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Fewer Workers, More Production / Artikel mises.org

verfasst von - Elli -, 16.04.2004, 21:41

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Fewer Workers, More Production
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by Jude Blanchette

[Posted April 16,
2004]

<img alt src="http://www.mises.org/images3/workers.gif" align="right" border="0" width="173" height="251">How
should the public, economists, politicians and workers measure the relative
success and failure of a particular industry? By its profits? Its stock price?
By its total employment? This may seem a rather elementary question, yet a
proper and clear answer would go a long way in silencing what has been the
loudest protectionist cry in recent memory. I am, of course, speaking of the
manufacturing sector and its so called"crisis."

I
have written elsewhere of the job losses that have occurred within
manufacturing. These losses are the logical and beneficial outcome of
increased worker productivity due to capital accumulation combined with the
gains from world trade. The American population should welcome and encourage
this trend. The cornucopia of goods that now confronts even the relatively
poor in this country is astounding.  

Yet the decision by most Americans to seek out the
cheapest goods on the market with little or no empathy for the American
manufacturer has created the most recent"crisis" to fill the
newspapers. By buying the cheapest goods on the shelf (which in many cases
emanate from <ST1:COUNTRY-REGION>
<ST1:PLACE>
China</ST1:PLACE>
</ST1:COUNTRY-REGION>
) the voters in the economic democracy have put pressure on manufacturers to
cut costs and this happens, we are told, through mass layoffs. It seems we are witnessing
the decline of the once mighty American manufacturing industry. But is a
decrease in employment an accurate representation of an industry's health?

What plagues the economic pessimists, in general and
specifically with regard to manufacturing, is the tendency to look only at the
immediate effects. Furthermore, trade, free markets, etc. are examined from
only one point of view, that is, from the observer who sees the layoffs, and
not the production. The decline of total manufacturing employment is reported
without any mention of output and productivity. Job losses are lamented while
the ability to produce more manufactured goods with less labor is ignored.

<img alt src="http://www.mises.org/images3/stlouisfed1.gif" border="0" width="448" height="249">

Case in point was the April 2nd announcement by the
Institute for Supply Management that their monthly index of manufacturing had risen
for the month of March. This is the 10th consecutive month the index has
shown growth in manufacturing, yet this report received scant mention in the
nightly news or on the editorial pages of the major newspapers. Instead of
celebrating that America's manufacturers are finally emerging from
the most recent recession with strong signs of growth, tales of
gloom and doom fill the air waves. The gains to consumers from less
expensive goods are largely forgotten. So too are the productivity
increases for producers who now need less labor to produce more goods. The
few, visible and concentrated job losses are much more resonant and
shocking than the widespread, subtle and diffused benefits of
growth.

While the trend over the past fifty years has been for
a gradual reduction in the number employed in manufacturing, both output and
productivity have increased. The labor force of the economy is moving more and
more toward services; that is, we are producing things in a way that doesn't
break our backs. This does not mean that we will not have a manufacturing
sector. Manufacturing today is as strong as ever—there simply aren't as many
people needed to produce the increased amount of manufactured goods. In
the May/June 2004 issue of Foreign Affairs, Daniel W. Drezner cites
data that shows global employment in manufacturing decreasing by 11% between
1995 and 2002, all the while global manufacturing output increased by
30% during the same period. Put another way, not only did the United States
experience a fall in manufacturing employment, so did the whole world, and as
this occurred output managed to increase by 1/3. As Drezner argues,"If
outsourcing were in fact the chief cause of manufacturing losses, one would
expect corresponding increases in manufacturing employment in developing
countries." 

This brings up the question: Which is preferred—a
healthy, productive manufacturing sector (that is, one that has shed excess
labor)—or a bloated, inefficient industry that can't and doesn't compete in
the global marketplace? <ST1:COUNTRY-REGION>
<ST1:PLACE>
China</ST1:PLACE>
</ST1:COUNTRY-REGION>
, for one, would be happy to take an even larger share of our manufacturing
market.

My favorite protectionist, Pat Buchanan, had this to
say in August, 2003:"Every month George Bush has been in office, <ST1:COUNTRY-REGION>
<ST1:PLACE>
America</ST1:PLACE>
</ST1:COUNTRY-REGION>
has lost manufacturing jobs. One in seven has vanished since his inauguration.
In 1950, a third of our labor force was in manufacturing. Now, it is 12.5
percent. <ST1:COUNTRY-REGION>
<ST1:PLACE>
U.S.</ST1:PLACE>
</ST1:COUNTRY-REGION>
manufacturing is in a death spiral, and it is not a natural death. This is a
homicide. Open-borders free trade is killing American manufacturing."  

As Buchanan may or may not realize, manufacturing is
not alone in its death at the hands of free trade. In the year 1900, roughly
half of the American work force was employed in agriculture. One hundred years
later that percentage had dropped (bled in Buchanan's words) down to 2%. Free
trade, innovation and capital creation had obviated the need for 98% of the
total work force. Farms today are big and highly technical. Imagine the
tragedy if government had"saved" the farmers from losing their jobs
100 years ago.

It is safe to assume that our manufacturing sector
would not be the rousing success it is today were there not the flexibility
and freedom of the American labor pool to move into new and innovative
sectors of the economy. Is the case of agriculture any different than
that of manufacturing? Not in the slightest. Both sectors are absolutely
necessary for the survival of the American economy and because of this, the
invigorating forces of competition and free trade should be left free to
benefit them.

<img alt src="http://www.mises.org/images3/stlouisfed2.gif" border="0" width="429" height="249">

While opponents are quick to blame the Chinese, Indians
and the market mechanism for manufacturing's slow death, few recognize the
structural reorganization that was necessary for manufactures to recover from
the most recent recession. The Wall Street Journal comes close to the
truth:"Manufacturing's resurgence is due in part to the depths to which
it fell during the recession and weak recovery of 2001-2003 because of
plunging capital spending, weak exports hampered by a strong dollar and
Herculean efforts to reduce inventories. In the process, some three million
factory jobs were wiped out." Today's manufacturers are recovering from a
Hayekian hangover. Drunk on the cheap credit and easy money of the late
1990's, these past three years have proven tough, yet necessary.

The debate over trade and manufacturing has reached a
critical point. History has proven that we can, and indeed usually do, kill
the golden goose. The threats of protection emanating from <ST1:STATE>
<ST1:PLACE>
Washington</ST1:PLACE>
</ST1:STATE>
are very real and have the potential to upset an already fragile global
economy. If we focus on employment, we lose sight of the subtle but very real
benefits that commerce and free trade bring to a populace. Public policy
should not be made based upon the personal circumstances of those who lose
their jobs due to trade for the same reason that we don't let the victims of
crime sentence their attackers. The impersonal forces of the price system and
free market are indeed harsh, yet this is exactly their great strength. Free
from the edicts of politicians and government rulers, the free market gives
every man his equal due.

_____________________________

Jude Blanchette works at the Foundation
for Economic Education in Irvington-On-Hudson,
NY. He can be reached at jblanchette1@hotmail.com.
See other
articles by him. Comment on this article on the Mises
Economics Blog.

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Fewer Workers, More Production / Artikel mises.org - - Elli -, 16.04.2004, 21:41