Rise of the Robots

download

Experts have been telling us that there is no point in getting American manufacturing jobs back. They have said the only difference between having a factory in China and a factory in America is that instead of Chinese Robots doing the manufacturing American ones would instead. Any economist who makes this argument is so myopic and short-sighted that they should be fired on the spot.

In the following article I will show you that bringing manufacturing back is very beneficial to the economy even if it is mostly automated. There is a concept in economics called backward linkages, or to put it simply demand the factory itself causes in other areas of the economy. I hope you see how much growth our experts are willing to give up because they cannot see these advantages.

JUST IN TIME

Before we begin we have to understand how companies manage their inventories. After all this is where backward linkages come from. Your raw materials, food supply, and other things you need to keep your operation going. The first thing we need to know is corporations do not like stockpiling extra items. They would rather get the item exactly when they need it. For instance if it takes 2 days to get your supply of silver on site then they would only want to keep a supply of 2 days of silver available. The reason is farily simple. Suppose it costs 5$ for 2 days supply. If you stockpiled 4 days worth of supply then you would have to pay 10$ right away, instead of being able to pay 5$ now and invest the extra 5$ for 2 days before having to pay it. This may seem like a small amount in this example but multiply it in the billions and you see how important this is for companies. In fact this concept is so important that an entire subset of the software development industry is devoted to getting the formulas just right.

Most people in the corporate world would be very familiar with the concept already as they are judged on their ability to maintain a lean and profitable operation. Politicians involved in government work may be unfamiliar with the concept and its impact to the economy as they can stockpile as many items as they need without concern.

Production Materials

Let us say you bring back a manufacturing facility that specializes in mobile phones. Due to the very precise work let us assume most of the actual work in producing the cellphone itself will be automated. According to our economists this facility is now worthless in terms of job production as robots produce the actual product not humans.

Do these products appear out of thin air? No you need raw materials to build them. In the case of mobile phones you would need a source of gold for wiring. If your factory was moved from Beijing to Detroit would you continue sourcing your gold supply in Cheng Du for example? Keep in mind it would take you weeks to get the raw material to the factory forcing you to keep 20 or more days of supply on hand, or would  you source your raw materials from another offshore company which will only require to have 3-4 days of material on hand? Keep in mind risk assessments have to be done for each case as well and the complexity of moving raw materials across borders and oceans will add to the sheer distance of sourcing your materials from China.

Gold is not the only raw material needed in a mobile phone. Plastic, Glass, Silver, I could go on and on. Demand for them will go up and places that produce them will be forced to hire more people. The materials need to be transported from one site to another which gives truckers jobs as well. Keep in mind we are just talking about one factory here. Our amazing leaders would give up all these benefits though because a robot would produce the final product.

The Robot

A surprising number of people think that the cost stops once you purchase the actual machine. This is not the case. Machines wear out. They need spare parts, somebody to repair them, and in most cases they also consume more electricity than a human would in the same position.

While the producer would be the machine you would need to hire people to repair and clean it generating employment locally. The spare parts would have to be sourced from the closest possible location which generates additional business to that area. The power plant would make more profits too allowing it to expand and hire more people.

In essence if we bring the automated manufacturing base back you are creating a brand new service industry centered around the machines. Why would our economists want us to forego creating a brand new sector of the economy?

Employment

No matter how automated a factory is it would still need to employ humans. People still need to watch the security cameras, mechanics still need to repair the machines, and some processes will not have been automated yet and still needs manual labor. It is not all blue-collar work either. Programmers need to be involved to make sure the machines are doing the right job, somebody needs to do quality control, and of course people need to manage the plant too.

These people need to live somewhere and they will most likely live in the nearby cities. That means that the money they earn goes into that economy which means that more people need to be employed there to provide the services that they need, leading to more employment and more people able to buy. Multiply this in many small towns across America and you are looking at an economic boom.

Robots Are Our Friends

Economists who say that there is no point bringing manufacturing jobs back are so myopic that they only see the individual tree that is producing the product and miss the forest which is the web which supports that production.

Trump may be the only candidate who sees this because he is the only one who has spent enough time in the corporate world. Remember Trump water and Trump magazine? They are actually very hard to buy on their own because they are used exclusively to supply his hotels. Does it sound very similar to backward linkages? It does because it relies on the same concept.

The importance of bringing back manufacturing is not really on who produces the actual good but that jobs are generated for the economy. The specific job does not really matter much after all more available jobs and less labor via deportations means more bargaining power for the laborer and higher wages.

Advertisements

2 thoughts on “Rise of the Robots

Add yours

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

Up ↑

%d bloggers like this: