Monday, May 16, 2011

Deindustrialization and American Hegemony

Manufacturing jobs have declined precipitously in the United States since the late 1960s. As the graph below shows they fell from 28% of total employment to 10% last year. The decline is continuous, and, one should add, precedes NAFTA and other Free Trade Agreements, (FTAs) which are often associated with the process of deindustrialization in the US. That the topic is old should be highlighted by the fact that the classic on the subject is Barry Bluestone and Bennett Harrison’s book published in 1982.
However, if one looks at the absolute number of manufacturing jobs, rather than their share in total employment, a slightly different picture emerges. First, manufacturing employment grows up to 1979 (peaking at around 19 million jobs). In other words, the fall in the manufacturing employment share from the 1960s to 1979 is fundamentally the result of a rate of employment growth in the manufacturing sector lower than in the economy as a whole. From 1980 manufacturing employment basically starts falling slightly up to 1994, and from 1994 to 2000 it grows only a trifle, fluctuating around 17 million jobs. Interestingly enough, 1994 is the year of the implementation of NAFTA. The whole period from 1980 to 2000 is a period in which the share of manufacturing employment falls, not just because employment grows faster in other sectors, but also because it stagnates.
However, after 2001 (the year China entered into the World Trade Organization, WTO) manufacturing jobs collapse, with only 11.5 million jobs in 2010. This may suggest that, in part, one may have to revise Bob Rowthorn’s view that North-South trade has no role to play in deindustrialization. But clearly the process that starts in 1979 is of a different nature. One view is that it represents a natural result of economic maturity, and that faster growth in manufacturing implies more workers absorbed in the services sector.

I would suggest, but not elaborate too much here, that deindustrialization in the United States, and I mean the post-1979 phenomenon, is part of a strategy of accumulation, which was based on lower wages and higher interest rates, with demand pushed by increasing the debt leverage of the private sector (as suggested in another post). The weakening of the unions (and FTAs have played a role in this), and the move of manufacturing jobs abroad (mostly to Asia), and, as a result, deindustrialization, are part of the pattern of accumulation since the 1980s. However, this should not be read as a general weakness of the United States industrial sector.

As noted by Fred Block, the United States has a shadow industrial policy machine, that has allowed certain sectors to be weakened, but has promoted vigorously other sectors deemed strategic.  For him:
“The rise of the computer industry in the U.S. was, at every stage, orchestrated by major government initiatives and even to this day large federal investments are being made to keep the U.S. computer industry ahead of foreign competitors. Nor is the computer industry atypical. Virtually all U.S. industries have become heavily dependent on scientific and technological advances that are financed primarily by the federal government's support of university and government laboratory researchers.”
Block argues that there is a hidden developmental State in the US. In that sense, deindustrialization has not been a sign of the weakness of the US, or of the demise of its hegemonic power, as some on the left would argue. On the contrary, is part of the renewed American Hegemony, which has been maintained at the cost of certain sectors, and, in particular, of its working class.

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