the quest for “productive investment” and power. That does not mean there is some kind of grand Chinese Hive Mind coordinating all these things (indeed, in several cases the offshoring and investment run directly counter to each others’ interests, like Dissidents buying up real estate to hide it from the Party, and even the Party or its allies sometimes butt heads like we see with Sri Lanka), but it does mean we’re looking at similar patterns.
All of which should point to a few things. Starting with the fact that if the Chinese are investing so much in here, it’s because they believe they will get better results than if they invested it at home. I’m guessing Cochrane is not going to address much of how that is, especially with things such as Confucius Institutes, foreign educations, and influence buying.
This is simply bullshit, and if it is truly a “bedrock principle of economics” it goes quite a long ways to explaining how we got into the dire situation we are in. Capital and current account not only must not “add up”, it’s a rarity where they do. Whether that’s due to one side of the ledger increasing in value, or decreasing. As Cochrane is going to mention later, values rarely stay static. What Cochrane isn’t going to mention here is that toxic assets that are negative drains exist. Many of them are not even frauds, but are just not worth the resources they absorb like any given “Tofu Building” in the PRC most money going to Baltimore Public Schools, or failed kickstarters.
So it’s more accurate that the US importing more than it exports has to give the foreigners SOMETHING, whether that’s valuable or not, and it has to be something they are at least willing to sign off on to make the deal. That’s part of the risk inherent in trading.
Usually – for obvious reasons – that something has to be valuable. But that goes into the issues of value being subjective.
This is going to be important later.
Among other things.
Which becomes a lot less thrilling when you remember that some of those goods and services are not very valuable (slave labor discounted shoes for instance) or actively counterproductive (such as deals inked with greedy but dumb companies for what amounts to all inclusive tech transfer deals with a side of influence peddling; or do you really think John Cena routinely shills Mao for the lulz?).
What Cochrane’s going to studiously ignore about all this is what the bottom line is. What both sides end up with when the trade is done and what value that has. Sure, the Confucius Institute in the US is probably providing some level of added benefit to the local economy as its MSS goons order some local food and pay the thing’s electricity bill and that goes back to the economy. But they also cause detriment to the local economy through things like serving as a Communist Chinese secret police base and indoctrination center on American soil, seeking to undermine the US with measures such as subversion of Chinese-Americans and others, technology theft, kidnapping, and a host of others. Even if these things were less damaging to the American economy than they give in (and that’s UNLIKELY) they’d be repulsive and damaging on principle.
Cochrane can’t and won’t address this fact and neither will you. In part because it goes to the heart of the folly of unilateral anything, and particularly advocating for unilateral free trade while ignoring the other factors.
I’d say that money is a medium of exchange more than a veil, and moreover there isn’t always an underlying movement of goods and services. But close enough.
Agreed to a POINT, though that has gotten a lot harder in the world where government currencies are increasingly funny money and where you see scores of basically homegrown currencies like the cryptos get off the ground. And in several cases like some species of speculation it’s dubious if there is real underlying flow at play, and in particular if those things are so valuable as to constitute “real goods and services” (as I’m sure anyone who has googled “Chinese Gutter Oil Food” and tries to imagine the “value” of such a “good and service” in exchange for currency).
Firstly: Planes, trains, automobiles, and wagons exist, and have for more than a century.
Secondly: This ignores distant investing entirely, such as investing in overseas, foreign market stores of US value such as the US Treasury market in Europe. This isn’t anything like the only or even main way people or orgs like the CCP invest in the US, but it exists and can be done by getting one group of foreigners to sell the US assets they got (often by said shipping goods or services to the US) to another foreign group.
This should not be shocking. International banking in a somewhat modern form began during the High Middle Ages around say the 1100s. A lot of this stuff is NOT new.
Holy. Fucking. Hell. This is incredibly dumb and naive on a spectacular level. And this is supposed to be a “Real Economist”?
A couple things.
Firstly: “China as a whole” is structured as a totalitarian state socialist regime that was designed to be able to – among other things – “accumulate US assets…as a whole” through various means, including wholesale confiscation of them from Chinese nationals or resident aliens in the PRC that supposedly “own” them. This is not surprising, we’ve seen it since at least WWI with Kaiser Wilhelm II and Erich Ludendorff’s Kriegsocializmus and possibly as far back as Metternich’s Austria.
Obviously, the system isn’t perfect. It isn’t even that good or productive, which is one reason why the PRC produces ghost cities while its nationals seek to offshore. But it is designed to be able to centralize control over assets with the regime as a whole and THAT It absolutely can and has done, as we see with the organized tech and IP theft.
Which is why talking about this only on the level of individual Chinese actors is fucking stupid and even moreso than doing the same only with individual American actors.
Secondly: Even in one of the more optimistic iterations of this, where the Chinese actually do have to “send goods” to the US, this does not mean that the goods have to be of value or use to us. This is something I would have THOUGHT Cochrane would have been able to grasp given his demonization of consumer spending earlier. But apparently not.
The Opium Trade into China in the 19th and early 20th centuries gave the Chinese very and probably negative value on the whole in exchange for social disruption, organized crime, and massive death while helping to give the foreigners trading it (whether British, Japanese, Indian, overseas Chinese, or other) massive amounts of good in the form of silver, tea, and others. It’s also not surprising that this is one of the go-to examples CCP apologists have when it comes to the predations of free trade or why the CCP or China have a right or justification to do what they did.
If I ink a deal with.. oh… Gutter Oil Limited Liability Company in order to run a catering job in which I provide USD and they provide food, I’m probably getting screwed and not just on the level of “Oh noes, the thing I traded in has slightly more value than the thing I’m trading for!!!”
This is very obviously a dramatic exaggeration since basically no PRC company or other is going to loudly advertise to foreign buyers that their chief product is compromised. But it’s probably less exaggerated than you’d think if you’ve observed the steady stream of recalled Chinese products over the last couple decades.
Under normal circumstances the correct remedies would be quality assurance to make sure you get what it is worth, and finding a new supplier. And possible legal remedies if this slips over the borders into outright crime or fraud. But the last one gets harder to do when you have one side engaged in intentionally partisan legal enforcement that openly dumps on what were supposed to be the acknowledged rules of the game, and the others get harder when the usual metrics you would use to provide warning signs or signals on buy or not buy get crowded out in the marketplace (such as due to fraud, puffery, misplaced good faith due to bleedover from legitimate businesses, and so forth).
Thirdly: This ignores the ability of say China or Chinese (or any other actor) to accumulate US assets down the stream by getting them from foreign holders of them after the latter had already been the ones “putting the goods on boats.” For instance, to use a completely hypothetical example, the US selling its military technology to Israel, who then sells it on to the PRC.
https://www.timesofisrael.com/expert-israel-must-always-heed-us-concerns-but-its-china-ties-can-still-thrive/
https://www.military.com/defensetech/2013/12/24/report-israel-passes-u-s-military-technology-to-china
Which is a reason why even some of the most doctrinaire of free trade idealists generally draw lines when it comes to national security concerns. But apparently Cochrane can’t muster the indignation or credibility to even give lip service to that eventuality (and an eventually IS EXACTLY WHAT IT IS).
Al of these poke holes in Cochrane’s thesis. The third in particular KOs it by showing how a foreign actor can and does accumulate US assets without ever putting something on boats themselves (by buying them at a remove, or by stealing them in other cases). The other two underline how the things put in boats are not necessarily of greater or equal value or worth to the US or any given American actor as what is given away, whether in absolute terms or even nominally.
All of these should be warning signs. None of them are being heeded. None of them are even addressed.
And then people like Cochrane wonder why there is a move towards protectionism and y81 assumes that anybody not willing to engage in unilateral free trade must have “drunk the kool aid.” Which is ironic considering how a totalitarian regime with global ambitions and a profound anti-American outlook means that unilateral free trade with such a regime is far more suicidal than even truly wrongheaded tariffs.
Which isn’t that surprising since almost everyone is investing more than we are saving, for myriad reasons. Especially since in a post-Keynes world saving has been almost demonized as slowing down the economy and GDP and helping to cause recessions, which means governments and investors save much less than they generally have in history, made worse by how unmoored much of currency and goods production has become from any given physical objects or goods.
Moreover, in worlds with profoundly top-heavy, aging populations and winnowed younger generations, this makes a certain amount of twisted sense like in Greece. There’s limited utility in saving for a rainy day if few of you are going to be around long enough to see a rainy day, meaning that for many or perhaps most there is greater perceived utility (especially on a personal level) for spending or investing now and less on deferred satisfaction.
To say this is not a recipe for long term stability or growth is an understatement. If societies grow great when old men plant trees they will never live in the shade of, our societies have generally been clear cutting the ancestral woods in order to provide firewood and liquid currency for the pensions and entitlements of societies top-heavy with old people while likely leaving the next generation with very little shade. But it makes a twisted amount of sense not just on the individual level mapped by things like the Prisoners’ Dilemma, but also on a wider level, especially if you do not want to shaft the older generations that after all helped make or continue so much of this.
What’s missing then is much investment in THE FUTURE or what kind of living standards or productivity the next generation will have.
There is so much wrong with this it isn’t funny.
Firstly: Yes, as a matter of fact, the PRC does make portable factories. As Pakistan could attest. They just tend not to WANT to for fairly obvious reasons.
Secondly: No, the PRC does not want to send us factories. AFTER ALL, the CCP has generally been VERY blatant about seeing us as its premier strategic, political, economic, and ideological threat and preparing accordingly. And sending us factories would after all incentivize us to compete more directly with them in consumer goods.
It’s just that money and goods tend to be fungible and even the “food” of the hypothetical Gutter Oil LLC can probably be sold for some change if you find someone dumb or uniformed enough to buy it from you or someone morbid enough to keep it as a curiosity or study item. So the CCP has resigned itself to trading SOME fungible value to us in exchange that we COULD use to build factories or other matters. It just seeks to provide as little value for us as it can in any given trade (much like we’d expect in many hostile negotiations or trades) and ALSO to help lobby, shape, and influence the marketplaces and business sphere to make it as unpleasant and unfruitful for the US to take the proceeds of its trade with the PRC and beat the saved pennies from buying China rather than Buying America into new factories.
Like for instance, lobbying against retaliatory tariffs with the PRC or action against Ip theft.
This should not be a surprise. It also points to how unilateral free trade or policy making is rarely worth it.
It also points to how for all of the condescending parables and analogies from High School Economics that Cochrane is peddling, he fundamentally does not try to model any given “Chinese” actors as their own actors pursuing their own agendas, whether individually or in concert with the CCP. He makes no attempt to explain why they have not adopted unilateral free trade of the kind this article is supposed to present. He cannot even address the state-sanctioned theft of American and other property by PRC enterprises.
Three words: Bull. Shit. Theft.
There are many more things that we can do to show how this neat little equation doesn’t pan out, but simply calculating the fact that some level of theft exists and has value is more than enough to outline it. Unless you very awkwardly kludged it in “government deficit” (and even then, is it really government deficit if it is – say – GMO seeds stolen from Monsanto?), there is no good place to put those figures. But they exist.
And more than anything, it fucking DEPRESSES me to realize that some idiot probably got paid a lot in money and/or praise in order to come up with such an obviously flawed, fundamentally broken and easily exploitable equation. And it depresses me even more to realize that neither Cochrane nor y81 had enough awareness to realize how STUPID and IRRESPONSIBLE citing it would make them look to someone who thinks on it for more than five seconds.
Also note: I’m not saying that this is the ONLY way in which the equation fails to accurately model the trade deficit or the costs from it. It’s just one of the easier ways to prove.
Which isn’t always a GOOD Thing, as the Japanese pointed out when they realized a Yen that was appreciating in value would help price out a lot of the average people using it as a store of value and medium of exchange. Hence their intervention to deflate the value.
We’ve seen similar problems for a bit in Russia, where the Kremlin’s overcorrection in the aftermath of sanctions and the depleting Ruble boomeranged onto an overly strengthening Ruble that the Russian Treasury had to then moderately deflate in order to make living expenses more livable.
I don’t have a hugely positive amount to say about the Kremlin’s economists or Japan’s ones, but they seem to have grasped something Cochrane is going out of his way to ignore. That money isn’t just a “veil” but is a functional economic asset used by real people to try and fulfil enough of their infinite demands and desires. It is ultimately a tool, with better and worse ways to do it.
Currency manipulation isn’t a phantasm. It can be overstated and makes a good boogeyman but it is a very real problem. And it absolutely affects trade and goods exchanged between the two, and we know the CCP manipulates in part to get a better deal.
https://ivypanda.com/essays/china-currency-manipulation/
This is true. What this “real economist” is ignoring is how there are ways to try and manage or alleviate that.
True enough as far as it goes, but this ignores the fact that a major reason why we see a higher real exchange rate is due to the US manipulating the USD less, and thus people having greater faith the government will not come by with a gun to seize it without compensation as we can see has happened in the PRC. We also can see how the PRC works to keep many staple prices low in its home market (while keeping direct foreign competition for those staples out).
Again, THIS IS NOT ALWAYS A GOOD THING. If the value of the dollar makes the value of Joshmuck McBluecollar’s union negotiated salary higher than its perceived value to employer, McBluecollar loses his job and it gets driven to somewhere else, whether that’s down the road or across the see to Zhang Qingcollar. Because again, money is a medium of exchange or a veil for the real goods and services and to be used as a tool for those things, meaning a “stronger dollar” does not always mean a stronger US or Americans.
Of course if the dollar is too weak McBluecollar’s cousin might not be able to affordably purchase goods for consumption or attract foreign purchases of their computers. So it’s not like driving the value of the USD into the ground is an inevitably winning move (though that does seem to be what most Keynesian and post-Keynesian economics and money printing has done). But it points out that economics is the dismal science BECAUSE it deals with tradeoffs and the inability to get the best of all worlds.
But Cochrane is addressing fuck all of that. Because while I can point off that there is probably no silver bullet to all economic woes or one policy that will satisfy everyone meaning there are tradeoffs that MUST be made, Cochrane seems to be trying to sell the Silver Bullet called “Unilateral Free Trade”, and pointedly avoids the issue of how too much foreign investment in the US and the USD can be a bad thing for actually existing Americans, especially in the lower and middle class.
I’d have pointed to competitive advantages in general, but ey what do I know?
No we don’t. See my long arse writing about this above.
If something sounds odd when you parse this narrative of “of course the PRC wants us to build factories in the US rather than in the PRC, because it’s not at all like it has a vested interest in keeping the US Rust Belt Rusting while onshoring things in places like Hunan”, that’s because something probably smells. And again what Cochrane is pointedly ignoring are other incentives and opportunity costs.
The PRC can’t really trade with us without giving at least SOME things that – however valuable or unvaluable – can’t be monetized and used to try and invest in factories. But they can try to give us as little as possible while taking as much as possible, and they can try to make it unproductive for us to build or staff factories in the US using the proceeds from our bilateral trades.
One of the easiest ways to do this is to continue to price out US labor by means such as onesided tariffs, economic espionage, and kicking money to a mixture of politicians and union reps in order to help artificially inflate the cost of doing business in the US while artificially deflating the cost in their own country. Which has important ramifications. Potentially devastating ones.
So if and when someone decides to open a factory in the US – an ACTUAL factory, not the “in effect” ones that might be scraped together from the effects of trade – and looks around, they’ll often find the US business environment overregulated, overpriced, and suffering from a paucity of manpower due to unionization. And increasingly a population of aging would-be-workers or would-be-workers that have never worked before in the field or at all and who will need time to bring up to speed. Time and investment. So many times the would be factory maker goes elsewhere. And even if they don’t they have to fight uphill against the headwind of things like PRC based factories using slave labor or even cheaper middle class “free” Chinese workers paid using manipulated currency. Because factories at present don’t work without human workers, and even if they DID you’d need humans to build the robots/AI/what have you that would do the work without human workers.
Cochrane wants us to pretend this doesn’t matter, at least in aggregate. Which makes Cochrane a useful idiot.
You don’t SAY?!?!
And so the PRC gets US assets (and often far more than we agreed to due to theft and whatnot) in exchange for helping to price the American blue and white collar workers out of the job, kneecapping their future economic horizons as worker, consumer, and investor. And Cochrane struggles to provide even lip service that this is a real problem. Not just for the actual, living people that are the workers, investors, and consumers but also for the economic units they are supposed to act as.
This is a hell of an excuse for a “Real Economist” to effectively handwave away a lot of nasty factors. It’s also bitterly amusing that this clown is acknowledging supply and demand move NOW, after having going through the highfalutin story of how their equation is supposed to be a law of economic nature (when it isn’t).
Now Cochrane, will you kindly apply this insight to the ramifications of the PRC trying to industrialize, often with our stolen tech, before going on to compete with us?
There’s something incredible about Cochrane purporting to lecture about hubris and the pride before the fall when making a whole lot of pronunciations like he’s speaking from the Temple Mount, many of them false, all of which without even the linkage I’ve done.
Ah yes, the old demonization. “Consumption binge.”
While ignoring the fact that much of what gets described as a “consumption binge” is often investment or at least sold as such, like USAID investing in transgender comic books or Iraqi Sesame Street. And also ignoring the rational (and irrational) motives behind consumption and how it partially drives the economy.
And again, it ignores that if you don’t care about tomorrow on a rational level (as many have no incentive to) it’s actually a pretty shrewd move, even if in the same way as the pump-and-dump crypto bro is. Eat, drink, and be merry because tomorrow we die, so all the better to do it on someone else’s dime.
I like ragging on the Federal Government and its profligate degeneracy as much as most people, but Cochrane isn’t going to try and even factor in things such as how much potential revenue was lost from the lack of reciprocal tariffs, how much was lost because State spent valuable time, money, and resources trying to open up the global market and the US to cheap imports even if it was down the road. These aren’t the source of all our problems or even most of them, but they contributed. And people like Cochrane helped agitate for them.
And also to expand said consumption and provide for it.
And because the current number of voters that would be happy outnumbered the number of those in a couple decades time who would be angry, it made sense. Even moreso given the Fed Gov’s incentive to expand in general like most other bureaucracies.
Which helped create a poisonous feedback loop, happily helped along by the PRC and others as well as by useful idiots like our friend Mr. Cochrane, even if not in teh same way.
In a totalitarian society what “The Chinese” in individual want to do matters only to a limited degree. The CCP, as it turns out, wants to finance its continued hold on power and rise to global hegemony using this. Made all the worse since it needs to deal with the Bare Stick problem of surplus military age men who seem poised to either tear the regime apart for how it has failed them, or rip through the wider world in a new war.
The hard truth is that is only true to a point. The Greeks managed to get out of paying about half of all the debt they had accrued through refinancing it and negotiating hard, holding over the prospect of a default and the issue that if the creditors didn’t compromise they would get nothing. This is one of the least savory truths of economics and finance but that does not mean it is any less true and has been for centuries.
Firstly: our currency is a textile, not paper or at least not primarily paper. And that’s the stuff we deign to have printed in the first place rather than existing in digital form.
Secondly: What this ignores is opportunity cost. The CCP didn’t seek to amass American “paper” for no reason, and neither do investors. They correctly recognize the value it has, both as a commodity and as a means of leverage.
Thirdly: That it will be hard to pay them back in either paper or goods with a declining population.
But which hasn’t stopped us and in particular recent leftist administrations from doing so anyway.
If you were China you would be but you’d recognize that isn’t among your immediate problems and you have other ways to get paid.
Frankly a mound of Scrooge McDuck style money would be useful in its own right about now, to help pay down some of the astronomical debt that saturates every level of our society. It also ignores the fact that trade deficits are ultimately a means to an end, and that we are not well served by pursuing them as an end to their own sake. And in particular when even if we wanted to build factories from the proceeds of the trades we don’t have the economic conditions or work force to profitably do so and employ people to compete with the global market, fed in part by onesided tariffs.
Your average investor probably doesn’t. But the CCP does.
Frankly if the most insidious thing the CCP intended to do with US taxes was funding retirements in China, the world would be a much better place. BUT IT IS NOT A BETTER PLACE. Cochrane dances around this as much as he possibly can precisely because facing the ideological dimension of our rivals or their long term aims, it would start to break down their little fantasies of High School Level Economics and the superiority of Unilateral Free Trade.
I tend to instinctively lean towards free trade temperamentally and ideologically. But you can fill libraries with what Cochrane isn’t saying. And as flawed as the Neo-Mercantilists, Paleo-Mercantilists, and the likes of their opponents such as Adam Smith and David Ricardo were, THEY AT LEAST TREATED ECONOMIC COMPETITION AS A POTENTIAL STRUGGLE WITH GREAT STAKES AND POSSIBLE MILITARY RAMIFICATIONS. That is something this clown is not addressing.
Which we’ve been doing for a long time and are facing problems from. In part due to structural issues with the Fed Government and economy.
I agree with this to a point, the fundamental problem with our lack of savings is home grown due to money printers and other problems. But just because the foreigners are not the chief ones to blame does not mean none of them are nefarious or worsening the situation.
This was supposed to be the “Real Economist.” The answer to the Kool Aid drinking. And yet this “result is the same/doesn’t really matter” is a more profound bunch of Kool Aid than most would dare to say. And it’s probably easy to say why his claims are so long on the claims and so short on the sourcing. Because you don’t need much digging to see the problems with them.
Let’s.
Understatement of the motherfucking century.
Sure, but still.
Not conventionally but it’s a bit trickier. For instance, the party officially owns all property and controls staples.
In part due to the cultural differences, in part due to the coming demographic crash and worries of tension, and in part due to the PRC threatening to seize them.
Like most governments.
With the intent to use them.
I gave a half-decent explanation for that.
Agreed.
All of this is true, but it ignores how there is a difficulty in determining profitable investment versus unprofitable, grey areas between consumption and investment, and tangible political and even economic benefit for this. And how it has gone on for a lot longer than 20 years. Hello FDR.
And does Cochrane apply any of this knowledge to consider that the US is a business unfriendly environment that is over-regulated, that would drive would be factory builders out, and make it prohibitively expensive?
Lol No.
This is true to a point, but until Trump got in we were steadily becoming a much less attractive place to invest (leaving aside how not all investment in the US is beneficial to Americans or the American economy). The Green New Deal is pretty close to energy suicide.
Again, at no point does Cochrane address the ramifications this would have on competing American workers and products against the PRC. Because it undermines his point.
There are a few key problems with this.
Firstly: we haven’t been able to finance our debts for a LONG LONG time, we’re mostly trying to finance the interest to the debt so we don’t have things get exponentially worse too quickly. Avoiding dealing with this does not make it better.
Secondly: This ignores how borrowing less and putting more people to work in hopefully productive and competitive businesses at home will generate revenue domestically and make it more competitive.
Thirdly: The reason the interest rates would spike so hugely is because of how the government has depressed them to insane rates, largely for political purposes.
Ok. How?
How blithe.
And it’s generally a policy I agree with. But we won’t be able to finance the government or even come close without all of those taxes. And even that won’t work if we can’t grow the economy and put people to work.
I’m leery at Trump’s policies, but the fact remains that this is a much trickier question than this clown wants to make it out to be.
Agreed on the whole, but how do you make such investment easier? Especially if some of those nefarious foreigners help to finance our opponents like the Kremlin does with green energy groups?
This “Real economist” doesn’t address that. y81 doesn’t address that. This is sophistic delusion going out of its way to avoid addressing relevant points.
Let alone a definition of that term and if that includes the likes of Bob Reich or Paul Krugman.
==
Dr. Krugman is an economist, though he has published little in the way of novel research since 2008. Robert Reich was a law professor who had a tour as chief counsel to the Federal Trade Commission. Ca. 1983, he wrote on industry for outlets like The New Republic but was not an authority on the subject. AFAICT, in spite of having held glam positions on law faculties, Reich has published little in specifically academic venues. He publishes trade books for professional-managerial types reading outside their discipline.
==
One big disappointment about academic economists is that almost none of them have been willing to say in print that Krugman’s polemics were an embarrassment to the discipline. (John Seater of North Carolina State the exception).
@Art Deco
That was one reason why I covered my bases. Krugman is or at least was a professional and formal economist (and some of his old work is surprisingly good) even if one that has long ago disgraced himself. Reich is a demagogue who is often billed by the msm as an economist but isn’t. Both have better claims to being a proper economist than I do, as I am sure the author of that essay I spent so long replying to does.
And look at the problems.