Colin Grabow eloquently explains why David Goldman’s concerns over U.S. manufacturing and the trade deficit are misplaced. Five slices:
David Goldman is concerned about the state of American manufacturing. Describing the sector as critical to both the country’s economic standing and strategic position in a recent piece, he calls for a raft of measures—including some aptly described as industrial policy—to shore up American industry. This restoration of domestic manufacturing, he adds, will have the added benefit of reducing the US trade deficit.
The argument’s premise, however, is deeply flawed. American manufacturing is thriving, and the trade deficit is a (arguably mismeasured) statistic with little relation to a country’s prosperity. Goldman is proffering solutions in search of a problem.
Before getting to that though, it’s first worth highlighting several things he gets right. Goldman’s numerous criticisms of tariffs in general—which he describes as an example of a policy answer that is simple, clear, and wrong—and their application to China in particular are spot‐on. Despite raising tariffs on Chinese goods by 25 percent in 2019, Americans continue to import hundreds of billions of dollars’ worth of products from China. And to the extent Chinese products have been displaced by imports from other countries, many of them feature extensive linkages with Chinese supply chains. The imported goods may not be stamped “Made in China,” but the country is still critical to their production.
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Goldman’s central contention, however, is that warning signs are flashing around the state of US industry. And that’s where the problems begin. Although claims of manufacturing’s ill health abound, the numbers simply don’t bear this out. As a share of global manufacturing output, the United States accounts for a greater share than Germany, Japan, South Korea, and India combined.
And this manufacturing output isn’t just beverages and gummy bears. The United States was the world’s fourth‐largest steel producer in 2020, second‐largest automaker in 2021, and largest aerospace exporter in 2021. Approximately 20 percent of all US manufactured goods exports in 2021—totaling more than $169 billion—were “high technology” products (i.e., “products with high [research and development] intensity, such as in aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery”).
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Rather than celebrate the strong state of US manufacturing or the innovation of factoryless producers, however, Goldman instead wrings his hands over the lack of growth in manufacturing capital stock since 2001. Exactly why is not apparent. Capital equipment is a means to an end—production. And in that regard, US manufacturing continues to perform strongly. Indeed, gross output is only slightly off its all‐time high. Manufacturing exports, which reached $1.6 trillion in 2022, have steadily risen over the last 20 years and currently stand near record highs.
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That the United States imports more than it exports—or to state it another way, has more capital flowing into it than out—provides little obvious cause for concern. For those interested in correlations, the rising US trade deficit in recent decades corresponds with, among other things, increases in household income, household net worth, and GDP per capita. For all the alleged harm inflicted by decades of trade deficits, evidence of their damage is remarkably difficult to find in the data.
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Concerns over both the state of US manufacturing and the trade deficit are ill‐founded. Nevertheless, improvements to US regulatory, tax, and immigration regimes are sound ideas worthy of adoption. If provided with access to the necessary talent, capital, and sufficient maneuvering room, American industry should continue to serve as a fountain of innovation and prosperity for decades to come.
Escalating a failed trade war defies any semblance of sound policy and is motivated by faulty understanding. As Scott Lincicome explains, China does not pose a significant economic threat to the United States. To be sure, China has and continues to display bad behavior: from increasing authoritarianism, market interventions, and its own industrial policy to human rights abuses and intellectual property theft. But a prohibitive tariff does nothing to directly address China’s problematic behaviors. Instead, it risks upending a global economic system that has delivered massive gains (and yes, concentrated pains) to the U.S. economy.
Beito begins by chronicling the ways that FDR empowered his allies in the Senate to harass, undermine, and delegitimize political enemies and critics of the New Deal through formal investigations. According to Beito, the Black Committee—chaired by Hugo L. Black (D-AL) who was an ardent New Dealer—was used “as an instrument of political surveillance.” The committee was created to look into opponents of Roosevelt’s New Deal in 1935 at a time when many of the New Deal initiatives had suffered significant setbacks from the Supreme Court. The Roosevelt administration empowered and supported the committee’s activities. The IRS issued “a ‘general blanket order’ for access to the tax returns of potential witnesses.” Roosevelt’s Federal Communications Commission (FCC) also granted “authorization to require the telegraph companies [to] comply” with Black’s requests that his committee be granted complete access to witness telegrams. Ultimately, the Black Committee succeeded in its goal to “spread the view that the main anti-New Deal organizations represented a small cabal of big business interests” and it successfully discredited opponents of the New Deal and discouraged financial contributions to FDR’s political opponents.
After Roosevelt secured reelection in 1936, the emboldened president made mistakes. The most well-remembered was his attempt to add six additional justices to the Supreme Court. Opponents of FDR’s heavy handedness, including the National Committee to Uphold Constitutional Governance (NCUCG), played a key role in defeating the Court Packing Scheme. The NCUCG was also pivotal in organizing the opposition to Roosevelt’s restructuring of the federal government bill in the fall of 1937. In response to these setbacks, FDR empowered Senator Sherman Minton (D-IN) to form a committee to investigate who was funding opposition to the Second New Deal. The Minton Committee raided offices, utilized some of the techniques of the Black Committee, and tried to force the organizations to disclose their donors. Walter Lippmann wrote that the Minton Committee was an attempt by the New Dealers “to embarrass, worry, terrorize and destroy.” He continued, “If this is not to be described as arbitrary government and capricious tyranny, what is the accurate way to describe it.” Like the Black Committee, the Minton Committee’s major success was in freezing donations and silencing criticism. The message these committees sent was clear: if you oppose the president and his program, you might find yourself a target.
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Although some historians have criticized FDR, most of the historiography of Roosevelt gives him a pass on the abuse of civil liberties during his administrations and hails him as a champion of democracy often citing his soaring rhetoric and the Four Freedoms. In reality, as Beito demonstrates, Roosevelt’s liberalism did not lead him to care about Americans’ civil liberties and he violated the Bill of Rights time and time again while in office. Further, historians generally treat the internment of people of Japanese ancestry as an exception to Roosevelt’s solid record on civil rights and they generally excuse the president’s actions and cast blame on those who carried out the relocation and internment—such as General John L. Dewitt. Beito set out to prove that Roosevelt’s decision to intern Japanese Americans was consistent with his general disregard for the Bill of Rights.
[DBx: My opinion of FDR has always been very low. Still, the more I learn about him, my dislike of – and disrespect for – him deepen even further. He was a scoundrel. As Mencken said about FDR: “If he became convinced tomorrow that coming out for cannibalism would get him the votes he needs so sorely, he would begin fattening a missionary in the White House yard come Wednesday.”]
Antitrust strikes again. See also here.
My GMU Econ colleague Bryan Caplan explains why Japan is more open to tourists than is the U.S.
It’s hard to escape the conclusion that it’s Mr. Peterson’s worldview, not his delivery, that has gotten him into trouble with the authorities. After all, online snark isn’t yet a crime in Canada. Court documents cite instances of name-calling politicians and his refusal to use pronouns other than those that correspond to biological sex. In May 2022, court documents say, “he commented on a Sports Illustrated Swimsuit Edition cover with a plus-sized model, tweeting: ‘Sorry. Not Beautiful. And no amount of authoritarian tolerance is going to change that.’”
In his willingness to fight back, Mr. Peterson may be an outlier. Many Canadians undoubtedly prefer self-censorship to the risk of getting crosswise with the Red Guard or being reported to human resources. But Mr. Peterson is a polemicist who is unafraid. This makes him a problem for the mob and a danger to a system that relies on cultural repression to advance its agenda.
It isn’t necessary to decide whether Mr. Peterson is correct in his views, or in the way he expresses them, to decry this bullying from on high. In a free society there is a right to be wrong. Sardonic commentary is an age-old rhetorical weapon. Mr. Peterson is entitled to his politics as much as the butcher or the baker.
Here’s more wisdom from Bob Graboyes. A slice:
An important parallel underlies both historical episodes. Both Hitler and Hamas were the cancerous outgrowths of respectable and sometimes altruistic intellectual movements that saw individuals as nothing more than avatars of demographic groups, defined by immutable characteristics.
