American Production

[G-Wohl]

Peter Schiff speaks often of the American worker and how the US does not produce enough to sustain its growth. He writes in Crash Proof: “It’s absolutely unarguable that they [foreign economies], not we, are the engine of economic growth.” I find that this is not a view that many people share with us - even within "libertarian" circles. I find Republicans and even many Objectivists disagree with him, and typically cite CATO US production measurements as indication that the US does still produce quite a bit.

I think this argument falls quite short because I don't believe CATO provides accurate (properly measured) data, not to mention the fact that most production statistics are actually algorithmically-determined through measurements of gross output, employment, and other data which may or may not necessarily indicate growth or decline in US production.

Nonetheless, this only refutes their evidence, as I've yet to find any data that actually supports Peter's claim through my own research. It seems that there doesn't exist a single official statistic that can objectively refute these peoples' claims, but obviously it is imperative that we do so. So, is there any data - from Peter Schiff or otherwise - that can help us defend this very important talking point?

 

[Renter45]

You won't find that data because what Peter has been saying is incorrect:

http://cafehayek.com/2007/09/the-state-of-ma.html

 

[LDA]

That was written in 2007. More production has left the country since then. A lot of the production going on before 2007 was the result of artificial demand caused by easy money.

 

[G-Wohl]

You won't find that data because what Peter has been saying is incorrect:

http://cafehayek.com/2007/09/the-state-of-ma.html

I don't think your supplied data is any more correct, however. Your link does not address Peter's claims directly. Peter's claim is that we aren't manufacturing enough - not that we aren't at all. Obviously, with all the illegitimate cash that was thrown around during the past decade, there's no reason that there wouldn't have been more productive output from the US. But the question is whether or not that's enough manufacturing output to sustain a viable economy.

If China's manufacturing output is 2.5 times less than the US's, that doesn't take into consideration the fact that China is producing on its own means, while the US does so by means of the charity and loans of other nations. If the US produces that much without ever paying back the other countries that it borrowed from, then essentially that productivity was spurred by other nations' capital wealth - not our own. That is the inarguable aspect of Peter's argument: no matter what is produced in the US, the US isn't the initial investor in that production. Our lenders hold all the risk.

The statistic that I'm imagining is some sort of number that can calculate the ratio of productive capacity to productive output (which I imagine would be very one-sided) - and also a number that can demonstrate the amount of local investment and wealth that is being used by a nation to produce those manufactured goods (again, a number I imagine would be quite low in the US compared to most other industrialized nations).

 

[G-Wohl]

That was written in 2007. More production has left the country since then. A lot of the production going on before 2007 was the result of artificial demand caused by easy money.

I took that from Crash Proof 2.0, actually.

 

[constituent]

I don't know, I'm seeing huge growth in bioengineering, biopharmaceutical manufacturing jobs where i live. Really, the entire state of Texas. Lots of small companies, no doubt a few will make the transition to megafacturer. I'd be interested in seeing where else this might be the case.

 

[Renter45]

That this is somehow a problem in and of itself is also incorrect.

http://cafehayek.com/2009/02/everyone-has-a-favorite-horse-to-beat-mine-is-not-dead.html

If China's manufacturing output is 2.5 times less than the US's, that doesn't take into consideration the fact that China is producing on its own means, while the US does so by means of the charity and loans of other nations. If the US produces that much without ever paying back the other countries that it borrowed from, then essentially that productivity was spurred by other nations' capital wealth - not our own. That is the inarguable aspect of Peter's argument: no matter what is produced in the US, the US isn't the initial investor in that production. Our lenders hold all the risk.

 

[constituent]

If China's manufacturing output is 2.5 times less than the US's, that doesn't take into consideration the fact that China is producing on its own means, while the US does so by means of the charity and loans of other nations.

It seems to me like you're conflating government action with production. Not all business in the U.S. is growing by means of charity and loans from other nations, though this can certainly be said of those dependent on government handouts for startup cash or revenue. There is tons of private wealth still in this nation, and much of it is getting tired of sleeping in the bank... it'll have to go somewhere.

 

[LDA]

I took that from Crash Proof 2.0, actually.

The link right above my post - the one that I was referring to - is not from Crash Proof 2.0.

 

[G-Wohl]

That this is somehow a problem in and of itself is also incorrect.

http://cafehayek.com/2009/02/everyone-has-a-favorite-horse-to-beat-mine-is-not-dead.html

Well I'm not speaking about the trade deficit, and indeed that is a common mistake a lot of people make. I'm not concerned with how much we export, because profit is profit no matter who buys it. I'm concerned with earnings.

To legitimately justify the amount of money we're borrowing, we'd need to make at least the principle amount back. We can easily determine that we are not doing so, and this is quite evident due to the fact that we continue to borrow insane amounts of money.

I understand where the confusion comes from, but my referencing of other nations is not meant to imply that we cannot have a trade deficit. Foreign nations' credit is simply the vehicle by which this country is accomplishing the task of consuming far more than it should as related to its productive earnings. Your link correctly states that how the borrowed money is used is the real indicator - I'm not looking at the nationality of the debtor, but rather how that debtor's funds are being improperly utilized. If we cannot make up for the shortfall, then there's a problem. In our case, we have the unique situation of being propped up by people who want the reserve currency of the world to thrive once more. Normal economies would have fewer lenders if it couldn't pay back the money it borrowed - which would defend your link's point - but in the case of the US, most nations feel it is in their best interest to loan money to the US if it means that it will continue to prop up the system that they wish to continue running. Again, the problem isn't who is lending this money. The problem is that we continue to borrow money at increasing rates, while not being able to productively utilize that borrowed money to return the initial debt.

 

[TGGRV]

Well, the US still produces something. 70% of the economy was retail and quite a bit of the remaining housing and other services, or something like that. The fact that the US produces is inconsequential because if the US would have produced so much, you wouldn't have had a trade deficit. It's not about producing, but producing enough to cover your consumption.

Debt in and of itself is irrelevant as long as it is put to productive use. I don't see Americans borrowing to open new factories and create productive capacity, though. You realize that considering your government has over 80T in unfunded obligations and the private sector over 55-60T, do you realize that you would need double digit productivity growth in order to be able to pay this off? Hell, you need double digit growth of the economy just to be able to fulfill your commitments on Medicare and Social Security.

 

[Bman]

We still produce a lot that the foreign world wants.

Seriously, what would the world do without us.

 

[RyanRSheets]

Our per capita production may be outstanding, but our per capita consumption is even more outstanding. I think Peter is absolutely right. We import more than we export. If the rest of the world cuts us off, our economy would necessarily shrink. Our economy cannot continue to grow without an increase in the deficit, because it is already well beyond its natural size.

 

[G-Wohl]

Our per capita production may be outstanding, but our per capita consumption is even more outstanding. I think Peter is absolutely right. We import more than we export. If the rest of the world cuts us off, our economy would necessarily shrink. Our economy cannot continue to grow without an increase in the deficit, because it is already well beyond its natural size.

Don't confuse the production:consumption ratio with the trade deficit. They're two separate entities, detailing two separate aspects of our economy.