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

Owen Byrne owen at permafrost.net
Sun Mar 21 05:45:38 PST 2004


I left out a key part of the algorithm.

If (Republican Administration) {

> US Good, Everybody Else Bad. Now lets get the facts to fit.
>
} else {
   US Bad (too much freedom!), Right wing dictatorships good. Ditto with 
the facts.
}
Owen

> 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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