It’s often said by our political leaders and economists that the United States needs a better-trained work force in order to compete with other nations and bring manufacturing jobs back home. If that’s true, then how do you explain the following?
Regarding illiteracy among the world’s population, the CIA World Fact Book notes that:
… over two-thirds of the world’s 793 million illiterate adults are found in only eight countries (Bangladesh, China, Egypt, Ethiopia, India, Indonesia, Nigeria, and Pakistan) …
I did some checking. Of these eight highly illiterate nations, the United States actually has a trade deficit in manufactured products with five of them. It has surpluses with Egypt, Ethiopia and Nigeria. (These surpluses are almost entirely in the form of aid. The U.S. counts aid as exports.)
In fact, these five relatively illiterate nations – Bangladesh, China, India, Indonesia and Pakistan – accounted for over 77% of our entire trade deficit in manufactured products in 2011. Clearly, the outsourcing of our manufacturing jobs can’t be explained by companies seeking out highly-trained work forces. If training were the issue, then why did our manufacturing jobs leave the best-trained work force in the world in the first place in favor of work forces that were completely illiterate?
The temptation is to say that these jobs actually left not because of better-trained work forces but in search of cheap labor. However, that argument falls flat when you consider that our trade deficits with high-wage nations like Japan and Germany are even worse than any of these five afore-mentioned nations.
What they all have in common is an extreme population density, making them incapable of reciprocating our consumption of their imports with consumption of American goods. We have trade deficits with these nations not because of the training of their workers or because of cheap labor or even because of manipulated currency exchange rates, but because of American trade policy that fails to account for the role of population density in driving global trade imbalances.