Donald Trump’s success as a presidential hopeful is a mystery to many. He has no political or governance experience. His business record is sprinkled with bankruptcies. And him yelling “You’re fired!” on television does not lead you to think he can command the world stage, leading a superpower.
However, what Trump promises, says or implies obviously appeals to many American voters. Many are not happy. They are well below the top 1 per cent and feel current leaders and governments have been serving only those at the top.
Even worse than political discontent is the pain in that very sensitive spot – the wallet. Unless you are a professional, it is now very difficult to earn at least a comfortable, middle-class living. This has not always been the case. In the second half of the 20th century, people with no specialized training or education could get good jobs in American manufacturing. These jobs were often unionized and offered high wages and good benefits.
Such jobs have virtually disappeared. One reason is the off-shoring of manufacturing from the States, primarily to Asia, where labour costs have been very much lower. Trump’s major appeal to those whose prospects have been trampled by this off-shoring is that he says he will bring those good manufacturing jobs back.
He will do this is by erecting major barriers on manufactured goods coming into America. High tariffs will help protect American manufacturing, he says, and dismantling or at least not extending free-trade agreements will reduce imports.
In fact, these measures will have several harmful consequences and will not bring back those good manufacturing jobs.
Trade-reducing, protectionist measures not only reduce imports, they reduce exports. Affected trading partners react by closing their markets. Any business in the U.S. that sells to the world faces losing customers and, therefore, jobs and profits.
American voters are not only workers – they are also consumers. Some have been hurt by off-shoring, but all have benefitted by having available a broad range of affordable electronics, clothes, shoes and housewares that come from outside the United States. One immediate effect of cutting off cheap imports will be the closure of the Walmarts and the Costcos, and the increase in the cost of living for those who used to shop there. Even big items like cars will become more expensive without the pressure to keep prices down that comes from outside competition.
And if or when manufacturing does come back, those good jobs of the 1950s and 1960s will not come back with it. The 21st century is different from the 20th in many ways, including manufacturing. Many people are unaware that major American companies are already starting to bring their manufacturing back from elsewhere. Employment in manufacturing in the States has grown by seven per cent since 2010, in part due to companies returning from abroad. And it is not protectionist measures bringing manufacturing back. It is the changing nature of the sector.
Plenty of relatively unskilled labour was needed to make things in the last century. Now, machines make things: robots, 3-D printers and automated tools. Manufacturing has been returning to this continent because labour is now only about 10 per cent of the cost of advanced manufacturing. And that cost is easily balanced by the advantages of being in a First World country: stability, legal systems and reliable infrastructure. Unlike much of Asia, the States can keep the lights on.
Of course, manufacturing will still generate employment, but it will be much smaller per unit and require much higher skill levels. Workers will not make things. They will design, implement and maintain the hardware and software of the automated systems that make things. No one who lacks engineering, technical or related skills need apply. But those who do meet the requirements will be much better paid than the less-skilled manufacturing workers of the past.
Not even Donald Trump can bring back the jobs of the last century. Let us hope that the people and leaders of America start concentrating on better ways to move forward rather than trying to go back.
Troy Media columnist Roslyn Kunin is a consulting economist and speaker.