This week, in a fresh attempt to derail the media’s focus on his Russian misadventures, Donald Trump is celebrating “Made in America” week at the White House. Once again, Trump is selling the myth of the great, competitive, well paying American manufacturing sector. Why do I call it a myth, you ask? Because he is deliberately referencing America’s manufacturing boom of the 1940s-1950s, and there was nothing normal about that economy. The only reason American workers of the 1940s and 1950s could come home to unskilled jobs that could support a family of 4 in Levittown while Dad went to school on the GI bill was because all our economic competitors were destroyed by war. The circumstances of the US manufacturing sector from 1940-1960 were unique. They were created by 1) the government’s need for war materiel to win the greatest conflict in human history, and 2) the partial or total destruction of our economic competition. Even without accounting for automation and advances in robotics, that sort of demand for unskilled labor is unlikely to ever be replicated in the United States. Unless we want to make like Randy Newman and drop the big one on all our trading partners, we need to stop pretending otherwise.
American manufacturers got a YUGE leg up from the Feds
The US manufacturing sector benefited from an unprecedented infusion of government cash from the passage of the lend-lease bill in 1940 until the end of the war (with significant infusions due to the Korean war and occupation of Europe thereafter). The entire economy was mobilized to manufacture war materiel, package food, and otherwise provide nearly all Allied manufactured resources for the duration of the war. Federal spending increased by a factor of 7 from 1940 to 1945, until it was over 40% of US GDP in both 1944 and 1945. A lot of that money went to goods manufactured for the armed forces, plus the $32.5 billion (1940 dollars) that the US exported through lend-lease during the war. It is very difficult to overstate how much this demand, especially from 1944-1946, turbocharged the manufacturing sector and set it up to dominate the post war years. When WWII ended, the US had a thriving economy, no political unrest at home, no domestic damage from the war, and vast manufacturing resources that had been producing at maximum capacity to meet government demand. In other words, we were perfectly situated to convert our manufacturing sector to sell the products the world needed to rebuild.
Most of the world was in a state of chaos – and we profited handsomely
America was the primary economic beneficiary of two back to back World Wars, resulting in the total destruction of Europe and Japan, the consequent end of colonialism, the permanent expansion of the American military to compensate for European (especially British) withdrawals, the economic isolation of the Soviet bloc, war in Korea, and civil war and mass starvation in China. If you want to see how we profited artificially from global chaos and destruction, you’ve just got to look at the numbers. From 1900-1913, the US accounted for about 10-12% of world manufacturing exports. In 1921, the first post-WWI year for which the UN has available data, the American share had jumped to over 19%. Over the course of the 1920s the US settled into a 15-17% manufacturing export percentage level, still higher than before WWI. This dropped during the Great Depression, but by 1938, the US again accounted for a little over 15% of the world’s manufacturing exports (please see above UN link for data).
In the 1920s and 1930s, the US was the world’s richest nation, just as it is now. In the 1940s, its manufacturing predominance became truly disproportionate. In 1948, 3 years after WWII ended, the US still accounted for 30% of the world’s manufacturing exports. As late as 1953 it accounted for 28%. It wasn’t until 1959 that the US share of world manufacturing exports dropped below 20%. For most of the 1950s, the US ranged from 22-28% share, more than twice the American manufacturing export share before WWI, and 10% higher than the interwar period. Now American manufacturing has maintained an export share in the high ‘teens ever since, but after 1959, the artificial boost from WWII and the destruction of our trading partners had ended. Since 1960, the share of American workers employed in the manufacturing sector has steadily declined.
American manufacturing in the Rust Belt responded poorly to postwar competition
The part of America that received the greatest boost from the World Wars is also the part of the country that handed us Donald Trump. That’s no coincidence. The manufacturers who dominated the Upper Midwest had virtually no competition in the ’40s and ’50s. as a result, they became complacent and failed to innovate. When competition, international and domestic, showed up in the late fifties, they started losing business. It took them until the 1980s to improve their production model and stop hemhorrhaging jobs both to competing countries and the American South. However, this decline did not happen because other countries and their workers were “stealing” US jobs. It happened because jobs and market share were undergoing a predictable and appropriate redistribution in a more peaceful world.
The period between 1955 and 1980 saw Germany’s “economic miracle,” and the reconstruction of Europe thanks to the Marshall Plan. The US helped Japan, Taiwan, and South Korea develop a healthy manufacturing sector. Finally, after Nixon went to China, it began to take its place as a manufacturing powerhouse. A lot of this recovery was fueled with US government cash, and for good reason. While the loss of American manufacturing jobs since the 1960s has been hard for many Americans, it isn’t as hard as helping prop up a destitute world devoid of trading partners. When the American worker’s artificial advantage disappeared, a lot of people, especially in the Rust Belt, saw a decline in their way of life, and some of that squeeze came from our trading partners’ recovery and increased competition. But in reality, the trading partners we helped recover in the ’50s and ’60s buy the American goods that still represent 17% of global manufacturing output. Global manufacturing output keeps on growing, and for the most part it hasn’t been German or Japanese or Korean or Chinese workers who encroached on the American working class after 1960. It has been automation and production efficiency.
We can’t return to a prosperity bought with global war and widespread death
Until we quash the myth that there was a sustainable golden age of the American worker, we are going to have more and more Donald Trumps. Americans support Trump for a lot of reasons, but I think many of them support him because they are chasing a time when unskilled labor could support a high quality of life, and he has promised to bring it back. A lot of Trump’s supporters are baby boomers who were born during the period when the Rust Belt had no competition and manufacturing jobs provided a stable future. They believe they are entitled to what their parents had, and I can’t blame them. The working class got to be middle class from 1940 until 1960 on the back of a war torn world, and they have, understandably, never gotten over the loss of that status. However, a lot of people all over the world had to die to create that lifestyle for unskilled American workers. We are going to have to find a new way forward for the children and grandchildren of the greatest generation of factory workers. Going backward is not an option.