I see that BusinessWeek has found another reason to oppose globalization:
But new evidence suggests that shifting production overseas has inflicted worse damage on the U.S. economy than the numbers show. BusinessWeek
has learned of a gaping flaw in the way statistics treat offshoring, with serious economic and political implications. Top government statisticians now acknowledge that the problem exists, and say it could prove to be significant.The short explanation is that the growth of domestic manufacturing has been substantially overstated in recent years. That means productivity gains and overall economic growth have been overstated as well. And that raises questions about U.S. competitiveness and “helps explain why wage growth for most American workers has been weak,” says Susan N. Houseman, an economist at the W.E. Upjohn Institute for Employment Research who identifies the distorting effects of offshoring in a soon-to-be-published paper.
FLY IN THE OINTMENT
The underlying problem is located in an obscure statistic: the import price data published monthly by the Bureau of Labor Statistics (BLS). Because of it, many of the cost cuts and product innovations being made overseas by global companies and foreign suppliers aren’t being counted properly. And that spells trouble because, surprisingly, the government uses the erroneous import price data directly and indirectly as part of its calculation for many other major economic statistics, including productivity, the output of the manufacturing sector, and real gross domestic product (GDP), which is supposed to be the inflation-adjusted value of all the goods and services produced inside the U.S. (For a detailed explanation of how import price data are calculated and why the methodology is suspect, see page 34.)
Although it may not be obvious from my incessant pressing of the problems with imported Chinese food, food ingredients, and drugs in my posts on the pet food recall, I think that trade is a good thing and that it and the interdependency that globalization brings along with it are making ours a better, more prosperous, more peaceful world. I merely think that we need to have realistic expectations about other countries, what we import from them, and what sort of attention is required.
I also think that we should be cautious in drawing very large conclusions from very small numbers.
But keep your eyes out. I think we’ll be seeing a hard court press for the U. S. to move to a more isolationist, more protectionist stance. I’m sure it will all be with the very best of intentions.
