August 08, 2016
There is apparently a very big market for spreading the story that trade has not been a major factor behind manufacturing job loss and wage stagnation. How else to explain the massive supply of such pieces?
Robert Samuelson gave us his latest contribution is his weekly Washington Post column. The trick is to say that productivity has been the major factor costing us jobs in manufacturing therefore we shouldn’t be upset about job loss due to trade. This is one of those trivially true arguments. Yes, we have seen productivity growth in manufacturing throughout the post-war period, and that is a good thing. (It means we can see higher wages and living standards.) But the period in which we saw rapid job loss in manufacturing was the period in which the trade deficit grew rapidly from 2000–2007. (I deliberately left off the post-crash period to avoid confusion.)
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
We had productivity growth all through this period, but there was relatively little change in employment in manufacturing until the trade deficit began to explode due to the over-valued dollar at the end of the Clinton presidency. It’s cute how Samuelson and so many other elite types try to tell us that trade hasn’t been a big issue, but as he says in his piece, “we are being fed a largely false narrative on globalization.” It’s too bad our elites have such an aversion to dealing with the real world.
It is also important to note that the Samuelson types are the biggest protectionists in this story. These wall builders are not bothered by rules that prevent doctors from practicing medicine in the United States unless they have completed a residency program in the United States and prevents dentists from practicing unless they have gone to a U.S. dental school (or recently, a Canadian dental school). These protectionist barriers cause us to pay twice as much for our doctors and dentists as people in other wealthy countries, adding more than $100 billion a year (@ $700 per family) to our annual medical bill.
It would be nice if the Post and the rest of the media would occasionally provide some space to free traders.
Addendum:
I should mention that if we want to replace the jobs lost to a trade deficit, we should want to see a larger budget deficit. Unfortunately, deficit hawks like Robert Samuelson, the Washington Post, and the rest of the Peter Peterson crew have prevented us from running budget deficits large enough to get the economy back to full employment.
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