Ikenson on Manufacturing and Meyerson
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Mr. Boudreaux states that: “manufacturing output has increased 81% since 1987″. That looks good BUT according to the BEA statistics for Value Added by Industries, real manufacturing of durable goods, as a percentage of GDP has steadily fallen from 17.1% in 1987 to 11.5% in 2008.
Aside: I wonder if Airbus is sourcing inputs from other countries for their China assembled A320s and are inputs being manufactured in the U.S.?
Seekingexports: No one denies that manufacturing output in the U.S. as percentage of GDP is falling. But that fact doesn’t mean that manufacturing output in the U.S. is declining. Every fraction has both a numerator and a denominator.
By the way: Given your penname, do you think that exports are the ultimate aim of trade?
I do not think that exports are the ultimate aim of trade. I beleive that the equation demands exports as well as imports to be valid. At this point in U.S. history we (U.S. citizens) have carried international trade to an absurdly unbalanced equation as importers. The way out of economic malaise for us we be greatly increased exports because the consumer is tapped.
Mr. Boudreaux, Please indulge me and explain where the lost U.S. manufacturing output as a percentage of GDP re-occurs. Is it in manufactured goods sold at retail? You have probably explained this before on this blog but I am a newbie. (Maybe as numerator and demoniator also).
There is no lost US manufacturing. Other parts of the economy are expanding, hence Don’s comment about numerators and denominators.
The numerator has increased 81% while the denominator has increase 130%, leading to a relative reduction in the “percentage of GDP devoted to manufacturing.”
If you were to examine the “percentage military budget devoted to tanks” you would get a rapidly declining number, while military budgets and power have most definitely expanded.
NathanS, this makes as much sense as government healthcare spending adding to non-government GDP, which it does. So, value-added manufacturing takes a hit but not manufacturing so everyting is ok — not to this economy.
Seekingexports, It looks to me like you are comparing apples and oranges.
What NathanS has said makes perfect sense but your reply does not. Value-added manufacturing does not “take a hit.” It only goes down as a percentage of GDP, not in actual dollars. The actual dollar value has gone up.
To put it in the simplest terms, if manufacturing doubles but the total economy triples, then manufacturing has gone down as a percentage of the total, but manufacturing has still doubled!
The trouble is that commentators like Meyerson have used the “manufacturing has declined as a percentage of the total” fact to mislead people into thinking that we don’t make as much anymore. In fact we make more stuff than ever.
So the 85% of the economy that was non-manufacturing in the good ol days was just a figment of our imagination?
Unfortunately Nostalginomics is becoming as popular as it is absurd these days.
If we look at the BEA statisitics we find that in 1947 manufacturing accounted for 25.6% of GDP. Please note that these are value-added inputs to the economy which is key. China has built the world’s third largest economy by major emphasis on building and holding onto value-added manufacturing. You give a lot of credit to consumption when you are dismissive of the fact that real manufacturing has gone from 25.6% to 11.5% of the economy since BEA records were started. Mr. Boudreaux has noted that foreign made inputs make up a substantial total of manufacturing; so yes manufactring has suffered from the loss of U.S. inputs (value-adding).
Check out this article:
Made in the USA’ still means something: Despite downturn, the nation remains the world’s leading manufacturer
http://www.msnbc.msn.com/id/30229507/from/ET/
It discusses some of the numbers in absolute terms, rather than as percentages. Here is a nice quote:
“[T]he U.S. ‘by far remains the world’s leading manufacturer,’ producing goods valued at a record $1.6 trillion in 2007 — nearly double the $811 billion produced a decade earlier. Indeed, the AP writer noted, ‘For every $1 of value produced in China’s factories [in 2007], America generated $2.50.’”