It’s the most emailed article at the NY Times today. Job Losses Hint at Vast Remaking of Economy screams the headline.
Unfortunately, the headline hints at a meatier article than actually exists. It’s mostly a summary of unemployment numbers, but it does raise the question of whether we are experiencing job destruction. This may be the case for lost manufacturing jobs. As you know, everything is less expensive to manufacture in China because there are 1.3 billion Chinese willing to work for a fraction of what Americans get paid—a near-infinite supply of cheap labor. So once a factory is shut down, it may not pay to restart it again in the United States.
I previously wrote about how our economy has transformed to a marketing economy. But that was before I thought about the issue of value creation vs. value transference. Does branding create value, or just transfer value? Because of marketing, people are willing to pay ten times more for True Religion jeans than for Levis, which themselves sell at a premium over no-name brands. True Religion has created psychological value, because people think the jeans are more valuable, even though they perform the same function as the Levis. The psychological value of the jeans causes an increase in the wearer’s status. See, for example, my post about the spoiled high school girls from Newton, Massachusetts. Nevertheless, there is a fixed amount of status in society. Thus the high priced jeans don’t create status, they merely transfer status from people wearing less trendy pants. Thus I conclude that brand-based marketing is a value transference activity.
One thing the Unites States exports is status. Rich people in China want to wear expensive American brands of clothing to lord their high status over their less economically successful brethren. That’s quite a scam we have going. The Chinese do all our manufacturing for us on the cheap so the richest of them can consume the most overpriced American products. Our marketing-based economy transfers value from China to the United States. If the Chinese ever wake up, and decide that their own Chinese brands are more prestigious than American brands, we are screwed.