Manufactured Objections | Daniel J. Ikenson | Cato Institute: Commentary

Manufactured Objections | Daniel J. Ikenson | Cato Institute: Commentary: "Meyerson makes a few claims that cannot be allowed to stand. For example, he asserts: 'We don't [make things] any more — at least, not like we used to. Since 1987, manufacturing as a share of our gross domestic product has declined 30 percent.'

First of all, note that Meyerson's second sentence does nothing to support his first. A decline in the manufacturing sector's share of the total economy can result from growth in other sectors, rather than from a decline in total manufacturing output, and that's what's happening in the U.S.

According to data from the 2009 Economic Report of the President, as gathered and reported recently by George Mason University economics professor Don Boudreaux, since 1987, real U.S. manufacturing output has increased by 81 percent. And as reported by the Bureau of Economic Analysis, American real manufacturing value-added — the market value of manufactured goods, over and above the costs that went into their production — reached a record-high level in 2007 (the last year for which final data are available), breaking the record set in 2006, which broke the record set in 2005, which broke the record set in 2004. Notwithstanding the recent recession that has affected all sectors of the economy, U.S. manufacturing has been thriving in recent years.

If Meyerson isn't intentionally misleading Washington Post readers, he is simply unqualified to be rendering conclusions about the state of manufacturing. A basic look at the history of the statistic he used shows its uselessness to the point he wants to make. Manufacturing as a share of gross domestic product peaked in 1953 at about 28 percent of the economy — well before the period of U.S. industrial prowess Meyerson yearns for — and has been trending downward ever since. Today manufacturing accounts for about 12 percent of our services-dominated economy, but manufacturing output and value-added are higher than ever in real terms.

Second, if the United States doesn't "make things anymore," nobody does. According to data from the United Nations Industrial Development Organization, U.S. factories are the world's most productive, accounting for 25 percent of global manufacturing value-added. By comparison, Chinese factories account for 10.6 percent.

That may be hard to fathom, given that U.S. factories tend not to produce the sporting goods, toys, tools, and clothing found in Wal-Mart and other retail outlets nowadays. But U.S. factories make pharmaceuticals, chemicals, technical textiles, sophisticated components, airplane parts, and other products. American factories have moved up the value chain."

"Economists at the U.S. International Trade Commission estimate that only about 50 percent of the value of U.S. imports from China is actually Chinese value-added; the rest is value added in other countries and embedded in the components, design, engineering, and labor."