Arnold Kling  

Manufacturing Crisis?

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Government Incentives... Comment of the Week, 2003-09-0...

On Labor Day, President Bush announced that there would be a new Assistant Secretary of Commerce charged with addressing the decline in manufacturing employment. This prompted a number of skeptical responses.

Yesterday, Daniel Gross wrote,


The new assistant secretary must persuade American workers that broad, immensely powerful forces are at work against manufacturing in the United States—forces that are beyond the control of even the most powerful government in the world.

Today, in A Manufactured Crisis, Steve Pearlstein writes,

there is no manufacturing crisis that suddenly requires some new bureaucracy, a new round of protective tariffs or another big package of tax cuts.

The same day, in Manufacturing a Crisis, I wrote,

With the political season upon us, you will hear that we are losing manufacturing jobs to China. The new Commerce bureaucrat will be tasked with looking into this. I wonder how the assistant secretary will decide what is the "correct" number of manufacturing jobs that belongs in the United States. I wonder how he or she will decide which of those jobs China ought to give back. It used to be that China had central planners who would do that sort of analysis. But they did away with central planning in their manufacturing export sector, and that is what enabled them to begin to compete. I doubt that we have anything to gain by turning to central planning -- or to any form of government management of trade.

For Discussion. Are there any cures for the decline in manufacturing employment that are not worse than the disease?


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COMMENTS (5 to date)
Eric Krieg writes:

There seems to be a lot of focus on China's fixed exchange rate with the US dollar, and the fact that there are strict currency controls. The feeling now seems to be that the yuan should float, and Chinese nationals and foreigners should be allowed to move money in and out of the country freely.

But aren't both of those policies exactly the ones that led to the Asian meltdown on 1997? Wasn't the answer to the Asian meltdown to fix currencies and impose currency controls?

Bernard Yomtov writes:

Why is this a "disease?"

What principle specifies that an economy must have a certain percentage of manufacturing jobs to be healthy?

David Thomson writes:

“What principle specifies that an economy must have a certain percentage of manufacturing jobs to be healthy?”

That’s absolutely correct! The number of jobs is mostly a meaningless statistic. Have we already forgotten that in the early 20th century about fifty percent of the American work force earned its living in farm related industries? Today that figure is around three percent---and dropping! The price of food is so ridiculously low that many of us are becoming fat slobs.

Scott writes:

Isn’t agricultural production at an all time high as well? I suspect that what’s happening to manufacturing is a repeat of what happened to agriculture. We need fewer people because we’re getting more productive. Total manufacturing output continues to increase. Some lament the job dislocations, but those people need to go find something more valuable to do.

Eric Krieg writes:

Check out the front page of the WSJ today. Not all manufacturers are anti-China.

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