With Congress having returned from its August recess last week, the rhetoric on employment has heated up. In particular, we are hearing more and more about the loss of manufacturing jobs. A Federal Reserve Bank of New York study warns that many have disappeared permanently and will not come back even after rapid growth returns. President Bush has responded by creating a “manufacturing czar” in the Commerce Department to focus on rebuilding that sector. History, however, suggests that manufacturing can take care of itself.
It’s important to remember that warnings about the death of manufacturing are not new. I have been hearing them for more than 20 years. For example, on April 24, 1983, the New York Times ran this headline: “Whither the Smoke in Old Smokestack Industries?” A few days later on May 8, it hit on the point again with a story headlined: “The Twilight of Smokestack America.”
Everywhere, it seemed, people were up in arms about the imminent disappearance of manufacturing from the U.S. There were widespread calls for an “industrial policy” to help American companies compete with those in Japan. Bookstores were filled with tomes such as The Deindustrialization of America by economists Barry Bluestone and Bennett Harrison. Republicans and Democrats alike criticized President Reagan for his laissez-faire approach to this problem. Many demanded that a full cabinet department be established to promote manufacturing with subsidies and trade protection, along the lines of Japan’s infamous Ministry of International Trade and Industry (MITI).
The problem then—as now—is that there was no serious economic analysis supporting the doom-and-gloom. When respected economists like Alfred Kahn of Cornell reviewed the Bluestone-Harrison book in the New York Times, he called it an “ideological tract masquerading as objective research.” He went on to say that their analysis was “distorted,” their explanations “simplistic,” and their policy prescriptions “dubious.”
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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