Monday, August 02, 2004

Great Editorial in the Post
I am not going to do the editorial an injustice by commenting on it - I'll let it speak for itself.

Even though it's true that the deficit has recently grown sharply, deeper historical forces explain manufacturing's attrition.

What forces? An honest candidate might highlight two. First, Americans are growing richer, and richer people tend to spend less of their money on manufactured goods and more on services. As a result, the composition of production tends to shift. Second, manufacturing productivity has risen fast -- considerably faster, in fact, than the average rate for the economy. That productivity gain explains why manufacturing jobs tend to pay well. But it also allows firms to meet consumers' limited demand with fewer workers, so that manufacturing employment has fallen even faster than manufacturing's share of GDP.

So here's what Kerry ought to say. "My fellow Americans, I promised in my convention speech to revitalize manufacturing. But this sector's long-term decline is the flip side of our economic progress. Our manufacturing workers are marvelously productive, which is why they are paid well and also why they aren't more numerous."

While he's at it, Kerry could correct the impression that the pain an Ohio steel worker feels is about to beset millions of others. American voters are forever being told that workers in poor countries get paid rock-bottom wages and that there's something suspiciously unfair about this; "our plan calls for a fair playing field" was Kerry's summation of his trade philosophy at the convention. But the fear of foreign workers is exaggerated.

The reasons are explained in "Why Globalization Works," a powerful book by Martin Wolf, the chief economics commentator at the Financial Times. Foreign workers may be cheap: Chinese ones, for example, cost an average of $730 a year in the second half of the 1990s, as against $29,000 for the average American. But the average Chinese worker in this period added only $2,900 of value per year, while Americans added $81,000 each. U.S. workers are better educated, better managed and equipped with better machinery: They had at their disposal fixed capital worth 25 times as much as the machines their Chinese rivals used. No doubt, in the future, China's handicaps will erode. But China's wages will rise, too, offsetting the advantage.

Read the whole thing.

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