Commentary

Smoot-Hawley-Dorgan

By Daniel Griswold
This article appeared in the National Review Online on November 30, 2006.

As he prepares to fill an important leadership post for the incoming Democratic congressional majority, never let it be said that Sen. Byron Dorgan hid his agenda. In a new book, Take This Job and Ship It, the North Dakota senator advocates far-reaching restrictions on the freedom of Americans to trade in the global economy. Along the way, he disregards the most basic facts and reveals an utterly distorted view of the American economy.

Dorgan has long been a critic of trade, but his views are now no longer the frustrated flailings of a minority party back-bencher. As the senator boasted in a recent op-ed in the Fargo Forum, “As a member of the Senate Democratic leadership and Chairman of the Senate Democratic Policy Committee, I am going to help chart our changing course.”

We can’t say we haven’t been warned about just what course Sen. Dorgan and a goodly share of his fellow Democrats have in mind. The senator advocates an elaborate system of import licensing to close the U.S. trade deficit. He wants to repeal permanent normal trade relations with China. He calls for strengthening labor unions at home and restricting the ability of U.S. companies to invest in and buy from less developed countries that do not have the AFL-CIO’s stamp of approval. To make his case, the book offers a mixture of nostalgia, invective, and hyperbole that often tips into outright falsehoods.

The hollowness of Dorgan’s argument reveals itself in the first few pages. He opens by praising the legacy of Franklin D. Roosevelt, never stopping to note the irony that it was FDR and a Democratic Congress that led the United States away from the same ruinous protectionism that Dorgan now advocates. On trade, Dorgan’s book more accurately reflects the thinking of the famous Republican lawmakers Reed Smoot and Willis C. Hawley than of his beloved FDR.

“America cannot be great if most of its workers are in the service sector or cashiering at Wal-Mart,” Sen. Dorgan declares. Well, most Americans do work in the service sector — about 80 percent, in fact — and most of those jobs pay much better than a retail cashier. In fact, the American middle class is built on good paying service jobs. Knock on the doors of any middle-class neighborhood and you will meet teachers, insurance agents, engineers, managers, bookkeepers, firefighters, police officers, small-business owners, and truck drivers (maybe even the odd politician or trade-policy analyst!).

As a nation grows wealthier, the share of the workforce in agriculture invariably falls and the share in the service sector rises. The share in manufacturing typically rises and then falls. According to the World Bank, countries with the lowest share of the work force in the service sector include Uganda, Vietnam, Romania, Sri Lanka, Indonesia, and Mongolia. Countries with the highest share in the service sector include, along with the United States, Sweden, Switzerland, Canada, Hong Kong, Japan, and Luxembourg. The first group is among the poorest nations, the second among the richest. Apparently one goal of Dorganomics would be to shift America from the rich group to the poor group.

In a typical flourish of hyperbole, the senator warns that “our manufacturing base is shrinking.” But here the senator confuses jobs with output. America’s manufacturing base has been both growing and changing. American factories are producing more aircraft and pharmaceuticals, more sophisticated machinery and semiconductors, more chemicals and even more passenger vehicles and parts than a decade ago. In fact, America’s factories are currently cranking out 50 percent more stuff by volume than they did in the early 1990s, before NAFTA and the World Trade Organization came into being. They can produce more with fewer workers because manufacturing productivity has been growing so rapidly.

The senator offers no overall production figures that would confirm his sweeping statement (because there are none), only nostalgic story telling about certain declining industries. Here is Dorgan’s list of products now made overseas but upon which America’s prosperity and industrial might supposedly depend: Huffy bicycles, Etch-a-Sketch, Fig Newton Cookies, Pennsylvania House Furniture, Levis blue jeans, Fruit of the Loom underwear, and Radio Flyer Little Red Wagons. Does the senator really believe we would be better off if more Americans were knitting underwear and baking cookies than selling insurance or writing software?

According to Dorgan, “the middle class is disappearing,” and free trade is largely to blame. Such a claim transcends hyperbole into the realm of “The Big Lie.” America remains a solidly middle-class nation by any objective measure. According to the U.S. Census Bureau, the median income for American households in 2005 was $46,326, up 7 percent in real dollars since 1990 and up 17 percent since 1980.

The same Census figures show that the share of American households earning between $35,000 and $100,000 (again in real dollars) has indeed shrunk a bit since 1990, from 47.0 to 44.4 percent. But so too has the share of households earning below $35,000, which has declined from 40.9 to 38.5 percent. Meanwhile the share earning $100,000 or more has grown from 12.0 to 17.2 percent. Far from disappearing, middle class households have been moving up the income ladder along with lower-income households. The American Dream is alive and well.

Take This Job and Ship It includes the obligatory attack on Wal-Mart. The charges are familiar: that the retailer pays its workers too little and sells its customers too many goods from China. Dorgan dismisses the fact that discount retailers, by shopping in the global marketplace, are saving American families billions of dollars a year and raising the real wages of millions of workers. Retail jobs tend to pay less than average because of their relatively low productivity, but within the retail sector, Wal-Mart’s pay and benefits are above average. The typical Wal-Mart worker undoubtedly enjoys a better pay and benefits package than the typical worker at a mom-and-pop retailer in North Dakota.

Not content to gloss over facts and pine for the past, Dorgan dishes out a strong dose of invective toward those who favor expanded trade and those who practice it every day in the marketplace. His opponents are not just wrong but downright un-American. U.S. companies that move production offshore “have abandoned any pretense of patriotism” and “don’t think much about the Pledge of Allegiance.” As Calvin of comic strip fame once said, the irony of this is sickening. Has anyone else noticed that many liberals who bristle at any questioning of their patriotism when it comes to national defense are the first to question the patriotism of others (like those “Benedict Arnold CEOs”) when it comes to protecting Red Flyer wagons and call center jobs?

Sen. Dorgan’s real gripe is not with free-trade economists or un-patriotic chief executives, but with the American people, including his own North Dakota constituents. He just can’t bear the thought that Americans are using their expanded freedom in the global marketplace to not only find more customers and investment opportunities but to find better products at more competitive prices.

Daniel Griswold is the director of the Center for Trade Policy Studies at the Cato Institute.