Up to 40% of the Gain in US Manufacturing Output Since 2003 is Phantom GDP?

I've long been very skeptical about the way the GDP and CPI numbers are calculated. More reason to believe it.


Since 2004 I have written a number of articles pointing out that offshoring is really labor arbitrage and that if offshoring had the mutual economic benefits associated with free trade, there would be US employment growth in export and import-competitive industries. Instead, employment in these industries has declined in the US but grown remarkably in Asia. In the 21st century the US economy has been able to create net new jobs only in nontradable domestic services, such as waitresses and bartenders and health and social services. Moreover, the growth in productivity and GDP attributed to the US economy were inconsistent with the stagnant real incomes of Americans. Somehow productivity and GDP were growing strongly, but it wasn’t showing up in the incomes of Americans.

Business Week’s June 18 cover story by MIchael Mandel explains the problem identified by Houseman. Economist Matthew J. Slaughter, a proponent of offshoring, says: “There are potentially big implications. I worry about how pervasive this is.” Business Week says the implications are big. The cover story estimates that 40% of the gain in US manufacturing output since 2003 is phantom GDP.

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