One of the reasons that the things being written—posts, columns, editorials, and just about every other kind of opinion piece—that are being written are so frustrating for me is that they are just too darned post-modern. Many if not most of the arguments made depend on peculiar or counter-intuitive definitions of things. That’s why, for example, I rarely write about “wokeness” or DEI. DEI, just to look at one of them, stands for diversity, equity, and inclusion. You can sum up my views on that subject in one not particularly grammatical sentence. Diversity—yes; inclusion—yes;equity—no. As used “equity” means racial discrimination. That’s how Ibram X. Kendi defined it: “The only remedy to past discrimination is present discrimination.”
In light of that in anticipation of some comments about what I think is a very good but puzzling post, I want to define some terms as I use them.
| Term | Definition |
| Globalization | businesses start operating at an international scale. That includes importing finished goods, intermediary goods, and raw materials as well as using imported or offshore workers |
| Middle class | we do not have social classes in the United States. Here it means middle income, which I define as plus or minus one standard deviation from median income |
| “Hollow out” | an increase the standard deviation from median income |
The post is Noah Smith’s post, “Globalization did not hollow out the American middle class”. In the post Mr. Smith neglects to define globalization, middle class, or “hollow out”. He also does not define “manufacturing” although from context he apparently means manufacturing finished good which is not how I would use the term. I would define manufacturing as any step from extraction through finished goods manufacturing. I would also point out that with organizations like Temu globalization now includes retail sales.
I think it is obviously true that globalization, particularly businesses extending their supply chains into China, has, indeed, hollowed out the American middle class. Let’s break that up into pieces. American businesses have extended their supply chains into China and that has had an adverse effect on American manufacturing employment.
and
Now let’s look at incomes:
Looks like “hollowing out” to me.
Just about everything else in Mr. Smith’s post is a red herring. It doesn’t make any difference if other countries are manufacturing less, too. It doesn’t make any difference if we don’t import as much as some other countries do. All that makes a difference is whether we have been globalizing (we have) and whether the middle class is being hollowed out (it is). Perhaps Mr. Smith can come up with an alternative explanation for what we’ve experienced. His post does not include that.
Just for the record I don’t defend President Trump’s tariff strategy and, especially, I don’t think it will be effective at bringing extraction and manufacturing back to the United States. I think that will require much broader reforms, particularly tax reforms to which I suspect Mr. Trump would reject.
So you are not claiming globalization is causal in the supposed hollowing out of the middle class? If you do, then you do need to consider those other factors. Manufacturing employment is going down globally due to automation. IIRC, our initial big drop in manufacturing jobs preceded stuff moving to China.
I say supposed since there are so many ways to look at it and lots of definitions are used. However, I think this analysis at Pew while older does a good job. What we actually see is that more people have moved into the higher income group than have moved into the lower income group. Not sure why that is bad, but it still doesnt mean that globalization was causal. Note that over the same period there was even a larger shift of income towards the top 1%. That has been written about extensively and I dont think a loss of manufacturing has been suggested as causal.
Steve
Could I be more clear about what I think has happened? The upper quintile of income earners has become much richer leaving the other quintiles behind. The coincidence between that and increased trade with China is, if nothing else, a remarkable one.
Asserting that doesn’t require me to refute Mr. Smith’s post point by point. Just one point is enough.
In 1965, my father, a union pipe fitter in Boston (Dorchester), owned a house, a car, and supported a wife and five children on his wages alone. Now two of my nephews in Pelham NH live with their retired father, because their incomes are too small for them to rent an apartment.
The US is in free fall economic, demographic, political, and military collapse. Although the media is studiously ignoring it, the Houthis just defeated the US Navy and Air Force.
Your comment touches on a number of significant points, bob. First, there was a sort of triple whammy in the 1960s: immigration reform which changed the demographics of who immigrated to the U. S. (more unskilled workers), significantly more women entering the workplace (not just because of the nascent women’s liberation movement but because working class families needed two incomes to get by), and Baby Boomers beginning to enter the workforce.
Second, the changes in the way things are calculated now makes it difficult to compare the present with the past. Once upon a time working age men who did not have jobs and weren’t in school would be considered unemployed. Now they might or might not.
So, for example, the U-6 unemployment rate (not the U-3) early in Biden’s term was around 25%. Now U-6 is nearly 8%. The official unemployment rate, U-3, began to diverge sharply from U-6 in 2007.
The bulk of wealth and income increase for the upper quartile started well before trade with China increased. If you want that to be causal you need a better explanation. Smith also notes that in other countries where manufacturing decreased and/or trade with China increased you didnt see the same changes in income or even the same thing happen with trade deficits. Also, in Bob’s case you ignore the devolution of unions*. With the loss of bargaining power companies paid workers much less. Where unions remained strong companies just moved the companies. As a result, the income premium for factory jobs is down to 10%. You also fail to mention automation which may be an even larger factor in decreased employment but may be helping to keep wages as high as they are as it now takes more skill to work in manufacturing.
To be clear, I am not saying that China is not a factor at all. US companies are profit driven and many of them will move their factories to wherever will improve their profit the most. China is convenient as it is large enough to have essentially complete supply lines. (India is too but it’s chaotic and corrupt, even by Asian standards.) However, if we are talking specifically about jobs China is a late factor and maybe not the largest one.
* You also need to remember that Europe was a wreck after WW2. For 20-30 years we faced much lower levels of foreign competition. People like to reminisce about how one job could support a family in the 50s into the 60s, but American workers were more highly compensated for a number of reasons, one of them being that their companies had less competition.
Steve
Go back and look at the graph of incomes above again, steve. What you asserted is simply not true. The preponderance of the gap appears AFTER trade with China began to accelerate in 1993, dramatically so. Prior to that a good deal of the gap can be attributed to trade with Japan and then South Korea. But that gap was much smaller than the one that opened after our trade with China began to accelerate.
And you’re ignoring WHY unions lost bargaining power. IMO there were several basic reasons:
1) companies were moving to right-to-work states
2) more overseas trade
3) unions were complacent and unwilling to go to the mat over the above two
“All that makes a difference is whether we have been globalizing (we have) and whether the middle class is being hollowed out (it is).”
Of course. Supposed Refutations are silly.
…..
Unions killed themselves.
…….,,,,
I never hear anyone ask if Americans deserve to lose their jobs or communities just so other Americans can buy their toys, iPhones or TVs cheaper. It’s an icky question no one wants to address.
I’m more optimistic than Dave about repatriating some icky businesses to the US. Our deal flow log has a number of them.
We shall see. From a blue sky perspective…..all things space and Navy.
I would include the Clean Air Act of 1990 (and not environmental laws in general) as a cause of collapse in manufacturing. The law required upgrades and committed the country to continual upgrade requirements as technology emerged. As with any significant upgrade, businesses and people have to choose whether to pay for it or do something different. The choice was made in the context of NAFTA and the opening up of trade with China as the implementing regulations were proposed and finalized through the 1990s.
(The EPA uses a model of cost and benefits that assumes full employment and that nobody is or will be involuntarily employed. A person unemployed has the option to an equally productive job (or equally valuable units of leisure). OTOH, it seems to me most benefits of air regulations are measured through the lens of high American healthcare costs without considering whether environmental regulations are the most effective means of addressing asthma or COPD or healthcare policy in general)