Trade is Good
More trade is more good. Restricting trade is bad. It's not complicated. And even unilateral movements toward free trade are good. Reminds me of the way I introduce my talks on free trade: a matching exercise.
China ... USA
1. Which country has the largest amount of manufacturing, by value, in the world?
2. Which country lost the most manufacturing jobs, gross, between 1990 and 2005?
The answers surprise people who know nothing about economics. The answer to 1 is "USA," by a lot.
The answer to 2 is China, again by a lot. Think of it this way: Here is a Chinese manufacturing facility, in 1990...
Here is a Chinese manufacturing facility in 2005...
China lost tens of millions of manufacturing jobs. Just compare the two pictures above, and you know it is true. The automated facility can produce 100 times, or 1000 times, as much output, and do it with fewer workers. But only if trade is possible. Because as Adam Smith brilliantly noted, "The Division of Labor is Limited by the Extent of the Market."
The point is that all factories, all over the world, are "losing" jobs to productivity. Adam Smith called it "division of labor." So while China has increased manufacturing OUTPUT (though not as much as the US!), China is rapidly losing manurfacturing JOBS.
So, to be clear, total US manufacturing is NOT falling. It's going up. Yes, up. We are losing jobs, sure, because we are becoming more productive. Check Mark Perry's graph:
UPDATE: Yes, I recognize that the idea of "gross jobs" is nonsense. I don't disagree with the comments. But when US protectionists talk about "shipping jobs to China" that is exactly what they are referring to. I'll stop when that idiot Lou Dobbs stops talking that way.
Further, remember this: In the Stone Age, unemployment was zero. Our goal is to be wealthy, not employed. Employment is often a means to wealth, but it is not the same thing. As my man Alan A says, "jobs are a COST." Cool.
Labels: just trade baby