Nicholas Bloom, Kyle Handley, André Kurmann, and Philip A. Luck revisit the “China Shock.” Two slices:
Our research investigates the extent to which the opposing trends in manufacturing and services job growth are related. Our findings reveal that local labor markets more exposed to Chinese import competition experienced larger manufacturing job losses. But these losses were offset by stronger services job growth, which mostly came from job reallocation within firms. Importantly, the extent of this reallocation varied across regions. Places with a high share of college-educated workers—including much of the West Coast and large cities—saw successful transitions, with service job gains outpacing manufacturing job losses. Places with a low share of college-educated workers and high manufacturing dependence—including much of the Midwest and the South—experienced only limited services growth to compensate for manufacturing job losses.
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The effects of the China Shock on jobs differ from aggregate trends. After breaking down the sources of job creation and destruction in aggregate US data, our findings reveal that about two-thirds of the overall decline in manufacturing employment from 1997 to 2007 came from firms closing for any reason, China-related or otherwise. In contrast, firm closures accounted for only 25 percent of manufacturing job losses from the China Shock—the rest were mostly due to firms downsizing and plants switching from manufacturing to services. Existing firms that created service jobs account for nearly all the overall job growth in services from 1997 to 2007. But job growth from newly created firms and establishments accounts for 25 percent of the growth in service jobs attributable to the China Shock—the rest came from existing firms.
Our findings provide more evidence that the China Shock was not the only driver of increased manufacturing plant closures during the 2000s. Rather, the findings suggest that manufacturing job losses and service-sector gains do not conform to some of the broader patterns and anecdotes in common narratives. Additionally, the findings suggest that the China Shock promoted the entry of new service establishments, which is consistent with evidence of the rise of goods producers that do not use factories and that focus on marketing, research, design, and logistics.
MAKING AN appearance as the “Grumpy Old Man” on Saturday Night Live in December 1990, comedian Dana Carvey inveighed against the abundance of merchandise for sale.
“I don’t like holidays,” he raged. “Christmas shopping? In my day, we didn’t have shopping malls with hundreds of stores with gifts people really want. We had one store and it had no gifts…. That’s the way it was, and we liked it!”
That skit clearly made an impression on me. Because when President Trump recently said it was fine that his policies would mean fewer toys for children, my mind immediately flashed back to that long-ago rant by the Grumpy Old Man.
“Maybe the children will have two dolls instead of 30 dolls,” Trump blithely told reporters on April 30. “And maybe the two dolls will cost a couple of bucks more than they would normally.”
In an NBC interview a few days later, he repeated the point. “They don’t need to have 30 dolls. They can have three. They don’t need to have 250 pencils. They can have five.”
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Strictly speaking, of course, Trump is right: No child needs 30 dolls, just as no supermarket shopper needs a choice of 30 brands of coffee, and no one needs to have access to hundreds of streaming services for music, movies, and podcasts. For that matter, no one needs to live in a mansion like Mar-a-Lago. But everyone does need freedom. And America’s extraordinary, over-the-top cornucopia of consumer choices is a testament to what freedom — including the freedom to trade with willing buyers and sellers, unimpeded by arbitrary government shackles — makes possible.
After the fall of the Berlin Wall in 1989, the essayist P.J. O’Rourke wrote with exhilaration of America’s victory in the Cold War. “The fight against life-hating, soul-denying, slavish communism — which has shaped the world’s politics this whole wretched century — was over,” he exulted.
The best thing about that victory, O’Rourke continued, was that it was achieved not primarily by force of arms but through the moral power of consumer abundance.
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Telling Americans to accept fewer choices and pay higher prices in the name of a greater good would be a mistake for any politician — think of the harm Jimmy Carter did to his reelection prospects with his “malaise” speech in 1979. It is bizarre indeed to hear such a claim from Trump, who campaigned for office on the promise of a new “golden age” and assured Americans they would “become so rich” if they returned him to the White House.
As a billionaire who has never known privation and a solipsist who has never been able to see the world through the eyes of others, the president may simply be incapable of grasping that the vast array of consumer choices that so astonished [Boris] Yeltsin is an essential component of what makes America great.
Why so much tariff love? The mind-meld on tariffs is about power. Everyone wants his finger in the pie. Politicians and technocrats insist they know how to direct a $115 trillion global economy and how many dolls your child needs at Christmas. C’mon now.
Power corrupts. Like identity politics and climate hysteria, passion for tariffs is a sleight of hand to grab power. Tariffs bring insider dealing and special interests, as we see with iPhone and some auto exemptions. Are Barbie exceptions next? Mr. Trump admits that tech leaders “all hated me in my first term, and now they’re kissing my a—.” It’s cronyism on steroids.
Tariff bedfellows are far and wide. Michigan’s Democratic Gov. Gretchen Whitmersaid last month, “Tariffs need to be used like a scalpel, not a hammer.” Let me guess, carving out foreign autos? Rep. Pramila Jayapal (D., Wash.), a Mod Squad progressive, tweeted, “Tariffs can be an incredibly useful tool to invest in American jobs”—except, of course, she doesn’t like how Mr. Trump is doing them. Oren Cass of American Compass, a siren of the New Right, told the New York Times in a pretzel-logic quote, “I actually see tariffs as the much more free-market position.”
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Its adherents are warmed-over industrialist power mongers. The economic New Right is like New Coke—it leaves a bad taste in your mouth and won’t last.
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Supporting free markets is now labeled “zombie Reaganism.” The “Last of Us” true free-market supporters are considered heretics. Funny, because tariffs are the true zombies, with grunting and herky-jerky movements of brain-dead power grabbers.
Forgotten is that markets do the dirty work of facilitating trade by finding the right price rather than whoever last whispered in the president’s ear. People do the dirty work of figuring out what’s next and delivering progress. Entrepreneurs, not bureaucrats, drive change in the economy and wealth-building productivity. Self-interested politicians never hit on the right price to clear markets or pick the right industries to support. Mr. Market has them beat. Proponents shouldn’t go weak-kneed or lily-livered now.
Free-market skeptic Mr. Cass recently tweeted, “Free trade, free markets, choose one.” How dumb. This thinking exposes corrupt biases and appetites for power.
Elijah Rios won’t graduate from high school until next year, but he already has a job offer—one that pays $68,000 a year.
Rios, 17 years old, is a junior taking welding classes at Father Judge, a Catholic high school in Philadelphia that works closely with companies looking for workers in the skilled trades. Employers are dealing with a shortage of such workers as baby boomers retire. They have increasingly begun courting high-school students like Rios—a hiring strategy they say is likely to become even more crucial in the coming years.
“How tariffs are crushing small businesses: ‘Nobody in power seems to care’.” Two slices:
The owner of a San Francisco card-game company cashed in his money-market funds. The founder of a tent maker is looking for investors. A watch and jewelry company in Colorado is holding off on signing a new office lease. And a New Hampshire consumer-product company has laid off more than half its staff.
Around the country, small businesses that import goods made in China are taking actions—big and small—to try to outlast the current 145% tariff regime on items from that country. But many are worried that their companies won’t survive.
“Nobody in power seems to care about small business,” said Scott Anderson, owner of 5 Star North, which works with Chinese manufacturers to make its products ranging from acrylic markers to tiki torches. “At this point the only option I see is selling out the rest of what we have and shutting our doors.”
Anderson now has five employees, down from 12 at the start of the year. Three are looking for jobs and Anderson expects them to leave by the end of the month. The New Hampshire company is also running low on stock and expects to be out of most items in the next few months.
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Some small businesses that manufacture in the U.S. are also struggling, because they rely on imported materials. Joe Bissonette, whose company, Sky View Tents, produces tents in Colorado from Chinese fabric, decided not to reorder supplies for a summer restocking. Instead he will produce fewer tents—300 instead of a planned 600. As a result, he laid off one worker on his fabrication team of five.
Alex Tabarrok asked ChatGPT about Adam Smith’s views on mercantilism.
