WaPo Flubs Another One

Most educated readers have learned long ago that the Washington Post runs a close second to The New York Times in terms of flubbing that facts.  I won't go so far as to say they intentionally skew the analysis to support some political agenda, but still the danger is that they both have large readerships (albeit declining) and therefore considerable influence.  I know first hand how the WaPo in particular can cause an otherwise intelligent and rational person to support some rather silly ideologies.

Russell Roberts over at Cafe Hayek recently pointed out one Washington Post flub by Harold Meyerson that deals directly with a subject near and dear to our hearts: manufacturing output, trade policy, and jobs.

America has gone from being a nation that manufactured things to a nation that manufactures debt. Manufacturing (as Kevin Phillips points out in the forthcoming issue of the American Prospect, which I edit) accounted for 25 percent of America's gross domestic product in the 1970s but just 12 percent in 2006. Finance, which amounted to 12 percent of GDP in the '70s, amounted to 20 percent in 2006.

Russell's analysis sums it up beautifully.

If you read that quickly, it does sound pretty scary. It looks like our manufacturing output has been cut in half! Actually, manufacturing output since 1970 has roughly tripled. TRIPLED. I feel like writing the word again but I'll refrain. But "TRIPLED" is a good word to remember when you keep hearing that America's manufacturing sector is being hollowed out and we don't make anything anymore and soon we're going to be sitting around doing each other's laundry.

So output has tripled, but it is a smaller part of the GDP.  As Russell goes on to point out, that's a good thing.

The reason manufacturing has become a smaller proportion of GDP is because other sectors have grown even more. The reason other sectors have grown even more is because we have such high productivity in manufacturing over the last 40 years. That's freed up people and resources to make other stuff.

It is a bit hard to understand when all we read about is the doom and gloom of jobs lost in manufacturing, but there's a readon.

In Harold's world, that's a bad thing, because that means losing high-paying manufacturing jobs for low-paying service jobs.  After all, doesn't a steel worker earn more than someone working at the cosmetics counter at the department store at the mall? Well, yes, some service jobs pay less than some manufacturing jobs. But some pay a lot more. Like the jobs in the finance sector that Harold cites.

In fact, if Harold Meyerson could have previewed the same edition of the Washington Post, he would have had some facts to refute his own conclusions.

Unfortunately for Harold, in the same edition of the Washington Post, we find a story with the line: Median household income increased 41 percent from 1970 to 2006.

The story has some bizarre interpretations of the survey findings and I hope to blog on it later. But just look at that one number. A 41% increase in median income. It's corrected for inflation. Because of flaws in how inflation is calculated it probably understates the growth in real income. It may not measure benefits correctly, another reason it may be understating the increase. But just taking it as it is, it sure makes Harold's argument look pretty silly. And of course, the standard Census Bureau numbers on median income tell the same story.

America's standard of living has been thriving at the same time that manufacturing is falling as a proportion of GDP.

That doesn't mean we don't have a problem with naive companies outsourcing offshore in the hopes of finding cheaper labor, instead of looking inward to find and reduce far greater costs.  And we also have some companies that are shifting their knowledge overseas, in effect creating new competitors.  But like it or not, increased manufacturing productivity has created a lot of good.  We just need to find a way to support, retrain, and rehire those impacted by the increased productivity instead of trying to artificially roll back the gains.  Just like we did over the past century with increased farm productivity.