Hill Article Ignores Gains in Manufacturing Productivity
In a September 27th Hill article, Russell Berman reports that House Majority Leader Steny Hoyer (D-MD) will promote a bill that aims to increase the manufacturing base in the United States. Berman writes, “In the speech to be delivered at the National Press Club, Hoyer will lament the decline in homemade goods during the last three decades and highlight Democratic efforts to promote ‘Make It in America’ policies as the November midterm elections draw closer. ‘Manufacturing, and the middle-class economy it creates, is a part of the American character that we must not give up,’ Hoyer plans to say, according to an excerpt released Monday.”
What Berman fails to acknowledge is that although manufacturing jobs have declined, manufacturing productivity has been increasing steadily. Mark J. Perry, professor of economics and finance in the School of Management at the University of Michigan shows on his blog how U.S. manufacturing output has doubled since 1975. George Mason economist Don Boudreaux adds, “In 2008, the value of U.S. manufacturing output – measured in inflation-adjusted dollars – was 84 percent percent higher than it was in 1980. In 2009, despite the severe recession, the real value of U.S. manufacturing output was still nearly 60 percent higher than it was three decades earlier.”
The economic theory of “creative destruction” is important when understanding the value innovation has on long-term economic growth. Popularized by Austrian economist Joseph Schumpeter, the theory says that the short- and long-term benefits of entrepreneurial activity and competition far outweigh the short-term losses caused by a new product replacing an old one. Audiotape makers may lose their jobs to the makers of compact discs, who may lose their jobs to a new technology in the future. The jobs that are lost are relocated to more efficient use. This is exactly what’s happening with our manufacturing sector and congressional attempts to disrupt this process and protect certain industries will only end up harming productivity and, consequently, the American consumer.