Comment by AnthonyMouse
Comment by AnthonyMouse 2 days ago
> One thing that I think that frequently eludes people in this discussion is that US manufacturing has pretty much been constantly growing for the past century; just its share of GDP has fallen as other sectors have grown faster. And the share of the workforce has fallen even faster, as the actual manufacturing has moved towards higher value items and greater degrees of automation.
The last part is missing something important though. If we're measuring "output" in dollars and the US is doing the parts (like aircraft manufacturing) that globally don't have a lot of competitors, the high "output" is from high prices rather than high production, and then what we're doing is surviving in the markets where there isn't a lot of competition and getting killed in the markets where there is.
There are three problems with this. The first is that it implies the US isn't competitive in competitive markets, which is a sign that something is very messed up. The second is that the markets where other countries aren't competitive tend to get eroded over time. The US essentially had a lock on the auto market in the mid-20th century; not anymore. What happens when China starts making globally competitive aircraft?
And the third is that supply chains matter. If you give up on the low margin stuff instead of figuring out how to make it competitively domestically (e.g. via automation) then foreign competitors have a leg up when it comes to making the high margin stuff for which the commodities are inputs.
> I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
Relying on "free markets" actually requires free markets. If other countries are willing to subsidize their industries until they drive manufacturing out of the US, that's not a free market. It's the equivalent of a monopolist using dumping and tying to leverage their existing monopoly into new markets, but with a country acting as the monopolist and therefore being exempt from antitrust enforcement.
Doing the same thing in return is not likely to be an efficient strategy, but neither is the status quo. The main alternative would be to realize that the thing we've been calling "free trade" is not actually that and a country that subsidizes its industries until its US competitors exit the market has to be dealt with as an abusive monopolist, e.g. via tariffs and similar policy levers, since antitrust laws don't apply to foreign governments.
We are not only measuring in dollars. We measure tons of steel, number of cars produced and so on. Not all of those measures are growing, but many are. While market share has gone down, total production is up.
Take cars - https://www.bts.gov/content/annual-us-motor-vehicle-producti... US production is up greatly in 2019 (that is before Covid - the chart doesn't have after Covid numbers to work with). US production is up by a lot since 1960. However in 1960 the US population was lower, and your typical family only had one car (women often didn't even have a drivers license). Thus you see market share is down while production is up.