Forums

[Tyrone Slothrop]

Club might want to think about this as he sets up his island:

• Daniel Drezner posts an extract from a Wall Street Journal article (subscription only, and I don’t have a subscription), suggesting both that there is a serious shortage of skilled machinists in the US, and that “U.S. apprenticeship programs have dwindled as the large American companies that once provided the bulk of such training have cut back to save money and now outsource some of the work.” As I’ve noted before, there’s a serious case to be made that both these problems reflect underlying weaknesses in the US model of capitalism.
  
  Margarita Estevez-Abe, Torben Iversen and David Soskice have an important piece arguing that countries like the US, which have a minimal welfare state, tend to discourage people from investing in risky specific skills. If the market changes, so that these skills are no longer rewarded on the job market, people who have these skills may find it very difficult to find new jobs, or to retool themselves for a changing economy. In contrast, countries with a well-developed welfare state can provide a buffer, allowing people more time to find new jobs that match their skills, or to learn new skills if necessary. Estevez-Abe, Iversen and Soskice argue that countries like the US tend to produce skill generalists, who can shift easily as market conditions change, whereas countries like Germany, with substantial welfare states, more easily support specialist skills.
  
  Machining skills are highly specific - those who invest in the lengthy process of learning how to be “Swiss machinists” will find it extremely difficult to find new jobs if the demand for Swiss machinists falls. Therefore, one may reasonably expect that in countries such as the US (where there isn’t a safety net), many people will be reluctant to become Swiss machinists, instead preferring more generalized skills, that can more easily be transported from job to job. In contrast, in countries like Germany, one may reasonably expect that there will be no systematic problems of undersupply of machining skills (although there may of course be conjunctural ones).
  
  Furthermore, as sociologist Wolfgang Streeck has noted, German-style capitalism is better in specific aspects of training. It produces “beneficial constraints” that help ensure that certain collective goods are produced. Apprenticeship training is a key example - in a free economy, every firm has an incentive to underinvest in training, because it does not realize the full benefits (the individual may leave and bring the benefits of her expensive training to a new firm). In Germany, firms are obliged to participate in collective schemes organized by local Chambers of Commerce, thus mitigating the collective problem of underprovision.
  
  German capitalism is, of course, going through some rather serious problems at the moment. Still, in certain sectors of the economy, it does seem to do a better job than the US. This gives Germany a real comparative advantage in specialized machinery production - it exports more machinery than any other country. In the 1980’s, the popular wisdom was that US firms were being ground into in the dust by the Germans and Japanese; now it’s that the US economic system is inherently superior to its peers. It will be interesting to see whether this wisdom changes any over the next ten years.

Crooked Timber