Automation, Trade, Globalization, and Manufacturing

There’s a passage in Jared Bernstein’s interview in the Washington Post of economist Susan Houseman on the relative importance of automation, trade, and other factors on manufacturing employment that I found interesting. Dr. Houseman notes:

As I mentioned, besides computers, output in manufacturing is barely higher today than in the 1990s and is actually lower than in 2007, before the Great Recession. Since the U.S. population has grown about 18 percent since then does that mean that the average person is buying fewer things? Of course not.

The reason for manufacturing’s anemic performance is that U.S. consumers and businesses are buying more imported products, and American exports have not risen commensurately. Instead of manufacturing their products in the United States and exporting them to foreign markets, U.S. multinational companies now often locate production overseas to take advantage of lower labor costs and taxes, among other factors.

So, manufacturing’s anemic output growth is largely the result of globalization. That fact, coupled with automation, is responsible for the large reductions in manufacturing employment since 2000.

Read the whole thing. In addition to the mandatory anti-Trump sections, Dr. Houseman also includes some policy prescriptions including ensuring (by unspecified means) that our trading partners do not keep their currencies artificially cheap, discouraging inversions, subsidies for R&D, and subsidies for worker training. I’d be interested in her ideas for how we might prevent China, Japan, and South Korea (just to pick three trading partners at random) from holding lots of dollars that wouldn’t provoke retaliatory responses. It seems to me that we’re already in a trade war but we’re just not shooting back.