In trying to explain the loss of jobs in manufacturing, the US president-elect, Donald Trump, has foolishly fingered China as the main cause. On the other hand, Trump’s critics, both conservative and liberal, have highlighted automation as the main cause.
Neither side has it right. The ‘China vs IT’ debate neglects how, in manufacturing, as elsewhere, US economic decline means a reliance on new forms of labour utilisation, and is strongly rooted in weak research and development (R&D).
New sources of labour, weak performance in R&D
US economic decline isn’t just a tale of job losses. Even in manufacturing, it’s more and more the case that robots work next to workers, not instead of them. And according to the US Bureau of Labor Statistics, general US employers have been falling back on new sources of labour.
It’s true that female labour participation is down, from 58.8 per cent in 1994 to 57 per cent in 2014, but this decline isn’t colossal. Once we look at the recruitment of Hispanics and older people, we can see how US capital has called on other reserves of labour. In 2014, Hispanics took 16.3 per cent of the US 160m-strong civilian labour force, up from just nine per cent of 131m back in 1994. In 2014, too, workers aged 55 and older took 16.4 per cent of the labour force – they took just nine per cent in 1994.
Overall, US employment is buoyant. And in 2015, the hours worked in aggregate by the whole of US society surpassed those worked before the recession of 2008-09.
Compared with the expanded scale of labour exploitation, however, US R&D is weak. Measured against GDP, US business enterprise R&D hardly ever exceeded 1.94 per cent from 2000 to 2013. Yet China is catching up with the US fast: it moved the needle from 0.54 per cent in 2000 to 1.58 in 2014. By the end of that period, too, corporate R&D in the Republic of Korea – home to companies like Samsung – reached a whopping 3.36 per cent of GDP.
These dynamics of labour and R&D are certainly beyond The Donald. For, in his framework, Beijing has simply depressed the value of the Renminbi so as to cheapen China’s manufacturing exports. At the same time, US manufacturers should stop outsourcing production to China just as much as they should no longer outsource to Mexico. Simplistic? Sure. But Trump’s critics are no better.