The Republican Candidates on Manufacturing
By David Henderson
During the Republican debate in New Hampshire on Monday, Mike Patinsky asked how the candidates planned to return manufacturing jobs to the United States. Ron Paul answered first, claiming that we have exported our jobs. He connected it with Federal Reserve policy. I did not understand him.
[E]verything we’ve done in the last 20 or 30 years we’ve exported our jobs. And when you have a reserve currency of the world and you abuse it, you export money. That becomes the main export so it goes with the money.
You have to invite capital. The way you get capital into a country, you have to have a strong currency, not a weak currency. Today it’s a deliberate job of the Federal Reserve to weaken the currency. We should invite capital back.
First thing is, we have trillions of dollars, at least over a trillion dollars of U.S. money made overseas, but it stays over there because if you bring it home, they get taxed. If you want to, we need to get the Fed to quit printing the money and if you want capital, you have to entice those individuals to repatriate their money and take the taxes office, set up a financial system, deregulate and de-tax to invite people to go back to work again.
But as long as we run a program of deliberately weakening our currency, our jobs will go overseas, and that is what’s happened for a good many years, especially in the last decade.
The other candidates did a poor job too. All of them seemed to see the lack of manufacturing jobs as a problem per se.
Here’s what I would have answered:
It’s unlikely that we’ll have more manufacturing jobs. The story of economic progress is one of doing more with less. This has been especially true in U.S. manufacturing, where the value of manufacturing, in inflation-adjusted terms, reached an all-time high before our current recession. And while that has happened, we’ve had fewer and fewer people becoming more and more productive. Moreover, every major manufacturing economy, including China’s, has lost manufacturing jobs.
UPDATE: Tim Worstall has an excellent piece on this on Forbes.com.
UPDATE 2: In response to Mark Brady’s comment below, here’s what I found:
Manufacturing employment declined from the mid-1990s to 2002 in a number of countries whose economies are rapidly developing, including China, Brazil, and South Korea. In fact, China, Brazil, South Korea, and Japan had steeper percentage declines in manufacturing employment over that period than the United States.
This is from Economic Report of the President, 2004, p. 76.