A Second Letter to the Hon. Gene Taylor

by Don Boudreaux on March 1, 2010

in Agriculture, Complexity & Emergence, Myths and Fallacies, The Economy, The Hollow Middle, Trade

26 February 2010

Rep. Gene Taylor (D-Mississippi)
Capitol Hill
Washington, DC

Dear Rep. Taylor:

You propose legislation to remove the U.S. from NAFTA
.  Your justification is that since 1993, the year NAFTA was ratified, manufacturing employment in the U.S. is down 29 percent – a fact that prompts you to assert that “NAFTA discourages investment in U.S. manufacturing facilities and accelerates the erosion of our industrial base.”

Manufacturing employment is indeed down – and will continue to decline.  But this fact reflects improvements in American manufacturing, for this decline is the happy result of higher productivity.  This higher productivity, in turn, is due chiefly to increased investment in manufacturing here.  Despite the downturn, that investment, in inflation-adjusted dollars, was nine percent higher in 2008 than it was in 1993* – a fact that’s in some tension with your assertion that NAFTA discourages investment in the U.S.  Also, manufacturing output in the U.S. hit an all-time high just before the current downturn.

(As an aside, if investment in manufacturing truly is discouraged, to find the real culprits look no farther than yourself and your deficit-spending buddies on Capitol Hill.)

The decline in manufacturing employment is no more troublesome than was the decline in agricultural employment.  Do you think that we’d be wealthier today had past generations panicked over falling agricultural employment and acted to obstruct the forces that enabled tens of millions of Americans to escape farms and move to cities, and all the while enjoy ever-fuller bellies?  If not, then why do you lament tens of millions of today’s Americans escaping from factories into jobs that generally pay better and are more interesting?

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University

* I used this Minneapolis Fed site to adjust the figures for inflation.

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