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Reversing Automation
Yesterday I asked what parts of NAFTA people on Ricochet would want to see renegotiated or abrogated. After reading the responses, I’m still not sure whether people here think that free trade is good, but NAFTA disadvantages the United States — that it’s not a level playing field, in other words — or whether we’ve got real support here for mercantilism.
I’m open to the idea that Adam Smith was wrong and free trade doesn’t, in fact, benefit everyone. I’ve been arguing, though, that it’s not trade that’s killed manufacturing jobs. It’s automation.
What if both are true? Here’s an interesting study from Ball State University: The Myth and the Reality of Manufacturing in America. It focuses on the effects of productivity change, domestic demand, and foreign trade on American manufacturing employment.
Although it took a hit during the Great Recession, the trend lines on production are clear: Manufacturing is not in decline in America:
In fact, it’s at record highs.
The increased productivity is largely the consequence of the industrial use of information technology:
In 1998, the inflation-adjusted output per worker was much lower than it is today. This is due to a variety of factors, chief among them being the automation and information technology advances absorbed by these sectors over this time period. The higher output per worker has meant firms could lower their price for goods. Very clear examples of this are the price indices for different types of consumer electronics.
We have people here who argue that free trade is beneficial, but our trade agreements aren’t fair. We also have people who argue that trade itself has cost jobs, or at least, that it hasn’t been obviously beneficial. No matter your stance on that debate, I think you’ll agree that the problem of automation’s effect on employment will remain:
The authors of the study endorse the idea that trade has cost us jobs: “The most scholarly work in this area (Ocemoglu, et. al. 2014) estimates employment losses in the United States due to imports from 1999-2013 in the 2.0 million to 2.4 million range.” But they argue that this only accounts for 13.4 percent of lost jobs.
So here’s my question: If we’re jettisoning free-trade orthodoxy, why not do it in a way that will bring back many jobs, not just 13.4 percent of them, at best? Why not ban the industrial use of information technology? Or at the very least, why not legislate steps that will strengthen rather than weaken unions, given that trade unions probably know better than anyone what’s costing them their jobs? Trade unions predicted the circumstances in which we find ourselves, and they seem to have a point about what would happen if the American working class confronted long-term employment precarity.
Here’s a 1983 survey of labor unions. Only 14 percent of unions advocated technology change; and most were only willing to accept it if its impact on the workforce could be minimized. This is why economists tend to find an inverse relationship between innovation and unionization.
You may say, “Well, obviously we don’t want to suffocate innovation. That would be bad for the economy.” But we have an economy that seems only to benefit urban elites. The Rust Belt made it overwhelmingly clear that it wants its jobs back and doesn’t want to hear one more word about laissez-faire economic theories. Unless Keynes was right all along, a big burst of spending on infrastructure projects won’t in the long term bring back those jobs. (It will be great for patronage and cronyism, however.)
Perhaps innovation — Silicon Valley, in other words — needs to take the hit for a while?
Published in General
Xennady’s position appears to be that because lots of people think free trade cost them jobs, free trade must have cost them jobs.
Apologies if I seem unimpressed.
Why the insistence on manufacturing jobs? Let’s start with jobs period. The next step, devising policies that enable people to do more with less. I.E., generating increased productivity. It often seems to me we’ve lost the purpose behind creative destruction. In theory, jobs destroyed should be replaced by production that better uses resources. What policies can we create that leads to better domestic employment of those resources?
You do realize that actual reality trumps “economic reality,” right?
People don’t live in an economics textbook after all- and rather often people who lose from free trade are the people who vote.
The tipping point in that scenario appears to have been reached.
Let’s make a distinction between (1) manufacturing itself; and (2) the role it plays in the economic system. To make it clear, the worry is jobs. It’s unlikely that the manufacturing sector will be able to generate as many jobs as it used to. Like agriculture before it, manufacturing will likely become a smaller and smaller slice of the job market – and like agriculture, the sheer productivity will mean that while we’ll get many more goods at much cheaper prices, manufacturing won’t be nearly the job generator it once was.
Manufacturing replaced agriculture as the big jobs generator. Now we’re hoping that something will come along to replace it, in turn. But we have nothing on the horizon just yet – and that’s why we’re worried.
The main social role that manufacturing has played was to generate jobs for people with no (or limited) higher education. The fallacy of the Clinton “information economy” is that the information sector requires higher education. That’s just not going to fly for half the country. And, not to mention, higher education keeps raising tuition – and community colleges can’t make up the gap. That’s a formula for disaster.
It’s a prisoner’s dilemma – although no individual has a responsibility to produce jobs, in a capitalist society, jobs come from the private sector overall. And so, here’s the challenge for capitalism: can it find a source of decent jobs for people without a college degree?
You’ve put forward no argument except that because people think free trade has cost them jobs, it must have.
This isn’t an argument. Factory losses in the rust belt are caused by a mixture of automation and over regulation.
This isn’t in dispute. Your proposed fix does nothing to address the problem. It seems to be nothing but an attempt to make Americans poorer in retribution.
I support tariffs as a tool of foreign policy and enforcing our standards on the Third World. You can trade freely, if you follow our standards. Chinese manufacturers have basically no regulations to deal with other than keeping the local officials happy. If your plant kills workers every day and poisons the local environment, oh well.
There are regulations out there that were put in place for good reason. (along with at least as many that were not) Once we pare back the regulations to the necessary ones, we can establish tariffs to balance against the fact that we do not view our citizens as disposable. It’s a way to level the playing field.
I’d also give a corporate tax break to any factory running in the US while tapering off subsidies. Same approach I’d do to family farms – farm income below a certain level is barely taxed.
I can only shake my head.
One of the things free traders explicitly admit is that this policy will cost jobs. They follow up by saying that net-net this is a positive. That is, we will benefit more by losing those jobs than by having a policy such that they are retained.
I’m sure at some point this was correct- decades ago, during the era when tariffs were the go-to policy of the regime- but not lately.
Anyway, the relevant point is that free traders admit that jobs will be lost because of it. At least in my experience, up until now. Now, I’m told, the idea that free trade costs jobs is just my imagination.
I get the sense that I’m arguing against religion, not policy.
I’m sorry that I challenged your faith tradition- but I do not share it.
What everyone forgets is just because Banking/Finance, construction and Agriculture are heavily regulated and have done fine. That does not mean traditional segments of manufacturing with its rooms full of laws and regulation have not hurt employment.
WELL SAID.
This is really the key concept. With government control comes less freedom, and when government control is reduced, freedom is increased.
Even that, however, is not the easiest question to consider. A completely free market in the USA facilitates slave labor in the third world. So are we in effect trading our prosperity for someone else’s freedom?
Do those who advocate free trade as an economic policy advocate or oppose using trade levers to encourage freedom?
More dogma from your faith tradition.
I have been told, in person, by people involved, that factories have been shut down and moved because of NAFTA. I have read of instances of Americans being filmed at work, to make training videos for their replacements in foreign countries.
More recently I have read of Americans being forced to train their H1B visa replacements, and the decision by Carrier to close a factory in Indiana and move it to Mexico figured in the recent presidential contest.
I suggest you look past your religion and discern the actual reality, political and otherwise.
Really? How does that work, exactly? What makes these people so sure that lower cost foreign competition would not have taken their jobs even without NAFTA? If their employer had not moved its factory to where the lower cost labor exists, then a foreign company would have started producing that product at a lower price, and put the American company out of business. Unless you put protectionist tariffs in place. Just be aware, please, that even before NAFTA, the US did not have protectionist tariffs on Mexican goods. What NAFTA mostly did was eliminate Mexican tariffs on US goods.
You claim that because someone blamed NAFTA for losing their job, that proves that they were correct. NAFTA is an easy scapegoat, often cited by people who have no idea what is actually in that treaty. All they know is that Ross Perot told them about a giant sucking sound, so NAFTA must be to blame.
There is a simple solution, if these folks want to keep their jobs. Work for the same low wages as Mexican workers accept. But they don’t want to do that. That want someone else to subsidize high wages for their job. And that’s fine, as long as you don’t look at the effect on the someone else.
What you haven’t seen is when other goods and services are cheaper from abroad, people get jobs in this country. Half of our meaningless trade deficit with China are industrial supplies for American companies to generate finished products that employ American workers. So with a tariff on those goods, some of those workers are out of a job.
And let’s say that China dumps it’s steel for cheaper prices. That’s bad for the companies that produce steel, but it’s good for those companies that buy steel and their workers. I wouldn’t like China to dump steel, but there is a benefit and there are way more workers in this country who depend on buying cheap steel than those that produce it.
Even most honest free trade proponents no longer try to argue that it doesn’t harm anyone. Even these guys will admit there are losers in your population if you’re a first world country trading with a third world country. The mantra used to be “re-training!”. They don’t even bother with that anymore. The only people free trade is a truly universal good for are the wealthy classes in all the trading countries. You can’t really argue that getting your TV’s cheaper justifies the trade policy if the trade policy is directly leading to considerable job losses.
It’s both. Free trade gave first world companies the cover to move their factories out of their countries and into third world nations where labor and construction costs were cheap. Now automation is finishing off the job that trade policy started. Policy was the shot, automation was the chaser.
And if self-driving trucks put 3.6 million drivers in the US out of a job? Whoa boy. What jobs do THOSE men get then?
AI, factory robots, automated cargo transportation: Frank Herbert’s Butlerian Jihad may not be science fiction after all if the social pressures build great enough.
Aside from the EPI (a liberal group, who no one else takes seriously) no one argues that deals like NAFTA have caused any significant job losses. The reference in Claire’s post is not talking about net job losses, and is spread across a 17 year span.
Some of us are in a position to see the jobs which are created because of free trade. Your anecdotes about job losses are no more valid than mine about jobs created. Regardless, we should argue the data, not anecdotes. And the data is not on your side here.
So in your opinion it is better to punish the 15 people who are better off with free trade to benefit the one who is not?
As Claire pointed out in the post, American manufacturing is at record highs.
If trade were the culprit here, that wouldn’t be the case. The jobs are vanishing because of automation.
So please answer Claire’s question: Do you think the government should intentionally stifle the use of innovation in manufacturing to save jobs? How far does your impulse to have the government regulate the economy extend?
How are you defining “better off”?
Good think we’ve just nuked TTIP, which would have eliminated that 10 percent tariff.
Here’s something I wonder…
We’re always talking about growth and percentages and data and theory and benefits and all that.
But what if people don’t care about growth anymore? What if we have everything we want and need and then some? Or at least half of us do?
What if the things beyond phones and Alexa and self-adjusting thermostats just aren’t that exciting and motivating for people anymore?
Maybe walling ourselves up and keeping everything in-house. though at the expense of growth and innovation, would allow the other half to catch up.
And then we can all bask in our sloth and let everyone else worry about stuff.
The H1B visa is an abomination which should be done away with immediately, if not sooner. Whether it is a good thing conceptually is no longer relevant; it has been abused by business with the tacit agreement of Congress and the Exec Branch to the detriment of many Americans.
I like free trade, in concept and often in execution. Too often, we (particularly but not exclusively the Right) conflate “business friendly” with “free trade”. There is a huge difference between government policy not interfering and government policy that facilitates and subsidizes. The H1B program facilitates and subsidizes the elimination of jobs for American workers.
Hi Claire. I suppose I am skeptical about the ‘jobs lost to trade’ data. The following data comes from Nike. http://manufacturingmap.nikeinc.com/
I don’t mean to pick on Nike. I have no axe to grind with them. I cite them only because they are remarkablely forthcoming with these numbers so they were public, simple to find and well organized.
As of August 2016, Nike claims a total of 1,069,020 factory workers engaged in manufacturing Nike (and Converse) products worldwide. Of these, 6,802 are in America. Just over one half of one percent of factory workers.
Factory workers in the North America Operating Region overall: 7,089. Not quite seven tenths of one percent of factory workers.
Conversely, for the quarter ended May 31,2016, North America accounted for $3.74 Billion of Nike’s $8.24 billion in revenues. A bit over forty five percent.
“Third World” China is about to set the standards throughout the Asia-Pacific, forever.
And we will probably be forced to adopt China’s standards, in due time.
Indeed. But to achieve this, we’d have to criminalize growth and innovation, because otherwise, an antisocial minority will be determined to have it.
My idealistic position is that government should not be deciding who gets punished or not. It should not facilitate the betterment of the fifteen at the expense of the one, nor should it protect the one at the expense of the fifteen.
I realize that there are very few situations where a single ideal can be applied completely, and that there are trade offs, such as the freedom abroad/prosperity at home trade off I mentioned in another post.
If productivity-enhancing technologies in US manufacturing were restricted, then the ability of US companies to export would be crippled, since their competitors in other countries would have no such limitations.
Moreover, US companies would also lose most of their *domestic* markets to imports from other countries…since the US companies would be at a severe cost disadvantage…unless very high tariffs were imposed.
It seems quaint that just because something has “free trade” embedded in its acronym that people believe it has anything to do with free trade. Free trade doesn’t take numerous volumes of law books to enact or describe.
One of many things that convinced me free trade dogma was bovine excrement was the relentless shilling from lobbyists paid by organizations who expect to benefit.
I recall an occasion when literally every story on a certain conservative website was pushing a particular trade deal, including one story with the memorable headline of “The hell with producers.”
You wouldn’t need endless shilling to convince people of the truth of your position, if your position was true. People would see the merits on their own, without the relentless asserting.
Much like how people figured out to vote for Trump, despite the hysterics.
Of course it does. Have you ever studied contract law?
If we are talking economics then we should be talking about being agnostic between the expected value of the costs to society of a jacobinist revolution whereby people are hunted down all over the world and nailed to the walls of their boardrooms and offices by application of a railroad spike through the face, an open casket funeral being widely viewed as too good for them and any alternative which costs the same, and prefer any option that costs less.
There are a few options like, for instance: An army of autonomous robot flying monkeys armed with hellfire missiles, which has the downsides of raining hellfire missiles on necessary customers, also becoming selfaware and destroying all of humanity.
That sounds good, but it doesn’t hold up to scrutiny. If we have a law that bars importation of Chinese toys because they are cheaper than American toys, that is a trade restriction. If we have a law that bars importation of Chinese toys with lead in them, that is a legitimate health regulation. You have trade deals and treaties and law books because it is necessary to sort out which is which.