Notes on Tides

I live by the Pacific Ocean and every morning I shuffle (used to run when I was younger) along the shore of Humboldt Bay. One recent morning I noticed an exceptionally low tide and I realized that I did not know how tides work. I then looked on the web and became rapidly confused by what appeared to be contradictory explanations published by what I thought were reliable sources. Then I found Donald Simanek’s paper: “Tidal Misconceptions” (Ref. 1) and things became clearer; indeed, there are conflicting views resulting from misconceptions. Simanek’s paper guided me to Eugene Butikov: “A dynamical picture of the oceanic tides” (Ref. 2). Much what follows here below is based on Butikov’s paper, augmented by my own analysis.

The physics of tides is well understood, but the details of the timings and magnitudes of tidal events at specific locations along shorelines depend on the local geography and currents; local predictions are beyond the capability of theoretical analysis and are based on accumulated data. In the following discussion, I focus on the interaction between the Moon and the Earth. Similar considerations apply to the interactions between the Sun and the Earth. However, even though the mass of the Sun is much larger than that of the Moon, the distance from the Sun to the Earth is much larger than that from the Moon to the Earth and therefore, the lunar gravitational force gradient at the Earth is much larger than the solar one. It is this gradient that is the source of the tidal forces.  Thus, in the following, I focus on the Moon-earth interaction. (See Figure 1.)

The Moon and the Earth form a binary system rotating about their CM (Center of Mass of the Earth-Moon system) located along a line connecting the centers of the Moon’s and the Earth’s masses, it is about 4,700 km towards the Moon from the center of the Earth. Since the radius of the Earth is about 6,300 km, the Moon-Earth CM is inside the Earth.

The simplest tide model examines the inertial and gravitational forces that may influence periodic changes of sea levels. (To be specific regarding my use of the term “inertial force”, I follow Butikov, Ref. 2, and here inertial force is the “pseudo-force” such that on any mass point placed at the center of the Earth it balances exactly the Moon’s gravitational force.)

The orientation of the Earth is fixed relative to distant stars. Thus, the Earth is experiencing a translational motion along its approximately circular orbit about CM. Simple geometric arguments show that at all times, all points on Earth rotate with the same radius whose length equals the distance between CM and the center of the Earth; and at any instant of time, the directions of all radii of rotation of all points on Earth point in the same direction, i.e., they are parallel. (See Figure 2.) Therefore, in the simplest model, the sub-lunar and antipodal locations on Earth experience the same inertial (centrifugal) force (away from the Moon) and in the formation of the bulges in sea level that correspond to high tides at these locations inertial forces can play no role.

The Moon and the Earth are coupled by gravity as described by Newton’s law of universal gravitation. The Moon’s gravitational force at any point on Earth is proportional to the inverse-square of the distance from the Moon’s center. Thus, along the line passing through the centers of the Earth and the Moon, the Moon’s gravity decreases continuously from the sub-lunar to the antipodal point. On the surface of the Earth, there is more pull towards the Moon at the sub-lunar point than at the center of the Earth and less pull towards the Moon at the antipodal point than at the center of the Earth. Thus, at both the sub-lunar and the antipodal points the lunar gravity force acts against the Earth’s gravity (reduces the weight of a mass point). Because the radius of the Earth is much smaller than the Moon-Earth distance, the net weight reductions at the sub-lunar and antipodal points are about the same and two tidal bulges of approximately equal magnitude form on opposite sides of the Earth.

In general, the net tidal force acting on any mass-point located anywhere in/on Earth is equal to vector- sum of the lunar-gravity force and the inertial (centrifugal) force due to the rotating Moon-Earth binary system. The inertial force is constant (same for all mass points), but the lunar gravity varies both in magnitude and direction; therefore, the net resultant force on the surface of the Earth is not constant and, depending on the location, it may have both radial (pointing along the line connecting the location and the Earth’s center) and tangential (pointing along the local horizon) components. Along the circumference (a great circle) of the Earth defined by the intersection of the surface of the Earth and a plane passing through the center of the Earth and that is normal to the line passing through the centers of the Moon and the Earth, the net tidal force is radial inward, causing a net weight increase. At all points on the Earth surface other than those either lying on this circumference, or at the sub-lunar and antipodal locations, the tidal force has both radial and horizontal components. The resultant static deformation of the Earth has the shape of an ellipsoid with its major axis along the line that passes through the centers of the Earth and the Moon. As the Earth spins about its own axis, observers located on the surface of the Earth will approximately twice daily sweep through tidal bulges and depressions (high and low tides). Approximately, because of the Moon’s rotation around the Earth slowly (relative to the Earth’s rotation about its spin axis) turns the tidal ellipsoid. The actual period is 12 hours and 25 minutes, that is, the two subsequent high (or two subsequent low) tides occur 12 hours and 25 minutes apart. The maximum lunar high tide to low tide difference calculated from the simple model is about 0.5 meter.

There is one significant problem with the above simple model: it predicts that the high-tide bulges occur at the sub-lunar and antipodal points and the low tides occur along the great circle defined by the intersection of the Earth’s surface and a plane that is normal to the line passing through the sub-lunar and antipodal points. In fact, observations of the tidal phenomena indicate that the above tide pattern does not occur and frequently high tides are observed where the simple model predicts low tides and vice versa. Butikov provides a reconciliation of observation and theory by including hydrodynamics in the model of tides. According to this reconciliation, tidal forces excite standing waves in the water of the seas and that these standing waves produce a modified tidal ellipsoid with its major axis rotated away from the line connecting the centers of the Moon and the Earth. The tidal amplitudes that result from this modified ellipsoid are influenced in addition to the Moon-Earth gravitational interaction by the resonant frequency of the standing waves and their damping constant. This hydrodynamics-augmented lunar gravitational force model provides a conceptual framework that agrees with the gross features of the observed tidal patterns.

In their detailed features, real tides at the shores are significantly different from those predicted by the simple theory augmented by hydrodynamic standing wave considerations. For example, the estimated magnitude of low to high tide difference was cited above as 0.5 meters. At the Bay of Fundy, off the coast of New Brunswick in Canada,  16-meter tides are observed (Ref. 3). Actual tides are influenced by many factors, including local geographic formations, water currents, as well as the Sun and the inclination of the Earth’s spin axis relative to the Moon and Sun orbital planes. There is no known general theory that can accurately predict the tides for any specific location. Accurate tidal predictions are important for shipping and for managing the daily affairs of shoreline communities. Detailed, reliable tide information is available for many locations based on historical observations. The data agree well with the theoretical predictions of periodicities, but the details of tide charts are based on the records obtained from long-term measurements.

Ref.1 https://www.lhup.edu/~dsimanek/scenario/tides.htm

Ref.2 Butikov, Eugene I. "A dynamical picture of the oceanic tides." Am. J. Phys. 7000 9, Sept. 2002. See the pdf on his website: http://butikov.faculty.ifmo.ru/Planets/Tides.pdf.

Ref. 3 https://oceanservice.noaa.gov/facts/highesttide.html

                                                                          Figure 1

                                                                             Figure 2

Manufacturing, Trade, and Jobs - Part 3. Jobs (and Automation and Need for Action)

This is my final note in this series, it is on jobs and automation. Advances in automation drive increased productivity, and result in job losses. In fact, contrary to some claims by politicians, manufacturing job losses in the past half-century were caused primarily by automation and not by “unfair trade”. Automation brings significant benefits, but it causes significant social dislocation we must address both locally and globally.

Why automation?

All goods producers (but for a few who, because of specific circumstances and/or beliefs, are exceptions to the general trend) in agriculture, mining, and manufacturing replace human labor with machines whenever the state of technology makes this cost-effectively possible. Furthermore, when such replacement is technologically possible, systematic engineering improvements will make it cost-effective. In farming, the multi-function integrated “combine” replaced horse and man, and now combines yield to GPS-controlled driverless planting/harvesting machinery. In mining, blowing off the top of mountains allowed scooping coal directly onto trucks that now morph into their driverless versions. In manufacturing, hard automation first replaced manual labor, now flexibly programmable “smart factories” are coming.

Why is this trend of replacing people with machines so strong and unstoppable? Producers want to minimize costs and optimize quality. In fact, any quality failure adds to costs, thus, lack of quality is a cost component. A quality failure in the plant, i.e. a reject, always means some combination of losses of labor invested, materials used, and machine time deployed. A quality failure in the field is typically much more expensive than those in-plant; field failures incur significant service and possibly legal costs too. People make mistakes and require breaks. Well-maintained machines do not make mistakes and can operate continuously around the clock.

Furthermore, the very nature of many advanced products would make their manual fabrication inconceivable. Thus, automation is and/or can be a cost reducer, a quality improver, and a new product enabler; it is one of two fundamental drivers of economic growth, and the other one is trade.

Evolution

Machines in early factories were mainly machine tools (e.g., lathes, drills). They were powered by a central steam engine that drove the main drive shaft mounted above the shop floor close to the ceiling. The machines were connected to the drive shaft by belt and pulley systems. After the invention of the electric motor, machine tools could be driven directly by such motors. Around 1900 this led to the development of assembly lines. New factories could be organized into lines; work stations along the line could be equipped with these independently driven tools. The principal purpose of the line was to convey the product that was then worked on progressively by operators located at the work stations along the line. Later, in the mid-1900s, “hard automation” was introduced to process mass-produced parts and sub-assemblies. For hard automation, each part and sub-assembly required the design and construction of a unique piece of equipment dedicated to the specific part and processing task. The loading of parts was typically done either manually into appropriate jigs, or the parts arrived from the parts suppliers in “well-defined-geometry” packages. The automated machine then performed pick-and-place operations and the subsequent processing of the precision positioned parts, for example, soldering of electronic parts or welding mechanical components. Hard automation needed to be augmented by the manual dexterity and vision of human operators. But the machines could be fast and precise.

The first robots introduced in the second half of the 20th century had some tactile sensing and dexterity, but they lacked vision. They were primarily transfer devices to move parts and assemblies from one place to another; they required less precise pre-positioning of parts, had more dexterity, and were more easily adapted to handling different parts than were the transfer systems in hard automation. Their movements could be changed by reprogramming, and a variety of pick-up devices (vacuum or mechanical) and tools could be attached to the dexterous hands. Lacking vision, their movements were mostly by dead reckoning. By about 2010 machine vision became well developed and robots could begin to “look”, though only in well-defined environments, e.g., recognizing objects having preprogrammed shapes and then performing preprogrammed operations on such objects.

The Future

Artificial intelligence (AI), including artificial neural networks (ANN), is now the subject of major development efforts. Like human vision, where the eye is the sensor, but the brain does the seeing, machine vision augmented by AI enables machines to not only look but truly “see”. This will lead to vision-based control of flexible robotic operations; such machines are expected to be able to operate autonomously in a wide variety of environments. Here we are not talking only about manufacturing, but about a wide range of activities that till recently required human operators. Think about self-driving cars and trucks operating on public roads. Think about automated manufacturing lines feeding automated warehouses delivering goods to consumers via drones or autonomous vehicles. And brainy machines are not restricted to working with goods only; they are well suited to join the service industries too. Hospitals already utilize robotic devices for drug delivery to nursing stations;   further impacts on jobs by automation are likely in hospitals, home care, cleaning, and the list goes on. The list of areas where AI-augmented, seeing, dexterous, and mobile machines are likely to replace humans, is limitless.

How many jobs will be eliminated by these smart machines that are not yet fully developed, but for sure are coming? Obviously, it will depend on their cost and performance. The question is not whether but when?  One estimate I read says that by the early-2030s, 38% of the jobs in the US, 35% in Germany, 30% in the UK, and 21% in Japan are at risk to be replaced by automation. (http://www.pwc.co.uk/economic-services/ukeo/pwcukeo-section-4-automation-march-2017-v2.pdf) While such predictions are never precise, and no doubt in the evolving economies new jobs will be created, some of them directly associated with the growth in automation. Two trends are clear. First: many jobs will disappear; second: the most affected will be workers with low education.

Consequences

The cost of goods historically shared three basic components: the costs of materials, labor, and capital. All these costs imply incomes shared elsewhere. As automation replaces labor, the share of capital goes up and the income of those who provide the capital goes up, while the share of labor’s income goes down. People who lost their jobs have no income; people who provide the capital to buy robots, and those who provide their intellectual capital to develop them, gain income. There follows a growing inequality that must be addressed.

Our highly-automated farms produce enough food to feed everyone; obesity is a much bigger issue in the USA than undernourishment. The automated factories can satisfy all consumer needs. But, we face a growing inequality. Even though the GDP per capita between 1970 and 2015 more than doubled, the earnings of people at the lower 40% income level increased by only 13%; between 2000 and 2015 the GDP per capita increased by 13 %, and the income at the 95th percentile increased by 7%, while the income at the 20th, 40th, and 50th percentiles decreased. (Data sources: census.gov and worldbank.org on the web.)

Growing inequality is a major, and growing, socio-economic and political issue. The outcome of the last US presidential election was decided by people in the rust belt who felt that they were left behind by the evil forces of globalization and automation. While cheap rhetoric may win elections, it does not change the fact that a prosperous and peaceful future will have more global trade and more automation. Serious effort is needed to address the real problem of inequality.

Actions needed

I believe there are three fundamental elements to the solution: reduce the standard hours worked, increase education opportunities, and strengthen the social safety net. An adjustment of the standard workweek is long overdue; the first 40-hour workweek was introduced over a hundred years ago; since then, US GDP per capita grew more than ten-fold. Education drives intellectual capital, lifetime earnings correlate with the level of education, and unemployment anti-correlates. Educated people usually keep learning throughout their lives, a trait much valued in the fast-changing modern economy. A revised and strengthened social safety net is essential, both for ethical and pragmatic political reasons. Going forward, there is virtually no need for purely manual labor. Not everyone will be employable. To lead a complete and satisfactory life, everybody needs food, housing, healthcare, safety, education, and some other amenities. To avoid catastrophic conflicts and preserve our democracy, we have an obligation to take care of all of us, even those who are unable to earn a living. We cannot, and should not desire to stop the beneficial forces of globalization and automation on productivity growth. But we all must share the benefits derived from it; thus, we should, and must, take care of all of us; especially those of us who are unable to earn a living in our automated world.

Much of this is contrary to traditional American thinking. But, it is time to update our traditions. The founding fathers lived in a totally different world from ours: one that was much poorer, much more isolated, and not automated. We are now, and going forward: rich, integrated, and automated. We need to work less and learn and think more. To correct one major labor mistake handed down by the founding fathers, we already had one bloody civil war; to prevent and avoid the next one, we must now take civil action.

Postscript. While much of this discussion was America-focused, most ideas presented here are applicable to countries enjoying advanced economies elsewhere, e.g., to the EU. True, Europeans do not carry the baggage of our “founding fathers”, they face other serious baggage. For example, the very history and geographic location of the USA make it much more effective in integrating immigrants than are the European nations facing the massive 21st-century waves of African and Asian dispossessed. The force of immigration only adds to those of trade and automation in driving the disaffected toward nationalistic isolationism, which in the short term is politically disruptive, and in the long term destructive.

Addendum to my blog series on 

Manufacturing, Trade, and Jobs

Acknowledgment: this Addendum was prompted by exchanges with interested readers of my blog series on “Manufacturing, Trade, and Jobs” and was added subsequent to the original posting of the series. Their comments focused on two broad subjects: 1) the cause of the ongoing trend of growing inequality, and 2) trends and fluctuations in the US GDP/capita growth. I thank them for their suggestions and insights.

One finds various published explanations for the worldwide growing inequality. Some suggest that “headwinds” and/or “tailwinds” that help and/or block an individual’s progress from early on may be the determining factors; thus providing “tailwind” assistance through social programs could provide a solution to the social problem of inequality. (Sendhil Mullainathan: “Taking a Different Approach to Inequality”, NYTimes, Sun. Apr. 30, 2017, p. BU5.) While such assistance is a welcome idea, and it could make a positive difference in the lives of many individuals, it would not eliminate the root cause. The root cause, in my opinion, is that automation is providing an economic benefit by cost-effectively replacing labor in progressively broader segments of the economy. Specifically, both in goods production and services, the basic cost elements are materials, labor, and depreciation of the cost of the tools deployed in the activity. As technology improves, automation replaces labor, and depreciation accounts for a progressively larger fraction of the activity’s basic cost. Depreciation is essentially the repayment with interest of the capital utilized in establishing and facilitating the activity. A secondary factor is that capital grows by compounding over time; while labor benefits from experience, and may compound over a practitioner’s life, those who do reasonably well must learn new tricks all the time to update their skills. Thus, in our current social-economic arrangement, the cause is that capital is being substituted for labor, and the effect is inequality. - - I do want to emphasize that I believe that automation is serving the common good and what we need to address is the distribution of its benefits so that inequality is mitigated and the explosive social tension driven by the growing inequality is resolved ethically and pragmatically.

Much of my thinking in these matters is based on a conviction that the US economy is basically sound, and is showing a secular growth trend; we have not reached the end of history. It is reasonable to question that conviction, especially given that on April 18, 2017, the BEA published that the real GDP in Q1 2017 grew at an annual rate of 0.7 %; this is the lowest growth in the past three years.  (https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm)

To address the growth question, I looked at 50 years of data, both in terms of growth and fluctuations to identify factors possibly hidden under the longer-term trend. From 1966 to 2015 the economy as measured by GDP/capita grew about two-and-a-half fold (during the same period the GDP grew about four-fold since the population increased more than one-and-a-half fold). Each decade in this half-century showed growth, though each had one or more years of contraction (negative growth). The 1976-85 period showed the highest aggregate growth, the highest single-year growth, and the highest variability as measured both by absolute deviation and range. The last decade had the lowest growth and the worst recession since the Great Depression. The next-to-last decade showed the second-highest growth and it had the lowest downturn year in the half-century. Is there an obvious trend, other than aggregate growth?

I don’t think so, though there are others who think we have reached the end of growth and that innovation is dead. (https://www.ted.com/talks/robert_gordon_the_death_of_innovation_the_end_of_growth/transcript?language=en). Clearly, growth requires continuous innovation. In the advanced world, mankind’s basic needs of food, shelter, clothing, and other basic amenities are now satisfied. Future innovators may need to work harder to identify needs they may satisfy with their inventions. At the same time, innovators now are much better trained, have better tools, and may face bigger issues than their forebears did. The environment, clean energy, and clean transportation are examples of major innovation and growth opportunities, also health and education services are likely to grow and be impacted by advances in technology. Maybe, in the advanced world, future innovation and economic growth will come from satisfying communal, rather than individual, needs. In any case, I expect innovation and economic growth to continue.

In closing, I present some measures of the problems the US economy is facing. These problems cause the growing conflict between those who feel they have been left out and the rest. (The “rest” includes much of the political and economic establishment as seen by the “left outs”.) The available income-distribution data shows how the majority has not fully shared in the benefits of our growing economy. In real (inflation-adjusted) terms, the Real Median Household Income peaked in 1999. Thus, in the past more than a quarter of a century, most Americans have experienced a declining living standard, while the economy has been growing. In fact, the median household lost 2% income, while the economy per capita gained 18%. Furthermore, even though between 1993 and 2015 the median still increased, most of that increase occurred before 1999. During this close to a quarter-century from 1993 to 2015 period, even though the nation’s per capita GDP went up 39%, the median household’s income increased only by 12%. Thus, the middle-class family was not benefiting proportionately from the national economy’s continued success. Most of the gain went to the upper-income groups. The most accepted measure of economic inequality is the Gini index; a Gini index of zero (0) implies that all members of the community share equally the benefits, while an index of one (1) implies total inequality where an infinitesimal minority takes all the benefits. Between 1993 and 2015 the money income Gini index increased by 5.5%.

To summarize: the economy has been growing and is likely to continue to grow. But, endemic factors associated with the progressive transition from labor-intensive to automation-intensive activities across most of the economy, have caused economic inequality to grow. A rebalancing is required to allow all to share the benefits derived from technological progress.

Manufacturing, Trade, and Jobs - Part 2. Trade

This is the second note in this series and it focuses on international trade. I look at its historical evolution and conclude that it is a multi-century secular trend that is both unstoppable and beneficial. Well negotiated win-win trade agreements are the path to global peace and prosperity. The modern world is defined more by supply chains and local (urban) communities than by national boundaries. (See: Parag Khanna, ”CONNECTOGRAPY Mapping the Future of Global Civilization”, Random House New York, 2016.) International trade plays a significant and increasing role in national economies of free societies.

Why trade?

Trade is most fundamentally based on the notion that not everyone everywhere is equally well suited to make everything that consumers need/desire. A long time ago all basic (tribal) communities were fully self-sufficient. Later, in the pre-industrial age, trades developed, and even though most households farmed and produced all the food they consumed, many items (e.g., clothing, tools) were supplied by specialized trades, and the practitioners of the trades secured most of their food from farming households. In the 19th century, railroads and industry concurrently developed; most people moved off the farms. In the USA, in 1800 about three-quarters of the working population were employed in farming, by 1900 about 40%, and by 2000 less than 2% were still so engaged. Manufacturing never became the dominant employer at the same level as agriculture had been; in the USA manufacturing’s share of employment peaked in the 1950s at less than 25%, by 2004 it was less than 10%, and its share of employment continues to shrink.

Global trade is relentlessly increasing. The trend is clear: trade is growing and exports now represent about 30% of the world-wide economic activity. While international trade grew almost continuously since the mid-1800s, interrupted by two World wars, it received significant triple-boost in the second half of the 1900s. These three boosters were the introduction of container shipping, advances in telecommunications and informatics, and the formation of the European Union and other trade alliances. Between 1960 and 2015 international trade’s share of the global economy more than doubled. (Sources: WTO and World Bank.)

The Evolution of Trade

Since for each exported item, there must be somewhere a matching imported item, the total economic impact of international trade on the global society is underestimated by the export figures. Furthermore, between trading entities, there is always eventually a Balance of Payments (BOP) that includes, in addition to exports and imports, incomes from investments, capital investments, and other financial transactions. Thus, apart from some timing adjustments, trade augmented by financial transfers always balances.

The evolution of US international trade balance in goods in the 20th century started with a positive trade balance and exports, as a fraction of the GDP, close to the global norm. In 1913 as WWI approached exports slowed down. After WWI came the Great Depression, resulting in a collapse of trade; then came WW II, and it took till about 1980 for trade to exceed its 1900 level as a fraction of the GDP. After 1980 US exports stayed reasonably constant as % of GDP, but imports started to rise. (Sources: unstats.un.org and US Census Bureau.)

What happened? A frequent popular claim is that it was cheap foreign labor that led to the import rise. Labor costs do play a role, but there is more to this story.

The Rise of Japanese Trade and Asian Manufacturing

Japan was the first major post-WWII exporter to the US. By about 1980 Japanese manufacturers captured major parts of the US automobile and consumer electronics markets. These two industries, till the middle of the 20th century, were totally dominated by American manufacturers. In automobiles Toyota developed the lean manufacturing system, resulting in significant quality improvements and cost reductions. In consumer electronics RCA dominated both the markets and the technologies; RCA invented much of the consumer electronics, including color TV, and owned virtually all the basic patents. RCA’s corporate strategy completely ignored exporting goods; it focused on global licensing of its patents and it single-handedly created the Japanese consumer electronics industry as its patent licensee. Subsequently RCA made several wrong bets in computers, video recordings, and TV displays; it was acquired first by GE in 1987, and subsequently, its consumer electronics operations were sold to Thomson, a French entity. For a while, some parts of Thomson’s global business thrived, but by the early-2000s in addition to Japan, the efforts invested into consumer electronics by the South Koreans and the Chinese resulted in a global shift, and Thomson went out of business. (Disclosure: the author worked as a researcher and inventor for RCA and later was the General Manager of a US operation of Thomson and a member of Thomson’s global management team.)

US International Trade

The US continues as a strong participant in international trade, though relative to its GDP, at a level significantly below the global average. As the US economy evolved into a service economy (see Figure 4 in Part 1 Manufacturing in this series), services gained an increasing share of US foreign trade. At the beginning of the 20th century it was insignificant; by the early 1960s service exports were about one-third of goods exports; by 2015 service exports are one-half of that of goods. While the service trade shows a positive balance, the negative balance of the goods trade pushes the overall trade balance to close to negative 3%. Since the current account is still negative, the BOP is achieved by foreigners’ interest in investing in America. (Source: US Census Bureau.)

There is a general notion that countries with high labor costs run negative trade balances. It is interesting to look at a comparison between Germany and the USA.

German living standards are very like those in the USA and so is the GDP per capita. Both countries enjoyed 1.9% GDP growth in 2016 and the unemployment rates for both were between 4 and 5% (in June 2016 US unemployment was reported as 4.9% and the German one 4.2%). The balance of trade in 2016 for Germany was +8% and for the USA -4%. Germany invests heavily into industrial training, has a highly-regulated employment structure, and a strong social safety net; its economy is referred to as a “social market economy”. The US economy is five-times larger, more entrepreneurial, has a higher degree of inequality. Germany is a net importer of services, while the USA is a net exporter.  Germany’s current accounts balance is positive, that of the USA is negative. Thus, to maintain BOP, Germany is a net investor abroad, while foreigners invest in the USA.

Global international trade, the sum of all exports and imports of goods and services around the world, in 2015 was 58.3% of the global GDP. US exports and imports added up to 28% of the US GDP. Similarly, Germany’s total trade in 2015 was 86% of its GDP. Thus, US trade could grow a lot before reaching the global standard, let alone catching up with Germany. (Global and Germany data from the World Bank, http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?name_desc=false; US data from US Census Bureau.)

Is international trade good?

In the aggregate and in the long run it is good for all. It promotes peace and collaboration among partners, and adds to global prosperity. In the short term, and in specific locations (for example, in the US rust belt), it can cause unemployment and economic hardship. To most US consumers it has been highly beneficial.

For example, in 1950 the price of an old type (500 line NTSC) 21” RCA color TV was about $500, or close to $5,000 in inflation-adjusted 2014 dollars; in 2014 the price of a 55” 4k Ultra HDTV flat panel TV was about $1,300. Automobile prices in constant dollar terms about doubled over the same period, but in terms of quality, reliability, longevity, and features, cars much improved in the last half-century. In these terms, cars now bear no resemblance to cars in the 1950s.

Today China is investing heavily (billions of $$ equivalent) in robots. Their current 5-year plan includes the development of a variety of advanced manufacturing technologies. China is not betting on cheap labor to retain its manufacturing power. No country should base its manufacturing strategy in the 21st century on low-cost labor and/or protectionist measures; unskilled labor is irrelevant; well-managed technologies and supply chains do the work.

Manufacturing, Trade, and Jobs - Part 1. Manufacturing

This note is the first in my series on Manufacturing, Trade, and Jobs, and it focuses on US manufacturing. I present first a historical perspective of US employment in agriculture and manufacturing, and second I look at the contributions of the various industry sectors to the GDP. I find that US manufacturing is stronger now than ever, but the economy has changed and employment opportunities have changed too.

Manufacturing evolution in the national economy

Figure 1 summarizes the evolution of US manufacturing employment. At the birth of the nation, and for many decades afterward, agriculture was the primary activity. In 1800 three-quarters of the labor force was needed to produce food for the nation. Fifty years later agricultural efficiency improved so that only about half of the employed were needed for food production; manufacturing was a significant employer. Throughout much of the 20th-century manufacturers employed between a quarter and a fifth of the workforce; but by 2014 manufacturing employs barely more than 8% of all workers and agriculture and manufacturing together, the total goods-production component of the economy, only employs under 10%. The forecast going forward is for further reductions in the fraction of the labor force producing goods.

So, what happened; did manufacturing die? Not at all. As Figure 2 shows, in constant inflation-adjusted dollars, the value added by manufacturing to the national economy grew steadily in the second half of the 20th Century from $0.8 Trillion in 1950 to over $2.1 trillion in 2014.

Figure 1

What happened is that as production efficiencies improved fewer people were needed to produce goods. In 1950 about 16 million workers produced $0.8 Trillion worth of manufactured goods, at a productivity of $50 thousand/head; in 2014 about 12 million workers produced more than $2.1 Trillion at a productivity of $174 thousand/worker (again in constant inflation-adjusted $ values, based on data from Figures 1 and 2).

Figure 2

Figure 3

Furthermore, as the economy grew, even though the value added by manufacturing to the national economy grew, the percentage contribution of manufacturing steadily decreased. Figure 3 shows the value added as a percentage of the GDP. Manufacturing’s fractional contribution decreased from about 27% in 1950 to about 12% in 2014; even though the value created by it grew more than two-and-a-half-fold. The economy grew even faster, close to six-fold over the same period. Also, as shown in Figure 1, during this period the population about doubled, thus the per head value of manufactured goods in constant dollar terms grew faster than the population, from about $5-thousand/head in 1950 to close to $7-thousand/head. Furthermore, due to technology advances, the features (and user benefits) of manufactured goods per constant dollar purchase price greatly improved.

Times change and old industries get replaced

As the economy has been growing the various industry segments have grown at different rates. As is well known, in about 200 years the US economy morphed from an agricultural origin through a heavily manufacturing-oriented phase to a service economy. Figure 4 presents a summary view of this transition. The trend from goods production activities to services is obvious, and this trend is likely to continue.

Conclusion

From the foregoing, we conclude that US manufacturing is stronger than ever and continues to thrive. But the composition of the economy has changed, with services having assumed the dominant role. In recent years (beginning in 2000), the US Bureau of Economic Analysis shows Information-Communications as a separate line item, indicating the growing significance of this relatively new industry in the continuously evolving economy.  Also, the structure of manufacturing has changed: today fewer people produce two-and-a-half times more value than more people produced 60 years ago. This secular trend of productivity improvement continues, inevitably leading to job losses, unless growth in demand exceeds growth in productivity and/or US-produced goods

Figure 4

provide superior cost-performance benefits to that offered by foreign manufacturers. Not likely scenarios, thus I expect that US manufacturing will continue to grow in absolute dollar terms, but its share of the GDP will shrink, and its share in US employment will continue to shrink too.  In fact, not only manufacturing’s percentage share of the employed will continue to shrink, but so will the total number of people employed in the manufacturing sector of the growing US economy supporting a growing US population. - - No amount of populist haranguing and no endless stream of misguided presidential initiatives will change these long-term trends.

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Manufacturing, Trade, and Jobs - Intro.

We have much-politicized discussions in the USA about the decline of American manufacturing and the disappearance of well-paying, good jobs in manufacturing, caused by international (“unfair”) trade. Similar discussions are also taking place in Europe, where the existence of the EU may be at stake. In a series of three blogs that follow, I address US manufacturing, international trade, jobs, and inequality. The bottom line is that things are not as bad as populist demagoguery claims it is. Our economy is growing, but significant numbers of disaffected, lesser educated workers justifiably feel left out from sharing in the benefits of economic progress. Their resentment has put an unqualified demagogue into the White House; others here and in Europe may follow. It is time to act to save our progressive democracies.

In the first blog of this series I look at employment and GDP data to respond to the question: is manufacturing dead? The answer: no, it is not dead, it is alive and well, but the economy is changing. In the second blog of this series, I look at the evolution and current state of international trade and trade balance. Global trade (including all exports and imports) is now about 60% of global GDP. Trade is good, it promotes peace and economic growth. I draw on personal experience and offer some insights into strategic forces that led to increased US imports of consumer electronic goods, and its relatively minor contribution to job decline. In the third, I review briefly the history and continuing evolution of automation and its overwhelming impact on jobs. I conclude: (1) jobs are disappearing because of automation, a process that replaces labor with capital, making it a driver of growing income inequality; and (2) the most important issue we must address is a growing need for socio-economic adjustments to cope with the overwhelming secular forces driving us further into inequality and societal polarization.

January 31, 2017: Where We Are.

We have a narcistic pathological liar in the White House, one not endowed with a superior intellect, and who may also be insane. I read the New York Times and watch the evening news on television. My hunger for news is insatiable and after I indulge myself I feel worse than I did craving information. Is my hope impeachment or invocation Section 4 of the 25^th Amendment of the US Constitution? And how long do I have to wait?

How did we get here?

The road to Trump was paved by the craziness of the Tea Party and the virtually unlimited funding of the ultra conservatives by the likes of the Koch brothers. It was managed by the Republicans in a dysfunctional Congress; they were determined to block any and all initiatives coming from President Obama. Certainly, Mitch McConnell and Paul Ryan may claim significant victories in this area. But Trump’s victory was ultimately delivered by the criminal negligence of the Democratic elite. We practically had no Democratic primary. Bernie Sanders stood up advocating progressive views. Most democrats thought Bernie’s nomination would lead to certain defeat, given the anti-socialist paranoia instilled in the course of the past three-quarters of a century. The minds and souls of the lesser educated mass voters were successfully influenced to vote against their self-interest. Joe Biden was briefly considered; he would have been a strong vote gatherer in the rust belt and other areas that went for Trump. But, not to challenge the heiress, Biden quickly stepped to the side. The Clinton team was given the uncontested winning ticket and they blew it. They did not recognize the power of the disaffected lower half of the rust belt population; they ignored the FBI warnings about Russian interference; they campaigned where it did not matter and failed to do so where it mattered; they behaved like amateurs and led us down the loosing path to the horrible reality where we now find ourselves. Even though Hillary got close to three-million more votes than Trump, given how the electoral system is stacked against the Democratic majority, Trump won with 77-thousand key votes in three counties that thus handed him the electoral college majority that then sent us on our horrible un-American current course.

As I am writing these notes, we are ten days into the Trump era. In these ten days we strengthened our Chinese competitors (by stepping away from the multi-lateral Pacific trade agreement we created a void that now China is proceeding to fill); we strengthened our ISIS enemies (by targeting Muslims and Muslim countries we are telling them that they were right all along, we are anti-Muslim, and thus all Muslims should view ISIS as their true advocate); we picked a stupid fight with Mexico that can only hurt both them and us; we told some of our closest allies that NATO will no longer provide them protection against Russian aggression; our president told the executive branch to step back from protecting the health and well being of the average American citizen.

What next?

Who knows. Most presidential acts are now based on no forethought, no legal vetting, frequently partially withdrawn before the are explained to those who are to execute the implied orders. The press is told that they are the worst scum; conflicting and untrue announcements are called "alternative facts"; climate change is not man made, global trade is bad. And who knows what science is now?