Bitter Suite

There's been a lot of attention paid recently to the mood of blue collar Americans (aka Reagan Democrats) in places like Ohio and Pennsylvania. The presidential candidates are full of praise for the noble American worker, promising them that they'll stem the "theft of American jobs by those damn furriners". The political conversation about global trade and jobs tends to go no deeper than "NAFTA sucks!" and "China cheats!". Hillary tries to win the "bitter" blue collar demographic by saying "NAFTA and the way it's been implemented has hurt a lot of American workers...". Hillary forgets to mention that NAFTA was authored by hubby Bill during the years she was working at his side, getting all that White House experience. Obama counters "...that he has always opposed NAFTA, and that the trade deal should be amended and renegotiated.", again conveniently forgetting that he used to support NAFTA. Both Obama and Clinton, speaking at the Pennsylvania Forum on Manufacturing, maintained that "...the policies President George W. Bush has supported have outsourced thousands of jobs all over the world but mainly to China, ultimately affecting the U.S. manufacturing industry." Whether they supported free trade in the past, both Obama and Clinton now agree that it was NAFTA and China who laid off all those American factory workers. In 2008 xenophobia is an easier sell than free trade.

The problem is, all this focus on NAFTA and China as the primary causes of lost American jobs is a load of baloney. No one can dispute that there are a lot of middle-aged Americans who've lost high paying manufacturing jobs over the past 20 years. They had found those jobs in the plants that bloomed in the United States after World War II. In the 1960s Americans only had to graduate high school and show up at the local factory to land a plant floor job with great pay and benefits. But those jobs did not last forever. Over the past couple of decades the news has been full of stories about US layoffs and plant closings on the one hand, and NAFTA trade agreements and the boom of manufacturing in China on the other. It's only natural to assume that a "giant sucking job vacuum" was siphoning jobs from Detroit and Gary directly into Tijuana and Shanghai. The problem is, that's not what happened. Americans didn't lose those jobs to Mexico or China. They lost them to productivity.

When we talk about the decline of manufacturing in the US we equate the loss of manufacturing jobs with a decline in manufacturing output. But manufacturing in the United States is not declining. US manufacturing output, as a % of GDP, is as high as it's ever been in the past 50 years. Unfortunately for Obama's "bitter" workers, while US Manufacturing output has remained strong, productivity growth has eliminated many of their jobs. Productivity in manufacturing has grown 2.8% per year since the 1960s, meaning that manufacturers only need 1 worker in 2008 to do the work that 4 did in 1968. In some industries, like automobile manufacturing, productivity gains have been even higher.

A walk through downtown Detroit provides ample evidence of closed plants and lost jobs. But Detroit autoworkers didn't lose nearly as many jobs to Mexico as they lost to the much more efficient plants run by Toyota and Honda (and even Saturn) in places like Tennessee and Kentucky. The loss of jobs in Detroit had little to do with globalization, they were lost because of the intransigence of autoworker unions, coupled with management incompetence at GM, Ford and Chrysler. Americans are still building cars. There are more automobiles being produced now in the United States than during the 1960s heydays of the big 3 automakers, but they're not being produced in old-line, union manufacturing cities like Detroit and Gary, Indiana. And they're being produced by far fewer workers.

The same is true of steel. In 1964 the US produced 126 million tons of steel while employing 515,000 steel workers. In 2001 the US produced 100 million tons of steel while employing 161,000 steel workers. Total US steel consumption fell about 20% during that time period, due to a shift to lighter-weight materials in cars and other products (weight costs money & energy, and steel is heavy). Note that while steel production and consumption dropped about 20%, steel worker employment dropped 68%. In 2001 the US steel industry produced 100 million tons of steel with 1/3 the number of workers that were needed to produce 100 million tons in 1964.

Displaced factory workers should be blaming computers, and robots, not China and Mexico. The digital revolution has created amazing efficiencies on the shop floor, in the warehouse, and in the supply chain. We love efficiency, it's a beautiful idea, but the reality of efficiency is that it saves labor, which means it eliminates jobs. That's what efficiency is all about. Not only are job losses in the US not China's fault, but in fact American workers and Chinese workers are in the same boat. Between 1995 and today China has lost about 15,000,ooo manufacturing jobs, even as their manufacturing output has soared. Automation, productivity and efficency are equally harsh mistresses for workers on either side of the Pacific.

Hillary's and Obama's xenophobic NAFTA and China bashing will do nothing to restore those lost manufacturing jobs. American workers don't need protectionism, they need new opportunities. We'd be a lot better off if politicians focused on balancing budgets, expanding education and increasing economic development, instead of making defensive promises to suspend NAFTA and put tariffs on Chinese toothpaste.