Must-read: Martin Sandbu: “Manufacturing didn’t leave; it left workers behind”

Must-Read: Martin Sandbu: Manufacturing didn’t leave; it left workers behind: “America’s blue-collar aristocracy fell on hard times long ago…

…but its ghost remains influential in politics. That much is clear from Hillary Clinton’s vow to ‘bring manufacturing back’ and Donald Trump’s railing against the ‘mortal threat to American manufacturing’ (presumably any number of foreign countries with which the US trades, but in this case the target was the Trans-Pacific Partnership trade agreement). One problem with this rhetoric, politically potent though it may be, is that manufacturing has never left the US. As the chart below shows, manufacturing output has grown at a steady pace for decades, only temporarily thrown off course by recessions before returning to its previous trend. American factories today produce as much as they ever have.

Of course the number of jobs in manufacturing has fallen deeply — US manufacturing employment peaked in the 1970s — with particularly steep slides in the recessions of the 2000s. And this is what drives the rhetoric, and makes the Trans-Pacific Partnership a particularly delicate issue, in the current US political campaign. Mark Muro and Siddharth Kulkarni are quite right to refer to the blue line above as a one-chart explanation of why voters are angry. That’s understandable even though, as Jeffrey Rothfeder points out, job numbers in US manufacturing have been on a steady increase since 2010. However, the fact that output has kept going up while employment has sunk like a stone means that the political narrative of manufacturing activity ‘stolen’, or whisked away to other countries, doesn’t quite add up. What the numbers show is, by definition, that manufacturing has become more productive as well as increasing in total output. In other words, what has been happening — since the 1970s — is a productivity-boosting restructuring, not a shrinkage…