[FoRK] Another take on deficits, employment, etc.

Owen Byrne owen at permafrost.net
Sun Mar 21 05:30:00 PST 2004


Another. I might actually check the references except its another in
John Hall's huge collection of

US Good, Everybody Else Bad. Now lets get the facts to fit.

Owen

>An old Japanese rerun
>Alan Reynolds
>
>
>March 18, 2004
>
>
>When people talked about the U.S. "exporting jobs" jobs a decade ago,
>they always assumed the jobs had moved to Japan and Germany. Why?
>Because those countries exported more than they imported, and thus had
>chronic trade surpluses. They still do. 
>
>The 1992 Clinton-Gore campaign book, "Putting People First," somehow
>imagined that "Japan and Germany "threaten to surpass America in
>manufacturing by 1996." The Tokyo-based journalist Eamonn Fingleton's
>subtitled his 1995 book "Blindside" as "Why Japan Is Still on Track to
>Overtake the U.S. by the Year 2000." Americans were being sold an
>economic inferiority complex, and many bought it. Or at least they
>bought the books. 
>
> What was really happening? From 1990 to 2000, industrial production
>increased by 49.5 percent in the United States, 13.4 percent in Germany
>and 1.5 percent in Japan. By 2003, Japan's industrial production index
>was still much lower than it was in 1990. Trade surpluses appeared in
>Japan and Germany only because their economies, and therefore their
>imports, grew slowly, not because exports grew rapidly. Japan's
>merchandise exports grew by only 3 percent a year from 1990 to 2001,
>slower than Europe's 4 percent pace and only half as fast at the 6
>percent yearly increase in U.S. exports. 
>
>Manufacturing jobs declined in all three countries, and most others, but
>industrial job losses were much greater in Japan and Germany. From 1990
>to 1995, manufacturing jobs fell by 1.6 percent a year in Japan and by
>4.2 percent a year in Germany, but only 0.6 percent in the United
>States. From 1995 to 2000, manufacturing jobs fell by 1.9 percent a year
>in Japan, by 0.8 percent in Germany but only 0.1 percent in the United
>States. 
>
>Neo-Luddites who view productivity gains as bad news should take note
>that annual increases in manufacturing productivity from 1990 to
>2001were 3.8 percent in the United States and 2.8 percent in Japan and
>Germany. The country with by far the largest gains in industrial
>production and productivity also had by far the least traumatic loss of
>industrial jobs. That country was not Japan, which probably failed to
>overtake the United States even in sushi consumption 
>
>In the United States, unlike Japan and Germany, the secular trend toward
>automation of arduous manufacturing tasks was more than made up for by
>increased employment opportunities in finance, health, education and
>various professions. From 1990 to 2001 (which includes two recessions),
>employment rose 1.2 percent a year in the United States, compared with
>0.3 percent in Japan and 0.1 percent in Germany. 
>
>Most of these facts are easily verified at the Bureau of Labor
>Statistics website, bls.gov. But in the mid-'90s, as today, those who
>claimed that U.S. jobs losses were due to trade deficits never bothered
>to look at facts. Instead they assumed trade deficits meant lost jobs.
>So they likewise assumed that trade surpluses in Japan and Germany have
>meant those countries were gaining the jobs we lost. At last count,
>Germany still had a huge trade surplus -- $153 billion over the past
>year -- and an unemployment rate of 10.3 percent. 
>
>Trade was balanced in the United States in 1981 and 1991. Economies in
>recession don't need to import much oil, copper, bauxite, high-tech
>components, etc. The trade deficit increased after those recessions
>ended. But it would be absurd to claim (as some really do) that such
>increases in the trade deficit meant we would have had more jobs by
>staying in recession forever. 
>
>Despite the evident nonsense of equating trade deficits with job loss,
>and surpluses with job gains, that assumption is nonetheless still used
>by the AFL-CIO and Progressive Policy Institute to estimate or "impute"
>job losses to trade deficits. It follows that Japan and Germany must
>still be gaining all those jobs we are supposedly exporting. But nobody
>is foolish enough to try repeating that claim again. So those afflicted
>with chronic trade phobia have recycled their faded stories by simply
>replacing the words "Japan and Germany" with "China and India." 
>
>Fingleton's latest effort is an article called "Trading Down" in The
>American Prospect. Citing fellow curmudgeons Lester Thurow, Pat Choate
>and Lou Dobbs, Fingleton predicts "a devaluation from hell ... a truly
>devastating devaluation." Given the author's forecasting record, the
>dollar naturally started moving up on this non-news. 
>
>Such efforts to rewrite the old "Japan will overtake us" melodrama lose
>a lot in translation. Unlike Japan, India has a chronic trade deficit in
>merchandise, averaging about 3 percent of GDP, so India has to export
>services to pay for rapidly increasing imports of food and machinery.
>Diehard "twin deficits" zealots have even more explaining to do. India's
>budget deficit has ranged from 9 percent to 10 percent of GDP for a
>number of years, but that doesn't seem to have slowed the economy a bit.
>
>
>China still has a small trade surplus, but the notion that China has
>been stealing our manufacturing jobs faces a bigger problem. According
>to the Asian Development Bank (adb.org), China's industrial employment
>fell from 109.9 million in 1995 to 83.1 million in 2002 -- a drop of 24
>percent. Anyone who wonders where U.S. manufacturing jobs have gone need
>not bother looking for those jobs in China, Japan, Hong Kong or South
>Korea. All those countries suffered much larger percentage declines in
>manufacturing jobs than the United States has. Politically inconvenient,
>perhaps, but true. 
>
>Nobody denies that many manufacturing industries went through rough
>times from July 2000 to June 2003. Yet super-economist Brian Wesbury at
>gkst.com notes that the manufacturing component of the U.S. industrial
>production index rose at an impressive 7.1 percent annual rate over the
>past six months. Six months is not enough time for that big turnaround
>to have had much impact on employment, but it will. People who keep
>reminding us that many measures of employment are not yet back up to the
>very top of the previous peak -- which took nine years to reach -- are
>making a lot of noise without saying anything. 
>
>Whenever overly excited journalists, politicians and pseudo-economists
>start telling you the United States should worry more about economic
>strength in China and India than about economic weakness in Europe,
>Mexico and Canada, remember to check what they said about Japan and
>Germany overtaking the U.S. economy a mere decade ago. 
>
>
>
>C2004 Creators Syndicate
>http://www.townhall.com/columnists/alanreynolds/ar20040318.shtml
>
>
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