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Politics, Manufacturing, and Change

By Chris | October 25, 2008

In the United States, the victorious presidential candidate must win a majority of the electoral votes. Almost all states are winner takes all. The magnitude of victory or defeat is irrelevant, all that matters is the outcome. It is not surprising then, that presidential candidates spend most of their time campaigning in “battleground states.” Wikipedia defines these as states where the victor’s margin of victory is 5% or less. Take a look at this map of swing states in the 2004 election. The three battleground states with the most electoral votes in 2004 were Ohio, Pennsylvania, and Michigan. Between 2001 and June of 2008 Michigan lost more manufacturing jobs as a percentage of total employment (5.6%) than any other state. Ohio and Pennsylvania also felt the brunt of the declining manufacturing sector. This map shows a snapshot of job losses as of last December:

(Note:  If you need one, I use this interactive flash usa map for my projects).

Of course, I’m always skeptical when people start measuring prosperity in terms of jobs. That is particularly true when discussing just one sector of the economy. Work for work’s sake is a bad thing. A person’s standard of living is what we really care about. I wouldn’t mind being unemployed, if I could afford to travel and buy ice cream. But, I’m getting off track.

Given the concentration of manufacturing job losses in a few states, it is not surprising that we hear so much protectionist rhetoric from the presidential candidates. They spend most of their time campaigning in the states that have visible losses from trade. Often, China and their “manipulated currency” is blamed for the loss of “American” jobs. I was intrigued, however, to read this Forbes article that notes that many U.S. states benefit from trade with the East.

Moreover, small states without any traditional ties to Asia have reaped major monetary benefits from U.S.-Asian trade. Idaho, New Mexico, Maine and Vermont all rank among the top 10 U.S. states in terms of their share of exports to Asia in 2007.

The Pacific coast states of California, Oregon and Washington enjoy huge manufacturing exports to Asia and very substantial export-generated employment. Almost 300,000 jobs in California, over 100,000 in Washington and nearly 60,000 in Oregon are directly tied to merchandise trade with Asia.

When I traveled to China a couple of years ago, I had the opportunity to have lunch with Idaho’s trade representative to China. I was surprised to learn that China was Idaho’s largest foreign trade partner.

Competition from Asia has certainly contributed to the decline of the U.S. manufacturing sector, but the manufacturing sector was inefficient to begin with. There is a reason GM is worth less today than it was in 1929: it was managed poorly. Many companies have prospered by exporting goods to China and all consumers have benefited from lower prices on imported non-durable goods. And, while foreigners don’t vote, we should acknowledge that American trade with the East has lifted millions of foreigners out of poverty.

Lastly, it is important to remember that manufacturing jobs aren’t such a bad thing to lose. What kid wants to grow up to install seats in Ford Explorers day in and day out? As we tap into an endowment of unskilled labor across the world and utilize technology to complete menial tasks we create the wealth to fund creative enterprises. As said in a fantastic article on education by Charles Murray:

The need for assembly-line workers in factories (one of the most boring jobs ever invented) is falling, but the demand for skilled technicians of every kind—in healthcare, information technology, transportation networks, and every other industry that relies on high-tech equipment—is expanding. The service sector includes many low-skill, low-paying jobs, but it also includes growing numbers of specialized jobs that pay well (for example, in healthcare and the entertainment and leisure industries).

Topics: Economics, Outsourcing, Political Science, Trade | No Comments »

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