Free Trade and election realities

There is a major disconnect.

In the one corner is the overwhelming consensus of economists: generally speaking free trade benefits the American economy and America’s influence in the world, and tarrifs cause harms.

In the other corner is the wide swath of voters who blame free trade for stagnant wages. In different ways this fueled Sanders run at it and more so Trump’s. See this article from today’s NYT:

Assuming for the sake of argument that the economists actually know their stuff but the court of public opinion does not see it that way … what should a politician do?

They should do exactly as Hillary Clinton has done. Pander to the left while claiming to oppose TPP and then support free trade once they’re in office.

Do a better job winning over union support.

Trump or whoever can scream ‘tariffs’ all they want. It’s not going to translate into more manufacturing jobs.

U.S. manufacturing rates have been going up, but jobs haven’t. That’s because robots and automation are doing the work.

They should offer better solutions to create jobs.

The GOP is chirping about tax cuts and Democrats are chirping about more regulations.
Trump is the only politician offering ideas targeted at improving lost jobs and stagnant wages. Terrible ideas, but still different from the usual politics over the last 30 years where politicians ignored the working classes. People are listening because they do not have a better alternative.

FDR was the last politician that offered good ideas to create jobs. It’s time for someone else to step up.

Free trade on average helps the US economy. But nobody lives the average life. As near as I can tell, free trade hurts a lot of people, even while it helps a lot more.

The appropriate question is, is there a better way?

The only thing Trump is targeted at improving is his own personal power. He says exactly what he thinks people want to hear. The difference between him and a career politician is he’s not bright and/or experienced enough to remember not to go back on them during the campaign.

If Trump told me the sky was blue, I’d go outside and check it.

+1

And perhaps make the argument that a whole lot of other ways deliver outcomes a whole lot worse.

Like Obama said, globalization isn’t going away. If jobs were magically created tomorrow for every unemployed person, they’d still just pay minimum wage or not much higher. And house prices and food costs won’t go down on their own, so there’s no real gain for the lower classes. The old attitude that you’ll be rewarded for working hard isn’t necessarily true anymore since you could still end up struggling to make ends meet. It’s a systemic problem that the social safety net doesn’t address. There’s going to have to be a sea change in how poverty is dealt with because poverty is here to stay.

Maybe something like a guaranteed minimum income that would keep people from sinking below the poverty line. A minimum wage job on top of that would keep them relatively comfortable and give them some purchasing power to, you know, buy those cheap goods from China that have been keeping them poor.

Try not to start a trade war. That would be bad. Drag your feet on international trade negotiations: the scope for further welfare improvement is limited because trade barriers right now are already pretty low. Insist on programs where those worse off from new trade deals are compensated. Otherwise economic reasoning does not endorse such trade deals.

Don’t confuse intellectual property arguments with free trade arguments. They are different.

Advocate a universal basic income and get rid of minimum wage and a few other entitlement programs. Cut some corporate taxes to help reduce inversions such as https://www.washingtonpost.com/news/business/wp/2016/02/25/giving-up-its-u-s-citizenship-could-save-pfizer-35-billion-in-taxes/. That way we have more people producing more stuff. Less people idle. And with the universal basic income we have a positive increase in money velocity.

A universal basic income yes but getting rid of minimum wage and “a few other entitlement programs” are just silly.

Are you saying they were good politically, or good for the post-World War II period, or good at ending the depression? I’d agree with the first two, but they had no net good effect on the third (ending the depression).

FDR led a country which was hit harder for the 1930’s depression than most other industrialized nations. This was true even in his second term, by which time you might have thought his ideas would have made things better. They didn’t, as was demonstrated when the economy crashed shortly after his first re-election:

As for what to do, give more encouragement to R&D. Pay math and science teachers more than Physical Education teachers. Yes, I know phys ed teacher put in more hours than math teachers. If you are really serious about educating students for an economy in which there are fewer routine jobs requiring physical strength, you should want to cut after-school sports programs, coached by phys ed teachers, that compete with time that could be spent doing math homework or studying a foreign language.

Look at countries which are doing better than the United States, and see what we can learn from them:

(Note: I’m saying to learn from Singapore regarding how to educate a multi-cultural society, but of course not endorsing other aspects of the one-party-rule government.)

In absolute terms, most future jobs don’t lie in the STEM sector:

I agree with almost everything in your link.

Re more math education and less physical ed, I didn’t say that because I am worried that job openings won’t be filled.

Factory jobs, including the little factory in every MacDonald’s, will increasingly have to do with machines tending, including dealing with the unexpected, and those require reasonably good math skills.

Also, I’m a little skeptical of projections of future job openings. We don’t know how quickly jobs like fast food cook, or nursing aid, get automated. This isn’t set in stone, or even, beyond a few years into the future, known.

In my way of thinking, good engineers find ways to make others more productive. While this can cause some loss of routine work job, it also causes new businesses to start that employ people doing work that is more interesting, and probably better paid, than what went before. And really good engineers will, I believe, usually find jobs. Same is true for people who are really good at other things.

Just changing the universities to churn out fewer English majors and more programmers is worthless, and would indeed fail the way your government job projections suggest. What we need is better engineers, and better English majors.

As I said, your link is mostly correct.

It’s suicidal for politicians to say it, but an aging workforce isn’t associated with high GDP growth. The US has dipped below replacement fertility, and this does reduce demand. Financial incentives for fertility have been tried. I’m for them, but they aren’t all that effective. You probably can’t make America great again in the sense of having the world’s highest per capita income. On the other hand, we can do better.

The right thing to do is what her husband did, and she should have learned from it: go right into union country and try to convince them about the benefits of free trade, and if they don’t want to hear it, then that’s the way it is and you do what you think is right.

Lying is how Donald Trump happened. It’s time for politicians to either do what the people want, even when the people are wrong, or tell the people they are wrong and do what’s right.

Absolutely incorrect. Minimum wage is counterproductive.