Thursday, December 1, 2016

Carrying Shibboleths

At the moment, I'm not going to get into a deeper discussion of the mechanics of the Carrier deal (though I will say in passing that announcing a deal to save 1000 jobs is better optics than standing around chanting "You did build that").  But it might be worth looking at a few of the attacks against this measure--and see how these attacks may fundamentally misunderstand some of the dynamics and history of manufacturing in the U.S.

Some critics note that the Carrier deal is just a drop in the bucket of the manufacturing jobs lost since 2000.  That's quite true, but small, incremental changes can be both a foundation for further change and a narrative rallying point.  Political messaging is in part about making the small example a sign of something bigger, so it's not clear why the smallness of this deal should invalidate any worth it might have.

But an even bigger argument made against the Carrier deal is that it's fruitless--any jobs saved will soon be eaten up by automation.  It's certainly true that automation is changing employment patterns and that some jobs have been lost--and will continue to be lost--to automation.  However, we should not turn automation into a shibboleth that freezes all thinking or that offers a comprehensive catch-all for explanations of the economy.

First of all, the huge U.S. trade deficit is not caused by automation.  For years now, the United States has supported a regime that incentivizes (often artificially) cheap imports from foreign nations.  Maybe this incentivization is in the broader interests of the American economy; maybe it isn't.  But, whatever its ultimate utility, this trade regime has caused some products that might be produced domestically to be produced abroad.  A reformed trade policy might cause some of these goods to be produced in the United States, which would in turn increase manufacturing employment.

Second, it's not clear how quickly--if at all--automation will ultimately devour all manufacturing jobs.  A chart in this Brookings Institution report is revealing: it shows that manufacturing employment (in terms of raw numbers of workers) was basically stable from 1980 to 2000.  The United States only shed millions of manufacturing jobs after 2000.  Interestingly, manufacturing gained far more in productivity in the twenty years between 1980 and 2000 (about doubling over that period) than it has in the years since 2000 (only increasing by about 25 percent).  Thus, the period between 1980 and 2000 saw huge gains in technology and productivity while not losing that many manufacturing jobs; the years since have seen a sluggish growth in productivity while also hemorrhaging manufacturing jobs.  This suggests that automation may not be a sufficient explanation for the loss of American jobs in manufacturing.

Third, even if automation will destroy many manufacturing jobs, there is no reason why policy-makers shouldn't take what responsible steps they can to ensure the survival of the manufacturing jobs that remain.  If more responsible trade, tax, and regulatory policies can help some manufacturing jobs stay even temporarily, that could be a not negligible win.  Human beings are not just economic inputs or outputs, so, if major economic disruption could be put off for even a decade, that could give older workers a chance to finish their careers before retiring while also providing space for younger workers to retrain.

The past eighteen months have shredded many Beltway political truisms.  There are some policy truisms that could also use reexamination.

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