Presidents Shouldn’t Tell Companies Where to Produce

By Eric Shierman 

My how things have changed since I last wrote a piece for the Oregon Catalyst in 2013. I’ve been busy with graduate school for the past couple of years, and as I attended the Executive Club last Wednesday, I felt like Moses walking down from Mt. Sinai seeing his people worshipping a golden calf. In all its euphoria over our presidential transition, many on the right did not seem too worried about threats by the incoming administration to significantly jack up one of the most pernicious of taxes: tariffs. I’m deeply disturbed by the way Donald Trump seems to be turning Republicans against free market economics.

This is a nontrivial issue for Oregon. Our state’s prosperity stands deeply tied to global commerce.

Listening to any of Trump’s stump speeches during the campaign, it’s clear that he starts from the same factually mistaken premise that many uninformed Americans tend to hold, that we don’t make anything here anymore. The actual data shows the opposite is the case. Thanks to Ronald Reagan’s vision that allowed our economy to integrate itself with the rest of the world, a vision that our president-elect has long opposed, we are living in the golden age of American manufacturing.

There is a data set going all the way back to 1920 that measures this; it’s called the Industrial Production Index. Look at those shaded areas which mark recessions. They definitely knock our industrial output downward, but our free trade agreements do not.

The urban legend of American industrial decline probably persists because productivity increases in manufacturing mean firms require fewer workers to produce these goods. It would seem silly to protest against the use of barcodes and robotic automation; so human nature being what it is, folks naturally gravitate to foreigners for scapegoats to explain a changing economy.

When Trump browbeats American manufacturers to deviate from their profit-maximizing strategies, he’s threatening American jobs in the long-run, not bringing them back. America is already great, but we cannot make it greater by making America 1953 again.

Many lucrative things are cheaper to make in the US than in Mexico or China. When Carrier or General Motors are allowed utilize less expensive workers abroad for labor-intensive components, these companies are ultimately able to hire more Americans at a higher rate of pay than they would otherwise if forced by Washington D.C.’s central planning to employ Americans for the mundane work.

Oregon has been a big beneficiary of NAFTA and the WTO. Have you ever heard of Lam Research? One of the most innovative manufacturing firms in the world makes a tremendous amount of money making high-end capital goods right here in Oregon, but our cognitive biases only allow the average voter to focus on an obsolete plant that closes in Indiana. This distorted worldview threatens to inspire bad trade policies that will threaten America’s already strong competitive advantage.

Eric Shierman lives in Salem and is the author of A Brief History of Political Cultural Change.