On Re-Industrialization: Brief Comment on Krugman's column

I have written on deindustrialization before (see here and here), and commented on the CHIPS Act, and how it was one of the first, if not the first, re-shoring of manufacturing jobs into the US. Krugman just wrote a column on that, noting that the concern with manufacturing is now bipartisan, as Biden policies follow Trump's, he argues the former more successfully than the latter. Also, I should note that the the pressures for US corporations to reorganize their supply chains away from China is bipartisan, but that might take a long while.

I mostly agree with Krugman's take. But there are two issues with his argument, in my view. One more conceptual, and the other just observational. Krugman says that

"we shouldn’t fetishize manufacturing. A good job is a good job; there’s nothing inherently superior about manufacturing as opposed to health care or even entertainment."

This smacks me too much as an acceptance of the post-industrial society myths. Kaldor's laws suggest that you should care about manufacturing. For example, a great deal of the increases in productivity both in health care and entertainment are associated to the rise of productivity in manufacturing sectors, like pharmaceuticals, medical equipment, electronics, computers, etc. And exactly because the US still is important in all these manufacturing sectors, in spite of the decline of the share of manufacturing jobs in total jobs the nature of deindustrialization in the US was different than in other parts of the world, like Latin America. That was my argument a decade ago.

However, something happened in the intervening decade. While before manufacturing jobs declined, and production increased, in the last decade the trend changed. Now manufacturing production stagnated.

So manufacturing output never recovered from the 2007-8 recession, and effectively stopped increasing. Even the fast recovery from the pandemic seems to have stalled. Again, I don't think this spells disaster for the US economy, since US corporations are still dominant in many sectors that are crucial for the future of Industry 4.0 or whatever that is called. My example during the pandemic was the video conferencing platforms I use (zoom, teams, google meet, webex, and skype) are from US corporations. But it does say something about how difficult it will be for the US to disentangle from the Chinese supply chains.

Also, I think that the reason for this change in attitude regarding manufacturing and China are less connected to electoral politics, than Krugman suggests (he said: "it’s not at all clear whether these policies will succeed in their implicit political goal: winning back working-class voters who have gone down the MAGA rabbit hole). If the implicit goal was political it wouldn't be bipartisan, and the solution would require recovering manufacturing jobs, not production, and that will not happen, at least not a recovery to the previous peak. This is revaluing of manufacturing is not about winning elections in Pennsylvania (even if it might not hurt Biden), it is a geopolitical concern with US hegemony.

PS: And expect a significant backlash against industrial policy, and any "protectionist" measures in the US from the neoliberal establishment, which is still entrenched. See for example Adam Posen here, or this from The Economist, who said that: "America’s openness brought prosperity for its firms and its consumers, both Mr Trump and Mr Biden have turned to protectionism... Subsidies could boost investment in deprived areas in the short term, but risk dulling market incentives to innovate. In the long run they will also entrench wasteful and distorting lobbying." On this I'm with Krugman that is considerably less upbeat about the US's great economic moment.