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To: Tommaso who wrote (276614)	2/8/2004 8:27:40 AM
From: Pogeu Mahone	Read Replies (1) \| Respond to of 436258

ECONOMIC LIFE Promises are easier to make than jobs By Charles Stein, Globe Columnist, 2/8/2004 It's an election year and politicians are making promises. The Democrats campaigning in Michigan last week were promising to reverse the decline in manufacturing jobs and maybe even get back some of the jobs that have disappeared in the past three years. That's about as likely as Dennis Kucinich winning the presidency. ADVERTISEMENT "Even in the best of times manufacturers are unlikely to add measurably to jobs," writes Mark Zandi in a recent article titled "Manufacturing Millstone." Zandi is the chief economist for Economy.com. As he points out, manufacturing hasn't been a job creator for an awfully long time. In 2000, the United States had just over 17 million factory jobs, roughly the same number it had in 1966. Rising productivity is the main reason the totals stayed so flat. Factories produced more; they just learned to do it with fewer people. Increased global competition also played a role. In some industries -- apparel is a good example -- production moved to cheaper locations. The same forces have been at work since 2000. The difference is that the process has been running on steroids. A global recession left the world awash in excess capacity, which in turn drove down prices for manufactured goods. In that kind of environment, companies had to double and triple their cost-cutting efforts, which meant more productivity gains and more outsourcing to the Third World. The scramble to cut costs coincided with the rise of China as the world's premier destination for low-wage manufacturing. The result: More than 2.5 million factory jobs vanished, the worst decimation since the Great Depression. On Friday, the government said the economy shed another 11,000 manufacturing jobs in January. Economists say a growing world economy will improve the situation, but improvement means an end to job losses, not actual job growth. The forces at work here -- productivity and global competition -- are both powerful and inexorable. That is not what voters in Michigan want to hear. In a place where an auto factory could be the state symbol, 175,000 manufacturing jobs have been lost since 2000. In January, Electrolux said it was closing a Michigan refrigerator factory and moving most of the 2,700 jobs to Mexico. Governor Jennifer Granholm called Electrolux's decision to leave "heart-wrenching." What do the Democrats propose as solutions? Nearly all the candidates want China to boost the value of its currency, a step that would raise the price of Chinese imports, and make American goods more competitive. Howard Dean wants countries like China to be held to higher wage and environmental standards. John Kerry is in favor of tax credits for manufacturers who make products in the United States. It is hard to say what voters think of this, but economists are uniformly unimpressed. "I worry that a lot of these ideas are protectionism in disguise," said Martin Baily of the Institute for International Economics in Washington. Asking poor countries to raise their wages and environmental standards is unrealistic and unfair, say economists. Extending tax breaks for domestic production could invite retaliation from trading partners. A revaluation of China's currency might help, but only modestly. According to Zandi, the average urban worker in China earns $54 a month. If a revaluation pushed those wages to $75 a month, would American workers really be in a better position to compete? Zandi's proposed solution wouldn't make him terribly popular in Michigan. He says instead of trying to hold back the tide, government should help those who are drowning -- people tossed out of good factory jobs who struggle to find new jobs at comparable wages. He argues that we need to spend more assisting "those unable to adjust successfully to a postmanufacturing economy." When it comes to manufacturing, it seems, you can't go home again. Charles Stein is a Globe columnist. He can be reached at stein@globe.com. © Copyright 2004 Globe Newspaper Company.