Monday, August 24, 2009

Ministry of manufacturing 

According to the Business Insider, former car czar Ron Bloom gets to expand his kingdom:
US Car Czar Ron Bloom (the sidekick and then successor to Steve Rattner), is set to shift to become the manufacturing czar. His task will be to oversee the rebirth of American manufacturing, a sector that's decline in significance over the decades, but which potentially could be a great source of new, post-real estate economy jobs.

Manufacturing is the Mick Jagger of economic sectors -- sexy for being decidedly unsexy. Almost everyone wants to see more manufacturing, especially if the products being manufactured are either "green" or "high tech."

Reporter Joe Weisenthal goes on to note that it would be better if Bloom could identify impediments to industry such as "red tape, labor laws, legal liabilities, and counterproductive environmental laws." Well and good, but he then falls for mercantilist fantasy:
Why is it that we have scads of unemployed Americans in our cities, yet it's still more economical to buy sneakers made in China and then ship them over here?
Two words: comparative advantage. Here's a chart of industrial production NAICS 3149, the classification that would include sneakers. How much more would you like? It's certainly true that it takes fewer workers to make those sneakers than it used to, here in the US. But trade is about creating more goods for more people, and meanwhile freeing people to pursue those things they do better than they do other things.

"But they're unemployed!" you'll say. Yes, for the moment, and while some will return to production of shoes later, others will move towards those things they now have a comparative advantage in. Comparative advantage is not static, and it does not need a ministry of manufacturing led by a tsar segodnya to take its effect.