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Home Publications Blogs Beat the Press Does America Need Manufacturing? What Does Mr. Arithmetic Tell Us?

Does America Need Manufacturing? What Does Mr. Arithmetic Tell Us?

Sunday, 28 August 2011 14:36

The NYT devoted a major Sunday magazine piece to this question. It never raised the most fundamental question, if we buy all our manufactured goods from someone else, how are we going to pay for them?

Our goods deficit is currently running at annual rate of around $800 billion or 5.3 percent of GDP. We have a surplus on services of around $170 billion a year, less than 1.2 percent of GDP. If we lost all our manufacturing, then the deficit on goods would increase by about $1.2 trillion to more than 13 percent of GDP.

What services do we think that we will export to make up this gap? We are rapidly losing ground in many areas. For example in software and computer services we are already a big net importer from India. It is hard to see how this gets reversed any time soon. We do earn a lot of patent licensing fees, but these fees will always be vulnerable to a tide of free trade sentiment. Besides, it is very hard to imagine them rising beyond a couple of percent of GDP as a maximum.

One of our biggest surplus areas is tourism. This raises the prospect that the anti-manufacturing crowd thinks that we are too sophisticated to work in factories, but not to clean toilets and make beds. There is nothing wrong with latter (I have done it as a summer job), but it's not what most folks would consider upscale employment.

The bottom line is that unless we think someone is going to hand us trillions of dollars worth of manufactured goods for nothing indefinitely, then there is zero doubt that America needs manufacturing. It also needs people writing on economic issues who know arithmetic.

[Thanks to Hapa for catching the typo.]

Comments (13)Add Comment
written by fuller schmidt, August 28, 2011 4:03
Mr. Arithmetic - very funny. The idiots also want to crumble our state and national parks, safety and infrastructure, so they're going to kill off tourism too.
written by denim, August 28, 2011 4:30
Yes, it is all about Mr. Arithmetic. But every American that needs an income, needs an income from some source. Without hand waving and other magical deceptions, Mr. Budget has to tally every source of income and match it to every one that needs an income. Hard work. And way too hard for our current Congress and President. Way too hard. So I guess they are hoping for a Deus ex Machina event to save us in this tragedy. Mr. Market failed at it.
written by Union Member, August 28, 2011 5:07

We're moving on from an economy driven by a series of bubbles to one circling a black hole.
written by anthrosciguy, August 28, 2011 5:28
It's also difficult to see how the money from licensing fees, for example, manages to get spread around to enough people so that most people can actually afford to buy something.
written by hapa, August 28, 2011 5:33
title sez "ariRthmetic"
Accent on the wrong syllable
written by diesel, August 28, 2011 8:02
"As the former White House economic adviser Lawrence Summers put it, America’s role is to feed a global economy that’s increasingly based on knowledge and services rather than on making stuff." And feed them we will, with nothing left to export but soybeans, wheat and corn.

And now on to the larger picture....“All you had to do in the 1980s was say, ‘That’s industrial policy,’ and it killed anything it was hurled at,” says Senator Levin...“It was the kiss of death. And it set us back 10 to 20 years in terms of manufacturing in America.” What is different now, Levin argues, is that “our companies are not competing with those companies in Korea and Japan. They’re competing with those governments that are supporting them. It’s naïve to believe that we just have to let the markets work and we’ll have a strong manufacturing base in America.” In his view, the lithium-ion investments are tantamount to repairing a kind of market failure.

From the time of the Reagan administration to this day the big wheels were free-market finance types--disembodied intellects all. None of them knew a damn thing about how things are fabricated, repaired, maintained etc. In their estimation, Edison was a tinker. It's the old mind/body schism, and now we're reaping what they sowed. Those morons didn't realize that the point of life is to integrate mind and body through virtuous action. Strength and Intelligence.
Andy Grove: How America Can Create Jobs
written by Scott ffolliott, August 28, 2011 9:09
Andy Grove: How America Can Create Jobs
The former Intel chief says "job-centric" leadership and incentives are needed to expand U.S. domestic employment again
North Korean Model of Juche Independence Will Save the USA Economy
written by izzatzo, August 28, 2011 9:39
...if we buy all our manufactured goods from someone else, how are we going to pay for them?

Exactly. This is why the USA must adopt the well known self sufficiency principles of Juche from North Korea.

Forget about trade and make everything domestically. Turn Adam Smith's specialization and invisible hand into what it was intended to be all along - up by the bootstrap generalists who know a little about a lot which makes them flexible and adaptable enough to turn on a dime and adjust to whatever economic shocks the world may dish out.

To kick things off President Obama and Jeffrey Immelt will be conducting training sessions with survivalist cults to demonstrate how competition works in the real world to drive resources to their highest valued use like they do for GE in North Korea.

Bring back the America we knew that we made with our own hands. Don't buy it. Make it. Be free. Be Juche.

Stupid liberals.
GE be Juche
written by Union Member, August 28, 2011 11:11

Adam Smith and Kim Il-sung got nut'in on GE. GE is not only specialized and generalized; they're externalized. They make nuclear weapons, they broadcast Meet the Press, and they don't pay taxes-- and they always meet earnings expectations!

If corporations do sensitive work for the Pentagon, they don't have give complete SEC Filings. GE is Uncle Buffet's favorite kinda people.
written by jumpinjezebel, August 28, 2011 11:46
Did you see that article about "What Obama should announce in his jobs creation speach". Of course it came from some loon at Forbes.
written by Ethan, August 29, 2011 11:37
The private economy is creating jobs -- not very many, but some. The local, state, and national governments are losing jobs.
Seems to me the national government -- which can borrow at historically low rates, or even print money electronically or physically -- should finance local and state governments to keep police, firefighters, EMT's, teachers, sanitation workers, park/road/building maintenance people, etc. etc. employed (and consuming) instead of drawing unemployment and food stamps.
"free-market finance types"
written by fairleft, August 29, 2011 5:48
Diesel gets to the bottom of the problem, a very long-term domination of our economy and politicians by finance capital. And their grip grows ever stronger as manufacturing capital and manufacturing unions disappear in the U.S. Short-term finance capital motivated economies are bubbly but the long-term trend is always downhill.
written by al, August 29, 2011 9:07
yes. exactly right. there's no good reason we can't create more manufacturing jobs right here. there's also a huge demand for infrastructure improvements, and much of the required manufacturing for those projects could be done here too. but the policies must be in place to make that happen. and a solid commitment to workforce development -- whether on the job or in REAL training -- is necessary.

ah, just forget it. that'll never happen.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.