Andy Grove article in 2010 warning about USA tech industry manufacturing & engg. job losses, and suggested solutions

Last updated on 29th March 2016

I was not aware of this side of the Late Andy Grove of Intel. Here's his thought-provoking and insightful 2010 article, Andy Grove: How America Can Create Jobs, http://www.bloomberg.com/news/articles/2010-07-01/andy-grove-how-america-can-create-jobs.

While I would recommend readers interested in this topic to read the whole article, given below are a couple of short extracts from it:

--- start short extracts ---

You could say, as many do, that shipping jobs overseas is no big deal because the high-value work—and much of the profits—remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?
...

Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best of all economic systems—the freer the better. Our generation has seen the decisive victory of free-market principles over planned economies.  So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.

Such evidence stares at us from the performance of several Asian countries in the past few decades. These countries seem to understand that job creation must be the No. 1 objective of state economic policy.

--- end short extracts ---

Ravi: Grove writes in the same article that he grew up in the Soviet-bloc (Hungary) and so had first hand experience of both govt. overreach and a stratified (layered) population.

A couple of extracts from https://en.wikipedia.org/wiki/Andrew_Grove:

Grove summarized his first twenty years of life in Hungary in his memoirs:

By the time I was twenty, I had lived through a Hungarian Fascist dictatorship, German military occupation, the Nazis' "Final Solution," the siege of Budapest by the Soviet Red Army, a period of chaotic democracy in the years immediately after the war, a variety of repressive Communist regimes, and a popular uprising that was put down at gunpoint. . . [where] many young people were killed; countless others were interned. Some two hundred thousand Hungarians escaped to the West. I was one of them.

...
[An earlier extract from the same wiki page about the HORRORS of Nazi occupation of Hungary]
When he [Grove] was eight, the Nazis occupied Hungary and deported nearly 500,000 Jews to concentration camps, including Auschwitz. Its commandant, Rudolf Höss, said at his trial that he killed 400,000 Hungarian Jews in three months. To avoid being arrested, Grove and his mother took on false identities and were sheltered by friends. His father, however, was arrested and taken to an Eastern Labor Camp to do forced labor, and was reunited with his family after the war.
--- end wiki extracts ---
====================================

A correspondent (C) wrote over email in response to above post contents (and was OK with public sharing), (slightly edited):
Sadly, the same thing seems to be happening here [India]. Figures I have seen (probably correct) suggest that around 30 million have employment visible to the government. About 21 million of those are in the government or with public sector bodies. The IT industry directly employs 3.5 million, or about 30-40% of the others. The rest of Indian industry put together, manufacturing, services or whatever, employ just 7 million or so.

No one should expect the IT industry to be a mass employer. It requires four years of graduate education and specialised skills, as well as relatively high investment per employee. So where is the mass employment going to come from? Not from startups certainly.
---

I (Ravi S. Iyer) responded (slightly edited):

Thanks --name-snipped-- for your views. Unemployment, especially youth unemployment, is a major issue in India today, I think (at least in Puttaparthi it is a major, major issue).

However, IMHO, there are some key differences between USA situation in this regard, and India:

1) The manufacturing (and some part of engg.) job losses of USA to other countries like Japan first, then South Korea and China (and even India to some extent) did not create a big political upheaval reaction/trade union movement reaction UNTIL NOW (both Senator Bernie Sanders and Mr. Donald Trump seem to have tapped into the job anxiety and unemployment/underemployment issues in the USA today). In India, I don't recall knowing/hearing of any big job losses from India to other countries (with lower wage employees). I think the trade union movement in India is too strong for such things to happen, or at least to happen on a scale that happened in the USA.

I wonder how things got so bad in the USA without trade union or other backlash. I wonder whether former USA President Ronald Reagan's following actions and effects from his actions, all worked together to completely suppress the voices of the trade unions in the USA:

a) Crushing an Air Traffic Controllers' strike under his presidency [From https://en.wikipedia.org/wiki/Professional_Air_Traffic_Controllers_Organization_(1968), "The Professional Air Traffic Controllers Organization or PATCO was a United States trade union that operated from 1968 until its decertification in 1981 following an illegal strike that was broken by the Reagan Administration.[citation needed] The 1981 strike and defeat of PATCO was called "one of the most important events in late twentieth century U.S. labor history" by labor historian Joseph A. McCartin."

b) His aggressive stance against Soviet Union and Communism [From https://en.wikipedia.org/wiki/Foreign_policy_of_the_Ronald_Reagan_administration, "The foreign policy of the Ronald Reagan administration was the foreign policy of the United States from 1981 to 1989. The main goal was winning the Cold War and the rollback of Communism--which was achieved in Eastern Europe in 1989 and in the end of the Soviet Union in 1991. It was characterized by a strategy of "peace through strength" and an escalation of Cold War tensions 1981-84, followed by a warming of relations with the Soviet Union, 1981-89. As part of the policies that became known as the "Reagan Doctrine", the United States also offered financial and logistics support to the anti-communist opposition in central Europe and took an increasingly hard line against socialist and communist governments in Afghanistan, Angola, and Nicaragua."

c) Later dissolution of the Soviet Union [In December 1991, see https://en.wikipedia.org/wiki/Dissolution_of_the_Soviet_Union]

In India, I have the impression that the big trade unions (and even small ones) are all tied to political parties. So I think such suppression of trade union voices that happened in the USA, could not happen in India of our times.

2) I don't know how good the data collection about such matters (employment) is, in India. While it may be decent in big cities and in big companies, the bulk of Indian small businesses would not be providing accurate data about employees to govt. and other agencies. ... And then we have what seems to me to be the HUGE unorganized sector (casual workers, street vendors, people who work from home without registering appropriately with govt. agencies), especially in rural and semi-urban India. I doubt how accurate any data on this unorganized sector in India would be.

3) Mainstream newspapers like The Hindu do not typically have AUTHORITATIVE articles on such employment matters. I mean, I don't know of any famous figure on such employment data in India, like we have important figures on economy in India (For example, chief economic advisor, RBI governor - both of the current holders of these positions, if I recall correctly, are world famous figures, as well as Nobel laureate Amartya Sen). I mean, one reads more about economy growth rate in Indian newspapers than one reads about unemployment rate (let alone any underemployment rate).
----

Having said the above, I do think we Indians should take lessons from both Andy Grove's article as well as the current problems of unemployment/underemployment in USA due to its manufacturing base having got hollowed out, and try to avoid the same from happening in India. As of now, I think India's manufacturing base has not got hollowed out in any way. While I don't have the figures, I think India's manufacturing base has grown over the past one or two decades. The growth may not be enough for the burgeoning (numbers wise) and materially much more aspirational youth of India (as compared to their previous generations). But that's another aspect of the employment problem - not a job losses problem.

--- end Ravi response ---

Correspondent C wrote back:
Dear Ravi

I meant to say that Indian manufacturing has not yet shown the ability to create jobs. The IT industry was never going to be a big employer but even so it is responsible for 30-40% of all jobs in the organised sector. Yes, there has been no loss of manufacturing jobs to other countries (but see the next sentence) but there has not been any substantial creation of manufacturing jobs either. While we may not have lost manufacturing jobs, we have certainly failed to attract the kind of industries that will create jobs and they have gone elsewhere.

Maharashtra [Ravi: a state in India, with Mumbai as its capital] is trying to reduce the number of approvals for starting an industry from about 64 to 39. I think those figures tell a story. In most other countries, approvals are far fewer and running a business far easier. It is hard to persuade an industry to set up a manufacturing base in India when there is this level of bureaucratic control and oversight.

The figures I mentioned are for the organised sector: people who work for employers who pay taxes, register them in employee benefits and so on. As you say, the employment in the un-organised sector is far larger and perhaps some of those figures will start to appear when (if?) such employers enter the tax net. That may not be too far off as it cannot be very hard to bring in all registered shops and small-scale industries into the tax net.
----

Ravi wrote back:
Interesting! Thanks.
----

[I thank bloomberg.com and Wikipedia and have presumed that they will not have any objections to me sharing the above extracts from their websites (short extracts from bloomberg.com) on this post which is freely viewable by all, and does not have any financial profit motive whatsoever.]