Nobel-laureate economist James Heckman and his co-author Hanming Fang busts myths about the “China Shock.” Two slices:
There is growing evidence that, while Chinese imports did hammer certain regions, they didn’t cause large net job losses across the entire U.S. Recent research from the National Bureau of Economic Research finds that job losses locally were mostly balanced by job gains in other regions. Manufacturing-heavy areas in the Midwest and South saw employment declines, but services jobs sprouted in coastal and high-tech hubs like the West Coast and Northeast. Import competition shifted jobs rather than eliminated them.
By analyzing supply chains, researchers have found that the China shock slightly increased total U.S. employment from 2000 to 2007. Cheaper imports reduced costs for businesses and consumers, which stimulated demand and job growth in other sectors. On average there was a net employment gain of 1.27% in each region exposed to Chinese trade, alongside wage gains, when accounting for broader effects. Remarkably, even in some communities hit hardest by import competition, the overall employment effect was positive once new service jobs are counted.
…..
Another often-cited analysis found that about 88% of the manufacturing jobs lost in the 2000s were eliminated by productivity growth including that from automation. Whether a task is done by a machine in Ohio or by a low-wage worker in Beijing, fewer Americans are needed to produce the same output.
The danger of blaming Chinese trade is that the U.S. is misdiagnosing the problem and pursuing the wrong solutions. While tariffs on Chinese goods might bring back a few factory jobs, they will raise prices for everyone and hurt U.S. businesses that rely on imports. Current attempts to turn back the clock by introducing tariffs are a costly remedy for a poorly understood ailment.
The details of the deal remain cloudy, but it seems like Nippon will invest $14 billion to take over U.S. Steel, with a few caveats. On Sunday, Trump told reporters that the deal is “an investment and it’s a partial ownership, but it’ll be controlled by the U.S.A,” according to the Associated Press.
On Tuesday morning, Sen. Dave McCormick (R–Pa.) told CNBC that the deal ensures an American CEO will continue to run U.S. Steel (presumably as a subsidiary to Nippon Steel) and that the federal government will get a “golden share” in the company. That would “essentially require U.S. government approval of a number of the board members. And that will allow the United States to ensure that production levels aren’t cut,” McCormick said.
If true—none of this has been disclosed officially yet—then the federal government would effectively hold a majority stake in what remains of U.S. Steel after the Nippon acquisition is completed. In short, Trump would have converted Biden’s meddling in the affairs of a private company into an official, permanent place for the federal government on the board of U.S. Steel—which is, I stress once again, a private company.
Pierre Lemieux asks: What if Mississippi became a sovereign country? A slice:
Mississippi would be a poor country relative to the United States. The average hourly wage in Mississippi is $23.91, compared to $38.41 in California (Bureau of Labor Statistics, data for May 2024). On average, wages are thus 38% lower in Mississippi than in California. For the whole (current) USA, the average wage is $32.66, which means that Mississippian wages are on average (about) 27% lower than in the rest of the United States. As a newly sovereign country, Mississippi would be much poorer than the US, although still wealthier than, say, Vietnam or China.
Voices would be raised in the (remaining) United States to claim that American businesses cannot compete against their Mississippian counterparts given the latter’s “unfair” wage advantage. “We need fair trade, an equal playing field, with Mississippi,” American lobbyists and politicians would proclaim.
After the first national-account system in Mississippi is set up and its customs authorities have become effective enough at measuring trade flows, the new data would lead to further conflict. By virtue of a frontier having been drawn on the map, the trade deficit would suddenly become a politically contentious issue. It is likely that Mississippi currently has a trade deficit with the rest of the US, although it cannot be measured in the absence of border surveillance and control. After independence, many Mississippian lobbyists and politicians would get all pumped up about the trade deficit.
From a liberal-individualist viewpoint, nothing would have really changed: it would still be individual Mississippians and their private organizations trading with Americans and the latter’s private organizations. Many variables, including a few new ones, would adjust between the poorer traders in Mississippi and the richer traders in the US: the terms of trade and (if Mississippi had its own currency) currency exchange rates and the terms of trade; interest rates; foreign investment flows; public policy and government, etc.
Through the bully pulpit or by some other means, the president hopes to avoid the political nightmare of rising inflation while preserving his much-loved tariffs. But even if he were to persuade reluctant Walmart shareholders to eat every bite of the tariffs, it would merely hide part of the cost. It’s still there.
For example, such an outcome might mean fewer Walmart stores built and fewer people hired to run registers, operate pharmacies or stock shelves.
Iain Murray, Kent Lassman, and GMU Econ alum Ryan Young offer a positive vision for trade. A slice:
Another reason for humility in trade policy is that in a democracy, the other side holds power about half of the time. A cardinal, yet little-observed, rule in public policy is not to give yourself powers you wouldn’t want your opponents to have. That means building institution-level safeguards against mission creep to limit abuses. This is why Congress should be in the driver’s seat on trade policy. Congress must reach a hard-won consensus on trade before passing legislation, whereas a president can make multi-billion dollar policy changes on a whim with a late-night tweet.
On June 9th, Phil Gramm will talk about his and my new book, The Triumph of Economic Freedom.
James Bovard warns of “the deadly perils of predatory idealism.” A slice:
Nowadays, idealism is often positive thinking about growing servitude. Idealism encourages citizens to view politics as a faith-based activity, transforming politicians from hucksters to saviors. The issue is not what government did in the past — the issue is how we must do better in the future. Politicians’ pious piffle is supposed to radically reduce the risk of subsequent perfidy.
Idealistic appeals permit politicians to stack the deck in listeners’ minds. To believe an idealistic speech is to “do good” — akin to displaying a “Support our Troops” decal on one’s automobile. Idealism is the most dangerous species of political lie. The idealistic draping confers an obligation to believe, or at least to defer. The moral bonus a politician receives for invoking ideals usually exceeds any demerits for lying. Thus, lying about ideals is a guaranteed win for politicians.
Self-government cannot survive people idealizing their rulers. Telling citizens to glorify contemporary politicians is like urging battered wives to idealize their husbands. Why should we expect political idealism to be more honest than politics? It is time to cease being idealistic about idealism.
