05.01.07
Protectionist Politics
Donald Luskin, of the National Review, has a lot to say about Lou Dobbs. The article is worth reading, and he makes some intelligent points. Nevertheless, his tone throughout reminds me of a four-year-old child throwing a temper tantrum. I’m not suggesting that liberal commentators are any better behaved. I’d just like to send the whole lot for a “time-out” until they learn how to discuss instead of simply argue.
Dobbs: “Since the beginning of this new century, the United States has lost more than three million manufacturing jobs. Three million more jobs have been lost to cheap overseas labor markets …”
Luskin: “So just what is Dobbs promising? That if we had pursued protectionist trade policies, we’d have six million more jobs — leaving only 700 thousand people unemployed?”
While it isn’t clear what Dobbs is referring to in the second half of this comment, the first half is clearly referring to manufacturing jobs. These jobs have traditionally offered workers without a college degree the opportunity to earn a comfortable wage. The service jobs that have replaced them either require a higher level of education or pay much less. The concern here has more to do with the quality of the jobs than with the number of jobs.
Dobbs: “Salaries and wages now represent the lowest share of our national income than any time since 1929. Corporate profits have the largest share of our national income than at any time since 1950.”
Luskin: “Today, the income share of total worker compensation — wages and salaries plus benefits — is higher than in any year prior to 1967, and lands in about the middle of the narrow range in which it has since fluctuated.”
This is a very interesting point, especially given the well-known escalation in health-care costs. On the other hand, I’m reluctant to accept Luskin’s assessment of the situation without actually seeing his data. My impression from my own (perfunctory) research is that the median standard of living was generally higher in the ’70s and ’80s and has slowly eroded over the last two decades.
The discrepancy between Luskin’s statistics and my own observations might be explained by expansion of the “professional” class? Even adjusting for inflation, there are more families earning six-figure salaries than thirty years ago. The effect of this can be seen in the “luxury” industries (e.g. professional sports) and in the construction of McMansions across the country.
Dobbs: “The cumulative effect of more than three decades of trade deficits and mounting external debt has produced our first investment income deficit on record.”
Luskin: “Is there any particular reason why it is virtuous for us to earn more from investing in foreign nations than the entire rest of the world earns by investing in us?”
The “current account” deficit is troubling because it implies that Americans are consuming more than they are producing/earning, not a situation that can realistically be sustained forever. It is true that Dobbs (and Luskin) were focusing more specifically on the “investment income deficit”, however we shouldn’t lose sight of the larger picture.
Conclusions:
My own position is closer to Luskin’s than to Dobbs’. Labor-intensive manufacturing cannot be cost-competitive in this country as long as wages are many times higher here than overseas. We could theoretically raise protectionist barriers to trade, however this would result in a dramatic increase in the cost of consumer goods and a cessation of foreign investment in the US. We are economically vulnerable as long as we are dependent on foreign oil — people who live in glass houses should not throw stones!
A better solution is to prepare our population to compete for the skilled jobs in the global economy, jobs that are currently outsourced because companies are unable to fill them in the US! Teach our children (and ourselves) to read, write, calculate, and THINK, and our workforce will once again earn the standard of living to which it has become accustomed.
One final question — am I biased because I’m a teacher? Or am I a teacher because I strongly believe in the value of education?