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Reich Is Repeatedly Wrong

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Here’s a letter to the Chicago Sun-Times:

Robert Reich’s “Free trade today enriches only ‘the one percent’ [2]” (March 17) is a carnival of confusions, faulty reasoning, half-truths, and outright errors.  Consider, for example, his assertion that “old-style trade agreements of the 1960s and 1970s increased worldwide demand for products made by American workers,” but that today “American corporations no longer make many products in the United States for export abroad.”

This assertion is false.  The real annual value of U.S. exports did indeed steadily grow from the end of WWII through 1980.  The annual dollar volume of U.S. exports hit their 1947-1980 high in 1980.  Reckoned in 2009 dollars, that 1980 figure is $376 billion.  But in 2015 U.S. exports totaled $2.1 trillion (also reckoned in 2009 dollars).  That’s an increase in the real value of U.S. exports from 1980 through 2015 of 460 percent.  Moreover, the average rate of annual increase in the real value of U.S. exports has been faster since 1980 than it was from 1947 until 1980 [3].

Finally, as a portion of U.S. GDP, U.S. exports are today – at 12.2 percent of GDP – near a post-WWII high [4].  In the period 1947 through 1980, U.S. exports reached their peak as a percent of GDP in 1980, when exports were 9.8 percent of GDP.  Yet that figure is 2.4 percentage points lower than today, and 3.8 percentage points lower than for each of the years 2011, 2012, and 2013 – the post-war years when U.S. exports as a percent of GDP were at their highest.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

(I thank my Mercatus Center colleague Michael Farren for alerting me to Reich’s op-ed.)

……

Not that it matters economically – because it does not – but today the top five U.S. exports are:

    1. capital goods
    2. industrial supplies
    3. consumer goods
    4. travel
    5. automotive vehicles

Note that of these top five American exports, only travel is classified as a service.  I constructed this list of five using Exhibits 3 and 6 here [5].  (I’m aware that Exhibit 3 – for services – has data for 2014 while Exhibit 6 – for goods – has data for 2015.  I assume, reasonably, that this fact doesn’t change the underlying story significantly.)

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