The Ticker Quick Views on Politics, Economics and Finance
Hold the Obituary on Manufacturing!
This week, I received a pitch for a new book: "Sand in the Gears: How Public Policy Has Crippled American Manufacturing," by Andrew O. Smith. The press release cites the catastrophic, two-decade decline in manufacturing, attributable not only to globalization and cheap labor overseas but also to "misguided policies."
Without knowing exactly what public-policy remedies the author is advocating, my initial reaction was: Stop the presses! U.S. manufacturing is well along in its self-help program and is retooling with impressive results.
Since the end of the recession in June 2009, manufacturing output has increased 5.5 percent, almost 2.5 times faster than overall growth, according to a weekly newsletter by Joe Carson, head of global economic research at AllianceBernstein.
"U.S. companies have become considerably leaner and much fitter in a tough global environment over the past decade," Carson says.
U.S. labor costs have been rising more slowly than in other major countries, while manufacturing productivity is near the top of global rankings, behind Taiwan and Korea, according to Carson. Cheap natural gas has provided an additional cost advantage.
A record 28 percent of manufacturing shipments went overseas in 2012 -- and a record 58 percent to emerging markets -- compared with 18 percent in 2000. Profit margins in manufacturing industries are well above average, as technological innovation enables companies to substitute capital for labor. Still, manufacturing industries have been adding jobs since March 2010.
During the 2012 presidential primary, Republican Rick Santorum campaigned on giving preferential treatment to manufacturers. President Barack Obama talks about rewarding manufacturing companies for bringing jobs home. Both of them should look at the data, take a deep breath and see what the market has accomplished.
"The U.S. has never had an industrial policy; it had a housing policy," Carson says.
Yes, and that's worked out really well! Comparing the detritus from the housing bust to the renaissance in manufacturing, it's hard not to conclude that being hands-off is the best government policy. If Congress really wants to do something to help manufacturing, it should consider revamping the tax code to make the U.S. competitive internationally. The rest it can take care of on its own.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)