On Thursday, I heard Denver radio talk show host Craig Silverman (whom I generally like even though he’s nominally the liberal on the show) buy into one of the most dangerous economic lies propounded by the American labor movement. Following is the e-mail I sent to Mr. Silverman on the topic:
Hello Craig,
I wanted to briefly respond to a couple of things you said on the air yesterday.
First, you said that US businesses can’t compete with foreign businesses that have government-funded health insurance. (Actually, to be fair, you said that that was one argument that supporters of ObamaCare make.) I would suggest that that argument is a classic case of Bastiat’s “what is seen and what is unseen” fallacy.
Yes, in those countries the companies don’t have our companies’ health insurance costs. Instead the people of the countries have much higher taxes than we do, leading to persistently higher unemployment and less disposable income – so they can buy less stuff from the companies. “Free” health care is anything but free. Indeed it is the “free” part of our health care system (free, or nearly free to the consumer that is) which is bankrupting the nation. That health care is NOT free. It is just paid for indirectly, by sucking resources from the rest of the economy.
Second, you said that the US “doesn’t make anything anymore". This is a line put out by industrial unions who want protectionist legislation, bailouts, etc., and it is an utter lie.
Our industrial production (at least until just before the current recession) has never been higher. Our share of world manufacturing has been fairly stable around 21% for decades.
From the Cato report linked below: “The year 2006 was a record year for output, revenues, profits, profit rates, and return on investment in the manufacturing sector. And
despite all the stories about the erosion of U.S. manufacturing primacy, the United States remains the world’s most prolific manufacturer—producing two and a half times more output than those vaunted Chinese factories in 2006.”
What is true is that manufacturing employment has dropped, to which I say “so what?" Are you deeply worried that the number of American farmers has dropped from a majority to a tiny minority of our population? Should we have a government program to “save the farmer"? Of course not. These changes are driven by extremely beneficial improvements in productivity which allow small numbers of people to grow record quantities of food and manufacture record quantities of widgets or whatever.
I would also point out that the declining manufacturing unemployment, much of which happened in the early part of this decade, did not translate into permanently higher levels of unemployment. In other words, people got retrained and moved into newer, more productive work (and some people just retired.)
The reason it’s so important that you don’t make the mistake of buying into the “we don’t make anything anymore” error is that it is specifically designed to lead to economic and political policy which is very bad for the nation. Free trade is an unvarnished benefit for the nation overall (which is not to say that it can’t temporarily displace some workers, who would then get other jobs.) Free trade allows us to buy more things we want at lower prices, leaving us with the savings with which we can pay for our kids’ schools, pay for health care, buy a better house or car, or just take a vacation. The savings to consumers from free trade are the most important and least discussed aspects of free trade. Unions use the “we don’t make anything anymore” lie to argue for protection and bailouts which are tremendously damaging to the American consumer and taxpayer, and I urge you to make sure you understand the data before deciding whether you want to agree with the unions’ policy goals.
Here are some resources for you:
- http://www.uschamber.com/international/primer/manufacturing.htm
- http://www.cato.org/pubs/tpa/tpa-035.pdf
Best regards,
Ross Kaminsky
3 comments
The reason leftist politicians malign American productivity is simple: their formula to perpetuate political power is to create victim classes, and transfer money or in-kind support to members of these classes. In the long run these groups become beholden to the political class that is funding their (meager) lifestyle.
I would also add to your letter that the superior productivity of the American worker is another important factor that allows our nation to remain a manufacturing powerhouse.
Generally speaking, there are three main drivers of labor productivity: physical capital growth, human capital growth (education, training), and technological advances (the most significant contributor to labor productivity). We excel in every category.
> Physical capital growth: not sure how much CAPEX is invested by American companies every year, but suffice it to say that it is on par or exceeding the rest of the world on a per capita basis. Given the 1/3 rule (every 1% increase in capital investment per labor hour yields a 1/3% increase in labor productivity), we are racing forward at breakneck speed.
> Human capital: we have the best education system in the world. Period. Liberal politicians who owe payback to teacher unions want you to believe otherwise, but it is a disgraceful lie.
I rarely hear people rave about the quality of our universities, which directly benefits American companies, and there is global competition to attend our schools. I don't see Americans tripping over one another for admission to schools across Europe and Asia, yet I graduated from an Ivy League university where is seemed as though 20% of my class was international.
Our technical training is top-notch as well. Our workers making synthetic composits, medical devices, jet engines, and other high margin products have superior training, thanks to investments by American corporations.
Even the US government invests in world class training. Before I went to war I received the best training money could buy (this is actually a legitimate function of government), and I can say that for many of my former colleagues as well.
> Technological advances: our competitive advantage in technology is unrivaled. By far, technological advances have, and will continue to be, the largest contributing factor to labor productivity. The microprocessor was born here. The software that runs the world's operating systems was created here. Planes that bring trade to the farthest reaches of the globe were built here.
I am interested in reading Mr. Silverman's reply on your blog if he is cool with that.
on 12/19/09 at 10:44
Those are truly tools of the left that inhibit corporate growth by limiting the ability of our children to excel and reducing the capital companies have to invest. If we want to get back on track in this country and employ more, we need to improve on the skills of our children and reduce the burden that taxes place on our citizens.
Silverman has never replied to any of my e-mails, so I don't expect anything this time.
If he does reply, I'll have to ask him before posting anything he says to me.
RGK
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Following Obama's Economic Policies
