Thursday, February 02, 2012

You would think they are doing it on purpose....

They get pissed when we call the gang that drove our jobs overseas socialist and Luddites.

But that's because we are polite!

America’s Dirty War Against Manufacturing (Part 1): Carl Pope - Bloomberg
Policy. But is U.S. government policy really hostile to manufacturing?

Sadly, yes. Take tax policy. Historically, manufacturing was the high-wage sector of the economy -- manufacturing jobs still pay about 30 percent more than service jobs in education and health care -- so tax policy milked it. Manufacturing companies, in the old days, actually paid the corporate income taxes that many others avoided. Commodity producers (oil, timber, agribusiness) lobbied for, and received, federal subsidies, with investors in oil and gas wells simply voiding corporate income taxes on the profits they earned. Banking, retail and services found their own ways around taxes, often by offshoring intellectual property or shifting profit to tax havens. Eventually, manufacturers figured out how to duck taxes as well -- by going overseas.
Varying Regulations

Yet it isn’t just taxes. Wind turbines, for example, are enormous, heavy and expensive to transport -- so there is a big advantage to fabricating them close to the installation point. But consider the predicament of the Spanish wind manufacturer Gamesa Corporacion Tecnologica SA after it began operations in Pennsylvania. Because the George W. Bush administration’s Department of Transportation wouldn’t establish uniform standards for transporting the enormous turbine blades, each state followed its own rules. Whenever a blade crossed a state line it had to be unloaded by a construction crane and then reloaded to conform to the next state’s specifications.

Similar policy failures explain why Minnesota’s Port of Duluth exports iron ore to China and imports wind turbines from Europe. On the way to China, the ore freighters pass Chicago; Gary, Indiana; Cleveland; and Buffalo, New York -- cities where steel could be made and turned into turbine towers. But the U.S. wind market is too small, and the government too focused elsewhere, to make it profitable.

And that Long Island golf-course story? Not unique to New York. During the 1991 California drought, Silicon Valley’s electronics manufacturers were warned by Governor Pete Wilson that the state might have to shut off their water supply. Agriculture, Wilson said, came first. When I asked a Silicon Valley lobbyist in Sacramento if he had quietly received assurances that California would prioritize 21st-century computer chips over 19th-century alfalfa, he said he hadn’t. In fact, he said, some plant expansions initially planned for Silicon Valley were being diverted to Oregon to secure access to water.

In 1991, it was Oregon. Today, it’s Asia. Conventional wisdom blames globalization for the exodus of factories and jobs. Because other countries pay lower wages, the thinking goes, there is nothing we can, or even should, do about it. But the evidence of Germany and Japan -- and the experience of manufacturers in the U.S. -- tells a very different story.

We are not victims of an impersonal Leviathan called “globalization.” We’re the suckers who allowed our government to sacrifice the manufacturing sector while protecting the real winners: commodities, intellectual property, finance and agribusiness. The U.S. didn’t lose its manufacturing leadership; it threw it away.

In the next two parts of this series, I’ll discuss how that happened and what we can do about it.

(Carl Pope is a former chairman of the Sierra Club. The opinions expressed are his own. Read Part 2 and 3 of the series.)

To contact the writer on this story: Carl Pope at carl.pope@sierraclub.org

To contact the editor responsible for this story: Francis Wilkinson at fwilkinson1@bloomberg.net.

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Showing 1-40 of 84 comments on America’s Dirty War Against Manufacturing (Part 1): Carl Pope

unihans 1 week ago
I fully agree. It's time for US citizens to realise that they have been made suckers during the last couple of decades by senseless deregulations all based on the concept that greed is good and the markets are taking care of everything. The result: (i) a huge financial crises which made shareholders broke, tens of millions of empoloyees unemployed, financial executives stinking rich on the finance casino which many of them must have realised must collapse one day (ii) sinking quality of education (iii) lousy infrastructure, (iv) complete distortion of the use of talents where a much too high portion go to the finacial sector where remuneration has been rediculously high which has made any talent a sucker if he or she would choose to go to the industry where real value is created (v) lack of investments in alternative energy (vi) a senseless inequality where the middle class is the big looser and income and capital more and more is and more concentrated (vii) a dysfuntional democracy dominated by the big money which makes the democracy too much an illusion.

It reallly is wake up time.
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wjc9 in reply to unihans 1 week ago
I completely agree with you on this point. My friend works for a bank and he reviews resumes sometimes. He said he was stunned by the number of over qualified applicants.

"
(iv) complete distortion of the use of talents where a much too high portion go to the finacial sector where remuneration has been rediculously high which has made any talent a sucker if he or she would choose to go to the industry where real value is create
"
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shaneaves in reply to unihans 1 week ago
x 2.
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rocketman 5 days ago
Something that should have been obvious to everyone is that this country has far too much government and far too many regulations. If it was up to me the congress would not be permitted to pass anymore regulations on corporations until it eliminated at least 70% of the ones now on the books.
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Spartacusstoo 1 week ago
Moreover, we must come to understand that manufacturing represents something else not mentioned and that which is plant. By plant we are referring to the costly machinery used to manufacture just about anything as manufacturing has moved to computer controlled methodologies that result in enormously expensive plant equipment and technique. Replacement costs are prohibitive. And should a plant go bankrupt, the equipment is usually sold for scrap and so the plant is not replaceable as the start up costs are way too high.

Thus, we see that the government in it's ever reaching effort for more taxes to fund more government boondogles taxes corporations (actually a corporation is not a taxable entity, the shareholders are). And so we have the phenomenon of double taxation, the corporation first and if anything is left over, then the shareholder and this is why most corporations pay very little in the way of dividends.

To make it short and sweet, we've all been sold down the river by the liberals pandering for votes and we will not be able to put humpty dumpty back together again. Thus, Americas backbone, manufacturing, is a thing of the past and without it there isn't much to look forward to for a future.
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simonts in reply to Spartacusstoo 1 week ago
"We have been sold down the river by liberals", say you? Did you read the article at all? To you Pete Wilson was a liberal? It seems that to the right wing extremists all ills are caused by those pesky liberals. In fact most of the problems that underlie to the exodus of manufacturing industries from our country has been caused by the right wing of the conservative movement. First among those is the lack of universal health insurance and coverage and the excess cost this inflicts on manufacturing businesses. This is the main difference between Germany and the USA, as far as cost goes. Germany has stronger unions, higher wages, higher taxes and at least as strong environmental regulations as the US. The differences are twofold. One, in Germany there is universal health coverage provided by the state, lowering the fringe benefit cost for employers significantly. Second, there is MUCH less lobbying of representatives by industry and much less influence of corporate (or private) money on government policies in Germany. Hence, corporations, whether in financials, agriculture of manufacturing, all pay their fair share of taxes, unlike in our country. In general, the super rich (whether individuals or corporations) have not corrupted the government in Germany, as they have done it in our country starting with the Reagan era (with that pesky liberal president Ronald Reagan).
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map0557 in reply to simonts 1 week ago
Yes, I have a hard time pitying poor US corporations like General Electric who paid ZERO federal income taxes in 2010, despite making BILLIONS in profit.
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MikeSchoenberg in reply to map0557 1 week ago
Not to mention the extreme CEO compensation. Anyone remember Hoe Depots parting gift to a CEO of $277 million as his stock had dropped in half during his tenure.
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Matt Colbert in reply to Spartacusstoo 1 week ago
You must not have read the article.
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Ron in reply to Spartacusstoo 1 week ago
When corporations stop shielding their owners from liability we can stop taxing them. While the public allows corporations to shield their owners from liability, the public should get something in return, such as corporate taxes.
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Ransomexx 1 week ago
You people didn't look at the picture. We are a government of consolidated special interests. The consolidated politically powerful out maneuvered the less politically powerful. Let's face it, currently, consolidated financial capitalization, using "other people's money" is more profitable for the few than is manufacturing. In fact, the destruction of manufacturing is more profitable for the few over the short term.

Highly compensated executive management has joined forces with the short term thinkers that use other people's money to profit in the short term. There is a famous line in "Other People's Money" where a lawyer states that upon the signing of a document, America's entire steel manufacturing business is now controlled by those that know nothing about it (the precursor to today's financial capitalists).

Manufacturing has gone the way of the mom and pop meat and three when chain restaurants moved to town or the local businesses that disappeared when the Big Boxes moved in. It is "Get big, or get out". Apparently the financial capitalists are not so much a threat in China because China is trying to improve it's long term prospects, rather than destroy them.
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Robinson_Cruz 1 week ago
I am an executive in a small manufacturing company in New England. Our suppliers are nearby US manufacturers. We regularly discuss off-shoring our manufacturing and supply base. Why? Not once has anyone on our executive team raised the issue of taxes, regulation, water resources, or labor laws. There is only one reason: Money, driven primarily by the cost of labor. By off-shoring, we can reduce our own cost of labor. We can use off-shore suppliers, with their lower cost of labor, to reduce our cost of goods without incurring higher incoming freight costs. Why haven't we done it yet? Because moving would require capital we don't have. So once again, the argument is money. American capitalism is about the pursuit of money in the form of profit. When someone tells you that American executives make decisions for other reason, be skeptical.
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yahoo-R3VCGNCCINSERHJSJJWDSCOQZE 1 day ago
He took the long but it was there, Blame the tea Party!! I'm surprised Bush wasn't thrown in there. After two pages of reading how manufacturing was screwed by the tax code, manipulative politicians and idiot bureaucrats, it is somehow the fault of the one group that is actually shouting that government interference is the problem.
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samswede 4 days ago
As a manufacturer of 30+ years, I can tell you that every executive I met in my travels back and forth to Asia would have preferred making their product where the market is- in the U.S. It is a myth that mfg. moved offshore because of low wages. The biggest culprit was (and is) nonsensical governmental regulations. The U.S. is the most hostile environment in the world for manufacturers. When that changes- the jobs will return- period!
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Robert 2 days ago
There is an opinion that regulations strangle business and investment, which I don't agree with.
Business, safety and environmental regulations have been passed over the years for various reasons. Some political, some for the greater good.
Some laws and regulations are obsolete, no longer necessary. Some have had unintended consequences.
The view that ALL rules and regulations are bad and strangle business: let the "Free Markets" regulate themselves, is unrealistic

Worker rights, environmental safeguards, and safety regulations were put in place by the government because businesses (Corporations) in this country, being supposedly equal to humans, except with no conscience, have only the bottom line and increasing profits for motivation.
Given free reign, Corporations have little regard for safeguarding the enviroment or safety, and race to the bottom in labor overhead to maximise profits.
Labor is a necessary expense and should be controlled. Regulations were passed and Unions formed to make sure that Corporations would pay decent wages and have safe working conditions. The Corporations would not pay any more than the bare minimum while reaping big profits.
Worker's rights regulations were put in place to standardise and ensure that workers were not exploited as they would be without the regulation.
Safety regulations have been put in place to protect workers from unsafe, hazardous practices and materials.
Environmental regulations have been put in place to protect the enviroment. We know more now about things like: the ocean should not be considered an endless dumping ground, the air we breathe is affected by industrial processes, etc.
Do the manufacturing here, pay reasonable taxes, pay reasonable wages, share profits, obey environmental, safety and business regulations. Try to effect positive change for things that need to be changed.Change perspective to more constructive, empathetic, responsible view based on reality and science and not politics or religion.
On the other hand:At this stage of the game if we moved much manufacturing back to the USA some other countries might see their economies collapse with high unemployment. Some offshoring was done in the spirit of economic aid. Catch 22?
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wellsoup 1 week ago

"Highly compensated executive management has joined forces with the
short term thinkers that use other people's money to profit in the short
term. There is a famous line in "Other People's Money" where a lawyer
states that upon the signing of a document, America's entire steel
manufacturing business is now controlled by those that know nothing
about it (the precursor to today's financial capitalists)."

Exactly, just ask Mitt Romney...

Romney's Bain Made Millions as South Carolina Steelmaker Went Bankrupt




Monday 16 January 2012
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Will Stewart 2 days ago
Lots of anecdotes, low on real reporting. Nowhere does Pope run down the golf course story. In fact, he only uncovers agriculture as the priority. " infrastructure, workforce
training," Do people in Taiwan need no training? Which infrastructure, exactly?

I'm afraid this was an agenda looking for the slightest anecdotal support. Bloomberg is losing credibility.
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Richard Mertens 1 week ago
When a CA residential home owner pays $19/1000gl/H2O but an alfalfa farmer and factory pay $19 per acre foot (326,000 gallons) where's the motive to conserve? Business enjoys many subsidies like this that are out of whack. Germany and Japan also have lower productivity costs thanks to one single item, universal healthcare, an item oddly enough that many conservative business folk defend as incredibly important to capitalism even though millions go without and the rest are paying through the nose. Talk about shooting yourself in the foot. I swear if Obama said his favorite color was blue, the GOP would crap itself to rid the world of it.
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jeffpopovaclark 1 week ago
The examples of Japan and Germany are not informative. German boards include employee/union reps and Japanese governance is shared between execs, employees, financiers and even key suppliers. These companies aren't just chasing profit for owners and exec bonuses, they are trying to maximise benefits for all of those stakeholders. As a result, these companies pursue less profitable strategies that benefit their workers, suppliers, customers and partners. This does not happen in the US: if it doesn't maximise profits you don't do it. America's problem is primarily skewed corporate governance, not government policy (although that needs significant overhaul as well).
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yasutate 1 week ago
Any country which neglects manufacturing, which is the real creator of national wealth, will become a country which does not have any future. Many people of a neo-liberal idea claim that the financial industries are the future industry, but they never create any wealth of nation, but they bring casino capitalism, causing economic crises one after another. Look the US, the EU, and soon the UK, whose ratio of national debts to gdp is more than 1000%, if correctly calculated taking into account its bank debts which will be taken care of the government at the costs to its people.
As one BBC program recently has mentioned, Japanese lost decade is in a way paradise for other coutries, extremely low unemployment rates, manufacturing basis not affected at all by the money bubble speculation in late 1980s and early 1990s. This is mainly due to the manufacturing basis which still remains in Japan, creating national wealth, which in turn provides money to ordinary people, who in turn can support the economy. The Japanese depdendency on export is extremely low at 19%, as compared with 45% or more for Germany.
One big problem of the US is that its politicians do not know theory of economics, as the majority is lawyers, including Obama and Clinton and they are often more eager to enrich themselves supporting speculative capitals.
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JosephGordon2 1 week ago
We need a new comprehensive American "industrial production policy" that looks at the totality of our shrinking industrial base, our disappearing middle-class, our jobless recession recoveries. I submit they have come to represent what has become an US unbalanced economy that was camouflaged by a long running housing bubble.

The truth is we have had a drag on our economy for decades that has only gotten worse as a ballooning negative trade-balance has dogged us, replaced our jobs with outsourcing, and draws our technology innovation elsewhere. We have tried in vein to bolster our standard of living by importing, and our lifestyle is has now slipping materially. To dig ourselves out we have trashed the dollar, poor yield now encourages replacement of our US dollar as a reserve-currency with a basket of currency. This will result in higher interest rates on our borrowing.

All these problems have at their root we are no longer a net producing nation, but a debtor. This new " industrial production policy" should recognize "producing nations build wealth, and consuming nations become debtors. Our entire economy can be turned around in 5-years with improvement in one. Once again America will be the land of opportunity.

We don't need hope. We don't need change. We need opportunity! Graduates should be able to pay their loans, and again experience an upwardly mobile society. Boomers should never expect to be poor and jobless late in life. The middle-class needs living wage jobs to thrive and survive. Our policies should return America to the land of opportunity. If our politician are too vested in the status quo to act, they should all be thrown from office and replaced.
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Richard Laycock 1 week ago
I look forward to Mr. Pope's explanation of how it happened and how to fix it. For a preview of the challenges we face all you have to do is read the comments. It's almost incomprehensible that such a stream of inane stupidity and regurgitated PC nonsense could be the response to this excellent thoughtful piece by Carl Pope.

The problem with America is liberal Americans and the rotten academics that raise our children to be useless programmed cyphers. We are surrounded by the most spoiled, idle and arrogant idiots in human history.
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HECConsulting 1 week ago
Thank you for the story. I think the American Elite is too much focused on there own profit today and loose through that focus on sustainable profit and long term prospective with exception of the military
business. I do business with US and Japan since beginning 80th. I always heard reduce taxes, we will reduce taxes and so on and so on... It's like the adds of detergent... we wash whiter than white. In, compared with us, little Germany, there are 1500 companies, most of them not public owned and located in the manufacturing business, which are in there business field world-market leader. Germany has just 80 mil. inhabitants compared with. Same in Japan, which was badly hurt with it natural and technical disaster last year. It is the sustainability, the common sense of the society what let the japanese companies grow after the second world war.
By lowering taxes all the time USA underestimate, statewide and national, the importance of infrastructural investments, like water and energy supply and the networks who guaranties the undoubtable function of those basic necessities.
USA is trimmed to growth. Growth is not only definite by profit percentages. The future profit percentages have to be secured today, with functional networks who can stand future growth and will be always maintained. It has to be a no-brainer.
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Bloomberg View in reply to HECConsulting 1 week ago
Thanks for your comment! We’ve chosen it as our Comment
of the Moment on our homepage | http://www.bloomberg.com/view/
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Nick 1 week ago
While no one would argue that America's regulatory environment is obtuse, at the least, any argument that factories moved overseas for any reason other than the ability to pay people in China, Mexico, etc. far less, give them no benefits, and work them much harder is fundamentally flawed. The decision to outsource is a short term one that intentionally gives the finger to the ideals behind things like the minimum wage.


Outsourcing is the result of business schools teaching that it is better and easier to reduce costs via manipulation, rather than innovation; that it is better to lay off workers to drive up short term profits or balance a budget sheet rather than reallocating resources in the way that best drives R&D.
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ES71 in reply to Nick 1 week ago
I went to business school and they didn't teach me any of that. But they did teach me that the purpose of the corporation is to "maximize shareholder profits".However, you won't hear that anywhere but in the US. Other countries treat corporations just like any other citizen - expecting them to contribute to the social stability and prosperity of the country, not just reap profits regardless of consequences. US needs to reaccess how it treats its corporations. Why they allowed to influence the poltical process but have no responsibility for adverse results of their influence.
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Mike in reply to ES71 1 week ago
Perhaps we should also hold the environmental groups and the EPA equally responsible for many of the "obtuse" anti business regulations that require obscene amounts of expense and non productive labor to remain in compliance?.
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Nick in reply to Mike 5 days ago
Perhaps they should hold businesses responsible for destroying the environment?


I'd love to know what you think "obtuse anti business regulations" are.
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Nick in reply to ES71 5 days ago
Part of the problem is that American government does treat corporations like people, providing them with all of the benefits of citizenship and none of the responsibility. It needs to be all or none.
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Christopher 1 week ago
The author is inventing and confounding facts. Depending on the count, the US is the world's number one or number two manufacturer (China is the other). Employment has dropped but output has increased and would increase more if the skilled workers needed in high-end manufacturing could be found. As for South Carolina, there is still a textile industry but it is highly computerized and the skill sets needed in today's textile workers are different than 40 years ago. South Carolina has also greatly expanded its manufacturing sector by providing worker training in its regional community technical colleges.

If we want modern manufacturing jobs in the US, we have to train people to fill them. This means that our schools must produce literate, numerate graduates.
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Patrick Ebnit in reply to Christopher 1 week ago
inventing and confounding facts?For years I have heard the same reasons citedin this article along with an increase in technology/productivity for our loss of manufacturing jobs. Also South Carolina has done more than just provide worker training to expand their industry. Tax incentives and investments in infastructure have helped.
In the end your explanation is overly simplified. An educated work force is only a piece of the puzzle.
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scvblwxq in reply to Christopher 1 week ago
I sure have a hard time finding "Made in America" products at the big stores. Maybe food is our big "manufactured" product.
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MorganaW 3 days ago
Why wouldn't the fabrication business be in line for water rights after existing businesses? Golf courses and agriculture are businesses. They have seniority. They also create jobs, jobs that can't be outsourced. They are "resource friendly" to the community, providing additional tourism jobs or local food. Also, fabrication is not a "clean" business. It's not unreasonable to require them to monitor waste water, communities that haven't done so are facing extensive heavy metal poisoning in both surface and ground water.
Granted,the tax code is a mess and needs to be overhauled; good luck, in the environment of partisan politics. Still, there's no worry about a local government nationalizing an expensive plant if that plant is in the USA. No under the table handouts to local politicians. No kidnapping worries for senior executives.
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FrankRestly 1 week ago
Well said sir, well said
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Ron 1 week ago
Failure of government to govern prudently has always been a barrier to progress. Removing government altogether is not a solution, however, because government is a natural outgrowth of human activity. There will always be government of one sort or another. Government must be made to work for the benefit of those governed...all of them.
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samswede 4 days ago
The U.S. is the most hostile environment in the world for manufacturers. When that changes- the jobs will return- period!
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Paata Gurgenidze 1 week ago
The story is very convincing, but it lacks explanation. Why the US threw away the manufacturing? My answer in the simplest formulation is as follow - Governments have to serve people and their policies can favor manufacturing, while markets serve only richer players and favor higher profits. Unfortunately the US government favor markets instead of people. The manufacturing is being outsourced not because of lower wages in Asia ( this is also a fact), but because of higher profits in other than manufacturing sector in the US. It is comparative advantage that drives markets not competitive advantage. If your government supports unfettered markets you will end up with only banking sector instead of the diversified industries.
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Guyute Icculus 1 week ago
China and other Asian manufacturing bases have one thing the USA will never have:

CENTRAL PLANNING.
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Zeon in reply to Guyute Icculus 1 week ago
Central planning didn't do the Soviets much good.
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Da_mad_hatter in reply to Zeon 1 week ago
Well, they were even less able to do it than we are.

Let me put in a plug for Competency.
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