The fallacy of a 21st century trade war is the reality of the 21st century American consumer.
For a lot of rural and small city America, the manufacturing economy was 1 to 1 correlated with US prosperity. The fact that that prosperity was incidental to this fact will forever be lost to them.
Many factory folks are drawn to Trump because he speaks to them like no other politician in recent memory. People in manufacturing in the early 200s felt that politicians shrugged off the migration of factory jobs to other countries, preferring to build a “knowledge economy” based on high-value services. To economists and policymakers, that approach made sense. Classical economists have long argued that economic growth is enhanced for all by letting countries produce what they are most efficient at producing, and that trade barriers only increase consumer prices.
Dan Pearson, who served for 10 years on the U.S. International Trade Commission under George W. Bush and Barack Obama and is now a senior fellow in trade policy at the Cato Institute, echoed that assessment:
“When we have a government trying to allocate resources or drive decisions in a nonmarket way, we are going to get a lower standard of living. It’s not like there are no opportunities in this country outside of manufacturing. The opportunities in manufacturing are rather few. If you want to build a career for yourself as a young person, you might want to look at something else. The goal should be: Let’s keep the business climate strong, let’s keep the manufacturing sector growing, and train these people for the service jobs that need doing.”
But many did not look to change. They merely looked to bring the jobs back. And, with threats of trade wars and revised tariffs, Trump promised this. However, the United States needs cheap electronics, spare parts, textile and so on which are produced in India and China. They can’t be cheaply mass-produced in the US. Electronics can’t be produced in the US, period. The US does not have the tantalum, tungsten, tin, gold, cobalt, copper and lithium required to make them. That’s why we almost fought WW3 over Congo.
Whether or not he realizes it, Trump’s base is okay with this. A huge part of Trump’s support is the promise that US manufacturing will be a larger part of the US economy again. That is to say, there are voters, of sound mind, who genuinely believe the strike on the US economy by slashing 20% of our service industry is a justifiable growing pain so that we can replace it with manufacturing. The actual attainability of this is laughable, as the processes of economics are what organically led to our service economy, but to towns/cities that use to be defined by the manufacturing sector (before it slowly got phased out) it’s a promise of “hope.”
Without trade, the US has no electronics. Without electronics, the US has no world-leading military. Without their military, without any allies, and with a lot of oil under the ground…
But this is lost on the Baby Boomer living in a rural area able to support a family on a single-income factory job.
Like a warrior painting a lion on his shield to harness the strength of a lion, Trump’s voters want to arbitrarily turn the factories back on to summon an economy that capitalism has forgotten. These people haven’t forgotten that the US is mostly a service based economy; they are the consequence of it. They are the demographic that has been made irrelevant. They saw all the money they used to generate concentrate into cities, they saw their youth atrophy and the main street shrink more and more.
It was a slow process. Most of them worked their whole life and didn’t realize what was happening until they reached retirement and actually pulled away from work to see the consequences of their labor. For many, it felt like they retired to a different country. Day laborers began filling their towns while the native population continues to shrink. The millionaires/billionaires that made the news were no longer captains of industry, but turtleneck wearing vegans who made devices they could barely afford, and all they can think is wait a minute, I thought I was middle class; where did my spending power go? All the while, cities are growing and concentration more wealth (never mind the growing wealth gap and it’s actual effect on this) and the visible trappings of prosperity are found in those “liberal” cities while another store closes on main street and your own son moves five states away because the town doesn’t have manufacturing jobs anymore.
Of course, America produces more than it ever has. The manufacturing hasn’t gone away. What has gone away are the jobs.
People joked in the 1970’s about robots coming to take your job, but it really happened. Slowly, over the course of a few decades, and then all at once in the last ten years. This is what failing towns and blue collar workers are feeling. The refineries used to provide all the capital for the area. If you didn’t work for them directly, you did something to support the people who did — you educated their children, you ran the grocery stores that fed everyone, you ran the bank so workers could deposit their checks. Today, the refinery one’s father worked in produces about ten times the amount of refined petroleum that it did when he started there in 1960, but with a tenth of the workforce. It used to employ 15,000+ people, now it employs 1,200. In a metro area of over 400,000 people (more than double what it was fifty years ago), it’s no longer a major employer.
What this means is that many of the 1,200 people that work there make far less than the people who did that job before them, because there’s a lot competition for the low-skilled, low-education jobs. In the 60’s and 70’s, you could work out there with your manual labor and make a damn good living.
Not so today.
The bulk of the profit of that refinery gets shoveled back to headquarters — which is in Houston. So there’s much fewer dollars going back into the local economy, which means everyone in the area has a much lower standard of living than they did when a kid grew up there in the 80’s. That means less money to build up local businesses, and many more failed restaurants and other establishments. Main street looks much like it did when a kid was in high school in the 90’s, except there’s a lot more vacant buildings and a lot of rot that’s never been addressed or repaired. There’s just no money to do it.
Now the Boomer Trump voter doesn’t understand any of this. He just sees that all the liberals in the big cities are living large and he’s scraping the bottom of the barrel looking for scraps. He knows the refinery has been laying off people for the last thirty years, but he never thinks about why. His job was to haul pipe and turn wrenches, not think about the bigger scope of operation. All he knows is that all the jobs went away — somewhere — and now his town is a shithole. Bring the jobs back! is his rallying cry, because if there are jobs, the town should be prosperous again.
He thinks the jobs must have went away to China and India, because he hears a lot about outsourcing. He knows we import a lot and there’s a trade deficit, so that must be why manufacturing is down. It isn’t, but in his mind, since there are less jobs, there must be less production. Or he’s seeing a lot of funny speaking people around the area lately, maybe it actually is illegal labor that’s been taking the jobs.
In his mind, if we can just start exporting again instead of buying foreign shit and kick all these damned illegals out and back where they belong, the manufacturing will ramp back up and his family can eat again. It’s a pipe dream, of course, if the manufacturing does come back, it’ll be automated because that’s cheaper than hiring workers. He hasn’t seen an Atlas Robot and doesn’t realize that manual labor as we know it is about to cease to exist. That robot can work around the clock, doing the job of three men, or five, or twenty, while never making a mistake, working in a far more caustic environment than a human can, and isn’t ever going to file a costly workplace accident lawsuit. The executives are salivating over this, because five years after that robot hits the market, that refinery is going to run on 120 employees. Unfortunately, Boomer Trump Voter is a desperate person in a desperate situation, and if someone tells him they’re throwing him a life preserver, he’ll do anything he can to reach it. Unfortunately, he’s going to find out it’s just another anchor.
We have switched from the Industrial Age to the Information Age. The train left the station ten years ago and these guys weren’t on it. They can hope and pray all they want, they can tear up the tracks or they can build the most beautiful Grand Central Station anyone has ever seen, but it’s not going to change the fact that the train is never coming back.
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