Sunday, October 9, 2016

Who Really Murdered Manufacturing Jobs in America and Why That's Important in November

by Nomad

American workers have every reason to be angry. For a crafty politician, it's the kind of emotion that wins elections. However, the question is whether they have fully understood who was responsible for their plight.

The Angry Unemployed American Male

The last half century of American history has been marked by one undeniable economic trend: the death of the American worker. Between 1965 and 2015, experts say that employment rates for the American male spiraled relentlessly downward. 
America is now home to a vast army of jobless men no longer even looking for work—more than 7million between the ages of 25 and 54, the traditional prime of working life...The collapse of male work is due almost entirely to a flight out of the labor force—and that flight has on the whole been voluntary. The fact that only 1 in 7 prime-age men are not in the labor force points to a lack of jobs as the reason they are not working.
The Atlantic Monthly provides a little more information:
Poor men without a college degree are disappearing from the labor force. The share of prime-age men (ages 25-54) who are neither working nor looking for work has doubled since the 1970s.
This is, not too coincidentally, the core support of Republican nominee Donald Trump's campaign.

The U.S.’s labor participation rate for this group of men is lower than every country in the  Organisation for Economic Co-operation and Development (OECD) except for Israel  and Italy. A 2016 White House report observes:
For more than sixty years, the share of American men between the ages of 25 and 54, or “prime age men,” in the labor force has been declining.
The male labor force participation rate peaked at 98 percent in 1954, compared to 88 percent today. These figures are, experts say, particularly troubling since workers at this age are at their most productive.
In a search for the cause of this phenomena, one commonly-cited reason has been the radical structural changes in our economy, in particular, the decline in US manufacturing, the rise of outsourcing and automation.

A robust manufacturing sector, as any economist will tell you, is key to a strong economy. A liberal American think tank, The Roosevelt Institute has pointed out that
The growth of manufacturing machinery output, and technological improvements in that machinery, are the main drivers of economic growth.
History shows that the rise of nations has always depended on its manufacturing sector. 
From the rise of England in the 19th century, to the rise of the US, Germany, Japan and the USSR in the 20th, to the newly industrializing countries like Korea, Taiwan, and now China, manufacturing has been the key to prosperity.
And yet, since 2000, US manufacturing sector has nosedived, hitting its lowest point just before the 2008-2009 recession.
According to the Bureau of Labor Statistics, US manufacturing employment fell from 19.6 million in 1979 to 13.7 million in 2007. Surprisingly, more than half of this decline occurred in the years following the relatively mild 2001 recession. In fact, the 1.5 million manufacturing jobs lost in the first year of that downturn far exceeded the 900 thousand jobs lost during the first year of the Great Recession.

In other words, the rapid decline of manufacturing jobs in the US occurred prior to the economic meltdown of 2008.  If the recession had no part to play, then what exactly happened to this ?

The (Down)Turn of The Century

Many on the Right have claimed that the blame lies with President Clinton's North American Free Trade Agreement (NAFTA). Its main goal was to eliminate barriers to trade and investment between the U.S., Canada, and Mexico.

Trump has said NAFTA has destroyed the nation and that he would "entirely renegotiate NAFTA" or he would "terminate it."
According to him, the treaty “is the worst trade deal maybe ever signed anywhere.” President Clinton signed it, he tells his audience at every campaign rally.

There are a few problems with this narrative.
While no trade deal is perfect, NAFTA had bipartisan support in Congress. In fact, both Republican president George H.W. Bush and Democrat President Bill Clinton signed NAFTA. (Bush on December 17th, 1992, and Clinton on December 8th, 1993.)

But there are other reasons Trump's views on NAFTA do not hold much water. Manufacturing had been in gradual decline before NAFTA was signed. Globalization and technology have sped up that decline. But there is something more that Trump and Republican conservatives generally avoid mentioning.

Four years before President Obama took office, the AFL-CIO, the largest federation of unions in the United States, published a well-researched ten-page report on the mass exodus of American jobs. It was entitled "The Bush Record on Shipping Jobs Overseas."
The Bush administration was not, the writers claimed, an idle bystander in the process but actively abetted in the disappearance of hundreds of thousands of jobs overseas.
Nearly every time George W. Bush had an opportunity to fix the flawed international trade, tax and investment policies that destroyed good jobs, he refused.

The labor unions fought tooth and nail against government policy but it was hopeless. As the AFL-CIO report states:
Instead of creating new jobs and championing the interests of America’s workers, the Bush administration has chosen to actively support policies that worsen our massive trade deficit, subject workers to unfair trade practices and reward companies for moving jobs overseas.
It concludes that President Bush did nothing as..
countries violated our rights under international trade rules; he refused to enforce our domestic trade laws; he negotiated new trade deals that threaten to weaken our trade laws and fail to protect workers’ rights; he subsidized job destruction with taxpayer dollars; and he shortchanged displaced workers and workers’ rights overseas.
The reports also alleged that the administration failed to reform our trade, tax and investment policies to create good jobs. Furthermore, the president refused to enforce the trade rules already in place to protect those jobs still at home.
The result of these misguided—and fundamentally wrong—policy choices has been the loss of hundreds of thousands of jobs. Every time President Bush has decided to help companies ship jobs overseas, America’s workers and their families have paid the price.
That highly-critical report was published in August 2004. So what was the Bush administration's reaction? 

"Everything is Just Fine"

Only a year earlier, when the Secretary of Labor, Elaine Chao (incidentally, the first Chinese American in the cabinet and Mitch McConnell's wife) was confronted on CNN, she absolutely denied that there were any problems at all.
Things couldn't be better.

The economy was, she claimed, "fully engaged." She highlighted fairly decent employment rates. When interviewer Lou Dobbs pointed out that any increase in employment was due to the influx of lower-paying jobs, most of them were the retail sector. He was suggesting that these jobs were not equitable replacements for American workers had lost.
(Factcheck at the time said that the evidence on both sides of the argument was inconclusive. Eventually, the fog cleared and showed that Dobbs, not Chao, appears to have been correct.)

Dobbs also asked her about the fact that hundreds of thousands of jobs were being sacrificed to outsourcing, a process in which American jobs, mainly in technological fields, are contracted out to countries where wages are significantly lower. Choa simply denied there was any problem at all 
At the time, Choa was speaking, people like Representative Dennis Kucinich, (D-OH) were giving the same warnings about the Bush administration's embrace of outsourcing.
"The outsourcing of US jobs is being accelerated with the help of NAFTA and the WTO, which make it impossible to place taxes or tariffs on such work.”
(It's incomprehensibly ironic that Republican nominee Trump has attempted to build an angry rhetoric out of the very things that a Democrat was saying over ten years ago to a Republican president!)

In 2004, the Bush administration wasn't listening. Either it simply didn't know- or didn't care- about the damage  outsourcing was doing to the US economy. Critics even claimed that the Bush officials had understated the true number of jobs being lost to such countries as China and India.

At that time, the Labor Secretary was reassuring the public that anxiety over the overseas outsourcing of work by American businesses was misplaced. 
She claimed that her own data told a different story. This fear, Chao ignored the millions of jobs that foreign companies have created in the United States. 
Everything was just fine. Really. We just have to keep giving Bush tax breaks to the "job creators" and the jobs would slowly but surely materialize.

The Magical Mystery Tour

Indeed, in July and August 2003, Chao and her colleagues, Treasury Secretary John W. Snow and Commerce Secretary Donald Evans, took a two-day, six-city, 550-mile road trip across the country on their "Jobs and Growth Tour." The tour's aim? to promote the president's $330 billion tax cuts.

Not many were impressed by the "feel-good" jaunt in the luxury coach with black leather sofas and a mirrored ceiling,  especially Democrats. 
In the same month that the nation’s unemployment rate hit a nine-year high of 6.4 percent, many people who turned out wondered how the administration's tax cuts would stimulate the economy.
The executive director of the Wisconsin state Democratic Party, Kim Warkentin, said at the time:
''It's a slap in the face. We've lost over 42,000 jobs in Wisconsin, and they're out there touting their economic plan when it's not addressing the needs of low-income folks.''
A year later, the administration still hadn't done much research to see if outsourcing were damaging the economy. One 2004 article noted:
Working in a vacuum, economists and other analysts have had to rely on their own imperfect estimates in trying to evaluate the true impact of outsourcing on the economy.
The real question wasn't whether Bush official didn't know. Clearly, they were aware that jobs were disappearing at an alarming rate. They all thought outsourcing American jobs to other nations was a "smart" idea.
For example, that same year, John Snow declared with the utmost surety:
The outsourcing of U.S. jobs “is part of trade... and there can’t be any doubt about the fact that trade makes the economy stronger.”
N. Gregory Mankiw, Chairman of President Bush’s Council of Economic Advisors, was also praising the idea of sending American jobs overseas.
“Outsourcing is just a new way of doing international trade. More things are tradable than were tradable in the past. And that’s a good thing.”
For hundreds of thousands of unemployed Americans who were unable to afford all of those  goods made in China, it was not a good thing at all. 
*   *   *
One final detail to add about Bush's Labor Secretary Chao. There was a semi-plausible item in which all traces (except for angry references) have been scrubbed from the Internet. 
It was purported to be an interview Chao gave to Parade Magazine printed in July 2007. Because of the dubious source, I have no way of knowing how accurate the story is. 

However, according to the article, Chao explained why she thought American workers were losing their jobs to foreign workers. It had nothing to do with flawed policy. No way! It was all about a poor attitude. If you lose your job to a foreign working, it's not because he's cheaper but because he has better workplace skills and discipline. 
"American employees must be punctual, dress appropriately and have good personal hygiene..They need anger-management and conflict-resolution skills, and they have to be able to accept direction. Too many young people bristle when a supervisor asks them to do something."
If it's true that Chao actually made this statement it's an amazingly insensitive thing for a Labor Secretary to say. Especially for one that oversaw the destruction of the once-powerful manufacturing sector of the nation.

The Amazing Chinese Scapegoat

The loss of manufacturing in the US has, of course, been a sure-fire election issue. While both of the party's nominees have used to fire up their supporters. Trump, in particular, has stressed the idea that China the job stealer is the arch-villain. 

And the angry unemployed working class has swallowed that line without question. It was such a successful scapegoat that Trump was unable to attend a rally without an attack on China.

There are, however, problems with Trump's position. To blame China allows the Republicans to escape accountability. Chinese officials, as far as we know, did not dictate trade and labor policies to George Bush. 

And there are a few other problems with blaming China for everything. As it has been pointed out time and time again, Trump the businessman has not hesitated to buy from China when it was practical, instead of patriotically buying American. 
His daughter, Ivanka, was also caught in the act.

Another difficulty in using China as a scapegoat for all American labor woes is that Trump fails to mention that the sharp decline in manufacturing occurred in the last Republican administration. Why should American voters ever trust another Republican president?

Under President Obama, the trend has slowly reversed. According to a recent article in the New Yorker:
[D]espite what the rhetoric would have us believe, global manufacturing is trending in a positive direction for the U.S. Factory jobs are on the rise here, and many of these new jobs are coming back to North America from China, which is struggling to maintain its manufacturing capacity.
In March 2010, manufacturing employment bottomed out but figures show a mild but steady resurgence in factory positions. Many of the jobs are occurring in states hardest hit by the recession.
Better still, the jobs are typically good ones: across that same five-year period, average hourly manufacturing wages have increased over ten per cent, to more than twenty dollars.
That's not a universal opinion. National Employment Law Project, a national advocacy organization for employment rights of lower-wage workers, published a report in 2014 that didn't paint quite as rosy a picture.
And while the manufacturing sector has been resurging in the last few years, growing by 4.3 percent between 2010 and 2012, the jobs that are returning are not the ones that were lost: wages are lower, the jobs are increasingly temporary, and the promised benefits have yet to be realized.
The sad truth is that, while Obama put the economy on the right track, the manufacturing sector may never completely recover from the Bush administration's incompetence.

However, the data reveals another noteworthy trend. According to Quanton Data, manufacturing positions in China have been dropping consistently since 2012, down nearly six percent in that time. China's Ministry of Commerce reported that factory activity has shrunk for the last half of 2015, falling to a three-year low.
But there was even more interesting news out of China. Foreign direct investment in manufacturing was flat for all of last year. At the same time, China’s balance of trade with the U.S. barely budged, despite the strong dollar. Moreover, China’s exports tumbled in February by twenty-five per cent, after falling eleven percent in January.

As the Obama tenure comes to its close, America might just be emerging from the chaos inflicted by the Republican administration. Just in time to elect a man who makes George W. Bush look like a genius.

Life in the Right Turn Lane

When you add all this data together, what does it mean for the American voters, struggling to decide between two fairly-unloved candidates?

The Cassandras of the Bush era, the AFL-CIO have come out strongly in support of the Democratic nominee, Hillary Clinton. Back in July, the organization's president Richard Trumka said:
Hillary Clinton is a proven leader who shares our values. Throughout the campaign, she has demonstrated a strong commitment to the issues that matter to working people, and our members have taken notice. The activism of working people has already been a major force in this election and is now poised to elect Hillary Clinton and move America forward.
On the other hand, Trump without a doubt comes off the loser. That's not too shocking.

The dismal record of the last GOP president would be hard for an even more intelligent candidate to escape.
The Bush administration betrayed the American worker for short-term advantages with China. Meanwhile, he was providing the super-wealthy , including Donald Trump, with an assortment of tax breaks. When the effects of poor decision-making were finally manifest, George Bush was long gone, no doubt, smirking at the mischief he had caused.
No matter what he might say as a candidate, Trump as a businessman, showed little inclination to support the working class in his native country.
Unfair characterization, you say?
When George Stephanopoulos on ABC’s “This Week” on May 8 confronted Trump on this issue, the candidate did what he has usually done.
He lied.
“But don’t you have to also lead by example?” Stephanopoulos said. “You know, so many of the products in the Donald J. Trump Collection are made overseas — Bangladesh, China …”
“Well, that’s because you can’t even buy them here,” Trump said.
“But if you want other companies to make their products in America, shouldn’t you make your products in America?” Stephanopoulos asked again.
“But they don’t make a lot of these products,” Trump said. “They don’t even make them here anymore.”
While Trump is correct that most clothing sold in the U.S. is made overseas, looked into that excuse and found it to be a fairly lame one. 

Let's take a look. 
No-iron twill stripe dress shirts? Hardly an exotic hard to produce item.
Made in Bangladesh.
What about that two button side vent stripe suit?
Imported from China.
Think that's bad? 
Even his specially-made T-shirt "Donald Trump For President" Men's T-Shirt was made by a Canadian company, Gildan, but very likely manufactured in Honduras or the Caribbean.

In truth, Trump had plenty of American alternatives to purchasing from foreign manufacturers. For all his condemnation of China, he was all too ready to turn his back on American workers and purchase from his pet scapegoat.

It was not the only or the most recent example. 
Sharp-eyed reporters found a curious thing the other day. Trump's newly-opened hotel in Washington offered exorbitantly expensive rooms, none stocked with American products.
“Italian bed linens, French table linens, Chinese duvet, Korean TV and, yes, Mexican tequila ($14 for a shot of PatrĂ³n Silver) in the minibar, er, “private" bar,…
But it didn't stop there.
In my room, I found a Trump logo bathmat and towels from India, bone china from Japan, Italian cutlery and tiles, two telephones from Malaysia, a Swiss refrigerator, German coffee cups, Trump soaps and lotions from Canada and, from China, all four lamps, coffee machine, bathroom scale, valet stand and shower cap. The hotel’s managing director is from France. Most hotel workers I met during my stay had Caribbean or African accents.
That's a strong indictment against a candidate whose main campaign theme has been "America First."

In November, many angry American workers will be persuaded to vote against their own interests. Given Trump's record, he has always been able to spot an "easy mark" when he sees one and this election year is, unfortunately, no different. 

American workers had better start voting smart or watch the final chapter of the destruction of the nation's economy under another Republican administration.