Robert Samuelson Spreads Confusion on Manufacturing
|Monday, 08 April 2013 03:52|
The Washington Post seems to have a quota for pieces that spread misinformation on manufacturing. Today's piece by Robert Samuelson fills the quota for the day.
The gist of the piece is that manufacturing employment has been declining in importance in the U.S. for decades and also everywhere else around the world. Therefore we should not expect any substantial boost to manufacturing employment.
This is the sort of three-card Monte story that people expect from the Post when discussing economic issues that are relevant to working people. Yes, manufacturing has declined in importance everywhere and yes, it has long been declining in the United States. However the issue is the rate of decline.
According to the Bureau of Labor Statistics, from 1973 to 1989 manufacturing employment declined at an annual rate of 0.3 percent. By contrast, it declined at a rate of 1.7 percent annually between the years of 1989 to 2012. If we had simply maintained the earlier rate of decline we would have another 4.7 million manufacturing jobs.
These years are business cycle peaks, however we get an ever sharper picture if we put the break in 1997 when Robert Rubin was able to put muscle behind his high dollar policy through his control of the IMF's bailout of the East Asian countries from their financial crisis. The annual rate of decline from 1973 remains the same at 0.3 percent, however the decline since 1997 has been 2.5 percent. If we had maintained the 1973 to 1997 rate of decline through 2012 we would have 4.9 million more manufacturing jobs today. That would be more than a 40 percent increase in manufacturing employment.
In the same vein, we have the comparison with other countries. As Samuelson's colleague Dylan Matthews showed us last month, the manufacturing share of employment in Germany fell by roughly a third between 1973 and 2010. By contrast, it fell by 60 percent in the United States. If the U.S. had seen the same pace of decline as Germany we would have another 8 million manufacturing jobs.
Alternatively, we can look at our trade deficit. At $500 billion it is around 3.2 percent of GDP. In economics textbooks, rich countries like the United States are supposed to be exporting capital to poorer developing countries, which would mean that we would have a trade surplus. But let's just say that we balance our trade and this was done through increased net exports of manufactured goods. (Manufactured goods account for the overwhelming majority of trade.)
This would be a 27 percent increase in manufacturing output. If we had a corresponding increase in employment it would translate into an additional 3.2 million manufacturing jobs.
In short, we can accept the basic points that Samuelson makes in his piece -- manufacturing employment is diminishing in its importance in the United States and around the world -- and still conclude that we should have many more jobs in manufacturing.
The main culprit is the over-valued dollar, which makes our goods less competitive in the world economy. And, for that tiny minority of economists and policy types who believe in accounting identities, the only way to get something close to a balanced budget without bubble driven levels of consumption, is by getting the trade deficit close to balance. This is not a personal opinion, it is basic logic and accounting.
But hey, Samuelson and the Post don't want us to think about manufacturing and those dumb workers who might get jobs in this sector.