FRED Facts

by Don Boudreaux on January 14, 2019

in Data, Myths and Fallacies, The Economy, Trade

In my latest column for AIER, I use some data – mostly from FRED – to debunk some persistent myths about the American economy. A slice:

Take, for example, the frequent assertion that globalization or other economic changes in recent decades have caused the United States to deindustrialize. Not so.

Industrial capacity in the U.S. is today at an all-time high. Today it’s 15 percent higher than it was when China joined the World Trade Organization (WTO) in 2001, and 66 percent higher than when NAFTA was launched in 1994. Unsurprisingly, therefore, real U.S. manufacturing output is today near the all-time high that it hit in 2007, just before the Great Recession, and it continues to rise. Despite the fact that America continues to more and more become a service economy, manufacturers in America today produce 11 percent more output than they produced when China joined the WTO 18 years ago and 45 percent more than when NAFTA took effect.

A somewhat broader measure of non-service-sector output is the Industrial Production Index, which tracks the output not only of the manufacturing sector, but also of mining and of electric and gas utilities. Today this output is higher than it has ever been. (Just FYI: the U.S. is the world’s 4th largest exporter of coal, the 6th largest exporter of natural gas, and the 16th largest exporter of electricity.)

While there would be nothing at all wrong with U.S. output of goods and energy falling — service-sector output is no less economically meaningful, real, or valuable than is non-service-sector output — the plain fact is that U.S. production of goods and energy today is, contrary to popular myth, high and rising.

Also high and rising is the real net worth of nonfinancial incorporated businesses in the U.S. Adjusted for inflation using the Consumer Price Index (which likely overstates inflation), these corporations are today worth on net 62 percent more than they were worth in 2001, and 200 percent more than when America, in 1975, last ran an annual trade surplus.

Here’s something else that’s high and rising: U.S. exports. Today these are 85 percent higher than when China joined the WTO, 200 percent higher than when NAFTA commenced, and nearly 800 percent higher than in 1975.

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