1/19
Is building strategic redundancy in the name of competitiveness — instead of funding new innovation — worth the price? This very interesting article, which uses TSMC’s Arizona investment to...
@kevinsxu in @NoemaMag noemamag.com
Is building strategic redundancy in the name of competitiveness — instead of funding new innovation — worth the price? This very interesting article, which uses TSMC’s Arizona investment to...
@kevinsxu in @NoemaMag noemamag.com
2/19
consider the costs of “deglobalization”, is in fact even more about the costs of maintaining our current form of globalization, although perhaps not in the way the author intended.
consider the costs of “deglobalization”, is in fact even more about the costs of maintaining our current form of globalization, although perhaps not in the way the author intended.
3/19
For example Xu makes clear that a key problem with US competitiveness is higher wages: “Building and operating fabs in Arizona will subject TSMC to higher labor costs in the form of salary, benefits and labor relations.”
For example Xu makes clear that a key problem with US competitiveness is higher wages: “Building and operating fabs in Arizona will subject TSMC to higher labor costs in the form of salary, benefits and labor relations.”
4/19
He also worries about Taiwan’s relatively better transportation infrastructure. “Among its many advantages, TSMC’s CFO described in great detail how Taiwan’s high-speed rail system enabled the nimble deployment of thousands of...
He also worries about Taiwan’s relatively better transportation infrastructure. “Among its many advantages, TSMC’s CFO described in great detail how Taiwan’s high-speed rail system enabled the nimble deployment of thousands of...
5/19
workers between TSMC’s three manufacturing hubs, which gives TSMC the ability to maximize worker productivity and output without needing to worry about losing talent or employee attrition, because families don’t need to relocate.”
workers between TSMC’s three manufacturing hubs, which gives TSMC the ability to maximize worker productivity and output without needing to worry about losing talent or employee attrition, because families don’t need to relocate.”
6/19
Although these are presented as reasons why reshoring would cost Americans (as consumers) and impair innovation, in fact they are almost the opposite. They show why reshoring would benefit both US workers and the world economically.
Although these are presented as reasons why reshoring would cost Americans (as consumers) and impair innovation, in fact they are almost the opposite. They show why reshoring would benefit both US workers and the world economically.
7/19
Taiwan, like other economies that run large persistent surpluses, is extremely “competitive” in manufacturing only because of aggressive policies that force households to subsidize manufacturing, including transportation infrastructure.
Taiwan, like other economies that run large persistent surpluses, is extremely “competitive” in manufacturing only because of aggressive policies that force households to subsidize manufacturing, including transportation infrastructure.
8/19
But in achieving international competitiveness by suppressing wages and salaries, Taiwan is also suppressing global demand, in a world in which for decades demand has been artificially propped up mainly by soaring household and fiscal debt.
But in achieving international competitiveness by suppressing wages and salaries, Taiwan is also suppressing global demand, in a world in which for decades demand has been artificially propped up mainly by soaring household and fiscal debt.
9/19
Taiwan’s competitiveness, in other words, comes at the expense of economies that don’t follow the same aggressively mercantilist policies. It comes from implicit and explicit subsidies paid for by Taiwanese households.
Taiwan’s competitiveness, in other words, comes at the expense of economies that don’t follow the same aggressively mercantilist policies. It comes from implicit and explicit subsidies paid for by Taiwanese households.
10/19
That is why it is not just coincidence that countries with persistent trade surpluses (and relatively low household income shares of GDP) have gained global manufacturing share, while those with deficits have lost it.
That is why it is not just coincidence that countries with persistent trade surpluses (and relatively low household income shares of GDP) have gained global manufacturing share, while those with deficits have lost it.
11/19
It is all of those direct and indirect subsidies, and not any special efficiency or comparative advantage, that explains their relative "competitiveness" in manufacturing.
It is all of those direct and indirect subsidies, and not any special efficiency or comparative advantage, that explains their relative "competitiveness" in manufacturing.
12/19
It is also what explains the dramatic failure of Taiwanese imports to keep pace with exports, which, after all, is the whole point of exporting and is the mechanism by which one country’s exports don’t repress growth elsewhere.
It is also what explains the dramatic failure of Taiwanese imports to keep pace with exports, which, after all, is the whole point of exporting and is the mechanism by which one country’s exports don’t repress growth elsewhere.
13/19
So what will happen if the US implements “protectionist” polices that force manufacturing back into the US? It is true that prices for consumers will rise, but wages will rise faster, and so workers will be better off.
So what will happen if the US implements “protectionist” polices that force manufacturing back into the US? It is true that prices for consumers will rise, but wages will rise faster, and so workers will be better off.
14/19
US innovation will also surge, because it is high wages, not low wages, that drive investment in productivity enhancement. This was certainly the case in the US in the 19th Century, when US wages were the highest in the world, through the 1970s.
US innovation will also surge, because it is high wages, not low wages, that drive investment in productivity enhancement. This was certainly the case in the US in the 19th Century, when US wages were the highest in the world, through the 1970s.
15/19
More importantly, and perhaps counterintuitively, forcing manufacturing back to the US will actually benefit the global economy (and especially poor economies) by increasing...
More importantly, and perhaps counterintuitively, forcing manufacturing back to the US will actually benefit the global economy (and especially poor economies) by increasing...
16/19
global wages and by forcing persistent surplus countries either to boost domestic demand by raising wages or suffer domestically the cost of their demand-suppressing policies.
global wages and by forcing persistent surplus countries either to boost domestic demand by raising wages or suffer domestically the cost of their demand-suppressing policies.
17/19
Globalization today means locking ourselves into the absurd notion that the purpose of economic development is to drive down the relative share of wages, while presenting this process as a drive to reduce consumer costs.
Globalization today means locking ourselves into the absurd notion that the purpose of economic development is to drive down the relative share of wages, while presenting this process as a drive to reduce consumer costs.
18/19
We have to return to the old, discredited (but highly successful) idea that a more legitimate purpose of economic development is in fact to increase, or at least maintain, the relative share households retain of what they produce.
We have to return to the old, discredited (but highly successful) idea that a more legitimate purpose of economic development is in fact to increase, or at least maintain, the relative share households retain of what they produce.
19/19
The holy grail of economics, in other words, should not be trade surpluses (disguised as "competitiveness"), as it is in our hyperglobalized world, but rather productivity and wage growth.
The holy grail of economics, in other words, should not be trade surpluses (disguised as "competitiveness"), as it is in our hyperglobalized world, but rather productivity and wage growth.
In this context it's worth remembering Dani Rodrik's "inescapable trilemma of the world economy".
rodrik.typepad.com
rodrik.typepad.com
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