Here’s a letter to the Financial Times:
Editor:
Endorsing “tariffs, capital controls, and friendshoring” as tools to bring about a “radical reorganisation of the global trading system,” Rana Foroohar writes that “deficit countries, particularly the US but also the UK, Australia and Canada, have had no choice but to balance out the loss of manufacturing jobs with excess debt, resulting in more fragile, financialised economies. The surplus countries, meanwhile — most notably China, but also Taiwan, South Korea and Germany — get jobs but remain stuck with weak domestic demand because households are directly or indirectly subsidising manufacturing” (“The global trade system is in desperate need of an overhaul,” Feb. 25).
Her claim is a torrent of factual ignorance and gobbledygook.
Manufacturing workers as a percentage of all workers in the U.S. peaked nearly 80 years ago. It has fallen steadily ever since in a downward trend unaffected by changes in the U.S. balance of payments. Meanwhile, between 2013 and 2018 (the latest year for which reliable data are available) China lost 23 million manufacturing jobs. Manufacturing employment in Korea shows no obvious long-run trend of increasing; the number of manufacturing jobs in Korea today (2022) is a bit lower than in 2015, and much lower than in the early 1990s. In Germany, manufacturing employment as a percentage of the workforce fell steadily from at least 1970 to 2012 and has since then merely leveled out. I can find no good data on Taiwan, but even if the percentage of workers employed in Taiwanese manufacturing is rising, that country would be counter to the long-run global trend of a falling percentage of employment in manufacturing.
And what can Ms. Foroohar possibly mean when she asserts that the loss of manufacturing jobs is “balanced out … with excess debt”? This assertion is word salad that bewitches only the economic illiteratae. As for her implication that the U.S. is suffering from excess debt, good luck finding supporting evidence. In 2019 (the last year before the gusher of pandemic spending), the average real net worth of an American household was 46 percent higher than it was 20 years earlier when China got Most Favored Nation trading status, and 118 percent higher than in 1987 (the earliest year for which I can get consistent data).*
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* Data on total household net worth are here, and these nominal dollars were converted into real dollars using this deflator. The number of households is here.
