The Thoughts of Dr. Bharat

Over the weekend I mentioned an offhand comment by Bharat Balasubramanian of Germany's Daimler AG -- that's "Dr. Bharat" to you --about the unwholesome effect on America's income distribution of American corporations bringing profits back home but sending manufacturing jobs overseas. This has provoked a deluge of mail, pro and con, of which I offer two samples for now. First, from someone who like Dr. Bharat sees the US from a European-comparative perspective:

As a Norwegian who lived in the US for six years before returning, I concur with Dr. Bharat's idea that Europe - or at least Northern Europe - has a more robust middle class than the US. One of the things that surprised me while living in the US is the idea that pretty much everyone goes through the same high school system in preparation for academic studies - the idea seems to be college or bust. In comparison, in most Northern European countries about half of high school students go to vocational schools that provide them with solid training for non-acacademic work. I know there are vocational schools in the US but it's a much less comprehensive system and, crucially, it's for post-secondary students. For a lot of kids who don't have the aptitude for academic studies and drop out of high school that is too late.

A comprehensive vocational school system at the high-school level has, the way I see it, two advantages. The most important one is that it provides young people with the skills demanded both in manufacturing and services and increases productivity. Second, it elevates the status of certain workers and provides them with higher wages. For instance, hair dressers in Norway are very good because they have gone through a program with both training in school and an apprenticeships. They also get paid well because the supply of professional hair dressers is limited to those who have gone through the program. Sure, I miss getting a hair cut at a barber shop in the US for less than $10, but the distributional effects of my having to pay several times that for a hair cut here is very good since it redistributes money from a highly-educated well-paid white collar professional to someone who is less paid. Of course, hair dressers aside, for manufacturers the productivity benefit of having a good supply of well-trained welders, machine operators and other technicians should be obvious.

Now, from Ron Russell of the Seattle area:

Dr. Bharat's comments indeed strike a chord- but I think the situation is in some ways worse than he is portraying.

My wife and I have a small company (just above Kenmore Air Harbor on Lake Washington, FWIW) that designs and develops high tech embedded electronics devices- most recently a computer to monitor scuba diver's gas saturation. But it could just as easily be medical devices or products for any specialized industry not large enough to be on the radar of an Apple or Samsung. There is considerable economic activity at this not-mass-market level. We are engaging in entrepreneurship in a way that would not have been conceivable when we started our careers (we're about 60). We design on very capable computers, we can access vast technical information databases online, we can send files over the internet and have finished circuit boards to test in days. We make products that can compete technically with the biggest companies, but just address smaller markets. We are a technology version of the family farm. We could be ads for the new "knowledge based" economy. Yet businesses like ours are threatened by the collapse of US manufacturing capacity.

Why? In the short term, because businesses at our scale, dealing in the thousands and not millions, need skilled assembly that can be done locally, we need skilled machinists and prototyping facilities to be available here, not on the other side of the world. The personal interchange and creative interaction that comes from a designer working directly with those who do the manufacturing is invaluable. The best designs come from working closely with those who know intimately the processes that go into creating the product.

In the longer term, losing manufacturing is a path to losing our creative edge. It's a fantasy to believe we can educate some kind of technical elite absent a connection to the physical reality of making things. The kind of technical secondary education common in Europe, yet almost absent in the US, creates people who do know how to build things. Some of them will have great ideas, and will put them into practice. Meanwhile, I watched my daughter's high school drop all shop classes rather than modernize them, and ramp up "technology" education- mostly by teaching kids how to use Word and Excel. This is so profoundly wrong as to bring tears of frustration to this high tech entrepreneur. Not everyone in society is destined to be a designer or developer. We need skilled manufacturing for a healthy society and economy, and that takes workers with the right skills.

Andy Grove got it right in his recent comments: losing manufacturing jobs puts at risk both our society and the wellsprings of our creativity.

Obviously this is a bigger topic than we can handle right here. My main pensee on the subject remains this article from the Atlantic, published nearly twenty years ago, when Japan (rather than Germany or China) was the cautionary example of purposeful employment policy. More to come.