Badly Made in America
Badly Made in America kali9/gettyimages.com

Gossip is important. How else do we know about what's really going down in the White House but through networks of gossip? Now that that's said, I have some gossip about the dysfunctional escalators in Link's stations. Nathalie Graham reported that between 2017 and 2018, "the escalators in Sound Transit light rail stations broke down 2,115 times for a total of 19,289 hours." That's bad. But why are these escalators so bad? No one will say. In fact, it seems that escalators are bad because the escalators are bad. This is as much as Graham could gather. Because no one who knows what's what wants to make the truth public, we have to turn to gossip. And I have some.

A person in the know gave it to me in a bar yesterday. It goes like this: Because Sound Transit received federal funding for the stations, it was required to contract a US company (America First!) to make and install the escalators. That is what I was told. And why is this at all interesting gossip? Because it implies other countries make better escalators that are generally cheaper. Do you get my drift yet? The escalators are crap because they were made by a US company. And why this an issue? Because America no longer knows how to make things.

Before you pull out your gun, don't shoot the messenger. And if the US can't make decent escalators, don't blame the American worker, blame the obscene corporate culture of buyouts (over investments in R&D) and wage-arbitrage in the form of outsourcing. For the latter, recall that the Apple CEO Tim Cook, when defending the corporation's hoarding of mountains of cash in off-shore tax havens to 60 Minutes, stated that his company manufactures its products in China, not because of cheaper labor (wage-arbitrage), but because they know how to make things. Americans do not.

The words out of his mouth:

Yeah, let me— let me— let me be clear, China put an enormous focus on manufacturing. In what we would call, you and I would call vocational kind of skills. The U.S., over time, began to stop having as many vocational kind of skills. I mean, you can take every tool and dye maker in the United States and probably put them in a room that we're currently sitting in. In China, you would have to have multiple football fields.

So, China now has the know-how. The US does not. But this is not an insight at all. No new knowledge is gained by saying: This is a camel because it is a camel. And that is pretty much what Cook said on 60 Minutes. The American worker was forced to drop "vocational kinds of skills" because corporations like Apple relocated jobs that required those kinds of skills to low- or middle-income countries. Chinese employees and workers now have that needed institutional memory, not those in the US.

The second blow to American know-how has been buybacks, a practice that directs profits not to the development of new products, but to share holders, who are basically useless. None of the money that goes up there to them comes down again in any meaningful way. Something like only 10 percent of the money entering and exiting stock markets is invested in the ideas and projects' actual businesses. A big part of the US economy is not about value creation, but value extraction (Read Mariana Mazzucato's books). Wage arbitrage and share holder extraction (and under-funding public education, and the value of) have enervated American innovation and know-how. Think about that when you look at another broken, American-made escalator in a Link station.

UPDATE: my gossip was not precise, but the point of the post still holds.