I listen to NPR shows like Marketplace almost everyday and while I love their stories, I can’t sit idle. So I wrote them:
“Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever.” – Henry Hazlitt, 1946.
Austrian Economist Henry Hazlitt wrote these words 70 years ago in the chapter “The Curse of Machinery” in his popular book, Economics In One Lesson. Yet his words are unfortunately just as appropriate today. The theory that automation along with “cheap” foreign labor are the primary factors destroying manufacturing jobs in America is simply a fallacy, a myth, and a downright lie. Today’s automation pales in comparison to the increases in productivity that the machines of the Industrial Revolution brought us. Yet manufacturing employment rose sharply during that time.So what happened?
The short answer is that we surrendered the economic freedom that started the Industrial Revolution and created millions of middle class jobs. We used to have gold and silver in our pockets. We used to be free to succeed or fail in life and in business. We used to enjoy the full benefits of the money we earned. But now we play with monopoly money that benefits a few at the expense of many. We do only what the government permits us or encourages us to do (little of which is actually productive). And we work to pay off the government before ourselves.
The manufacturing industry and middle class it gave birth to are victims to the forfeiture of our economic freedoms. And automation and “cheap” foreign labor has nothing to do with their respective declines. The government’s data are wrong; we are not manufacturing more goods with less workers. We are just doing a better job making less with less.
I respect the work that Marketplace and NPR produces, but this perspective has to be presented to the people. Not all economist believe in the Curse of Machinery.
It’s been a while since I’ve published an update on the state of our manufacturing industry. So let’s start with employment given today’s release of November’s job numbers. Manufacturing employment has declined year-over-year for now 9 months straight from March to November. This is the longest stretch since the multiple year-over-year declines that concluded in September of 2010. This is certainly not a sign of strong economic growth that the Federal Reserve and financial news outlets have been pandering with little evidence. And yet, the biggest indication of how much the manufacturing industry has been struggling of late is that it has occurred while the U.S. dollar has been strong.
Counter to general belief, a weak currency is not good for the manufacturing industry and even the data demonstrates this. From 2000 to 2010, the U.S. dollar dropped steadily and so did manufacturing employment. Employment only turned around when the U.S. dollar reversed course in 2010. US manufacturers depend heavily on supplies produced abroad and it doesn’t help them when those goods become more expensive when the dollar drops in value. But the fact that employment has been going down with a strong dollar lets you know that catastrophe lies ahead when the air starts to come out of this dollar bubble.