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The Strange World of Harold Meyerson

Harold Meyerson in the Washington Post wants America’s trade policy to help Americans. An interesting idea. And how should it do that? Harold wants to save manufacturing jobs, the key to prosperity in his view. He argues that because of foolish free trade policies such as NAFTA and other increases in trade:

…America has gone from being a nation that manufactured things to a nation that manufactures debt. Manufacturing (as Kevin Phillips
points out in the forthcoming issue of the American Prospect, which I
edit) accounted for 25 percent of America’s gross domestic product in
the 1970s but just 12 percent in 2006. Finance, which amounted to 12
percent of GDP in the ’70s, amounted to 20 percent in 2006.

If you read that quickly, it does sound pretty scary. It looks like our manufacturing output has been cut in half! Actually, manufacturing output since 1970 has roughly tripled. TRIPLED. I feel like writing the word again but I’ll refrain. But "TRIPLED" is a good word to remember when you keep hearing that America’s manufacturing sector is being hollowed out and we don’t make anything anymore and soon we’re going to be sitting around doing each other’s laundry.

The reason manufacturing has become a smaller proportion of GDP is because other sectors have grown even more. The reason other sectors have grown even more is because we have such high productivity in manufacturing over the last 40 years. That’s freed up people and resources to make other stuff.

In Harold’s world, that’s a bad thing, because that means losing high-paying manufacturing jobs for low-paying service jobs.

After all, doesn’t a steel worker earn more than someone working at the cosmetics counter at the department store at the mall? Well, yes, some service jobs pay less than some manufacturing jobs. But some pay a lot more. Like the jobs in the finance sector that Harold cites. He cites finance, I suppose, because it invokes the image of speculators moving pieces of paper around, doing nothing as real as making a car. But of course finance jobs pay very well.

Unfortunately for Harold, in the same edition of the Washington Post, we find a story with the line:

Median household income increased 41 percent from 1970 to 2006, though it never returned to its 1999 peak.

The story is about a recent survey of Americans’ financial situation. The story has some bizarre interpretations of the survey findings and I hope to blog on it later. But just look at that one number. A 41% increase in median income. It’s corrected for inflation. Because of flaws in how inflation is calculated it probably understates the growth in real income. It may not measure benefits correctly, another reason it may be understating the increase. But just taking it as it is, it sure makes Harold’s argument look pretty silly. And of course, the standard Census Bureau numbers on median income tell the same story.

America’s standard of living has been thriving at the same time that manufacturing is falling as a proportion of GDP.

You can find more on America’s trade deficit and manufacturing jobs here.