Addressing the AFL-CIO recently, President Obama said:
For generations, manufacturing was the ticket to a better life for the American worker. But as the world became smaller, outsourcing, an easier way to increase profits, a lot of those jobs shifted to low-wage nations... We are going to rebuild this economy stronger than before, and at the heart of it are going to be three powerful words: Made in America.
The president's belief that American manufacturers can help reignite our economy is exactly right. But he misdiagnoses the challenges facing manufacturers, and his policies are doing little to advance their cause.
There's no question that American manufacturers are hurting from the recent recession, but this doesn't change the fact that in the past two decades they have set new records for output, revenues, profits, profit rates, and return on investment. In 2008, the United States remained by far the world's largest manufacturer.
The same can't be said of factory jobs. U.S. manufacturing employment peaked in 1979 at 19 million jobs. But the jobs haven't "shifted to low-wage nations," as the president asserts. Rather, the lost jobs have gone, for the most part, to a country called "productivity." Technological change, automation, and widespread use of information technologies have allowed firms to boost output even as some have cut payrolls.
The productivity revolution is a worldwide phenomenon. In fact, China shed 25 million manufacturing jobs from 1994 to 2004, 10 times more than the United States lost in the same period, according to William Overholt of the RAND Corporation.
So if offshoring isn't the cause of manufacturing job loss, what can we do to spur our manufacturing sector? The simple answer is to boost exports. President Obama acknowledges that one in three U.S. manufacturing jobs depends on exports, and yet he has failed to advance a trade agenda that would result in more U.S. manufacturing jobs and sales. Put simply, we can't "make it in America" if we can't sell at least some of it abroad.
If you don't believe me, listen to the former head of the AFL-CIO from 1952 to 1979, George Meaney, who wrote: "Millions of American workers are dependent for their livelihood on the sale overseas of the goods they produce... We must keep in our minds the necessity to find even more markets for American-made goods overseas."
We need to get back to the pro-manufacturing, pro-trade policies of the past, which many presidents have turned into political success. For the sake of those who make things in America, we hope that President Obama does the same.
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