A Few Charts That Speak Volumes on American Manufacturing
A response to the protectionists who think they have all the answers.
A recent article in The Free Press, “The Intellectual Godfathers of Protectionism,” tries to make the case that so-called “neoliberalism” has destroyed US manufacturing, sent jobs overseas, and decimated the American middle class. It’s essentially an assault on the post-WWII economic order, where the United States has seen unmatched economic progress, and human flourishing, while engaging in (mostly) free trade with nations across the globe. I say mostly, because the United States has utilized protectionist policies from time to time, such as the steel tariffs implemented during the Presidency of George W. Bush, which did not work.
Journalist Joe Nocera’s article reads like a giant victory lap for skeptics of global trade. Even the subtitle is dripping with arrogance:
“Once shunned, globalization’s doubters turned out to be right about its destructive economic and social consequences.”1
Oh?
But the quote that seems to be grabbing the most attention on social media, is this:
“No one anymore, on the left or the right, denies that globalization has fractured the U.S., both economically and socially. It has hollowed out once-prosperous regions like the furniture-making areas of North Carolina and the auto manufacturing towns of the Midwest. It has been a driver of income inequality. Perhaps most alarmingly, the U.S. has outsourced not just the manufacture of toys and furniture, but pharmaceuticals and semiconductors—products we need for our national security.”
Well, I deny it. I deny it strongly, and so does nearly every credible economist who understands the impact of trade, and can look past buzzwords and catchphrases like “hollowed out once prosperous regions.”
Nocera started with a logical fallacy, specifically, the bandwagon fallacy, or appeal to popularity. “All of these people think this is right, so it must be right,” essentially. That aside, there are metrics we can look at to test the claims being made in the article. Most of what Nocera is doing, is appealing to people’s emotions. Talking about hollowed out parts of the country and defunct factories is a tidy way to tug at folks’ heart strings. But it doesn’t tell us the whole story.
I promised charts, and charts you will receive!
This is the share of US employment in the manufacturing sector, going all the way back to 1947, and the beginning of the post-WII era. As you can see, the percentage of people working in manufacturing has been on a steady decline the entire time. As technology changed, so too did the US economy, and the way we worked.
Think about this. If you were alive in the 1700s, you were most likely going to be consigned to a life of hard labor. Whether it be chopping wood, or tilling fields, or whatever else, those were the most common types of jobs that people could work. There was limited, early machinery to help do those tasks. For example, the circular saw, which was instrumental in cutting lumber, wasn’t invented until 1777, and it didn’t appear in a sawmill until 1813! After it was invented, and after it was used in sawmills, less manpower was required to do the same work, prior to the invention of the circular saw.
This is one example, but you get the point. As technology evolves, societies can accomplish more with less. This is true of both resources, and manpower. So, jobs and inputs both shift according to what is required. Things get better, and easier. Tasks become more efficient over time, so long as there is technological progress.
On to the next chart!
What we have here is a comparison of manufacturing output across the major countries of the world. As you can see, the United States is ranked second, behind China. However, it’s important to note, that China’s population is enormous, and dwarfs America’s population, 1.4 billion to 346 million. So if you were to calculate this adjusted for population size, the United States would easily be ranked first.
Does this look like a hollowed out manufacturing sector to you? The United States is a manufacturing superpower. It’s just that, it looks different today than it did in, for instance, the 1960s. It’s true that the American economy is now primarily a service sector economy. We export more culture than we do cars, more software than beef, and more financial services than cotton.
A big driver of this argument that protectionists make, is the state of the American auto industry. The “Big 3” (Ford, GM, & Stellantis) are no longer employing as many people in factories/plants as they used to in the mid 20th century. They’ve lost significant market share too, going from a high of ~90% in 1965, to ~40% in 2010.
Protectionists will say that free trade eroded the ability of the “Big 3” to maintain their dominance in the auto industry, and forced jobs to go overseas. They’re actually half right! It’s true that increased global trade brought with it more competition that the “Big 3” were not used to. But you know who benefitted the most from competition? The average American! We have more choices than ever before, across a wide range of prices, which means more people can afford a car. Our standard of living rises in the process, too.
You know what else this led to? Jobs!
When the textile industry left South Carolina, the state was facing an employment crisis. Thankfully, global trade led to a surge in growth for the auto industry, in a new area - the American south! In particular, BMW has transformed the economy in South Carolina.
“BMW Group’s Plant Spartanburg drove Upstate South Carolina’s transformation from a declining textile economy to a thriving center of advanced manufacturing. Its 26.7-billion-dollar economic impact outperforms other major industries, multiplying across a vast network of in-state suppliers producing parts in Spartanburg, Greenville, and beyond. BMW is responsible for Upstate South Carolina’s density of engineering, supply chain, and logistics jobs, and has contributed to drastic quality of life and infrastructure improvements across our region.”
You can see that other southern states have also seen drastic increases to their share of auto industry employment. The jobs that left places like Michigan shifted, rather than disappeared, to the south and other places with more business-friendly environments.
We can and should do more to help people left behind by the dynamics of the modern economy. As technology progresses, it’s inevitable that people will need to adapt. But going back in time is not an option, and global trade, despite what the protectionists say, has done far more good for the average person than any central planner could ever do.
