Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers.
One can’t blame the Financial Times for publishing an opinion piece by Wilbur Ross, if he is indeed a senior policy adviser to Donald Trump (“Trump campaign benefits from criticism of trade imbalances,” 29 August). It is hard to judge the Republican candidate’s positions from his own words, because of his famous “shoot from the lip” style. Does Trump really believe, for example, that American workers’ wages are too high, as he said in the Republican debates? Many had been waiting to see who his economic advisers would be, in part so that we could have clear and precise language by which to judge what are the candidate’s positions. The written statement in the FT is the first by any of them that I have seen.
So what does Ross say? His column is not economically literate or coherent. This judgement is not based on economic theories, but rather definitions and facts.
For example, he says three or four times that American productivity has fallen. It has not; it continues to rise.
Okay, what he means is the rate of productivity growth, which has indeed fallen since the turn of the century, and is indeed a problem. But what numbers does he choose to cite to measure the productivity slowdown? “During the 1970s growth in US unit labour costs was 6.8 per cent a year but it dropped…to 1.2 per cent so far this century.” What a bizarre thing to say! Growth in unit labor costs (ULC) equals the rate of wage increase minus the rate of productivity growth. Other things equal, the productivity slowdown would show up as a higher rate of increase in ULC, not lower. Does he know that higher ULC is usually considered a bad thing (by hurting competitiveness)? Is he trying to say something about wages, and if so, what? Is he agreeing with Trump’s statement about wages being too high or not? It is impossible to tell.
There are other mistakes as well. For example, the continent of Europe does not “run massive and chronic trade deficits.” To the contrary, it runs trade surpluses. He seems to imply manufacturing employment shares in Germany and Japan have not declined. They have. And so on.
It appears that definitions, logic and facts are no more important to Trump’s adviser than to the candidate himself.
This post written by Jeffrey Frankel.