Economist John Spry said his profession maybe deserves a little of its reputation for muddling an issue, but on a few things, economists really do know the score.
The case for trade is one. It’s “unambiguously good” for the people who trade, he said, including us.
That’s not what we are hearing from presidential candidates. Their case has even been bolstered by a study by prominent economists arguing that imported goods from China cost up to 2.4 million American jobs from 1999 through 2011.
Spry was watching some of this news and decided to kick up what’s known as a “tweet storm.”
In a flurry of 44 posts on the social media platform Twitter, Spry banged out a case for the benefits of trade. In a wide-ranging follow-up conversation last week, he lamented that arguing about trade with China will only get people worked up about the wrong problem.
With or without Chinese imports, he said, most of those manufacturing jobs would be gone.
Spry teaches international finance at the University of St. Thomas in Minneapolis, and he said he’s certain he’s not selling economic snake oil. The benefits of trade are about as settled as such things get in economics.
It’s not two countries trading with each other, of course; it’s really people and companies here trading with people and companies in such places as Germany and China. It’s in their interest to do so. If they aren’t too heavily taxed, they will likely do a lot more of it.
We are all traders, one way or another. You can see why if you imagine the life of a neighbor who decided that everything worth having could be produced with his own hands.
The furniture he built for his house looks great. To build more, he soon realized that having a better way to move lumber around would sure be a nice thing to have. The problem, though, is that even for a brilliant craftsman, it might take a lifetime of labor to build one versatile vehicle that works as well as a new Ford F-150 pickup.
It’s far smarter to trade some custom furniture, what the neighbor really knows how to do well, for that new truck.
That’s the basic idea: to sell what you do better than others and buy what somebody else does better than you. Your neighbor’s life just got better with the trade. So did the Ford dealer’s, with a new living-room set that’s the envy of the neighborhood.
To kill the trade by slapping a big tax on one of them — say, on custom-built furniture — hurts them both.
Spry isn’t disputing the data collected by MIT economist David Autor and his co-authors, acknowledging that workers in industries and company towns most vulnerable to competition from suppliers in China have felt a lot of pain.
One important question that doesn’t get easily answered is who really benefits from efficiently produced imports. Apparel is a good example of an industry that declined here and took thousands of jobs down with it.
Who got the benefits? Well, we did.
In 1950, spending on clothing took about 12 percent of American consumers’ budgets. By 2014, the Bureau of Labor Statistics reported that buying clothes came to 2.7 percent of U.S. consumer spending. And we still like to dress well.
His bigger point is that we’ve looked at declining employment in manufacturing and decided that it must be that the work got sent to Asia. But if that were the case, manufacturing employment numbers should have slumped as trade with China surged about 15 years ago.
Look at a chart of manufacturing employment as a percentage of total nonfarm jobs, though, and you can’t even pick out on the curve where trade with China picked up.
That’s because a decline in manufacturing employment has been going on for more than seven decades. It peaked at nearly 40 percent of nonfarm jobs in the 1940s and has slid all the way down to less than 9 percent.
Meanwhile, the output of American manufacturing has never been greater. It’s the jobs that have disappeared. And that, Spry said, “has been going on my whole life.”
He used his own life story to explain why, starting in the early 1990s when he took a summer job at a seat-belt factory near where he grew up in Piqua, Ohio.
This plant supplied a Chrysler and Mitsubishi joint venture called Diamond-Star Motors. It was his job to pull the completed seat belts off the line and package them, 24 to a box. He wryly noted that some of those seat belts later got recalled.
Millions of seat belts are still being made for the auto industry, he said, but he’s certain that the job he once did no longer exists. It got automated out of existence by people like his brother, who has enjoyed a good career improving manufacturing processes and equipment.
He’s not sure how the workers once at that plant now make a living. What pays well now is developing software code, solving engineering problems on spreadsheets or maybe teaching international finance to MBA students. It sure isn’t manually packing seat belts.
It’s almost impossible for him to imagine how someone in 2016 could have a career like that of his grandfather, a high school dropout who still climbed to a supervisory position in the booming industrial economy of Ohio. He even became wealthy enough to buy a new upscale Buick once General Motors got back to making cars after World War II.
Another worrisome trend, Spry said, is that Americans seem far less likely to seek a new opportunity elsewhere; movement between states has fallen by half since the early 1990s. Economists are still trying to completely nail down why.
If presidential candidates want to talk about something important in the economic lives of Americans, he said, they should ask what set of government policies would help lower-skill workers who have lost the best job of their lives transition to their next well-paying job.
“To me that’s a much better question to ask,” Spry said. “But it won’t get you dominating the news. Not like saying ‘We are going to stick it to China.’ ”