When you finish reading Robert J. Samuelson's article of
April 7, 2013 in the Washington Post: “Myths of post-industrial America ,” you
ask yourself two questions: What were the myths he meant to talk about? What
was his overall point, anyway?
If you hold the view that a speculation that did not pan out
is not a myth but a false speculation that should not have been made in the
first place, you reject the notion with which he begins the article. It is that
in speaking of an American yearning for a manufacturing renaissance, he
advances the notion that the benefits resulting from such renaissance will be
“make-believe” and not real.
He lists what he calls benefits and rejects them all without
identifying some of them as being speculation, not benefits. They are (1)
kick-starting the recovery (2) providing well-paying jobs, especially for
semi-skilled men (3) strengthening the middle class (4) restoring the heritage
of “making things”, (5) reducing the U.S. deficits and reestablishing America's
global economic preeminence. Instead, he says, “The transition from factory to office has raised living standards,
curbed pollution and reduced the number of grueling, often-monotonous jobs.”
Well, if you've read the Samuelson article before reading
these words, you would have noticed that I reversed the order in which he
presented this part of his argument. Indeed, he first talked about the good
things that resulted when the transition from the factory to the office happened,
and only then did he talk about the make-believe benefits that did not result
from a manufacturing renaissance. I did this deliberately to point out that the
approach he took has reversed the logical order of things, and has led to the
wrong conclusions.
And this will help me illustrate the reasons why he and
other debaters see the economy in static snapshots instead of the evolving,
dynamic process that it is. So, here is the core of my argument: The big
reversal that Samuelson should have made was to start the article with his last
paragraph which is this: “It’s a
mistake to romanticize manufacturing and disparage services; portraying them as
separate economic realms ... they’re completely intertwined. Almost all
services depend on manufactured products ... And almost all manufactured
products generate services.”
Had he started with those notions, he would have written an
article so different, it would almost be a contrarian view of what he actually
wrote. And that is because in acknowledging that there exists a relationship
between manufacturing and the services, he would have found it impossible to
ignore the dynamism that results from the to and fro between the two parts of
the economy. And this would have led him to see that the static view by which he
concludes everything is fine the way it is now may not be so.
Now the question: What is there to indicate that he has a
static view of the economy? Well, here is one indication: “To be sure,
manufacturing is reviving [in the US ].” Why is this not satisfactory?
Like he says it himself, manufacturing is reviving in America because: “Rising wages abroad and
heightened anxieties about global supply chains are causing some U.S. firms to relocate production from China or Mexico
back to the United States .”
What is not satisfactory about this is that it involves only some firms, not
all of them. They are only U.S.
firms and not from other nations. The relocation is from China or Mexico not from everywhere. Most
importantly, these same firms will just as fast leave the US and go to other
locations if and when better opportunities will present themselves. Thus, this
is a temporary phenomenon that cannot be counted on to be permanent.
Here is another indication as to why Samuelson has a static view of the
economy: “manufacturing’s decline is misunderstood.” Why is this not
satisfactory? Because, in response to the so-called misunderstanding, he
reverses the logical order of things and starts with this conclusion: “The
truth is that output has continued to climb” then cites numbers that contradict
this very conclusion. Here are the numbers he cites: “In 2011 near-record
output was 72 percent more than in 1990 and six times greater than in 1950.”
Why does this contradict what he says is the “truth” about manufacturing continuing
to climb in America ?
To see the answer, you need to brace yourself for some simple math, my
friend. It is that there are 21 years between 1990 and 2011. If you take the
21st root of 1.72, you get an average annual increase of 2.6 percent. On the
other hand, there are 61 years between 1950 and 2011. If you take the 61st root
of 6, you get an average annual increase of 3 percent. And 3 percent is larger
that 2.6 percent – but we're not done yet because the 3 percent includes the
dismal performance between 1990 and 2011. If we remove this part, and do the
math for the period between 1950 and 1990, we get an increase of 4.25 percent.
What these numbers tell us is that contrary to the Samuelson “truth,”
manufacturing has not been climbing in America ; it has been declining over
time during the 61 years between 1950 and 2011. This is simple math, not spin.
The inevitable judgment we must reach is that Samuelson – like many of
his ilk – started with bad math, reached a false conclusion then began an argument
based on that conclusion instead of doing things the other way around.
Unfortunately, this is also what many debaters do when they discuss other
subjects.
Now, in view of the relationship that exists between
manufacturing and the services, you ask: What does that do to the service
industries? Logic would say they should decline by the same proportion to
maintain a proper balance. But no, says Samuelson, this is not what is
happening. He says the service industries are expanding in the sense that there
is more of them, and they are paying higher salaries. He adds that it is a good
thing but you, the reader, interject: Oh yeah? In reality, it can be said that an economy having a shrinking
manufacturing base with an expanding high paying service jobs is a bubble
economy that cannot be sustained. To be convinced of that, just look at what
happened in the 2008-2009 period in America and elsewhere.
While Samuelson cheers because some companies have come back
to America from China and Mexico , he fails to see that a
hundred other nations are trying to lure those same companies to relocate in
their jurisdictions. What does that do to American society? Well, quoting Marc Levinson of
the Congressional Research Service, Samuelson provides the answer: “In 1970, the 17.8
million manufacturing jobs represented 25 percent of all 71 million U.S. jobs. By
2012, the 11.9 million manufacturing jobs were only 9 percent of the 133.7
million total … As for labor-intensive products, clothing output has dropped
more than 80 percent since 1980, with jobs falling from 1.3 million to
150,000.”
Even he realizes that this will ultimately lead to the following:
“Factories will provide less economic and social support for blue-collar
workers than in the past.” In other words, he says that when manufacturing
shrinks, the natural course of action would be for the service industries to
shrink by the same proportion – which contradicts what he was advocating
earlier. He also fails to mention that an attempt to go against the natural
trend will cause the formation of an economic bubble that will eventually burst
as it did in 2009.
And this is what happens to an argument when you adopt the
static view of things. So then, why do some people adopt the static view? They
do to come to a conclusion that will allow them to do nothing. Here is how they
do so: “More important, greater factory
efficiency raises living standards. Prices are held down; purchasing power
expands. This has enabled Americans to spend more on education, health care,
travel, recreation – and much more. Because these activities typically don’t
require the huge energy inputs of heavy industry, society becomes less energy
intensive.”
All of that turns
out to be an illusion because the efficiency is temporary. It disappears when things
begin to evolve in earnest and the manufacturing companies relocate elsewhere.
This is when prices can no longer be held down, and the purchasing power can no
longer expand. Thus, there will not be enough money to spend on education or
health care or travel or recreation. In fact, this is happening in America right
now, something that Samuelson ignores in favor of cheering the status quo and
advocating doing nothing.
Yes, this lack of
activities may require less energy than the heavy industries, but don't go to
North Korea and brag about it because if you do, they will have more to brag
about; they who are so efficient in this sense, they live in almost total
darkness.