"We" still design a lot of things, actually. So Tom Friedman (that asshat) gets it wrong even when he actually tries to get it right. For example, Apple makes successful products, and it has people who design them who still work in the USA. But who makes them?

Among the industries that helped open the floodgates to offshoring production was the high-tech industry... companies like Intel that made many millionaires and billionaires -- that still do a lot of great engineering work in the USA -- set up their factories in places like Malaysia where they didn't have pesky labor unions. They beat back an attempt by the UAW to organize their Livermore fab (see page 152, "Inside Intel")

But part of the victory [over the UAW] was also the result of a successful, military-style campaign, convincing the staff of the carrots they would receive if they stayed unrepresented and the sticks they'd get beaten with if they didn't. For instance, the leaflets had pointed out in a dry, factual way that if workers went on strike and picketed outside the plant, they needed to realize that the company had the right to fire them and bring in replacements to take over their jobs.

That was the 1970s. Ironically, the choice of Livermore itself was already sort of an attempt to "offshore" work, away from Silicon Valley where experienced workers could demand better wages and benefits because they had other opportunities from other high-tech companies. Intel moved production so that workers in the new places would have no options. And they admit as much to anyone who chronicles the history of the company.

So where is Intel's Livermore fab today? It was closed in 1990.

The reason the pimps of the financialized, globalized economy were bleating on about the service economy is because those jobs were thought to be less likely to be offshored, and after all, surplus Americans are still needed to buy Chinese manufactured goods made in the production supply chain of US-based multinationals, otherwise Apple's stock won't go up.

Of course that was before it was figured out that you could even have your X-rays read in Bangalore. Now all bets are off... almost anyone can be rendered a surplus worker, whether it's the good engineers that asshat Friedman thinks we need, or the poor guy on the production floor who used to put together your television set, or even the doctor who suddenly finds the patients are going on a "medical tourism" trip. My friend is becoming a surgeon. I advised him to specialize in surgery for things where a person could not possibly survive a plane flight longer than one hour. I'm only half kidding.

I knew I liked Krugman as soon as it was announced that he would receive the Nobel Prize. Joe Scarborough, as he as done every time a so-called liberal receives this prize, went nuts. For the next three days or so he kept attacking the organization that gives out the prize.

As I understand it, Paul received the prize for work done years ago, an analysis of global economics.

You are right in pointing out that new perspectives on economics are needed and I think these new perspectives will be discerned from actions taken by the New Administration.

I like this post and the comments.

Sorry, Tom, but we didn't fall into a trend - we jumped head first into the post-industrial-financial-service-economy-is-the-future abyss, and you were standing tall at the edge of the flat world assuring us the bungee cord was secure.

Naomi Klein, whose little finger has more IQ points than Tom's, points out over and over what a scam "free market" fundamentalism is. It's just repackaged feudalism. She calls the followers of Uncle Miltie Friedman just another group of shapeshifters who have found a "reason" for stealing stuff from other people.

I am glad that Krugman is walking away from the swamp of neo liberalism, even though I wish he were running away. One year ago he confessed to Charlie Rose that he had been convinced that "globalization" would raise living standards around the world, but did not foresee how devastating free market orthodoxy would be to the U.S. I found that a bit disheartening, but at least he had put the Kool-Aid cup down.
Great minds have resisted neo-liberalism, but they have been stuck in the basement, literally. Read Chris Hayes great article in "The Nation" called "Hip Heterodoxy" where he goes to an economist convention and all the anti Friedmanites are in a basement room with a cash bar while the so-called high priests of the free market have free booze and great food upstairs. It was also discussed here in 2007.
http://www.thenation.com/doc/20070611/hayes

Thanks for the discussion. We must get back to making stuff. I'm pretty sure economy writers and researchers have proven that innovation comes from being around people are who are building things. And there should be a partnership between the workers, researchers, and managers not a feudal caste system.

I agree with Tiggers.

Why are people so convinced that research & engineering follow production?

Apple is a great example. So is Microsoft. So is Nike. So is GE

There are still plenty of great products being created in the US

Sure. I didn't mean to imply that a company like Microsoft won't spend money overseas on R&D. They spend about $8bn a year in R&D so to spend a couple hundred million per year in China makes a lot of sense. But I don't think that this means that R&D is "following" production. Microsoft sells their products to the Chinese market, so it's only logical that they have local R&D that helps them design products tailored to that local market. The Chinese version of Excel for example works alot differently than the US version. I wouldn't want an American designing it. Same thing for the X-box

I also didn't see anything in the press release you posted which talked about the cost of engineers being a fraction of US costs. I don't think the people they're hiring in China are "replacing" any US engineers. I think Microsoft understands that if you're going to sell products to the Chinese, you need to have local Chinese workers that understand the local market. These people that they're hiring in China are additive to the company's overall R&D efforts

I'm also glad that the Taiwanese have climbed the ladder. But that doesn't mean the US can't fairly compete with the Taiwanese on design. And just because the Taiwanese have that capability, I don't think you'll be seeing Apple (for example) outsource all of their design work for the next iPod to Taiwan.

À propos of Friedman, he's just trying to change his spots to blend in with the new wave of opinion so that he can sell more books. He's like George Gilder, a well-remunerated cheerleader. Incidentally, I saw Friedman on C-Span with Joseph Stiglitz. Friedman sounded like a 12 year old in comparison, but the audience who had heard of Friedman but not of Stiglitz directed all of their questions to the 12 year old. Friedman is married to a Florida real estate billionaire's daughter and lives in a $13,000,000 house. He would never want to bite the hand ...