Yesterday I sent a letter to the Washington Post challenging Harold Meyerson’s completely misinformed understanding of the state of manufacturing in the United States. Today I sent this other letter challenging another of Meyerson’s misunderstandings:
Protectionist Harold Meyerson asserts that the higher tariffs endorsed by protectionist Sen. Sherrod Brown would inject “some pro-American considerations into our trade policy” (“Just One Word: Factories,” August 12).
Wrong. Higher tariffs would inject only some pro-American producer considerations into our trade policy – and only for some American producers.
The consumers who would pay higher prices in return for fewer and lower-quality goods and services would be Americans. And at least one-third of American imports today are inputs used by American producers to enhance their products’ qualities and their firms’ operating efficiencies. So higher tariffs would harm many American producers.
Does Mr. Meyerson rank as “Americans” only those relatively few producers who stand to gain from monopoly protection which would make the vast majority of the rest of us worse off?
Sincerely,
Donald J. Boudreaux
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Ka-pow!
Thanks Don. Very nicely put.
Bravo Don
Mr Meyerson seems to be a one-man myth spouting machine. Its almost like a cheeky libertarian ‘programmed’ this virtual character to spout nonsense.
Great rebuttal! Will use!
America runs a trade deficit in manufactured goods. Using:
http://www.bea.gov/agency/uguide1.htm#_1_19 IDS-0008
The 1st Qtr mfg goods imports (M2 -> M5) are $230B and the exports (X2 -> X6) are $159B. And these are the best trade numbers in years.
So, a very advanced economy has a net trade defict in mfg goods. Most advanced economies run a surplus in mfg goods. (Heck, they just plain run a surplus!) America use to run a surplus in mfg goods also.
Things have changed. America produces fewer of the mfg goods it consumes than it use to and than other advanced economies do.
Something is wrong. Government policy probably has contributed to the goods deficit and government policy changes are needed to turn it around.
Besides, as the worlds greatest debtor nation, America will have to service that debt by exporting material stuff to our creditors. The day will come when bonds just will not do it. It is reasonable for the government to craft a policy or policies to facilitate that change.
“Something is wrong. Government policy probably has contributed to the goods deficit and government policy changes are needed to turn it around.”
Does it not strike you sir/madame, that this needs to be expounded upon?
Government has created the mess through its insane mess of shotgunned regulations to please this group or that group, and you’re suggesting that government is the only one that can fix it?
Well, yes, but not by more regulations or laws; but, only by simply canceling the ones that they have already created.
The answer to a law in error is not another law, but to cancel the one that is in error.
I got a better idea.
This worlds biggest debtor nation should simply cancel all laws regarding what is exported or imported, and cancel any law that in any way gives public money to a private company for any reason or at any time, let private companies form, grow, profit, or, stagnate, and die as a normal course of life and stop using public money to prop them up in any way.
Let Archer Daniels Midland use its own profits to advertise its products, let the Popcorn council of America use popcorn sales profits to advertise popcorn, etc. etc., and we don’t even have to mention what has happened in the last year, do we?
Let’s cancel all laws dictating which trading partners free individuals or companies can do business with. If a nation or a company is a moral cesspool (I mean what the hell, after all they deal with this moral cesspool), let the people of the nation or the company deal with it, as long as the deals with our people and companies are trade worthy, government stay the hell out of it.
Let’s cancel all laws, passed by any level of government, giving any business or corporations tax breaks, not available to all individuals or companies, at any time or any place.
And, last as an aside, all the stats concerning trade thrown around by everyone above, I am driven to ask the question, “Regarding the Pipe manufacturer up the street from me, what percentage of his mfg output is sold domestically and what percentage to foreign business?
In other words of the total mfg output of the USA what percentage is sold domestically and what percentage is exported. What percentage of domestic sales of mfg goods is made of foreign produced goods and what percentage is made in the USA?
Does it matter a whole hell of a lot if we run a trade deficit or a trade surplus. I think Don et. al have made an excellent case that a trade deficit is not a bad thing, and their ideas permit me freedom. Opposing Don et.al. are those whose case is not, IMHO, so sound, and somehow their version always involves me losing or giving up freedom, more freedom.
Good post, vidyos! I would argue, however, that rather than cancel the laws passed by any level of government, we would be much better off if we simply canceled the government!
For the sake of thought, for the sake of discussion, think for a moment that entering our border from abroad in search of CPA, Circuit Product Auserhalbgegangen is CMI, Circuit Money Innerhalbkommen!
You also have an electrical circuit of CEI, Circuit Electrons Innerhalbkommen flowing into our border to complete the circuit by pushing out CEA, Circuit Electrons Auserhalbgehen
Our government then interposes an resistor to retard the flow of CEI, hence also retarding CEA.
Analogously, our government interposes tariff on CMI, thus slowing micro-economics of CPA.
This means that factory workers producing CPA take a hit on overtime, medical benefits, and paid vacation. Shipping industry takes a hit on shore leave and a shot at lonely Fraulein at Port HagenRowdy.
Why government levies tariff? To service public debt. Alternative approach would be to reduce public debt thus reduce debt service thus reduce its concomitant tariff induced economic slowing. Fast flowing economy would increase campaign contributions to cash strapped politicians.
Voila
!
Lawyers write laws that allow people and companies to hire lawyers to force those threatened with government force to hire lawyers.
Shakespeare had it right.
“Besides, as the worlds greatest debtor nation, America will have to service that debt by exporting material stuff to our creditors.”
Aside from a balance on a Barclay’s bank credit card, I don’t think I owe anything to anyone outside the US. I don’t think Barclay’s wants any of my stuff, though I do have some old ski boots I’d be happy to send them if you think that would help.
I don’t know what you owe or what kinds of deals you’ve struck but you’ll have to send your own material stuff. I’m using most of mine. And I’d rather you not send the government to take any of my stuff or have them pass laws that prevent me from buying the stuff I want.
The point is that the amalgamation of debt you have created for “America” may not be meaningful. Even if you are talking about government debt, I don’t believe the terms of that debt allow for the substitution of material stuff. I am not sure how the finance of government debt has anything to do with trade policy. Please tell me how restricting or taxing my ability to buy goods from outside the US reduces the federal budget deficit.
“Most advanced economies run a surplus in mfg goods.”
Therefore “a surplus in mfg goods” makes an advanced economy.
This is how people learn to do economics these days. We should burn all of the macroeconomics books and start from scratch. The fuel from the conflagration would be worth a hell of a lot more than the print.
Mr. Boudreaux, Amost all of the companies on the Shanghai index are government controlled. The mercantilist policies of China along with stimulus funds going to government cronies and officials make a poweful defense of China’s industries. The effectiveness of China’s trade policies with the U.S. result in China’s share of U.S. imports of 16% but its share of of the trade deficit at 58%. Your defense of classic mercantilism helps perpetuate the myth of the benefits of trade that result in the huge losses of value-added jobs. Please help the U.S. break down barriers to U.S. Goods and Services.
I live in a metro of 6-7 million people, encompassing 9 counties. I have heard of only one manufacturing unit in this entire area – it is an auto assembly place. In addition, There are some refineries and such, none of them have been built any time in the last few decades. I know of several factories that were shutdown over the last dozen years. Some of them were converted shopping malls. If AMerica’s manufacturing base is growing, I don’t know where it is.
Now, I believe that government policy – regulatory, tax and trade – is largely to blame for the crisis.
Free market oriented economists will have a tough time convincing public that America’s manufacturing base has been on the rise. Their time will be better spent in identifying the specific policies causing the current decline.
Come to Texas, S. Andrews. Houston leads the way, but Dallas, Austin, San Antonio all have a solid manufacturing base, and I can see it grow and expand every year as I drive around Houston.
I have been to Austin. I really like the place. I had half a mind to move there from Bay area. But, for my specific skills, I have more opportunities right here.
Could you tell me what kind of manufacturing industries are showing growth over there?
Austin and its burbs I think have more of the high tech industries, but in general I see just about everything here.
Understand that I do not go door to door and make a survey, but the in&out freeways as well as the circular beltways or loops have just consistently shown growth is happening as huge empty areas alongside those thoroughfares have virtually all been filled in with new business and mfg in the almost 20 years I have been back in Texas. I am constantly astounded when I go to some area where I haven’t had an opportunity or reason to go for some time, and I find what once was scrub forest or empty pasture is now some thriving industrial area with its accompanying support businesses like convenience stores, strip malls, housing developments.
Then I listen and read about what is happening around Texas in general and all the large cities are reporting much the same. My work takes me to other major cities here on an infrequent basis and the same thing happens when I go there. I look around and think “My God, where is all this coming from?”
I have a group of friends I meet with once a quarter for dinner, about 15 of us from an old legal support organization, and one particular friend is a supervisor for a huge home builder firm, and at our last meeting I asked him how his business was holding up, and he just smiled and said, “We can’t build them fast enough.” His firm concentrates in a suburb of Houston called Sugarland, and they build homes in the $250,000 up to $500,000 range.
We are blessed down here, for sure.
If you live in Texas you just keep looking around and saying, “Recession? What recession?”
If the Feds do anything to pull TX into the mess the rest of the country is in, Perry needs to take serious 10th Amendment action.
S Andrews,
In 1900 I believe that farming employed around 90% of the work force, today aound 2% (I may not be exact, but you see the spread).
Where did all these jobs go? Do we have 90% unemployment?
I am willing to bet a large sum that if you go to your local library and look for newspaper articles from the early 1900′s you will find the same arguments; just replace the words farming for manufacturing.
As productivity improves, as more automation becomes availabe, there will be less people required for manufacturing. I understand that. I wasn’t commenting about the number of people employed in the manufacturing sector. If all the people were replaced with robots, we will still have factories. My point was that, there are a declining number of manufacturing facilities, at least from what I can observer from my living and traveling experience.
If you look at the total area farmed in 1900 and compare it to the total area being farmed today, I am pretty sure that the number will be much higher today than 109 years ago.
If that is true, (I don’t know) it would only be because of the population growth we have and the need to feed the world.
I would say 1 acre of farmland is many many times more productive today from capital and knowledge. So if the population were the same today as 1900, the total land farmed would be much much lower.
I know in California some of the good growing land has been built on, I believe this is “Creative Destruction;” capital flowing to where it gets the most money, can someone add here or approve my thought?
Thanks.
It is true that the caloric needs of human beings can change only so much ( assuming relatively healthy eating habits ), based on prosperity alone. But, that is not true of other consumption goods. The increasing prosperity of the world is reflected in the fact that people are able to consume more of non-edible goods per person. More over, as you pointed out, there are simply more people doing the consumption. This would lead me to believe that there is a need for factories producing more stuff, not just for the sake of increased consumption per capita, but the much larger consumer base itself.
I guess Smith’s invisible hand does not apply to politicians acting in their own sell interest.
To the extent that they are participating in free trade for “their own sell interest”, yes it does. To the extent that they are taking a sledge hammer to the invisible hand, pulling out its fingernails, nailing it to the floor, and slicing off each finger in 5 mm increments–then no, of course not.
If ‘the invisible hand’ applied to anything anybody did no matter what, then it would be an empty concept.
“Doesn’t apply” may be too strong. “Doesn’t work as a well” might be more like it. And, “doesn’t work as well” could be applied to all political decisions, not just politicians, in relation to economic decisions.
Why? As Thomas Sowell explained well in “Applied Economics”, political decisions tend to be categorical, made with less care than economic decisions and made based upon the desired outcome rather than the track record of actually accomplishing that outcome.
Economic decisions, on the other hand, are incremental, made with much greater care and with much greater emphasis on the track record of accomplishing the desired outcome. And you get all this great info in the first 3-4 pages of Sowell’s book.
The fact that the invisible hand, or incentives and constraints people are confronted with, doesn’t work as well in politics is enough reason for me to want to limit government in almost anything except its basic function. I believe this truth was fundamental in the design of the Constitution.
Next time you go to the vote for a bad politician, who’s going to hold you accountable? Probably nobody. Find yourself in a habit of selling lemons to your customers and you won’t be in business long.
The Washington Post is posting some ludicrous articles. For example, this one on machinery and labor: http://www.washingtonpost.com/wp-dyn/content/article/2009/08/07/AR2009080702043.html?hpid=opinionsbox1 .
I critiqued it ( http://www.economicthought.net/2009/08/technology-machinery-and-the-human-laborer/ ), but as I read more I’m not sure if he’s being sarcastic, or if he’s being serious (especially the part about France and welfare).
Did Mr Meyerson also indicate specifically which American Products one especially should protect?
That, at least, would indicate where his loyalties originate from.
Here is another and unique perspective on globalization.
http://www.chron.com/apps/comics/showComic.mpl?date=2009/8/14&name=BC
Aplausos para el Profesor Don. Permítame usar sus propios términos: Usted es una gran cuerda de la libertad…
sandre,
Sorry for late reply, went away for weekend.
I see your point, from this earlier post;
http://cafehayek.com/2009/08/manufacturing-error.html
we know that the US manufacturing output is the highest ever even though it has declined to 30% of gdp.
So where us the sq footage? (New Factories, etc)
Maybe states with lower min wages or better tax shelters have actually seen and increase or good times like vidyohs says above. Can we find data on
growing manufacturing sq ft in states with lower min wages taxes? Texas?
http://www.economist.com/printedition/displayStory.cfm?Story_ID=13990207
Can we translate this to the protectionist to quite them down?
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