The Washington Post Manufactures a Fake Industrial Rebound
Alan Tonelson
Monday, January 04, 2010
United States Business & Industry Council
Can the manufacture of hype replace the manufacture of tangible goods as an engine of U.S. wealth creation? Obviously not. But the more articles we at GLOBALIZATION FOLLIES see like the Washington Post’s December 23 paean to dollar weakness as a cure-all for manufacturing’s ills, the more powerful and widespread this delusion seems.
After all, domestic manufacturing remains mired in a genuinely historic downturn. Yet what Post reporters and editors evidently consider of paramount importance is fragmentary evidence that “The weak dollar has made it easier for U.S. manufacturers of parts for appliances, automobiles and other equipment to compete globally on price and is helping them win back business lost to overseas competitors.” Even better, according to the article, “Economists say [this shift] should help the country's economic recovery.”
It’s arguably interesting, as the observed, that “U.S. exports were 12 percent higher in October than in April”– although that claim per se tells us nothing about exports of manufactures specifically. It may even be interesting that 47 percent of manufacturers in one survey reported “doing more business in the United States as a direct result of the dollar's decline....”
But a little perspective, please. Although inflation-adjusted manufacturing output is now 4.61 percent higher than in its June trough, it remains 12.85 percent lower than when the recession officially began in December, 2007. Real output in key industries like machinery, fabricated metal products, steel, construction equipment, and heating and cooling equipment stand at 15 to nearly 25-year lows, while in sectors like ball bearings, machine tools, and engines and turbines production stands at all-time record lows. And manufacturing capacity is actually shrinking for only the second time in modern American history.
And although manufacturing exports are indeed up this year, manufacturing imports have increased even more. Thus the manufacturing trade deficit is rising once again (by more than 30 percent since the April trough stressed by the Post), and consequently is slowing growth overall and sinking the whole economy further into debt.
There’s nothing wrong with, as that classic song says, “accentuating the positive.” But when it comes to domestic manufacturing, this article reveals the Post to be whistling in the dark.
Sources: “Dollar’s decline a boon for U.S. manufacturers,” by Dana Hedgpeth, The Washington Post, December 23, 2009; calculated from “Federal Reserve Statistical Release: Industrial Production and Capacity Utilization, Tables 1 and 2, 1A, 1B, 1C, 1D, and 1E of the G.17 Supplement; and Table 10: Industrial Production: Market, Industry Groups, and Individual Series, Data from January 1986 to present, and Data through 1985, Seasonally Adjusted,” http://www.federalreserve.gov/releases/g17/table1_2.htm; and calculated from Trade Dataweb, U.S. International Trade Commission, dataweb@usitc.gov
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).