But manufacturing has always been declining! At least that is how the story goes. Proof usually looks something like this:
As you can see, steady downward trend means manufacturing has been declining. No impact from NAFTA, so what is the big deal?
Or maybe you see a graph that looks like this:
People get hired & fired all the time! What’s the big deal? These graphs are nice because they either bury what has been happening in manufacturing within the context of the larger economy, or they just present a bunch of meaningless fuzz. But to get a simple answer, just ask a simple question: How many people were employed in manufacturing before NAFTA, and how many after? Well, if you go by totals, it peaked in 1979 at 19.4M and hit 12.3M last year. So the peak was well before NAFTA, and the valley well after NAFTA. Again, it looks like no big deal. But, if you throw it all on a graph, you get a different story:
There is alot of information in this graph. Yes, manufacturing peaked in 1979, but overall it was pretty stable at 16-18M jobs for 35 years. Then NAFTA hit. Jobs didn’t drop immediately when NAFTA was passed as it was politically risky at the time to move production out of the US. It also takes alot of time to move massive production facilities. But eventually it became passe to pack up and ship out, and ship out they did.
I threw the import quotas from the 80s on the graph. Everyone knows they didn’t work, except for the fact that they did. Foreign imports were rapidly eating into the market share of the Big 3 at that time. When the import quotas hit, two things happened: sales from the Big 3 stabilized, and foreign companies started building plants in the US to get around the quotas. Here are Japanese auto companies voluntarily limiting exports into the US in 1988, and here they are in 2012 still talking about them as they build plants and add jobs in the US. To say that the import quotas in the US were ineffective is nonsense.
By the way, when I was looking up information on the import quotas, I saw some old information I didn’t recognize back in the 80s-90s, but now I do.. It is the ‘high cost of jobs saved’. It usually goes something like this:
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A 1984 Brookings study estimated that each auto job saved by Japanese voluntary restraints on exports cost Americans $165,000; a later International Trade Commission study upped the estimate to $193,000. |
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To understand this number, you need to read old automotive annual reports where they talk about the cost of labor being ~$70/hour. No one was actually making that, those numbers are generated by dividing the number of hours of actual work per assembly worker into the entire workforce pay (vacation & sick pay, salaries for non-line workers like electricians and maintenance, etc. etc.). To reference this as the ‘cost of a job saved’ is to assume that for every one job on the line ‘saved’, two more are ‘saved’ elsewhere. But did you catch that? Depending upon who’s buying and selling, jobs are now a drain on the economy. Increasing employment is now a drain! Not to mention that this type of analysis completely discounts that the imports aren’t free, or that money that leaves the country can’t be spent in the local economy but instead has disappeared. But nothing beats a big scary number to generate spite, and boy did people get spiteful. And if you want big scary numbers, check this one out:
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The cost per net textile or apparel-related job saved amounts to $4,145,669. |
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Except, every dollar spent on an item is either profit thrown in the bank, money spent elsewhere (which becomes either salary or profit), or tax revenue. So if there is really $4M+ in extraneous profits per textile job, it seems people would be falling over themselves to open shops. If it is all salaries, then back to ‘the more people we get to fire’ argument. And if it is tariff revenue, well everyone gets to make up the loss in higher taxes. It is a big fun scary number, but have fun following the money. I’m sure it’s right next to the blue unicorn at the end of the rainbow.
So the last question is, who really gained from all of this anyway? Surely NAFTA was an export boom, right? Where is all of this magical growth that NAFTA was supposed to generate? Someone had to make out, didn’t they. Well, here are income charts from the mid-60s to the present. See if you can spot the winner because I can’t. The wealthy kept getting wealthier and everyone else was left behind.
Is NAFTA really worth it? Is this what we expect from TPP? At the rate we are going, we won’t even need TPP. NAFTA is still picking up steam. And one last thing, if you want to know why people are angry, I’ve included a game in the comments.