Steve,
Love your site, but I need remedial help with economics. Our beloved senator, Fritz, exited politics by saying "at the end of World War II we had 40 percent of our workforce in manufacturing. And now we're down to 10 percent. We've got 10 percent of the country working and producing, and we've got the other 90 percent talking and eating. That's all they're doing." Insert Hollings joke here.
This has always bothered me, as well. My head tells me that production doesn't necessarily mean a physical product, and therefore there is little downside, but the gut says otherwise. Could you recommend a resource to foil my protectionist buddies? We have lost thousands of textile jobs in South Carolina, and will no doubt fill many service related jobs as a result. I trust the market, as long as I understand why. Just as flying in an airplane became easier after someone explained to you why the plane gets off the ground.
Thanks in advance if you can help.
Brian Stritt
Dear Brian:
First of all let's stipulate to something very important: the market stinks. It chews up and spits out people, businesses, cities.
Market adjustments -- the process of getting from "there to here" when those funny curves shift on the blackboard -- can wipe out a hundred thousand families. Just like that bored summer-vacation sixth grader who finds and crushes an anthill.
We have heroic-ironic expressions like "creative destruction" to describe this. And then there's Karl Marx:
...Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish [capitalism]. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices...are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned and man is at last compelled to face with sober senses his real conditions of life and his relations with his kind...
To face this grim reality and get some sort of understanding I'd suggest two starting points.
First of all, loss of job, decline of an industry, is just one of the many bad things that can happen to good people. There are bookstores of material out there addressing this question. Lots of these books are bad, but some are actually okay. This is way outside my field so I can't really advise here, other than to say economic trouble is only one of many kinds of misfortunes people face in life.
Second (and here I can be more helpful) we've got to remember the "urgency/there's got to be" rule. This rule states: just because you can say with great urgency "there's got to be an answer" doesn't mean there is one!
The simple hard fact in life is, sometimes there are no easy answers, or no answers at all. Sometimes anything we do makes things worse.
Having a service economy when we could manufacture virtually everything we buy from abroad feels really odd, until you go to Cost Plus and buy stuff for less than we could produce it. The fact is we've voted for globalization with our dollars, and this has cost lots of jobs.
But the economy is constantly shedding and re-growing jobs all at once. New firms, new jobs, new kinds of manufacture are happening all the time. This is a hard message for families facing economic dislocation -- until they get caught up in new activies and catch that great feeling of optimism America seems to generate.
Marx was wrong about many things, but he was absolutely dead-on correct that capitalism means constant revolution. In my lifetime I've seen tiny garage businesses grow into Microsoft and Apple, and there are lots more out there.
So what can we "do" about the market? Leave it alone. When it hurts our families and friends (as it will inevitably do) we've got to take care of each other as best we can.
And finally we've got to realize we built carnivals, amusement parts, Disney World and Great America because we wanted safe imitations of the breathtaking wonder of capitalism itself. So hold your breath and wait for the next exciting twist of the roller coaster, because this ride won't be over for a long, long time.
Best wishes,
EconoPundit
UPDATE: Bruce Bartlett adds this, suggesting in addition we round things out with quantitative support:
There's a better answer to your manufacturing jobs question. One is that the real output of goods as a share of real GDP has never been higher. In other words, manufacturing is fine. The decline in jobs is mainly the result of higher productivity. It would be stupid to sacrifice productivity just to keep jobs. The result would be a declining standard of living for everyone.
Second, the you have to be careful about defining a manufacturing job. Thirty years ago...manufacturers like GM tried to do as much in-house as they could. They had [whole buildings] full of accountants, for example, who were all counted as manufacturing workers simply because they worked for a manufacturing company. Now, GM contracts out its accounting services. So those same accountants are counted as being in the service sector, rather than the manufacturing sector. If you check the BLS data, you will find that the fastest rising occupational category is something called business services, most of which used to be counted in manufacturing.
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