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Balance this!

from David Ruccio

MFG

Both Donald Trump and Eduardo Porter would have us believe the U.S. trade deficit is a serious problem—and that, if it can brought back into balance, jobs for American workers will be restored.

Nonsense!  

Yes, I know, Trump’s attacks on free trade did in fact resonate among working-class voters. And, as I have argued, there is clear evidence that that a tiny group at the top has captured most of the benefits of trade agreements and other measures that have allowed U.S. corporations to engage in increased international trade, both importing and exporting commodities that have boosted their bottom-line.

It’s possible then to make the case (as I did here) that mainstream economists, in their zeal to push globalization forward, ignored those problems and concerns, thus paving the way for Trump’s victory—and, at the same time, that the solutions for those real issues will not come from reducing the trade deficit and supporting a renewal of the manufacturing sector.

First, we have to understand, the U.S. trade deficit has risen and U.S. manufacturing output has fallen not because of the “blind forces” of international trade. For decades now, U.S. corporations have decided to increase their profits by a combination of shifting production to other countries and automating many of the production processes that remain in the United States. And they’ve left the American working-class behind.

Second, there’s no guarantee that increasing manufacturing output within the United States will be accompanied by an equivalent number of new jobs. Just look at the chart at the top of the post. Since 2009, U.S. manufacturing output has increased by more than 38 percent but jobs in the manufacturing sector have only risen by 8.2 percent.

The U.S. trade balance is thus not the problem. The forces of U.S. capitalism have sacrificed the American working-class on the altar of higher profits. They did so before Trump was elected—and they’ve continued to do so since.

Let’s see Trump and Porter balance that.

  1. Risk Analyst
    October 27, 2017 at 8:02 pm

    “Let’s see Trump and Porter balance that.”

    I’ll take a shot at it. Trump is busy right now. However, I have not heard of this Porter guy before; he is not Michael Porter and just seems to be some talking head from the NY Times with zero background in economics. Note he also totally disagrees with Trump on the trade deficit so I’m not sure why he is included in your example.

    First of all your commentary of increasing manufacturing jobs conflicts with your chart. Your commentary cherry picks a low for the business cycle in 2009 where manufacturing sectors such as autos and chemical products dramatically fell for reasons having nothing to do with long term trends of international trade and FX rates. The chart, in contrast, allows one to correctly pick more comparable data points of time before the last recession compared to now as two low unemployment periods. Using only the data points of 2007 and now, one sees a steady downward trend in manufacturing employment, and upward trend in manufacturing output. This relationship aligns with the technological progress where fewer workers are needed over time because of automation in addition to the (mostly) constant trade deficit representing the offshoring of jobs.

    Next, Trump to my memory never blamed the problem on only the trade deficit as if the thermometer were to blame for the hot weather. He blamed the inappropriate incentives encouraging the offshoring of jobs. In his pre-election speeches anyway he gave examples of tax incentives to close US plants and open them in Mexico and elsewhere. He also attacked manipulated FX rates on this issue. I think there was an economist, his name was something like John Maynard Keynes who pointed out the danger of trade imbalances and beggar thy neighbor policies. The knee jerk reaction to automatically oppose anything Trump supports here leads to rather strange writings on this heterodox site.

    • October 27, 2017 at 10:17 pm

      Risk Analyst seems to be at cross purposes with Ruccio here, for the latter is not blaming the trade deficit. He is making the very important point that U.S. Capitalists who don’t need to make anything, but profit from trade in both imports and exports, have CHOSEN to support making money over enabling U.S. workers to work, i.e. exporting jobs and importing robotics. The imbalance of trade is doubtless still made up by seniorage on petro-dollars, but as Ruccio is concluding, it is not relevant to the imbalance of blind mammon over kind sanity. The sad thing is that Trump has not yet put his money where his pre-election mouth was. I see no knee-jerk reaction in concluding that.

      • Risk Analyst
        October 27, 2017 at 11:02 pm

        If I missed his point then I’m sure he will forgive me especially since much of my energy was just that I like to hear myself talk sometimes.

      • October 29, 2017 at 1:04 am

        Well said!

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