Smart Philosophy Major Snowed by Rustbelt Governor
Matthew Yglesias has a new argument for encouraging exports of manufactures. I am not at all convinced. He seems to be asserting that employment in wholesaling and transportation follows production not sales and so is increased by manufacturing for export. I really doubt that.
Yglesias wrote (click to see his graph).
I saw Michigan Governor Jennifer Granholm at CAPAF earlier today and she naturally went on at some length about the importance of preserving manufacturing employment. In the course of doing so she very briefly made the more nuanced point that manufacturing activity supports considerable employment in manufacturing-related services. … Given the rate of productivity growth in manufacturing, there’s no plausible volume of exports that’s going to sustainably increase manufacturing employment. But that doesn’t mean that exporting more goods won’t boost employment:
… during the pre-recession slump in manufacturing employment—a period in which manufacturing output was growing thanks to increases in productivity—that employment in services related to manufacturing was going up. What kind of services? “Upstream” services are …. “Downstream” services are wholesaling and transportation. When output collapses, this dries up, but if we had an export-driven increase in output we’d see increases in these fields even if manufacturing employment per se doesn’t really rise.
I am very not convinced
Downstream Services are wholesaling and transport. Hmmm isn’t retailing downstream ? That would be a problem wouldn’t it ? You know that retailing of exports happens over there. I do not believe that a significant fraction of the downstream services are transport and wholesaling for export. How could that be ? It can’t take that much labor to take things from a factory to a port and then the container is just put on a ship.
I suspect that most employment in transporting and wholesaling manufactured goods is, like retailing, transporting and wholesaling goods made anywhere to be sold in country. Getting the goods to the store is labor intensive. That doesn’t depend on whether the good is domestically made or imported.
You might be able to convince me that you are not totally utterly completely wrong by looking at huge swings of the dollar and huge swings of net merchandise exports. Hmmm I will check myself.
Well this is very crude, employment by very broad sector from the bls. Employment in “trade, transportation and utilities” roughly corresponds to Yglesias’s numbers for “downstream services.”
I look at the 80s a period of a strongly overvalued dollar and a ballooning trade deficit. I find employment in “Trade Transportation and utilities” grew more than 20% while employment in manufacturing declined. In the 90s employment in Trade Transportation and Utilities grew less while manufacturing employment was roughly stable. This is crude but there is no evidence for your odd theory that exporting implies lots of jobs in trade and transportation.
Any thoughts ? Anyone ? Rusty ?
There are increases in shipping via ocean and air freight. You can see the pickup in train transportation and trucking. I tend to thing it is found in moving container loads by one person which is different than one person maufacturin a container load of product. The Labor content is less than manufacturing.
Look at the big picture The movement of manufacturing to Asia is identially correlated with that region’s meteoric rise in living standards. This also led to a quick move up in education and then ‘intellectual capital. Marketing, Services, Culture, and eventually Finance follows production.
If the US political and economic elite thinks it can continue to dominate finance without a manufacturing base they are wrong.
Well the efficiency of transportation is dominated by how much you’re shipping. Unit trains* are very efficient indeed. Using UPS to get 5 of this, 7 of that and 2 of the other to a specialty store much less so. I’m pretty sure that moving 40′ containers around is on the more efficient end of the spectrum. I really have no idea what percentages of exports are shiped in big efficient batches and what percentage is air-freighted in small packages.
*Entire trains moving from one source to one destination, say coal for a powerplant.
At a local and regional level manufacturing has a major spin off effect from both purchasing goods and services and from wages.
When manufacturing is healthy, lots of other businesses are healthy. When manufacturing catches a cold, small business gets pneumonia.
(If you want to knows how an economy really works do not ask an economist or a journalist, ask some CPAs.)
This may be the first thing Jen-Jen got right in 8 years.
And Matt, a wildly overrated kid-blogger.
I do love economists, they do lots of good work, but suffer from paralysis by analysis.
Taking a break from house painting…
(When i was a baby CPA many years ago I worked in heavy manufacturing areas mainly with companies supporting manufacturers and also with smaller parts manufacturers.)
Manufacturing operations are voracious consumer of indirect materials and support services, plus transport.
Every thing from cleaning products to food vending to electricians/pipefitters/welders to security to insurance to utilities get a boost. This is why putting a 200 job plant in a community of say 20,000 can make a huge difference.
Visit a manufacturing areas and you will see lots of major company truck terminals and rail spurs.
Whether or not to count wholesale seems a little silly, the wholesalers will get goods from somewhere whether we make them or not.
Back to the paint brush.
I suspect there is a gulf between macro which is highly theoretical and micro is widening and the macro stuff begins to unravel as the micro (real world) goes differently than accounted for in macro.
In other words macro talks about the movement of the glacier, while micro gets into how it forms and inches ahead until the icegberg floats away…………………………………