Coming Home to Roost

Master Lock, which has made locks in Milwaukee since 1921, has brought 100 jobs back from China over the last year and a half. And Mr. Bink, who has worked at the plant for 33 years and heads the United Auto Workers local, is sure more will follow. “They are making a lot of capital investment; buying a lot of new equipment,” he said. “That will create more jobs.”

Master Lock’s story dovetails nicely with the budding upturn in manufacturing employment, which has rekindled hope across a Rust Belt pummeled by 30 years of job loss. Nationwide, factories have added 400,000 jobs in the last two years, the first sustained bout of growth since the 1990s, replacing about a fifth of the positions lost during the recession. Other companies, from Otis to General Electric, are bringing home jobs once thought lost for good.

While more domestic jobs are a welcome development, it is sad that they are only now returning because the transfer of wealth is reaching completion. The price of American labor has now begun to decline to the point where domestic production is feasible. This also means that foreign labor’s price has increased to the point where foreign production is no longer feasible. What happened?

In brief, the federal government decided it would be a good idea to hamstring domestic businesses in a variety of ways, including price floors for labor, costly regulations, high corporate taxes, and a large number of other impediments. While doing this, the federal government decided that it was simultaneously a good idea to open up the market to foreign producers, especially those who did not have the same regulatory burdens as domestic businesses.

This caused upheaval in labor markets. It also caused some capital flight. Some Americans lost their jobs, but at least they had cheap goods, most of which the federal government prohibited them from manufacturing. Now, foreign workers have the capital (including intellectual capital) that would have otherwise belonged to US citizens had not the government taken it from them. Now, US citizens have jobs again, only they don’t have all the capital that generally goes with these jobs because the government effectively taxed it away from them and gave it to non-citizens. The kicker of this story is the federal government is nominally a representative democracy, and acts on behalf of its citizens.

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