Economic Nationalism Helps Workers and Strengthens the Nation

By | 2018-03-25T23:58:29+00:00 March 25th, 2018|
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Among the many malapropisms of Donald Trump during the campaign, one in particular rankled the credentialed class. After his primary victory in Nevada, Trump intoned, “We won with young. We won with old. We won with highly educated. We won with poorly educated. I love the poorly educated. . . . So I’m very proud of you, this is an amazing night. I love the country, I love the country.” While fat shaming is out, education shaming has been in for a very long time. Commenters at the time were aghast at Trump’s offering this kind word for a fairly large part of the electorate. By contrast, Hillary Clinton smugly described her voters as coming from places “that are optimistic, diverse, dynamic, moving forward.”

The Middle Class and the Middle of the Country Are Suffering
The Midwest and the Rust Belt have been coterminous for a long time. These places were admittedly not very optimistic or dynamic prior to Trump’s election. They were moving backward. The people were hurting. And this hurt stems from a broader problem in the economy: it has become unbalanced. And this problem is creating cascading stress to family life, health, and safety in the affected communities.

Since the early 1990s, the economy’s rewards increasingly go to the technology sector, which produces neat gizmos, but few jobs, as well as the finance sector. Incidentally, both of those sectors are the place where the really smart kids end up. They siphon talent from the Harvards and Stanfords of the world, and they make a ton of money for their companies, their shareholders, and their top level talent. These sectors do not, however, create jobs among those who used to work in steel mills, auto plants, refineries, and other places where “dirty, dangerous, and difficult” work takes place.

The decline of the manufacturing sector has gone on a long time and has occurred for many reasons, including automation, stricter environmental controls, and the crippling short-sightedness of labor unions. But the decline has particularly accelerated since the 1990s when China’s large, low-wage, high-IQ workforce became available to the world. Labor and environmental regulations at homemade domestic manufacturing less attractive. At the same time, the American financial sector grew to a remarkable 7.5 percent of the U.S. economy, even as its investments in capital goods increasingly occurred overseas. Things got messy. After lackluster wage and income growth for all but the top earners, the economy essentially blew up in 2008. In the Obama years, following this debacle, the economic picture was mixed. Jobs grew at an appallingly low pace, wages remained flat, but those at the top, on the eve of retirement, or with positions in technology and the finance sectors, benefited tremendously as the stock market rose through a combination of earnings growth and artificially low interest rates.

Republicans and Democrats each treated the decline of the manufacturing sector as a fact of life. Obama callously declared, as if he were a mere observer, “some jobs aren’t coming back.” Jeb Bush said he wanted more millionaires, this at a time when many would settle for $40,000 a year.

The most famous cheerleader for these anxiety-inducing changes to our country’s economy is Tom Friedman, whose contempt for workers is only matched by his love of name-dropping. He excitedly quoted an expert who declared “the high-wage, medium-skilled job is over.”

Friedman says the solution is education and training. “In a world where average is officially over, there are many things we need to do to buttress employment, but nothing would be more important than passing some kind of G.I. Bill for the 21st century that ensures that every American has access to post-high school education.”

Friedman, Hillary, Jeb, Wall Street, and Silicon Valley forgot that average gets to vote. Average liked the way things were before. And average ain’t so average that they can’t figure out when a system is rigged against them.  

Enter Trump and Economic Nationalism
The centerpiece of Trump’s policies of economic nationalism is immigration restrictions and protective tariffs. Contrary to Friedman’s advice to get training and be prepared to job hop until you somehow retire, Trump’s proposals are substantially more realistic and find strong historical examples of success in America’s phenomenal growth as an industrial and world power during the 19th Century.

Under Trump, manufacturing jobs have grown nicely—171,000 in 2017—and he has reiterated his support of this sector with the recent call for tariffs.

Coming back to Trump’s offending remarks, it rankles because it reveals an important truth about life that undermines the deus ex machina solution of education and training: half of the people are, by definition, below average. Yet, somehow in the past they found jobs. When Trump says “Make America Great Again,” he recalls an era when the merely average (or below average) could have decent lives, intact families, home ownership, high trust communities, and economic progress.

The key to this equitable and rising tide was not merely free markets and limited regulations at home—although that was part of it—but also a limited labor pool, which encourages capital investment, which increases the average productivity per worker, and ultimately leads to an increase in wages. If you permit the natural limits of the labor pool (through sensible immigration limits) and if you discourage capital flight and pure wage competition (through protective tariffs), the result is a more productivity and investment at home. And thus, high wage manufacturing, as well as services that cannot be outsourced, reward the hard-working, but not necessarily high IQ or dynamic, cohort to earn a decent living.

Lake Wobegon We are Not
With all of the gnashing of teeth regarding the Bell Curve and its alleged implications for America’s commitment to racial equality, commenters missed out on two important insights for the future. First, that education can do little to enhance the prospects of those of middling intellect. That is, IQ tends to be stable, heritable, and mostly immutable. And, two, that our system increasingly rewards a “cognitive elite,” which intermarries at a greater rate than ever, and that this elite has replaced the more intellectually diverse, hereditary WASP elite of yesteryear, which was animated in part by an ethic of noblesse oblige and patriotism, values not necessarily restricted to the brilliant. As the authors observe, “The cognitive elite has pulled away from the rest of the population economically, becoming more prosperous even as real wages for the rest of the economy stagnated or fell. The divergence has been most conspicuous in the lowest skill jobs.”

America’s free trade policies served it well after World War II. The rest of the world was in shambles, and America had the capacity to sell its goods far and wide. As the rest of the world rebuilt, however, competition became fierce. Other countries developed policies to favor their own manufacturers and through various policies shut out American exports. Following the post-World War II script in the 1990s, China obtained “most favored nation” status, and its economic power was unleashed. Americans could buy low priced Chinese goods if they remained employed and had disposable income, even as others sunk from middle class to destitute status.

The promise of opening China’s markets was that they would liberalize over time through contacts with the West. Further, their interconnectedness with the rest of the world would create conditions for international peace and prosperity. Instead, they have built a first-class navy on America’s dime, and products that we used to make at home are now imported from China, while millions of jobs and communities have been crippled in the process. Their growth would be of little moment when G.I. Joe dolls, iPods, and trinkets are involved. But the focus of Trump’s tariffs—steel and aluminum—are essential to national independence and national defense, as well as being a source of high-paying jobs. You can’t build cars, skyscrapers, planes, guns, tanks, and aircraft carriers without them, and when the industry sinks below a certain level thousands of years of experience and know-how can be lost. When that happens, not only the jobs but the ability of the nation to remain independent is jeopardized.

Trump’s immigration and tariff policies are part of a unified policy of economic nationalism. The two components of this policy—immigration restrictions and tariffs—are designed to strengthen the nation as a whole, as well as to address the extreme and destabilizing imbalances in the economy. Any realistic economic policy must deal with people as they are, which includes the fact that many are “poorly educated.” Instead of imaging they can all become computer scientists and verbally facile “knowledge workers,” we must instead capitalize on the fact that they are willing to work and are finite in number, but the skills required must match their abilities. In other words, we need a robust, high-paying manufacturing and services sector.

Open borders, whether for goods or people, do not allow this cohort to benefit from the one thing they traditionally can trade upon: their work ethic and their scarcity. Instead, they must compete with the 7 billion people worldwide who are willing to do what they can do much cheaper, whether in factories abroad or in the shadows here at home. So long as they face this kind of competition, their wages will become decoupled from their increasing productivity, as demonstrated in the chart above. Restoring their prosperity and dignity is essential to national greatness.

Even someone who is poorly educated can see that.

By | 2018-03-25T23:58:29+00:00 March 25th, 2018|

About the Author:

Christopher Roach
Christopher Roach is an attorney in private practice based in Florida. He is a double graduate of the University of Chicago and has previously been published by The Federalist, Takimag, The Journal of Property Rights in Transition, the Washington Legal Foundation, the Marine Corps Gazette, and the Orlando Sentinel. The views presented are solely his own.