Manufacturing labor productivity in the United States grew at a 3.3 percent annual rate from 1987 to 2010. From 2010 to 2023 it shrank at a 0.3 percent annual rate. A Breitbart Business Digest piece published June 22 asks why, and leans on a new NBER working paper for the answer.
The authors are Robert Gordon and Kenneth Ryu of Northwestern University. Their argument starts from the old promise of free trade: factories would employ fewer people, but those who remained would produce more, with better machines, software, supply chains and management. As the digest puts it, productivity was meant to be the consolation prize for deindustrialization.
The break came in 2000
Many observers date the breakdown to 2010 and the post-financial crisis period of so-called “secular stagnation”. Gordon and Ryu look earlier. In their telling, the real break came around 2000, when U.S. manufacturing output stopped growing. Between 2000 and 2023 it was essentially flat, while real gross domestic product rose 57 percent.
Imports filled the gap. They made up 28 percent of domestic manufacturing output in 2000 and 45 percent in 2023. Gordon and Ryu call this the “import invasion,” and they say foreign production did not just supplement American factories but increasingly took their place.
Productivity as an ecosystem
Most accounts treat productivity as a matter of technology, management or training. The paper treats it as industrial ecology. When output stagnates, plants close and workers leave. Supplier networks weaken, and firms that move offshore take with them parts, process knowledge and engineering feedback. The factory floor, the authors argue, is where engineers learn what works, where defects turn up and where suppliers and manufacturers solve problems together.
Across manufacturing industries, they find a strong link between rising import penetration and later output stagnation. Apparel, textiles, furniture and electrical equipment lost enormous amounts of output after 2000. Computers and electronics, long seen as America’s productivity engine, reached 84 percent import penetration by 2018, almost as high as textile production.
The tariff argument
The digest draws a policy point. Critics of tariffs often say that reshoring production would cost productivity. Breitbart reads the paper as showing the reverse: productivity grows out of production itself, so bringing production home and rebuilding the industrial ecosystem should be expected to improve it.
