I don't mean to be overly bashing the New York Times lately -- there are plenty of other media outlets that are just as bad -- but sometimes it's unavoidable. Yesterday they had a big front-page article titled "Town's Decline Illustrates Peril Of Trade Deals," by Binyamin Appelbaum. The article is about Galesburg, Illinois, its long decline, and the causes of that decline. Or I should say "cause" (singular), because exactly one cause is discussed, namely "increased foreign trade." Does that really explain anything at all about what is going on here?
Now there is no doubt that Galesburg has declined. Wikipedia here helpfully collects decennial census data, showing that Galesburg reached a peak population of 37,243 in the 1960 census, and was down to 32,195 by 2010. Much discussion in the Times article concerns a large Maytag factory in Galesburg that closed in 2004, when a large part of its production moved to Mexico:
In 2004, Maytag shut down the refrigerator factory that for decades was Galesburg’s largest employer and moved much of the work to Mexico. Barack Obama, then running to represent Illinois in the Senate, described the workers as victims of globalization in his famous speech that year at the Democratic National Convention. A decade later, many of those workers are still struggling. The city’s population is in decline, and the median household income fell 27 percent between 1999 and 2013, adjusting for inflation.
Permit me to point out a couple of problems with the thesis that Galesburg's woes have been caused by "trade deals" and "globalization."
- Which "trade deal" are you blaming for Maytag moving these jobs to Mexico? NAFTA? That was 10 years earlier in 1994.
- Even if the closing of this factory could be directly attributed to some "trade deal," or to "globalization" more generally, the problem is that lots and lots of places have lost lots of manufacturing jobs without declining overall. Exhibit A of course is New York City. Here in New York we had over 1 million manufacturing jobs in the 1950s. Today there are about 75,000. But the total number of jobs is up significantly, recently setting all-time records of around 3.6 million. So all of the manufacturing jobs and then some have been replaced by other jobs, and in fact much better jobs, mostly much cleaner and cushier white collar and office jobs. I'm certainly not meaning to hold up New York City as a model of a good business climate to attract jobs. But New York City is definitely a complete disproof of the thesis that loss of manufacturing jobs to foreign competition dooms a city to economic decline. Los Angeles would be another such example if any were needed.
Let's face it, trade deals or no, globalization or no, every factory sooner or later is going to close. Even if the Chinese can't make the stuff cheaper, eventually someone will come up with a better product, or a cheaper way of making the same product, or the equipment in this factory will wear out, or this company will hire incompetent managers who run the place into the ground, or something else. No town can maintain itself over the long pull by just hoping to hang on to the exact same set of factories forever. To maintain yourself and grow, it is essential to attract new businesses. And that requires one very simple thing, which is a good business climate.
Does Illinois have that? No. What are the problems? There's nothing very complicated about this:
- Overall state/local tax burden. The most recent (2011) Tax Foundation data put Illinois at #13 out of 50 states, which is bad but not disastrous. (Numbers 1 through 4 are NY, NJ, CT and CA respectively). But perhaps more relevant to Illinois's situation is that almost all the states around it are lower, including Ohio (#18), Michigan (#21), Indiana (#22), Kentucky (#23), Iowa (#29) and Missouri (#33). The only neighboring state ranked higher is Wisconsin (#5), and there they have been cutting taxes aggressively under Republican leadership of recent vintage.
- Pension burden. By this time almost everybody knows that Illinois has the worst unfunded pension problems of all 50 states. And just last week the Illinois Supreme Court basically declared unconstitutional any effort to fix the problem short of massive tax increases or firing all state employees en masse.
- Illinois is not a right to work state. Neighboring Michigan, Indiana, Iowa and Wisconsin are right to work states.
So if you have an idea for a new factory and money to build it, are you going to invest it in Galesburg, Illinois, where you will be a sitting duck for high current taxes, big coming tax increases and predatory unions? When you could just as easily go to any of those neighboring states and avoid all those problems?
Sorry, New York Times, but "trade deals" and "increased international trade" have next to nothing to do with the woes of Galesburg, Illinois.