An excellent piece by Brad Delong here

I often don’t agree with him and I don’t with all here.

But this is an excellent piece:

Adding up the effects of the much-maligned trade agreements
The relative decline in employment in manufacturing since World War II is the biggest structural change, or evolution, to hit the American economy over the past half-century. Politicians, with their preference for truthiness over the facts, attribute roughly all the 22 percentage point decline since 1971 in the manufacturing employment share to NAFTA, to China’s entry into the WTO, and to a few other scattered “corporately backed unfettered free trade agreements.” But — I really would like to drive this home — the worrisome part from trade is not the decline in the manufacturing job share from 30 percent to 12.2 percent, but the “excess” decline from 12.2 percent to 8.6 percent. That worrisome part of the decline of the manufacturing job share is, roughly, only one-sixth of the total decline: 3.6 percentage points. And the amount of decline attributable to the two big bad trade agreements is only one-tenth of that: 0.36 percentage points.

In sum, we can attribute a mere one-tenth of the excess reduction relative to Germany in the manufacturing job share to NAFTA and to China joining the WTO.

10 comments on “An excellent piece by Brad Delong here

  1. Although I agree with his broader point, I’m not sure about his methodology of stripping out the manufacturing job losses that Germany suffered and saying that only the USA’s excess job losses over Germany’s is due to trade liberalisation.

    Although Germany isn’t in NAFTA, it is still affected by China joining the WTO, and it has been part of other regional trade liberalisations over that period, in particular the expansion of the EU. So some of Germany’s manufacturing job losses are also potentially caused by trade liberalisation.

  2. But I would have thought that losin manufacturing jobs is an inevitable part of having an advanced rich economy, and the fact that Germany is less far along the curve is due to the way the EUR works in their favour (on the surface) and that they are in reality stroingup touble for the future by standing around clapping themsleves on the back and enjoying their rather old fashioned economy which will at some point go tits up, when reality kicks in (ie the euro explodes, or implodes or melts down or whatever the fuck it’s going to do)

    Don’t get me wrong, I like manufacturing and stuff, but i get tired of people pointing at Germany and saying why can’t we be more like that?

    Cos it’s bollocks.

  3. Richard, is this just a special case of a general rule that all calculations by economists are very rough at best? Or has Broad DeLarge been particularly incompetent?

  4. Here’s a theory: Manufacturing employment is correlated with German-descended people. America’s proportion of Germanics has declined, Germany’s less so. (Feel free to extend this rule to other countries: Anglo-Saxons in the UK; Alsace in France, etc.)

  5. The issue is not that jobs have gone overseas but that few new and worthwhile jobs are appearing to replace those gone.

    And the cause of that is taxation/inflation/regulation/migration and scummy state control-freakery.

    Get rid of all that shite and jobs will return without a destructive Int’l tit-for-tat protectionist circus.

  6. Has US manufacturing output gone down? If not then I don’t see what all the fuss is about.

  7. I’m staggered. Ecksy actually almost makes sense for once. Change ‘few’ for ‘not quite enough’, though, because it’s a tiny percentage that have actually suffered significantly. (Ignoring the way all of us suffer from lower growth as a result of inept government, etc.)

  8. @BiI,

    It is curious that Germany can be both a successful manufacturing economy and a high-wage economy. It’s managed that through booms and “sick man” periods, the current weakness of the euro is no more a boost to it than the eyewateringly strong euro of the late naughties was a threat to it.

    It’s not a model to emulate because you probably couldn’t get there without having spent decades being what Germany was (at least since 1948) beforehand. Germany is an anomaly, economically, but then most places are. It happens to be the best at high-wage manufacturing, and of course not everywhere can do that. To minimise future problems – watch Japan and do not emulate should be top of the list.

    How Switzerland copes is even more of a mystery.

  9. The quality reputation helps a lot. As Sigmar Gabriel said a few days ago, when asked about how America could get Germans to buy more American cars, the (arrogant but correct) answer was “build better cars”.

  10. BiG>

    It’s a myth, anyway. Ford sells more cars in Germany than Opel. The anomaly is why Germany buys so many VWs.

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