Thursday, February 21, 2008

Russell Roberts on economic growth and prosperty

and fisking Harold Myerson along the way:

Harold Meyerson thinks we've become a nation of shoppers rather than a nation of producers:

If 19th-century England was a nation of shopkeepers, the United States today is a nation of shoppers, and our role in the world economy is to buy what other countries -- or U.S.-based corporations with factories in other countries -- make. It was not ever thus. In the four decades following World War II, our largest employer was General Motors; for the past decade, it's been Wal-Mart.

It's a fact. Sort of. Actually, the federal government is the largest employer—1.7 million employees and that excludes the Post Office. Does that mean we've become a nation of bureaucrats because a little over 1% of all employees work for the government? Does it mean we're on a perilous downward path where instead of making things, we regulate things? That would be a silly statement. It is equally silly to conclude that because Wal-Mart is the largest private employer we've stopped making things.

And as it turns out, we do make a lot of stuff here in the United States. Manufacturing output is dramatically greater today than 30 or 40 or 50 or 60 years ago, the halcyon era that Meyerson imagines once existed. Manufacturing output has almost tripled since 1970. What has happened over the last 60 years is that productivity in the manufacturing sector has increased greatly. That has allowed the US manufacturing sector to produce a lot more stuff with roughly the same or even a declining number of employees.

Wal-Mart is a red herring. It's success hasn't come at the expense of the manufacturing sector. The trends in the manufacturing sector go back 60 years, long before Wal-Mart existed.

Meyerson's solution to our alleged economic crisis is to elect either Hillary or Obama:

One of the crucial differences between the two parties this year is that Hillary Clinton and Barack Obama have both revived the idea of a national industrial strategy -- better late than never -- while John McCain still acts as if banks and corporations, left to their own devices, would revive our economy through their investments. Problem is, we've left banks and corporations to their own devices for decades, and they've funded the rise of low-wage, high-profit East Asia . Nonetheless, McCain calls for across-the-board corporate tax cuts, though that money may well be bound for Shanghai. Clinton and Obama, by contrast, call for the public sector to take up the slack created by the private sector's reluctance to invest in the United States.

Ah, that's the ticket. Let's try the Japanese economic strategy. And what does he mean by the private sector's reluctance to invest in the United States? Everybody wants to invest in the United States. Foreign governments, foreign investors, American investors and American companies. The money flows in because the United States is the most productive economy on the face of the earth. Would someone let Harold Meyerson in on this secret?

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