U.S. Economy

Trade Is the Scapegoat for Political Failure

Liberals who side with Trump on the issue are missing the larger picture.

Scapegoater in chief.

Photographer: Alex Wong/Getty Images

Writing last week in the Guardian, Thomas Frank identified the Democratic Party’s “enlightened Davos ideology” as the source of both the ascendance of Donald Trump and the despair of Midwestern manufacturing towns.

The wreckage that you see every day as you tour this part of the country is the utterly predictable fruit of the Democratic Party’s neoliberal turn. Every time our liberal leaders signed off on some lousy trade deal, figuring that working-class people had “nowhere else to go,” they were making what happened last November a little more likely.

The notion that the Democrats have little to offer the working class is not exclusive to Frank. The Washington Post’s Greg Sargent spoke with Democratic pollsters about their survey and focus-group research on working-class voters, including voters who switched from supporting Barack Obama in 2012 to Trump in 2016.

Sargent’s conclusion: “A shockingly large percentage of these Obama-Trump voters said Democrats’ economic policies will favor the wealthy -- twice the percentage that said the same about Trump.”

In reality, across policies from health care to taxes, the Trump administration is working to enact a vast transfer -- perhaps $5 trillion or more over a decade -- from the poor and working class (and future poor and working class) to the wealthiest Americans. By contrast, Hillary Clinton in 2016 proposed a range of policies that pushed in the opposite direction, raising taxes on the wealthy to fund programs for the unwealthy.

Is the perception about Democrats a legacy of the Obama years? Obama and his Democratic congressional allies didn’t lack ideas for protecting the vulnerable or boosting the viable sectors of the economy. They reoriented the enormous health-care industry toward cost containment, measurable results and vastly greater access for low- and middle-income Americans. They rescued the auto industry and its feeders. They imposed new regulations on the finance industry to restrain leverage, speculation and predatory practices. They stimulated and championed the solar and wind industries.

None of those actions revived dying industrial towns in the Midwest. Democrats have no viable plans to bring back sustainable, high-paying, blue-collar jobs. Neither, it seems, does anyone else. And wages in the service economy don’t remotely compare with the best wages of industrial glory days. (Neither do most of today’s manufacturing wages.)

The notion that “lousy trade deals” are responsible for the erosion of working-class prosperity is a common denominator in the rhetoric of Trump and Bernie Sanders. For them, “trade” is a flexible villain, sufficiently elastic to encompass blows to labor power that originate in broader trends of global competition or de-unionization or the specific effects of automation.

At a panel discussion last week at the City University of New York, a handful of prominent economists grappled with “Trade, Jobs and Inequality.” None echoed the views of Sanders or Trump.

“No, lousy trade deals are not a primary cause” of working-class despair, said panel member David Autor of MIT in a follow-up email to me. “It is the case that China’s accession to the WTO in 2001 was a big shock to U.S. manufacturing. This was not really a trade deal, however. This was China becoming a member of an existing trade agreement. And this was an inevitable long-term result of China’s spectacular development.”

Another participant, economist Bradford DeLong of the University of California at Berkeley, pointed out that technological evolution steadily drove down manufacturing’s share of U.S. labor for half a century before the China shock.

The demonization of trade deals, DeLong wrote to me in an email, is off target. “NAFTA was supposed to kill the U.S. auto industry,” he wrote. “It didn't -- the auto industry loved it.”

It might not matter whether trade, automation, globalization or some combination is at fault. But it matters greatly that American politics has proved incapable of mitigating the damage, helping to open the path to power for Trump.

At the CUNY panel, Ann Harrison, a former director of development policy at the World Bank who is now a professor at the University of Pennsylvania, said: “The idea behind globalization is the winners, the exporters, the consumers, are so much richer that it is easy and straightforward to redistribute some of the winnings to compensate the losers. That turned out not to be true.”

That failure of redistribution is a failure of politics more than economics. It’s in part a function of the consistent devotion of the Republican Party to lowering tax rates on the most successful while resisting virtually all efforts to help the economy’s losers. But the resistance is also rooted in powerful social attitudes.

The textbook analysis of trade is that it has broad benefits and concentrated costs. The GOP’s efforts to redistribute upward to those who most benefit are unpopular. But so are many Democratic efforts to redistribute downward to those bearing the costs.

“Our package for helping the losers, Trade Adjustment Assistance, helped only about half those that it should have helped,” Harrison said at the CUNY event. “But, much more important than that, Americans do not want handouts. What they really want are jobs.”

Good jobs bestow dignity as well as wages. Concepts such as a universal basic income are controversial in part because they promise to separate income from work, and from traditional values about who deserves how much in return for what. But with a system delivering extraordinary gains to the highly skilled, and offering severely limited options to less skilled workers, attitudes may need to evolve along with the economy.

As DeLong said at CUNY, wealthy heirs don’t seem to suffer a loss of dignity when they cash their trust checks.

“Back in the 1920s ‘welfare’ was a good word,” DeLong said. “When Edward Filene in the 1920s talked about ‘welfare capitalism’ -- firms providing health, accident, and pension benefits to their workers -- the ‘welfare’ was in there to make his readers think that the idea was a good thing. But because people want respect, over the past century the word ‘welfare’ has been poisoned.”

Bill Clinton, George W. Bush, Mitt Romney and Barack Obama all agreed that American workers are wonderfully productive. If so, productivity isn’t getting them very far. Major public investment in the right kind of infrastructure and education might alter the odds for Americans on the economy’s losing end. Programs to encourage and help workers move to where they are most needed might boost wages. A higher minimum wage and an expansion of the earned-income tax credit would put more money in more pockets.

But Trump’s attacks on trade always implied that the old factories would materialize in their old haunts once the trade regime went away. Those mid-20th century industrial jobs, which paid comfortable middle-class wages, with long-term security, to high school graduates, are never coming back. As Autor wrote in an email before Trump’s inauguration, the three decades after World War II “were surely the best in history for the growth of the Western middle class.”

Abandoning nostalgia for the glory days is long overdue. Indulging it misleads voters and allows politicians to remain complacent. Trump’s extravagant promises changed U.S. politics. Perhaps his all-but-certain failure to redeem those promises will be a preface to a new and better deal for workers.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Francis Wilkinson at fwilkinson1@bloomberg.net

    To contact the editor responsible for this story:
    Katy Roberts at kroberts29@bloomberg.net

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