When I started my career in manufacturing, I remember the scorn of many, who were within a decade of retirement. To them I represented a new era of manufacturing, which threatened to make them obsolete. Outsourcing was a reality in the beginning of the 21st century, but automation was the villain they could see. It was delivered in the form of three large machines, which remained dark and silent for the moment.
The shop had made room for them by declining to bid for assembly work. For those, who are unfamiliar with industrial production, assembly is among the lower tiers of skilled labor in machine shops. Various metal parts of connected with rivets, to form a larger assembly. The task requires speed and accuracy, but is fairly accessible to anyone, who can follow directions. Before I arrived at the company, there had been a whole section of the shop devoted to assembling.
I had been trained in what was at the time the latest computer aided automation, which had already been replacing most manual machines by this time. These machines, for which I was hired, were more sophisticated than previous incarnations. Across the shop their ancestor computer controlled machines churned out parts alongside their progenitor manual machines. No doubt there were far less manual machines than there had been some twenty years before. Surely, the arrival of each generation of machine was greeted with the same disdain by some other group of workers.
On a manual machine each operation had to be taken along a single axis. A single part could require dozens of separate setups to complete. The first generation of computer controls allowed for more operations on a single plane. The machines I was hired to program and run were all 5 axis machines. What would take someone days of work a few decades ago could be accomplished in 45 minutes.
From one point of view this progress eliminated the need for as many skilled laborers. However, these machines have also made it possible to engineer products, which prior to their existence, would have never been economically viable.
So what does this have to do with trade?
Well, those machines took the spot of contracts likely won by another nation. It could have been South Korea, China or India. Companies based either in the US or abroad bid for that work against US companies, and likely won their bids. The plain truth was that they could do it cheaper, and their workforce was less adverse to that type of work. If an American worker got an assembly job here, they would likely view it as a stepping stone. It is painfully repetitive, and the profit margins leave little room for many pay raises. However, it is a good entry level position for someone desiring to learn a trade.
Why didn’t the politicians at the time protect those jobs? They could have easily passed a law restricting bidding practices. They could have preferred the US in any number of ways. Still I want to issue a couple of data points here. This would be 2002, when I started in this field.
(this is all available at www.census.gov/...)
2002 US/China
Exports $22.1 billion
Imports $125.2 billion
Trade Deficit $103 billion
2002 US/Mexico
Exports $97.5 billion
Imports $134.6 billion
Trade Deficit $37 billion
No doubt these numbers seem to suggest how screwed we all are by globalization. Look at all that money being siphoned out of the US economy. But look at this.
2015 US/China
Exports $116.1 billion
Imports $483.2 billion
Trade Deficit $367.2 billion
2015 US/Mexico
Exports $235.7 billion
Imports $296.4 billion
Trade Deficit $60.7 billion
Again, if you chose to look at those numbers through Trumpian eyes, you’ll focus on the trade deficits. You’ll say that America is losing. But look at those exports for a moment. In thirteen years look how much wealth was created in all three nations. Every single player ended up with access to a far larger market.
I’m not going to argue the ins and outs of any single trade deal, because quite frankly, they won’t receive a fair hearing. However, I would caution against the scapegoating happening on the left and right both domestically and internationally against global trade. It is being presented as the sole culprit in income inequality.
It is not global trade, which has prevented us from raising the minimum wage. It is not global trade, which cuts taxes on the wealthy. It isn’t global trade, which fails to fund infrastructure, education or healthcare. Global trade doesn’t set domestic policy. Global trade doesn’t force anyone to stay home in the midterm elections.
I don’t expect anyone will look favorably on this diary, but I feel someone should point out that a lot of politicians are cheating. They are telling a frustrated population to blame foreigners for their own domestic failings. The irony is that every nation is doing the same thing at the same time.
The United Kingdom’s workers weren’t hurt by the EU. They were hurt by a conservative government, which chose to respond to recession with austerity. Closing off European markets will only deepen the pain these workers feel.
The danger of populism is that it is too easy for a population to hear what they want to hear.
We like to look back at the boon following the second world war, and somehow pretend that we weren’t aided by international trade. American prosperity went unchallenged, because the rest of the world was in various states of destruction. Using that period as a benchmark is simply insane. It should never be the basis of a reality based progressive view.
Likewise, any notion of a self reliant economy is madness. America can not last in a world, where it only trades with itself. It also can’t win the import/export game, while remaining the strongest currency. Just because we may be losing in terms of trade deficit, doesn’t mean that opening up new markets isn’t a net benefit.
Isolationism and protectionism don’t work. If we retreat from the world, someone will gladly fill the void. As depressing as Brexit may be for the UK, it will be a windfall for some of the smaller EU nations able to fill the niche left in the common market place.
Iran is ordering planes from Boeing. That means more jobs for Americans. That means more skilled jobs for Americans. That is progress, which will also help incentivize peace and stability. We need more, not less of this.
I await the storm of hate...