Foreign Trade Angst

There's great angst over the loss of manufacturing jobs. The number of U.S. manufacturing jobs has fallen, and it's mainly a result of technological innovation, and it's a worldwide phenomenon. Daniel W. Drezner, professor of political science at the University of Chicago, in "The Outsourcing Bogeyman" (Foreign Affairs, May/June 2004), notes that U.S. manufacturing employment between 1995 and 2002 fell by 11 percent. Globally, manufacturing job loss averaged 11 percent. China lost 15 percent of its manufacturing jobs, 4.5 million manufacturing jobs compared with the loss of 3.1 million in the U.S. Job loss is the trend among the top 10 manufacturing countries who produce 75 percent of the world's manufacturing output (the U.S., Japan, Germany, China, Britain, France, Italy, Korea, Canada and Mexico).

But guess what -- globally, manufacturing output rose by 30 percent during the same period. According to research by the Federal Reserve Bank of St. Louis, U.S. manufacturing output increased by 100 percent between 1987 and today. Technological progress and innovation is the primary cause for the decrease in manufacturing jobs. Should we save manufacturing jobs by outlawing labor-saving equipment and technology?

Economist Joseph Schumpeter referred to this process witnessed in market economies as "creative destruction," where technology, innovation and trade destroy some jobs while creating others. While the process works hardships on some people, any attempt to impede the process will make all of us worse off.