Given Tuesday’s disappointing Republican primary results and the end of Ted Cruz’s campaign for the nomination as the Republican party’s presidential candidate, now is as good a time as any to look more closely at Trump’s actual ‘policy’ positions (to the extent he has any positions at all that won’t change at a moment’s notice when it is convenient for him) and discuss their relationship to the common good. I’m particularly interested in examining Trump’s views on international trade and I thought I would use as a springboard for my piece National Review’s Kevin Williamson, who caused a bit of a kerfuffle on the internet recently when he decided to take Donald Trump’s supporters to task. More specifically, Williamson had the gall to call out the white working class as the author of their own failures.
Williamson has been writing about the white working class for National Review for the past year or so in poignant and well-researched articles on their use and abuse of prescription drugs and heroin in the South and their dysfunction in the white ghettoes of Appalachia. However, when he dared to suggest in clear sentences that the best thing that folks faced with few opportunities in dying small towns (like Garbutt in upstate New York) could do was to move out and seek better opportunities elsewhere, his critics on the mostly traditional and paleo Right (at least these are the critics I’m interested in) were not happy with him.
Rod Dreher led the charge in a long and thoughtful post that is worth reading in its entirety. To begin, Dreher uses his dad as a springboard to find himself in agreement with Williamson on some points (especially with the idea that young men do need to stop being lazy, exercise self-restraint, and get to work):
During my crusading liberal days in college, I was full of ardor and right-thinking on the subject of race and poverty. I dismissed my dad’s conservative views as typical hard-hearted Reaganism, and fumed over how someone like him, who was raised working-class and was culturally working class, could sympathize with Reagan, that old racist. What it took me years to see was that however shaped my father’s views on race and poverty were by his generation’s attitudes, they were also deeply informed by years of observation of how poor black people, like poor white people, lived. He would try to explain to me how nobody who lived the way so many of the black (and white) poor did in our parish could ever hope to break the cycle of poverty. It took education, and hard work, and self-discipline, especially staying off of drink, drugs, and avoiding having children outside of marriage. You had to be sensible with your money, he would tell me (I didn’t know until many years later how hard he and my mom, a school bus driver, struggled financially during my childhood).
Then Dreher shifts gears and uses the writer Michael Brendan Dougherty, who has gone back and forth with Williamson on the subject of the white working class, and uses Dougherty as a foil for Williamson on the following points:
(MBD says:) When conservatives think of American trade negotiators and diplomats working to lower the barriers to American capitalists investing in overseas workforces, they see it as a core function of government, not as a kind of favor to wealthy clients of the American state. But if the same negotiators had in mind the interests of American workers instead, they see it as corrupt protectionism, that coddles the undeserving. There is a huge failure of imagination on the right. And a failure of self-awareness. It may also be that I don’t see conservatism’s primary duty as guarding the purity of certain 19th century liberal principles on economics. I see its task as reconciling and harmonizing the diverse energies and interests of a society for the common good.
Ah ha! There it is in all its Trumpian glory – the classic case against “free trade” – it is bad for American workers and bad for the “common good.” As Trump says himself (or at least the people he hired to write his website say) of our deal to let China into the World Trade Organization:
In January 2000, President Bill Clinton boldly promised China’s inclusion in the World Trade Organization (WTO) “is a good deal for America. Our products will gain better access to China’s market, and every sector from agriculture, to telecommunications, to automobiles. But China gains no new market access to the United States.” None of what President Clinton promised came true. Since China joined the WTO, Americans have witnessed the closure of more than 50,000 factories and the loss of tens of millions of jobs. It was not a good deal for America then and it’s a bad deal now. It is a typical example of how politicians in Washington have failed our country.
So setting aside for a moment all the other issues related to the white working class, let’s train our focus on trade as it has become one of Trump’s signature themes of his campaign. Indeed, another one of Williamson’s critics, this time on the “alt-right” also singled out this issue (among a litany of issues) as a policy that has hurt the working class:
Kevin says, “Nothing happened to them. There wasn’t some awful disaster.” But he’s wrong, there was a disaster, but no just one, multiple related disasters all occurring simeltaneously. Ones that would be missed by a rootless cosmopolitan like Williamson. These disasters include the sexual revolution, the long march, feminism, mass immigration, globalization/off-shoring, forced integration, the drug epidemic, mass TV propoganda, governmental growth, and cultural genocide [my note: the alt-right is nothing if not colorful!]
Within a span of a few decades working-class whites saw their communities invaded and destroyed by immigrants and integration, the traditional sexual/moral framework destroyed and replaced by degenerate Hollywood mores, the collapse of restraining institutions such as the church and local community, and what [sic] forced into competition for what jobs weren’t off-shored to foreign places paying starvation wages with imported illegals willing to work for almost nothing [my emphases].
Moving on to the paleo right, Chronicles magazine also called out Williamson and the issue of trade when one of their writers highlighted the Michigan Assembly plant he grew up next to in Wayne, Michigan and claimed that:
Michigan Assembly has had its ups and downs, as I wrote in Chronicles last July. The stupid trade laws Trump attacks have played a part. So has Federal Reserve Board policy. When the Fed inflates the dollar, as in the 1970s and 2000s, gas prices rise fast and people switch from SUVs to the small cars made at Michigan Assembly. But when there’s deflation, as in the past five years, gas prices plunge and American drivers park their small cars for giant SUVs. That’s the major immediate reason why a year ago Michigan Assembly laid off 700 workers—my people—and moved production of the small Focus and C-Max to Mexico. No wonder Wayne’s population has dropped 20 percent the past 30 years. The long-term reasons for the industrial economy’s problems are all the other government stupidities and sellouts Trump has attacked. No wonder my Michigan relatives told me in the recent GOP primary they voted to Make America Great Again.
One wonders what exactly these other “government stupidities and sellouts” the Chronicles writer is referring to, but you get the sense that he is not a big fan of free-trade agreements or trading with Third-World countries in general.
Breitbart finishes our little round-up of attacks with some of the most specific claims against Williamson related to trade policy:
Williamson blames the very people who are undeniably the victims of a combination of big government regulation and disastrous trade policies that have traded manufacturing jobs for lower costs for those products. In spite of his claim that “On the trade front, American manufacturing continues to expand and thrive,” the reality is that since the year 2000 when Permanent Normal Trade Relations with China went into effect, five million manufacturing jobs have been lost, according to data compiled by the Bureau of Labor Statistics. What’s more, the nation’s Gross Domestic Product growth has not exceeded 4 percent since that same year. In fact, GDP growth hasn’t exceeded 3 percent since 2005 making the past decade the worst for economic growth since the Great Depression.
This is not the fault of those who lived in those towns that depended upon local manufacturing that was shipped overseas, it is the fault of the government policy that put into place the environment where closing local mills in North Carolina made more economic sense than keeping them open.
Notice by the way, that the guy attacking free trade who actually does some research comes up with a figure (five million) that is different from Trump's by a factor of at least 10!!
Clearly these writers attacking Williamson are incensed by a variety of issues – but they all mention trade and its supposedly baleful effects on the working class of America and this is the focus of my blog post. Should the conservative movement reconsider its long-time support for free-trade given Trump’s rise and the plight of the white working class? In a word, I would argue a firm no.
Whether or not Kevin Williamson’s advice to the working class is always and everywhere sound counsel (i.e. maybe not every young ‘blue-collar’ man needs to move out of a small town to find gainful employment – maybe he can start his own home remodeling business or car repair shop or heaven forfend, a lawn maintenance service and compete with the Hispanics who seems to have cornered that market in my neighborhood!) it is certainly still sound economic theory and practice that trade with other nations will enrich our own. I like the way the economist Mark Perry laid out the basic concepts in a recent Los Angeles Times opinion piece:
To understand how economically backward Trump’s position is on trade, imagine him standing in the parking lot of a Walmart, Home Depot or Best Buy and shouting to Americans as they leave with their merchandise, “Hey, you just got absolutely crushed by those merchants who sold you cheap products made in China, Japan and Mexico. People overseas are now laughing at you.” That’s ridiculous. Consumers who voluntarily purchased those products, and who probably said “thank you” to the cashier as they left, did so because they valued the merchandise they selected more than the dollars they left behind.
When American businesses and consumers voluntarily purchase more products from China than Chinese businesses and consumers buy from us, it does lead to a U.S. trade deficit with China. But the trade deficit can’t accurately be referred to a “loss,” because it’s based on millions of mutually agreeable individual exchanges that took place between a willing seller and a willing buyer.
In fact, you could make a strong case that China “lost” last year on trade with America, not vice versa. After all, we acquired $482 billion of merchandise made in China and they acquired only $116 billion of merchandise made in the U.S., for a net merchandise surplus of $366 billion in our favor. China “lost” a net amount of $366 billion of goods that ended up being consumed and enjoyed by Americans.
It would also be accurate to say that China gained a net amount of $366 billion worth of U.S. currency, the exact amount of the trade deficit. But what happened to those dollars? They aren’t sitting idly somewhere. On the contrary, they quickly came back into the U.S. as a capital inflow to purchase America’s financial assets like corporate stock and bonds, real estate, bank deposits and Treasury securities, and as foreign direct investment in America’s factories and businesses.
Well, the critics say, what about all those job losses and the working class? Unfortunately for the critics, they don't even get this right! The economic picture concerning manufacturing job loss is more complicated than the story the anti-trade side tells (from an excellent piece on trade in the National Review):
For these and other reasons, it is widely accepted that U.S. manufacturing “decline” has been limited to employment, and that these loses were primarily cause by productivity gains, not trade. Indeed, even the most pessimistic academic studies on imports and manufacturing jobs have found only a limited connection between the two. Autor, Dorn, and Hanson found in 2013, for example, that “import competition explains [only] one-quarter of the contemporaneous aggregate decline in US manufacturing employment” between 1990 and 2007. Other studies have been even more sanguine. For example, a recent Ball State study attributed almost 90 percent of all U.S. manufacturing-job losses since 2000 to productivity gains. “Had we kept 2000-levels of productivity and applied them to 2010-levels of production,” the authors write, “we would have required 20.9 million manufacturing workers. Instead, we employed only 12.1 million.” Thus, it is simply wrong to blame import competition for the disappearance of American manufacturing jobs of the supposed destruction of U.S. industrial capacity.
Second, despite its harms to some manufacturing interests, free trade also has generated broad-based benefits for U.S. consumers, businesses, and workers. In The Payoff to America from Global Integration, economists with the Peterson Institute found that past global-trade liberalization through the WTO and other efforts generated between $2,800 and $5,000 in additional income for the average American and between $7,100 and $12,900 for the average household. The consumer gains from trade disproportionally accrue to America’s poor and middle class. A 2015 study by Pablo Fajgelbaum and Amit Khandelwal finds that these groups, because they concentrate spending in more-traded sectors such as food and clothing, enjoy almost 90 percent of the consumer benefits of trade. These benefits are even more concentrated for Chinese imports, since poor and middle-class American consumers are more likely than their richer counterparts to shop at “big box” stores such as Target and Walmart that carry a lot of made-in-China goods.
American businesses, of course, also benefit. More than half of all imports (including those from China) are inputs and capital goods consumed by other American manufacturers to make globally competitive products. Raising these firms’ costs via tariffs would mean fewer employees, if not outright bankruptcy—a particularly bad outcome given that downstream industries (e.g., steelmakers) typically employ far more workers than their upstream counterparts (e.g., steel users). Non-manufacturers benefit, too – whether they be retailers such as the Gap, transportation and logistics companies such as FedEx, or multinational firms such as Apple, which assembles iPhones in China but generates most of their final sale price through marketing, design, engineering, and even manufacturing done in the United States. (Chinese manufacturers themselves earn only a few dollars from an iPhone’s assembly.) U.S. exporters such as Caterpillar and Boeing also gain from trade, and many foreign markets wouldn’t be open without reciprocal trade agreements, such as NAFTA. According to the Business Roundtable, in 2014, U.S. free-trade-agreement (FTA) partners purchased 13 times more goods per capita from the United States than non-FTA countries did.
Minor job losses and overall strong, positive economic income effects for poor and middle-class families -- what's not to like about free trade? It should also be noted, in direct response to the foolish Breitbart author, that Williamson is correct to point out that manufacturing is thriving in the United States (indeed we produce more than any other country in the world except for China) despite the fact that manufacturing employment is declining – this is because manufacturing in the United States, as detailed above and in this link, gets more and more capital intensive and efficient in producing finished goods. In China it might take 10 workers to produce one $100 television – here in the U.S. it might take five workers to produce a $10,000 machine that is used to make televisions!
So if trade makes sense for the common good, what about those workers who do get left behind? Is Williamson’s advice enough for them? Well actually, Williamson offers more than exhortations to the working class to get a job – he does advocate for better public policy that supports economic growth. Here he is in a “Corner” post from February 8th on what conservative policy offers the working class:
What do conservatives offer to lightly educated, lightly skilled, low-earning white men of the sort Dougherty considers? Only the same thing we always have: The opportunity to be something else. Between 1980 and 1990, real household income for Americans who were in the lowest-earning bracket at the beginning of that period grew by 77 percent; among those who had been in the lowest-earning income quintile, 85.8 percent moved to a higher-income bracket over the next eight years, and 14.7 percent of them moved to the top bracket. Which is to say, those in the lowest-earning fifth of Americans in 1980 were more likely to have moved to the top income group by 1990 than to remain at the bottom. That wasn’t magic. It was economic growth driven by real investment and enabled by better public policies than those that had prevailed before.
I would go further – some very smart conservative economists have been beating the drum for macro-economic policy changes that would help promote economic growth for a number of years, the kind that usually follows a recession and generates job growth. Here is my favorite, John Taylor, discussing this subject in the Wall Street Journal last year:
For years I and many others have argued that a return to the principles of economic freedom would convert this not-so-great recovery into a great one. But Washington has not seriously considered pro-growth policy—no tax reform to lower tax rates and spur hiring, no regulatory reform to scale back costly regulations, no new free-trade agreements, no entitlement reform to stop the debt explosion, and at best only a hint at monetary normalization to reduce uncertainty.
One reason: There is growing skepticism that these tried and true policies will boost growth rates. It is too late now, pessimists say. The economy missed the 6% or 7% 1980s-style growth at the start of the recovery, and it is impossible to make it up. Or even more pessimistically, an incurable “secular stagnation” plagues the economy with permanently diminished rates of return on investment and ever-increasing income inequality. Why bother with difficult reforms if they won’t make much difference? At least we’re doing better than Europe.
But a sharp acceleration in growth is a real possibility in the U.S. if policy makers take the necessary steps. Rapid growth following a recession usually occurs as people return to the labor force and productivity accelerates, boosted by higher investment. Labor-force participation—the percentage of the population that is looking for work or employed—is now lower than at the end of the recession. There is a lot of room to grow. And the growth of productivity—the amount of goods and services produced per worker-hour—has hovered around 1% for the past five years, less than half the nearly 2.5% average of the previous 20 years. There is room for acceleration there, too.
As a matter of arithmetic, the growth of the economy equals employment growth plus productivity growth. Simply reversing the decline in the labor-force participation rate—it fell every year of the so-called recovery, to 62.9% in 2014 from 66% in 2008—would cause a 5% increase in employment, or 1% growth for five years. Adding about 1% for population growth from Census projections equals employment growth of 2% a year. The percentage of the working-age population that is working would thereby finally exceed 2009 levels, and the U.S. would begin seeing promising changes.
Professor Taylor has also devoted his blog to this topic over the past couple of years and summarizes all of his posts on the subject here. They are worth reviewing if you think there is nothing to be done to help growth the economy and therefore provide meaningful help to the working class.
Williamson is mostly right – some small towns can’t be saved and it makes sense for young men to leave Garbutt and search for better opportunities where they can be found. We can also push politicians and policy makers to adopt tried and true economic reforms of the kind that will promote real growth and therefore job creation. This might not be the message that the Rod Drehers and the alt-right wants to hear (they seem enchanted with the possibility that we can somehow alter the fundamental realities of the world and change basic patterns of supply and demand so that trade is not necessary and no one ever has to abandon Garbutt.) But it is a good message and an old-fashioned conservative one.
P.S. One good reason to restrict international trade would be for national security reasons: I'm not convinced that we are doing all we should be doing to keep important secrets away from the Chi-Coms. But this is a national defense/security argument, not an economic one.
P.P.S. Sometimes you'll read someone argue that free trade must mean open borders. Nonsense. Immigration is different from trade -- going to live in another country, adopt their language and culture mores, etc. is not the same thing as buying goods or even services (if a worker comes over to your country for a set period of time to provide a service) from another country. It is silly to conflate the two and it is perfectly consistent to be opposed to high levels of immigration and still be happy with free trade with other countries.