Manufacturing

Trade, Tariffs, and Prices, continued

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Palmer Luckey, founder & CEO of Anduril, on the importance of US manufacturing.

Warren Buffett had an interesting suggestion for an approach to tariffs: Import Certificates. The idea is that when you export products, you receive import certificates, according to the dollar value of the products exported.  In order to import products, you need to provide Import Certificates of equivalent value.  And the certificates trade. So the system would be self-balancing.

Buffett suggested this approach in a Fortune article more than 20 years ago, I have no idea if that’s still his view, but I think it’s an interesting approach. The original Fortune article is still online but paywalled, the content can be read without subscription here.

See also my post Trade, Tariffs, and Prices from last November, in which I cited an earlier post:

In a world with global and highly-efficient transportation and communications…and billions of people who are accustomed to low wages…is it possible for a country such as the United States to maintain its accustomed high standards of living for the large majority of its people?…and, if so, what are the key policy elements required to do this?

This question should be fundamental to discussions of trade policy, along with national defense and resilience considerations.  See also the discussion about tariffs and consumer price markups–it’s far from true that it’s always just a simple pass-though.

Retrotech: An Automated Flour Mill in 1785

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(A guest post by Grok, with editorial guidance from David Foster)

 

In the late 18th century, America was still a land where much of life’s daily rhythm was dictated by manual labor, especially in the essential task of milling flour. Oliver Evans, born in 1755, a visionary from Delaware, would set the stage for an industrial transformation with his invention of the automated flour mill. This innovation not only changed the way flour was produced but also marked a significant leap into the era of automation in America.
Before Evans, milling was a labor-intensive process. Grain, once ground into meal, needed cooling and drying, a job performed by “hopper boys” who would spread the meal across the mill floor, often walking over it to ensure even distribution. This method was not only physically demanding but also introduced potential contaminants into the flour.

Evans’ revolutionary design, detailed in his 1787 publication “The Young Mill-Wright and Miller’s Guide,” introduced a system where human effort was significantly reduced through mechanical ingenuity. Here’s how:
  • Automatic Elevators and Conveyor Screws: Grain was lifted and moved using bucket elevators for vertical transport and the Archimedes screw, adapted into a conveyor screw, for horizontal movement. This was a significant departure from the muscle-powered methods of the past.
  • Self-Regulating Millstones: The grain was ground by millstones that adjusted themselves for consistency, eliminating the need for constant human oversight.
  • Mechanical Cooling: The role of the hopper boy was taken over by a machine of the same name, which used a rotating rake to spread the meal for cooling, ensuring hygiene and efficiency.
  • Automated Sifting and Packaging: The flour was then sifted and bagged without human intervention, making the process cleaner and faster.

The adoption of Evans’ system was slow at first due to resistance from traditional millers but soon spread like wildfire. By the early 19th century, it’s estimated that hundreds of mills across the United States were built or converted to operate on the Evans principle. Notably, within a few decades of his invention, from the 1790s through the 1820s, there were reports of over 200 mills adopting his methods, with some sources suggesting the number could be closer to 500 by the mid-19th century. This number reflects not just the mills directly constructed by Evans or his immediate associates but also those that adopted his designs independently or through licensure.
However, despite the widespread adoption of his technology, Oliver Evans did not reap the financial rewards one might expect from such a transformative invention. His patents, among the earliest granted in the United States, were often ignored or infringed upon. Evans spent much of his later life in legal battles to protect his intellectual property rights. While he did earn some income from selling rights to his mill designs and through his involvement in manufacturing, the financial success was not commensurate with his innovation’s impact. He also ventured into other fields, like steam engine design, but again, legal and financial challenges dogged him.
Evans’ automated flour mill was more than just an engineering marvel; it was a beacon for the future of industrial America. His work laid the groundwork for automation, reducing labor, increasing efficiency, and improving the quality of life by making food production more accessible and cleaner. His legacy, though not financially lucrative for him, has been a boon for generations, illustrating how one man’s vision could change the course of industry and daily life. His story is a reminder that innovation often comes with its battles, but its impact can endure far beyond the lifetime of its creator.
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(The automated flour mill had been on my list of retrotech posts for a while, thought I’d try the lazy man’s way and let Grok do it. I did have to give it multiple prompts to improve the result, and also found and added the image manually. Also, paragraph breaks were lost, which is common when copying anything into WordPress; I fixed some but not all of them by editing the HTML)

Book and Movie Review: The Valley of Decision (rerun)

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WSJ briefly reviewed Marcia Davenport’s book The Valley of Decision in its roundup of books about family businesses a couple of weeks ago. I reviewed both the book and the 1945 movie that it inspired (starring Greer Garson and Gregory Peck) last year.

The book could be subtitled An Industrial Romance, as could the movie. Both could enjoy some renewed attention at a time when the importance of manufacturing is receiving increased focus in the US.

Pittsburgh, 1873. The Scott family owns a steel mill, and sixteen-year-old Mary Rafferty has just started work as maid in their home.   There are 5 Scott children, but 17-year-old Paul is the only one who truly values the mill as anything other than a source of dividends.   William Jr, the eldest, is   engaged to a young Boston socialite and wants to to maximize his take from the mill to support their joint social ambitions.   Elizabeth is “plain and angular and earnest, full of purpose and good works.”   The twins Constance and Edgar, 9-year-olds when Mary first meets them, are always into mischief–“known in the backyards and nurseries of Western Avenue as holy terrors and limbs of the devil”…as they grow older, Constance dreams of marrying an English aristocrats, moving to Europe to get away from what she sees as her boring family, and meeting “all the wicked people,” while Edgar prefers life as a rather raffish gentleman of leisure to doing any kind of serious work.

Paul, though, shares with his father William a strong personal bond with the mill, the work it does, and the people who work there. Will Jr, who as oldest is the presumptive future chief of the mill,  has no desire whatsoever to be a part of scenes such as a Bessemer Converter blow:

And now excitement, familiar but primevally keen, swept everything else aside. The great bulbous brute towering above him began to rumble and belch. From its mouth high overhead a stream of scarlet flame threw itself at the acid winter sky. The blower gave a sign. The blow was ready, and suddenly the usual concert of barbaric noises in the shed was drowned in one fearful ear-crushing roar as the cold blast was shot into the converter’s belly.   Element grappled with element, oxygen in a death-struggle with carbon, a battle more terrible and wonderful than man had ever made before.   The flame, steady and fearfully red, began to change color, a descending scale of blinding flashes echoing from the death-and-birth agony of the elements. Inside the beast steel was being born, and from the vessel’s roaring mouth the solid fire changed from red to blue, to orange, to yellow…

Paul does see things differently from his father in that believes that a more scientific approach to steelmaking will be necessary if they are to compete successfully with giants like Carnegie Steel. When he returns from college he sets up a metallurgical laboratory at the mill, and an open hearth furnace is installed to help in the switch of focus to specialty steels.

There is an immediate strong attraction between Paul and Mary, but the are obstacles–not only the very different class positions of Paul and Mary, but the fact that Mary’s brother..a key skilled worker at the mill…is also a labor leader, attempting to organize a union among Scott employees. And while William Scott Sr does care about his workers, he will resist any attempts to interfere with what he see as his management prerogatives.

Mary quickly comes to share Paul’s emotional bond with the mill, and she also develops a strong sense of connection to and responsibility for the entire family..indeed, more of a sense of connection and responsibility that than felt by some of the family’s own members.

The book begins with Mary starting work for the Scott family, but the history of the mill goes back further, to its founding by Paul’s immigrant grandfather–and the book extends the story through multiple generations, up through the early years of World War II.   The mill played an important role in arming Union forces in the Civil War, and a similar role in later conflicts.   The importance of this exemplar of heavy industry to the national defense is played up strongly, as one might expect in a book published in 1941.

Read more

Economic Development: From the Roof, or From the Foundations?

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An interesting thread by Kamil Galeev:

Why the USSR failed? There are two ways for a poor, underdeveloped country to industrialise: Soviet vs Chinese way. Soviet way is to build the edifice of industrial economy from the foundations. Chinese way is to build it from the roof. 1st way sounds good, 2nd actually works.

To proceed further, I need to introduce a new concept. Let’s divide the manufacturing industry into two unequal sectors, Front End vs Back End: Front End – they make whatever you see on the supermarket shelf Back End – they make whatever that stands behind, that you don’t see
Front End industries are making consumer goods. That is, whatever you buy, as an individual. Toys, clothes, furniture, appliances all falls under this category. The list of top selling amazon products gives a not bad idea what the front end sector is, and how it looks like.
Still, the production of ready consumer goods comprises only the final, ultimate element of manufacturing chain. The rear part of the chain remains hidden from our sight. We call it the Back End Back end products are not recognisable. You never bought an SMX 700 radial forge.

Read the whole thing.

I’m reminded of something Peter Drucker wrote in 1969:

In any aid program, the economist, especially the development economist employed by government, tends to impose his own values on the choice of priorities and projects. Understandably he likes things that look big, impressive, and “advanced”: a petrochemical plant, for instance. He likes the things he knows the poor “ought” to have. He has nothing but contempt for the “frivolous,” e.g., small luxuries. In this respect there is amazingly little difference between the Russian planners and the economists in the governments of the most “capitalist” nation.

The factory girl or the salesgirl in Lima or Bombay (or the Harlem ghetto) wants a lipstick. She lives in a horrible slum and knows perfectly well that she cannot, in her lifetime, afford the kind of house she would like to live in—the kind of house her counterpart in the rich countries (or the white suburbs) can afford. She knows perfectly well that neither she nor her brothers can get the kind of education they would like to have. She probably knows perfectly well that—if lucky—she will marry some boy as poor as herself and as little educated who, within a few years, \vill start beating her out of sheer despair. But at least she can, for a few short years, try to look like the kind of human being she wants to be, respects, and knows she ought to be. There is no purchase that gives her as much true value for a few cents as cheap cosmetics.

A cosmetics plant gives more employment per dollar of investment than a petrochemical plant. It trains more people capable of developing and running a modem economy. It generates managers, technicians, and salesmen. Yet the economist despises it. And the reliance on aid makes it possible for his moralism to prevail over economics and for his desire for control to prevent development.

(The Age of Discontinuity)

Of course Drucker understood the importance of the petrochemical plant; his argument is that things work better when the petrochemical plants are called forth by the cosmetics factories and other consumer-facing businesses, rather than planned from the top.

I don’t think the above points just apply to poor & undeveloped nations.  In the US, the development of the computer and semiconductor industries benefited greatly from the sales volumes and technical challenges created by the computer game field…which is not the kind of thing that a central planner would be likely to earmark as a critical industry for the future.

In a market economy, ‘industrial policy’ intended to spur vital industries via subsidies and tax incentives will often seem to make sense–the US certainly does need it own ability to produce high-end chips, for example–but carries the danger of starving other industries of investment dollars and talent. And some of those industries may turn out to have been just as critical, or more critical, than the ones focused on by the industrial policymakers.

Worthwhile Reading and Watching

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The Middle Ages may have been more colorful than usually thought, based on an inventory of garments belonging to people in medieval Valencia.

Memnon of Rhodes says “There is a subset of the US precariat class that is quickly becoming the new face of genteel poverty — characterized by a combination of high academic achievement and poor financial prospects (think post docs, academics, journalists, nonprofit staff).”. Noah Smith opines “This is the Bernie base. They are people who *could* get high paying jobs thanks to their general intelligence and education level, but are downwardly mobile due to some combination of emotional problems, chasing “cool” professions, disdain for the business world, and laziness.”

I note that to the extent these people earn over $150K and lives in dense urban areas, they will be categorized as ‘elites’ according to a categorization used in a widely-circulated Rasmussen survey of political attitudes.

(I never heard the term ‘precariat’ before, but it seems useful)

Bad election narratives, by Musa al-Gharbi, summarized and discussed at the Assistant Village Idiot’s blog.

Glenn Reynolds: Is AI Coming for Your Kids?  The example of the kid asking ChatGPT about how cars are made, and then talking with it about counting, is impressive, and there is obviously a lot of value in this kind of thing. But, the possibilities for the ‘nudging’ of political, social, and philosophical attitudes, in the direction desired by the creators of the system, is immense. See my post Stories and Society for some related thoughts.

Canada: the ongoing disaster and the possibilities for change, at Stuart Schneiderman’s blog, along with several other interesting items.

Several discussions going on about the the prospects for manufacturing in America:

Andrew McCalip says “We have an existential manufacturing problem in America.”

Zane Hensperger writes about reindustrialization and especially about machine shops.

Bill Waddell has several essays at LinkedIn, including Manufacturing in the Age of Tariffs, The Ethics of Free Trade, and 12 Million Middle Class Jobs Sacrificed on the Altar of Globalization.

Marc Andreessen says “From near total dominance in manufacturing to near total dominance in technology. What happens if we dominate in both? Let’s find out!” 

For contrast, a WSJ article: Factories Aren’t the Future.  I do wonder whether, when thinking about factories, the economist who wrote the article visualizes processes like this.

And finally, watch this mountain lion experimenting with a swing.

Happy Thanksgiving to all!