(What’s Left of) Our Economy: The AP’s Manufactured Nonsense About Manufacturing

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AP, Associated Press, Calvin Woodward, fake news, innovation, Jobs, manufacturing, productivity, research and development, technology, Trump, {What's Left of) Our Economy

The Associated Press (AP) is a ginormous global news organization, and its reach is especially widespread here in the United States (although I couldn’t find figures breaking out its American clientele specifically). So it’s a big deal when one of its highest profile writers spreads the kind of utter claptrap about domestic U.S. manufacturing that Calvin Woodward just peddled in his new piece on President Trump’s views on the economy.

In an article posted today, Woodward portrayed Mr. Trump’s emphasis on industry (and other elements of his worldview) as nothing more than a pathetic and downright dangerous exercise in nostalgia for the “grunt work of old” that ignores how “Industry, technology and much of the culture are finding new ways of doing and living” and how “U.S. prosperity has been driven for decades by services, technology and new things….”

Some confidence in Woodward’s conclusions might be justified if he relied on manufacturing specialists or even economists to support them. But the authorities he cites are a “professor of communications” and a psychologist who “studies nostalgia from Britain’s University of Southampton.”

Not that economists have been killing it in recent decades in properly evaluating the importance of manufacturing. But if Woodward had bothered to consult one,  the odds would have been higher that he’d have encountered the idea that industry is kind of important for any country seeking to build or maintain a world-class military. Or” that it’s historically been the U.S. economy’s leader in productivity growth (although as RealityChek regulars know, it’s recently been losing its mojo on that score). Or that it boasts one of the nation’s biggest employment multipliers – meaning that the creation of each American manufacturing job generates an outsized number of jobs elsewhere in the economy compared with employment increases in most other sectors. Or that manufacturing accounts for the lion’s share of American business research and development spending. 

That last fact is especially important for Woodward and others of his ilk to know. For it makes clear that if the United States is to keep generating the “technology and new things” that of course are central to its hopes for continued (much less greater) prosperity, it has better keep its manufacturing base world class.

I’ll leave it to you to judge whether Woodward’s article qualifies as Fake News.  But there can’t be any legitimate doubt that it’s manufactured nonsense.   

Im-Politic: Home Delivery for Chinese Propaganda

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"Democracy Dies in Darkness", BBC, China, China Daily, ChinaWatch, fake news, Im-Politic, journalism, Mainstream Media, propaganda, RT America, The Wall Street Journal, Washington Post

For all the attention that’s been focused lately on the mainstream media’s objectivity and credibility, there’s no doubt that some major newspapers have for years been foisting unmistakably fake news on their readers, and I just got a reminder when I went out to my front porch this morning to pick up my Washington Post. It comes in the form of the ChinaWatch supplement (see here, e.g.) that arrives stuck inside the print edition periodically.

My main problem with ChinaWatch – which also has deals with other leading publications, including The Wall Street Journal – isn’t that it’s issued by the Chinese government, and therefore is nothing more than Beijing propaganda. Any country valuing free expression should welcome all comers to its media markets and national debates.

Instead, my main problem with ChinaWatch is that there’s no way for anyone lacking considerable knowledge about China and its state-run media to know that ChinaWatch is a Chinese government product.

Near the top of the front page, readers can see that the ChinaWatch supplement is “prepared by China Daily, People’s Republic of China” and “did not involve the news or editorial departments of the Washington Post.” At the very bottom comes the statement, “ChinaWatch materials are distributed by China Daily Distribution Corp., on behalf of China Daily, Beijing, China. Additional information is on file with the Department of Justice, Washington, D.C.”

But why should that raise any red flags (no pun intended) with non-specialists? After all, the Post and most other news organizations routinely report that the Chinese economy is full of “private companies.” (See, e.g., here.) Why not simply assume that China Daily Distribution Corp. is simply one of them? It certainly sounds like a typical American-style business. And although the Justice Department reference might look a little odd, how many readers of American newspapers recognize it as a sign that the “company” is required under U.S. law to register as a foreign agent (though not necessarily as a foreign government)?

On page two you’ll find the masthead, with contact information for ChinaWatch‘s offices in China and various foreign locations. But no hint of any Chinese government affiliation appears here, either.

But there’s an easy fix for this problem: Require ChinaWatch to mention prominently on the front page (at least) that it’s a Chinese government publication. And because ChinaWatch is hardly the only foreign government product to appear in American news media outlets, the same should go for the United Kingdom’s BBC, Russia’s RT America, and others. As those two are among the foreign government media organizations that mainly broadcast, their identification could come in the form of text that continually appears in the “crawls” that so many televised news programs run at the bottom of the screen, or, in the case of radio, as periodic announcements (say, every five minutes).

And finally, in the interests of full disclosure, although ChinaWatch specifies that its content has nothing to do with the news and editorial departments of papers like the Washington Post, its appearance has lots to do with the business departments of those newspapers, and their bottom lines. For ChinaWatch is paid advertising. So the Post and the Journal and any others should make clear on a regular basis that they depend in part on the Chinese government for revenue.

After all, as the Post declares ominously in its new, Trump-era advertising slogan, “Democracy dies in darkness.” That’s also the place where reader ignorance and conflicts of interest flourish.

(What’s Left of) Our Economy: A Fake News Attack on the Trump Metals Tariffs

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aluminum, Catherine Rampell, competitiveness, fake news, manufacturing, metals, steel, tariffs, The Washington Post, Trade, Trump, {What's Left of) Our Economy

Pundits like the Washington Post‘s Catherine Rampell have every right to warn that President Trump’s metals (and other) tariffs will ultimately harm the U.S. economy more than it helps. What they have no right to do is peddle demonstrably false claims like her contention that because of the price hikes so far seen for steel and aluminum since these levies came onto the American trade agenda earlier this year, companies reliant on these materials for their final products “are now less competitive.”

I call these claims demonstrably false because every month, the U.S. government publishes detailed statistics on the nation’s trade performance, and the data through April contain absolutely no evidence that domestic metals-using industries are on the ropes – or anywhere close.

Let’s examine what seems to be the national chattering class’ and policy establishment’s favorite measure of industrial competitiveness: American exports. If the Trump tariffs have indeed been pushing U.S. metals-using industries close to the ash heap of economic history, then their overseas sales for the first few months of this year (the tariffs became likely when the Commerce Department officially recommended them in mid-February), should be much lower than they were the first few months of last year – or at least growing much more slowly.

In fact, just the opposite has been seen, at least when it comes to three major sectors of the economy that are especially heavy users of steel and aluminum – transportation equipment, non-electrical machinery, and fabricated metals products.

Over the first four months of this year (the latest data available), America’s global exports in these categories were not only 5.83 percent greater than over the same period in 2017. The year-to-date growth rate was some 7.2 times higher than that for 2017 (0.81 percent).

Perhaps more significant, the difference between the January-April, 2018 export growth rates for these metals-using industries and their January-April, 2017 growth rates was much greater than for American manufacturing as a whole. During the first four months of 2018, total U.S. manufacturing exports have grown 7.45 percent year-to-date. That’s higher in absolute terms than the export growth for the metals-using industries, but this export increase has been only 2.12 times faster than their export growth rate for January-April, 2017 (3.52 percent).

But what about my favorite measure of American competitiveness – trade balances and how they’ve changed? I focus on these two-way flows because the theory of comparative advantage at the heart of all justifications for the freest possible global trade makes sense only if these surpluses and deficits have consequences for global production patterns.

After all, comparative advantage holds that trade is the best possible way to create the best possible global division of labor – meaning that in a world of unfettered commerce, countries that trade products and services most successfully will inevitably wind up making those products and providing those services most successfully, and that all countries will benefit on net. And the countries that trade products and services most successfully are those that amass the biggest surpluses in those products and services. The opposite propositions logically hold the impact of running deficits in various sectors.

As it happens, the trade balance figures don’t show or presage any apocalypse for America’s metals-using industries, either. During the first four months of 2017, their cumulative trade deficit with the rest of the world increased by 10.56 percent on year. For the comparable period this year, the deficit’s year-to-date growth rate was faster: 11.64 percent. But clearly, this trade shortfall didn’t grow much faster.

The comparison with trade deficits for manufacturing as a whole is instructive as well. During January-April, 2017, this trade gap increased by 10.19 percent on year. During January-April, 2018, the figure was 10.85 percent.

So the metals-using industries’ trade deficit did grow faster during both periods than the shortfall for manufacturing as a whole. But the difference in the rate of acceleration has been trivial. In the metals-using sectors, the deficit during the first four months of 2018 grew 1.10 times faster than it grew during the first four months of 2017. For manufacturing as a whole, the deficit during the first four months of 2018 grew 1.06 times faster than during the same period in 2017.

I’d be the last to argue that this situation will never change. The Trump metals tariffs haven’t been imposed very long. Moreover, they’ve been phased in, so the full impact of their final (for now!), most sweeping version hasn’t yet been felt.  

Nonetheless, the effects could also be swamped by the benefits metals-using sectors have gained from the new corporate tax cuts and the regulatory relief offered by the Trump administration – two policies that industry as a whole has hailed enthusiastically as major boosters of competitiveness.

What should be unmistakably clear, though, is that claims that U.S. metals-using industries are already suffering from the Trump steel and aluminum are no better than Fake News – and deserve nothing more than scorn from all fair-minded readers.

Im-Politic: A Neglected Russia Disinformation Objective?

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2016 election, Barack Obama, Central Intelligence Agency, China, CIA, CNN, collusion, cybersecurity, Director of National Intelligence, disinformation, fake news, Im-Politic, intelligence community, James R. Clapper, John O. Brennan, Matthew Rosenberg, MSNBC, NBC, North Korea, Putin, Russia, The New York Times, Trump

Well then. Two passages in a New York Times article from this morning’s print edition were sure conversation-stoppers when it comes to the ongoing uproar about charges that President Trump’s 2016 presidential campaign colluded with Russia to boost his election odds and ensure soft treatment from his administration. That is, if you read far enough into the long piece to encounter them. In fact, they’re so important that they should have been the main angle – or at the very least, the main theme of front-page stories from now until we ever find out what’s really happened.

The passages (which make the same critical point):

First, according to Times reporter Matthew Rosenberg, by some point last September (at the latest), American intelligence officials were worried that Russia had developed an “operation to create discord inside the American government.”

Second, and more specifically, the intelligence agencies viewed one key part of this operation as feeding information suggesting that Vladimir Putin’s regime could blackmail the President (and/or the candidate) to “United States intelligence agencies and pit them against Mr. Trump.”

And here, in Rosenberg’s words, is the context:

“American intelligence agencies believe that Russia’s spy services see the deep political divisions in the United States as a fresh opportunity to inflame partisan tensions. Russian hackers are targeting American voting databases ahead of the midterm election this year, they said, and using bot armies to promote partisan causes on social media. The Russians are also particularly eager to cast doubt on the federal and congressional investigations into the Russian meddling, American intelligence officials said.

“Part of that effort, the officials said, appears to be trying to spread information that hews closely to unsubstantiated reports about Mr. Trump’s dealings in Russia, including [a] purported video [depicting him in compromising sexual situations], whose existence Mr. Trump has repeatedly dismissed.”

In plainer English, if Rosenberg has it right, the Russians have not only been trying to put Mr. Trump over a barrel and make sure that he defeated his main rival, Democrat Hillary Clinton. They have not only been trying to shake Americans’ confidence in their democratic institutions by hacking into them and unleashing a flood of fake news onto its media platforms, social and conventional. They have not only been trying to cover their tracks by using such fake news and other tactics to discredit the Congressional investigations into election meddling and related reported outrages.

They have also – separately – been trying to whip up antagonism between the President and the intelligence community. Achieving this goal of course would both tend to hamper America’s own intelligence operations and broader foreign and national security policies, as well as undermine the nation’s political system and its underlying social and cultural unity. And the tumult engulfing the capital and the nation as a whole suggests that the Russians are succeeding with this disinformation campaign, and that the intelligence agencies are playing their hoped for role.

Not that this possibility lets Mr. Trump and his aides totally, or mainly, or partly off the hook when it comes to their Russia ties either before or after his election.  For this objective could well have been sought on top of an effort to turn Mr. Trump into a Manchurian Candidate and President, not instead of it. But it does raise the question of how many of the allegations have stemmed from simple, and completely fictitious, plants.

Something else noteworthy about this article: If it’s accurate, then the potentially disastrous loss of America’s cyber-weapons to Russia and perhaps other adversaries that keyed Rosenberg’s piece was just the latest disclosed possibly catastrophic intelligence failures that occurred during Barack Obama’s presidency, and on the watches of the former intelligence agency chiefs, like his Director of National Intelligence (the complex’s top job) James R. Clapper, and one of his Central Intelligence Agency (CIA) Director John O. Brennan – both of whom have been particularly sharp Trump critics.

Two others? China’s penetration of the CIA’s operations in the People’s Republic, which reportedly resulted in the assassination or capture of “more than a dozen sources” (according to press accounts, the breach began in 2010, under Brennan’s predecessor, former General David Petraeus) and the failure to anticipate the speed of North Korea’s nuclear weapons development (which can be laid directly at Clapper’s feet, and which Brennan apparently missed as well).

Clapper, incidentally, is now a “national security analyst” for CNN. Brennan has just joined NBC and MSNBC in the same capacity. Good luck to you if you think there’s any chance these networks’ weekend talk shows tomorrow will raise any of this, including the Rosenberg article, with them?

(What’s Left of) Our Economy: The Laughable EU-Japan Trade Deal

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agriculture, automotive, driverless cars, EU, European Union, fake news, Financial Times, free trade agreements, G20, globalization, Japan, Mainstream Media, Trade, Trump, Wolfgang Munchau, {What's Left of) Our Economy

It seems like the economic policy world is all abuzz about the news that the European Union (EU) and Japan have agreed to the broad outlines of a trade agreement. That’s odd, to put it mildly, since reviewing what’s known about the deal for about five minutes is enough to debunk the notion that it’s a global economic game-changer – and the related claims that it will represents a stinging rebuke to President Trump’s moves toward a more results-oriented U.S. trade policy.

It’s true that the EU and Japan are enormous economic entities. They’re also high-income entities. But they haven’t been very dynamic economic entities. From 2005 to 2016, the former increased its output by just under 28 percent (in euro terms) before factoring in inflation. The latter has grown by less than 2.50 percent in yen terms. By contrast, the United States (which hasn’t been killing it, either) has boosted its current dollar gross domestic product by 41.82 percent during this period in U.S. dollars. 

They’re also regions that tend to run trade surpluses – although massive energy imports following the Fukushima nuclear plant disaster have generally tipped Japan’s total trade into deficit. So from a macro-economic standpoint there’s a major question regarding how willing they are to open their markets significantly on a net basis – especially given how slow their overall growth has been. Maybe that’s why one joint European-Japanese effort to estimate their welfare effects came out with results that barely move the needle. And interestingly, this study projects that the United States will be a net winner.

But the strangest aspect of the prospective deal, especially from the EU perspective, concerns the specific trade flows that are apparently targeted. For Brussels is aiming mainly to boost its exports of food products like meat, wine, and dairy, and in return has been willing to lower its automotive tariffs. The agreement has even been nicknamed the “cars for cheese” deal.

In other words, the Europeans supposedly believe they’ll prosper – and show the Trump administration a thing or two – by giving pride of place to industries that, however politically powerful, have relatively little ability to generate big positive spillovers to the rest of the economy, and welcoming more predatory competition to an industry with phenomenal potential to foster future innovation and productivity growth. (Think “driverless cars.”) In fact, this quid pro quo is so bad for Europe that it casts considerable doubt as to whether its terms will be honored.

Also interesting – for all the European ire about the steel tariffs being mulled by the United States (which runs a big trade deficit in this sector), Brussels has said little about the industry during its trade talks with Japan (which runs a big surplus).

Financial Times columnist Wolfgang Munchau has admirably dissented from the Mainstream Media groupthink and dismissed the EU-Japan deal as “a shameful attempt at manipulation” of the narrative surrounding the recent G20 summit that was hyped by journalists exhibiting “confirmation bias” of their pro-internationalist, anti-Trump views. On this side of the pond, we’ve come up with a simpler description: fake news.

(What’s Left of) Our Economy: And the Labor Shortage/Immigration Beat Goes On

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CNN.com, fake news, illegal immigrants, illegal immigration, Immigration, labor shortages, productivity, wages, {What's Left of) Our Economy

Here’s yet another Open Borders- and amnesty-friendly article from the Mainstream Media that simply doesn’t add up – this time from CNN.com. In this story about a small San Francisco-area manufacturer who claims that he lost a tenth of his employees due to a 2011 government raid in search of illegal immigrant workers, one whopping inconsistency in particular stands out. It concerns the wages paid by the employer Emerald Packaging of Union City, California.

Emerald’s owner, claims that the company is still suffering from the personnel losses because he can’t find adequate replacements. And the CNN reporters’ sympathy for his supposed plight – and the obvious difficulties encountered by his illegal workers – was made clear by the article’s melodramatic headline: “RAIDED: Immigration agents showed up at Kevin Kelly’s factory and he lost his star workers.”

RealityChek regulars know by now that such claims of labor shortages due to restrictive immigration policies are usually open and shut tip-offs that the business in question is paying inadequate wages, or has refused to automate and become more productive. As I’ve noted repeatedly, mainstream economic theory teaches that when the demand for anything – including labor – exceeds the supply, the price of that commodity (in this case the wage and/or non-wage benefits) tends to rise until a new equilibrium is restored. Alternatively, businesses tend to substitute capital (typically in the form of technology) for what they view as overly expensive labor.

Kelly emphatically denied to the CNN reporter that he’s been skimping on wages by using illegal workers: “When people say these companies are hiring illegal labor because they want to keep their costs down… in our case that argument is complete bulls–t.”

In fact, according to Kelly, the jobs that illegals were filling – and that in some cases have remained unfilled – “aren’t cheap positions.” He added that “They range from $15 an hour entry-level jobs to $35 an hour for experienced mechanics. ‘With overtime of $27 to $35 an hour, you can make pretty good money of $75,000 to over $100,000 a year.’”

But his claims started to fall apart – not that CNN picked up on this – the instant he started discussing in detail the employee whose departure he felt most keenly – an assistant foreman named Miguel Gonzalez.

As the CNN article tells it, “Gonzalez had worked for Emerald Packaging for over 20 years. He started as a box handler, moving and storing product pallets and factory supplies, and worked his way up to assistant foreman. He was a gifted mechanic and Kelly relied on him to help keep the factory running.” Further, he could:

>”walk into my office and tell me what’s going on in the facility.”

>Gonzales was “Keen to learn and move up the ranks [and] routinely took on extra work and hours. He also rarely missed work, even returning to the factory floor just two days after his first child, Casandra, was born.”

>Soon after Gonzalez’ hiring, “he showed initiative by tinkering with and fixing up the machines on the factory floor on his own time to help them operate better. Two years into the job, he was promoted into a role where he learned to set up, repair and maintain the factory equipment.”

>”Over time, [he] taught himself every aspect of the business, including payments and shipping.”

>In Kelly’s words, “He was the single best machine mechanic we had.”

>”Losing him had an immediate impact on production because there just wasn’t anybody of Miguel’s caliber to replace him. There just wasn’t,” said Kelly.

And what was this supremely talented “star worker” making in 2011, after twenty years of superlative performance? Twenty-two dollars per hour. (He also received healthcare and retirement benefits.) According to the Labor Department’s data, that wage is somewhat ($2.50 per hour) more than the average hourly wage (before inflation) for all workers in the plastics packaging manufacturing sector that year, and a little over six dollars an hour more than non-supervisory workers alone make. (It’s not clear whether an assistant foreman qualifies in the Labor Department’s eyes as a supervisory or a non-supervisory worker.) But that $22 per hour is also about $13 dollars an hour less than what Kelly said he pays “experienced mechanics” nowadays (five years later).

There’s no doubt that some businesses that hire illegal immigrants need every body they can get, and there’s no doubt that some illegal immigrants are earning good wages largely as a result. But when a news organization plainly convinced of the desperate need for illegal workers touts a single alleged example of this dire situation that’s so full of gaping holes, Americans are more than entitled to start wondering whether this narrative as a whole is fake news.