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FIGURE 14-2 Manufacturing productivity and real-wage indices, 1949 to 2000. SOURCE: Department of Labor.

manufacturing sector.

The short-term, cyclical challenge that we face is a manufacturing-led recession with what I will call a manufacturing-constrained recovery. Before we can solve the short-term problems faced in this recession, it is essential to deal with the problems of manufacturing. In particular, it is essential to deal with the problems of manufacturing capacity, because manufacturing constraints will be reached before the economy recovers.

There has been a lot of discussion about economic growth and President Bush’s plan for stimulating the economy. The American labor movement disagrees with the predicted economic impact of this plan. The economy is more open than in earlier recessions, with imports and exports as a percentage of national income being much higher. Therefore, if the government spends money now, in the form of new government spending or tax increases, a large part of the money will be spent on goods not manufactured in the United States. The same initial expenditure will not result in the same stimulus as before. If we try to expand the economy without dealing with manufacturing problems, politically unsupported levels of budget deficits will be generated long before there is any traction in labor markets.


The two major imbalances that existed in the economy going into this recession were private sector debt, which will not be addressed here, and the trade deficit. The trade deficit

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