Manufacturing employment from 39
Fun graph, eh?
This is your manufacturing economy on globalization. Bear in mind that these numbers are absolute numbers, they don’t reflect the fact that the US population has grown significantly.
a high level Obama administration economic adviser is quoted as saying that America’s export future resides in exporting “consulting and legal services, software, movies, and medicine.”
Whistling past the graveyard would be the kind way to characterize that statement. Typical Summers/Geithner “brilliance” might be the less kind way of putting it.
US manufacturing was never going to stay as high as it was, relative to the size of the population, after World War II. The majority of the world’s manufacturing capacity had just been bombed into rubble, after all. A relative decline was always to be expected.
An absolute decline, however, is quite another matter, so let’s do a 30 second seminar on international trade and development.
No country other than a city state has ever industrialized except behind trade barriers. None. There are no exceptions. Mercantalism is how states industrialize. The trade barriers can be classic tariffs (like the US used), they can be direct subsidies, they can be through interest rate policy or they can be through making your currency cheaper than it otherwise would be.
For good chunks of the 2000’s, the Chinese government spent about 10% of their entire GDP keeping the Yuan undervalued. Other countries, like Japan and Korea also worked hard to keep their currencies undervalued (or the US dollar propped up, depending on how you want to look at it.) This made their goods more competitive than they would have been otherwise and the direct result was the loss of US manufacturing jobs. (One might also point out that this doesn’t qualify under any definition as “free” trade).
This isn’t the entire picture, just dropping the dollar won’t fix the problem, because if that happens, the US gets creamed on resource costs (read: OIL). This means the US is in a policy bind. Drop the dollar and get slaughtered by resource prices. Keep the dollar high, and lose jobs.
This isn’t just a policy bind, it’s co-dependency, in the worst sense, like when a drug dealer needs a customer’s cash and the customer needs his fix. Americans got something in exchange for this: they got cheap consumer goods, and funding for their overspending. At some points during the 00’s the American savings rate was negative!
In exchange manufacturing and other jobs were moved directly overseas. Off-shoring went to China, outsourcing (of legal, administrative, call center and whatnot) went to India, Canada and Ireland (because they all have large numbers of English speakers).
Breaking this policy bind is simple enough: first you have to break US dependence on oil, then you can tell the countries which are selling you drugs (which you desperately want and need, don’t blame them for your addiction to cheap credit and consumer goods) where to go. Then you go through a very unpleasant withdrawal period, which as any ex-addict can tell you, is hell on earth.
But the status quo isn’t so hot either, is it?
Want your manufacturing jobs back? Get off oil, then you can get off easy foreign credit and cheap consumer goods. Then you can have them back. And maybe once they’re back we’ll be able to buy an appliance which isn’t so lousy that it’s expected to wear out in 5 years max and be thrown to the curb.
One can dream.
jbaspen
The old Appalachian writer-philospher Joe Bageant summed it up pretty well when he quipped: “Obama has appointed the same damn folks who fucked it up to fix it”! Scott Fitzgerald (“there are no second acts in Amercan lives”) obviously never met Larry Summers or tax fraudster Timmy Geithner. Not to mind multi-millionaire oil speculator Rahm Emmanual and godfather Robert Rubin lurking in the shadows.
These appointments weren’t just desultory, they are mind-blowing. Using the so-called “output gap” as their latest excuse, these chutzpah endowed idiots are borrowing/printing trillions to prop up their Wall St. buddies and create an even more grotesque bubble.
Ian, does Obama really think that he can somehow co-opt or manipulate these Neo-liberal/con Wall Street types? Do you think that Obama is “one of them”; or, is Obama playing clever Realpolitic, cognizant that he “needs” these people for everything from economic recovery to an Arab-Israeli peace deal??
Ian Welsh
I think Obama’s fundamentally a conservative democrat, and unlike Bill Clinton (the best Republican president of my life) I don’t think he really ‘feels other people’s pain’.
BDBlue
It’s weird isn’t it? Usually politicians are good at least at pretending they feel the pain of ordinary folks, Obama can’t even do that. Most of the time he doesn’t register on my emotion-detector at all, the few exceptions were when he was angry over what somebody said about HIM (i.e., Jeremiah Wright suggesting he was just a politician). Of course, television is a cool medium and perhaps he radiates more emotion in person than he does through the tubes, but his lack of ability to connect with ordinary people – their anger, pain and fear – hurt him in the last election (until Lehman blew up) and I think could sink him in the next. While there are people who revere him, he doesn’t seem to have the same kind of emotional connection with most working people that, say, Bill Clinton had (and admittedly he was on the high-end of the scale).
senecal
The subject of this post is a long-term, structural development, not something that can be blamed on Obama, Bush or even Clinton (though he was the first tout for globalization, and thus belongs with Reagan and Thatcher as principal architects of the new world order.) The astonishing fact of the graph is that the number of manufacturing jobs today is exactly the same as it was in 1946!
I never thought of getting off oil as the best way out of this economic mess. It bears thinking about.
Ian Welsh
They made it worse. In particular Bush and Greenspan did. Putting the pedal to the metal in 98 precipitated the collapse. However, as with everything else, you’ll notice that the chart peaks in the 70s. That’s not coincidental.
BDBlue
As history passes, that 1980 election just gets bigger and bigger, doesn’t it? It’s not so much that Carter was some great liberal, but he got it on energy.
Ed
Obama’s two credentials for the presidency were his experience as a constitutional law professor and his time on the Senate Foreign Relations Committee. His expertise seems to be in law and in foreign policy.
The worst decisions of his presidency have been in economics and finance, while his decisions in other areas have at least been defensible. I think the reason for this is that Obama simply doesn’t know much about economics and finance.
senecal
Ed: I think you have to add foreign/military policy to the list of “worst decisions”. Actually, calling them decisions is misleading. Continuing the Bush policies was a condition of his election.