U.S. Produces More Goods Than It Ever Has
April 1, 2002
Many supporters of tariffs or policies to promote government-favored industries are concerned that the United States is losing its capacity to produce goods, and America will end up a nation of "hamburger flippers" and paper shufflers.
However, there is not the slightest bit of evidence this is true. In fact, the U.S. economy produces a higher percentage of goods as a share of total output today than at any time in history.
Production of goods -- "things" -- is not falling; it has risen steadily for the last 30 years.
Looking at the production of goods as a share of inflation-adjusted gross domestic product (real GDP):
- At the trough in 1932, goods production represented just 28.3 percent of GDP.
- Goods production rose sharply during the 1930s through the end of World War II; by 1943 it had risen sharply to 35.5 percent.
- Production then fell gradually during the 1950s and 1960s, falling from 34.6 percent of GDP in 1950 to 32.3 percent in 1972.
This is ironic because many industrial policy advocates imply the 1950s and 1960s were the "good old days," when manufacturing industries like steel were vibrant.
- Throughout the 1980s, goods production rose steadily, hitting 36.1 percent of GDP in 1989 -- the highest level in American history up to that point.
- By the middle of the 1990s, production of goods accounted for 38 percent of GDP, and by the year 2000 was up to 40.3 percent, according to official government data.
- In short, goods production is now about 20 percent higher as a share of GDP than in the "good old days."
Most of the growth took place in businesses such as computers, software and telecommunications that lack the high visibility of steel and auto factories or textile plants.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, April 1, 2002.
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