‘We need to unleash American workers, not protect them’ – Mackinac Center
“I think the future for America is very bright,” says Dave Hebert, senior research fellow at the American Institute for Economic Research. “I think the future for the American manufacturing sector is very bright, provided, of course, government stays out of the way.”
Hebert joins the Overton Window Podcast to dispute the popular idea that the industrial power of the United States is in eclipse.
“When it comes to manufacturing in the United States, there’s a lot of what I’ll just call misinformation out there,” Hebert says. “We hear things about how American manufacturers are in decline, how the manufacturing industry is being destroyed or hollowed out. And if you look into the data and you look into what’s actually happening around the country, you find that the manufacturing sector, in terms of the output that they’re producing, is near to, if not exceeding, historic highs.”
This is not to say that the traditional, frequently unionized, job on a factory floor is a growth area.
“In terms of its output, things have pretty much never been greater for the American manufacturing sector,” Hebert says. “What is in decline, and this is certainly true, is employment in the manufacturing sector. So we went from having a lot of people in the United States working in manufacturing in, say, 1950, to today, where we have relatively few.”
Hebert compares this shift to farming, which over the past century experienced a steep drop in employment and a large increase in productivity. He notes that American political leaders err by focusing on the collapse of manufacturing in certain regions and by comparing total manufacturing employment numbers with those of rival nations.
“We look at these rural communities in the Rust Belt that have suffered real economic hardship, and I’ll never deny that they’re suffering,” he says. “So that’s certainly true. The challenge, though, is why are they suffering and what can we do to alleviate it? And time and again in those towns and in those communities, what we find is that in the past, they used very protectionist policies to try basically to shield their dominant industry from competition.
“Now this works in the short term. But here’s the thing: Policymakers never think about the ground beneath them. The economic soil that they are working in is eroding. So what you have is the single industry on a pedestal, and the ground beneath it continues to crumble. That pedestal is getting higher and higher. But what happens if that pedestal were to wobble, if it were to fall over, the collapse is going to be devastating.”
Hebert is working on a project comparing the divergent fates of Detroit, which never recovered from the shift in carmaking, and Pittsburgh, which has continued to thrive as the steel industry slowed.
“Today, Detroit is on the way back, it’s rebounding,” he says. “But it had to rebound from the largest municipal bankruptcy in U.S. history and multiple decades in decline. But they also had multiple decades where state, local and federal policy all tried to prop up the auto industry. That just led to less and less resiliency or economic diversity within the city and within the greater metropolitan area of Detroit, so that when the auto industry starts to wobble, a lot of people suffer, and it’s a real hardship.
“Pittsburgh, by comparison, is not a free market bastion of sanity or anything like that. But they had education, they had tech, they had health care, they had industry. They had lots of things in their city and within their community that were independent of steel. And so when the steel industry there collapsed, and when local policymakers, through some shenanigans, let it collapse, those people and that capital had somewhere else to go. That wasn’t true in Detroit.”
Hebert says it is “tremendous” that the federal government is largely avoiding heavy industrial regulations, and he considers that policymakers might have a different perception of manufacturing if they considered the rise in highly specialized high-end manufacturing for business customers.
“Our coffee comes from South America,” Hebert says. “So it seems there are all kinds of things that come from all over the world. And that’s true, we do buy more products from all over the world on a product-by-product basis. But we are still exporting a lot of manufactured goods around the world as well, a lot of big equipment. A lot of medical equipment actually is made here in America and then shipped to hospitals all over the world. Why is that? Because we have the engineering and technical knowhow. How many MRI machines do we need in the United States? A lot, but other people need them too. And so we want to have more customers around the world. Because here’s the really crazy thing: There are eight billion people in the world.
Listen to the full conversation on the Overton Window Podcast.
