A Manufacturing Catastrophe?

One of Donald Trump’s main campaign themes is that American manufacturing is in free fall, because of liberalized trade and foreign nations taking unfair advantage of us. There is something to the point about currency manipulation by China, and lower wage rates in Asia and Mexico are certainly a factor for some companies moving out of the country. And Trump is also correct to be targeting our highest-in-the-world corporate tax rate as a disincentive to invest more here or repatriate overseas profits.

But is it really true that manufacturing output has declined? The Federal Reserve data charted below suggests not. This is is not a new story. Improvements in productivity—think robotics and computerization—have enabled American manufacturing to produce more with a vastly lower labor force. I don’t have the numbers handy (I’m on an airplane with slow internet right now), but I believe American auto manufacturing produces as many or more cars as 30 years ago, but with one-third the labor force.


Maybe manufacturing numbers could be higher if our tax rate was fixed and if certain other trade asymmetries were address, but I’m not convinced that it would bring back 1960s-era manufacturing employment levels. Neither Trump no Hillary has an answer to this fundamental change in our economy. The usual bromides about “more education” won’t do very much (especially if it’s liberal policies like more “free college” for identity politics curricula).