Is Manufacturing Coming Back?

The anger that many working-class Americans feel about the decline of American manufacturing has manifested itself in the 2016 presidential election. On the Republican side, Trump has promised to do whatever is necessary in order to protect American manufacturing jobs - including implementing policies like high tariffs and conducting business interventions. On the Democratic side, Senator Sanders blamed past trade agreements for the decline in manufacturing jobs. This anger is, perhaps, warranted: according to a report from the Federal Reserve, American manufacturing employment decreased by 18 percent between March 2001 and March 2007 and can be tied to the U.S. granting Permanent Normal Trade Relations to China.

However, some argue that �reshoring� (bringing manufacturing jobs in foreign countries back to America) cannot and will not restore the American manufacturing industry as it once was. The argument is that reshoring is already happening, but many blue-collar workers are not seeing the results. More and more companies are bringing their manufacturing jobs back to the U.S. (60 percent from China), company executives are increasingly planning on reshoring production, factory jobs have been on the rise since March 2010, the wages for those jobs have been increasing, and for the past few years, for every offshored job, another job has been reshored. And yet, American manufacturing is still not what it was. The U.S. has approximately 7 million less manufacturing jobs today than it did during its peak in 1979.

One possible reason for these statistics is that while manufacturing is coming back to America, the factories being built are heavily automated, and thus need much less workers than they might have needed previously. A better solution for helping the middle-class might then be to raise wages for people in service jobs, like retail workers. More Americans work in retail than manufacturing, and on average, retail workers also make less than factory workers.

Another possible reason for this is that modern factories, due to more advanced technologies, require workers who are adept at handling those advanced technologies. Current factory workers do not have the training for this, and thus, another possible solution is to invest in training programs. This in turn might encourage more companies to reshore, as there would be more highly-trained workers in the labor market.

Further Reading:

FiveThirtyEight, Manufacturing Jobs Are Never Coming Back

The New Yorker, Why Donald Trump Is Wrong About Manufacturing Jobs and China

NPR, How Machines Destroy (And Create!) Jobs, In 4 Graphs

The Panama Papers

The first days of April, the International Consortium of Investigative Journalists (ICIJ), working with media partners and journalists from all over the world, unveiled one of the biggest leaks of information in history, denominated the �Panama Papers.� The investigation reveals offshore links and investments in tax havens of several individuals and organizations, created by a Panamanian Law Firm called Mossack Fonseca.

What it is unique about this leak, in the first place, is the geographical extension of the business. According to the ICIJ, �[the] analysis of the leaked records revealed information on more than 214,000 offshore companies connected to people in more than 200 countries and territories.� The investigation revealed information of the wealth of national leaders, state officials, celebrities and others. Among the involved figures, so far, is the President of Argentina, Mauricio Macri; the President of Ukraine, Petro Poroshenko; professional soccer player Lionel Messi; and the former President of Georgia, Bidzina Ivanishvili. Family members and associates of other world leaders, like Vladimir Putin, Bashar Assad and David Cameron, are involved in the leak too.*

One of the first victims of this revelations was the Prime Minister of Iceland. Sigmundur Dav�� Gunnlaugsson stepped down from office only a couple of days after the leak, when massive public demonstrations in the country requested his resignation due to the ownership of an investment company in British Virgin Islands.

According to the The Economist, the top ten tax havens where these companies are located include the British Virgin Islands, Panama, Nevada (US), Hong Kong and Britain. As shown by the following graph, most of the offshore investments are located in the Caribbean, lead by the British Virgin Islands (110,000 approx.), Panama (45,000 approx.) and Bahamas (18,000 approx.).

The second element that makes this leak so monumental is the impressive amount of documentation that the ICIJ managed to expose. The total data collected and analyzed comprised 2.6 terabytes of information, a significant amount compared to similar investigations like Wikileaks (1.7 GB) or the HSBC files (3.3 GB). The investigation includes emails, financial spreadsheets, identification documents and corporate records of bank accounts and companies, amounting to almost 11.5 million documents.

The main reason is because Mossack Fonseca firm has spent more than 40 years creating and regulating this offshore structure and working with intermediaries from all over the world. Since the creation of the company in 1977, the establishment of offshore companies grew exponentially, reaching its peak between 2005-2010 with more 12,000 firms.  According to the researchers, the decrease may be due to the increase regulations after the global financial crisis.

As the days pass and the millions of documents are analyzed, more and more individuals are being exposed and new stories are developing. In the next weeks or months we should expect newer stories and developments as countries have initiated investigations and citizens from all around the world are demanding answers from their leaders and other public figures.**

*Complete interactive list of public leaders and figures involved in the leak https://panamapapers.icij.org/the_power_players/

**Additional Panama Papers Key Figures https://panamapapers.icij.org/graphs/