Sunday, April 22, 2012

Was Manufacturing Good for U.S Big Cities?

Gary Becker has posted a blog entry on U.S manufacturing trends.  Harvard's William Julius Wilson has long argued that manufacturing offered "good jobs" for low skill workers.  Labor economists such as Derek Neal have quantified the losses to workers who transition from the manufacturing industry to the service sector.

To quote Becker; "Still, if past trends continue, the share of American jobs in manufacturing will probably be lower in the future than it was even as late as 2007.  New and exciting technologies, like 3D printing, may bring back some manufacturing output to the United States since labor costs will be a lower fraction of the total cost of manufactured products based on these new technologies. However, these technologies are unlikely to offer many jobs since they are generally labor-saving, not labor-using, but the jobs will require skilled and better paid workers."

He points to China's rise as an exporting economy to explain our accelerated deindustrialization over the last 20 years.

Given my interest in "green cities" and the intersection between environmental and urban issues. I have consistently argued in this 1997 paper and this 1999 paper and this 2003 Communism paper that  deindustrialization offers significant environmental benefits.  This trend played out in Eastern Europe with the  death of communist energy subsidies and now is playing out in China's superstar cities.   In each case, local environmental quality improves sharply when old high production factories close.

The old factories that have closed due to international competition were located in densely populated areas (i.e Pittsburgh and the Rust Belt) and used older technologies that were grandfathered under the Clean Air Act and these industries (such as steel) and others significantly contributed to local air and water pollution.  As the U.S has grown richer, our individual willingness to pay to avoid such pollution increases and hence the social cost of that industrial activity was rising.

Do new manufacturing plants have a much smaller Pigouvian impact?  I hope so.  Urban economists such as Ed Glaeser have argued that the future of cities is as places for the "consumer city" to flourish. Manufacturing activity does not contribute to the "consumer city".  When I was a student at UC,  Chicago was making a transition to being a "green city" but local historians continued to speak about Gary, Indiana's steel plants and center city slaughterhouses.  Pretty gross!