Trump must create jobs, not just keep them in America
In his campaign, Donald Trump pledged to renegotiate trade deals such as the North American Free Trade Agreement (NAFTA), punish American companies that offshore and outsource jobs and “bring back” manufacturing jobs.
The Carrier Corporation is the perfect talking point. In February, the company announced a plan to move some 2,000 jobs from its Indiana plants to Mexico.
The episode became a centerpiece of Trump’s narrative-driven campaign, which he hasn’t forgotten since his election. On Thanksgiving Day, he tweeted that he was working to persuade Carrier to reconsider the move.
Those efforts have apparently succeeded: Carrier has agreed to keep about 1,000 jobs in Indiana in exchange for $7 million in state tax breaks for its parent company.
This is an important political victory for Trump, but the long-term success of his economic policies cannot depend on one-on-one negotiations with companies to keep individual jobs at home.
The truth is that freer North American trade since the 1990s has not only benefitted Mexico and Canada, but the United States as well. The problem is that its costs are unevenly distributed. Manufacturing jobs across the American rust belt have been especially hard hit.
But the claim that trade is to blame for the decline in manufacturing jobs is only a partial truth. And the implication that American manufacturing itself has declined is false.
Old-style manufacturing jobs have been disappearing at a rate of about 0.4 percent annually since 1960 (NAFTA became law in 1993). A third fewer Americans work these jobs than in 1979, but the sector is more productive than ever.
“In 1980 it took 25 jobs to generate $1 million in manufacturing output in the U.S.,” Mark Muro of the Brookings Institution explained in the Washington Post. “Today it takes five jobs,” he adds.
The manufacturing sector brought in $2.4 trillion dollars to the American economy in 2015. How is that possible? Domestic manufacturing isn’t dying. It’s being offloaded to ever more capable machines. As a result, we produce more goods with less labor.
No one, not even Donald Trump, can bring back an earlier generation of jobs or build a wall against robots without destroying our economy. That’s especially true of factory jobs with an assembly line. Adam Smith realized as early as 1776 that these are jobs where men and women do, in effect, the work of machines: simple, repetitive tasks.
They are ephemeral artifacts of the industrial age and are quickly becoming uncompetitive in the information age. It makes no more sense to bring them back than to return to textile mills with manual sewing machines.
Cutting-edge factories in the U.S., like the one that Tesla is building in the Nevada desert, will be almost entirely automated. Even in China, specialized robots have already begun to fill factories.
Information technology has also destroyed or decimated the jobs of many white-collar workers, such as computers (which used to be a job title), typographers, insurance adjusters, travel agents, stock traders, financial advisors, and customer service agents.
This is just the beginning. A 2013 study by two scholars at Oxford University estimated that 47 percent of U.S. jobs were at risk of what they called “computerization.” They expect a hollowing out of routine, middle-skill jobs.
Before you panic about the “rise of the robots” and a jobless future, remember that human beings are not mere consumers of a fixed number of jobs. Around 95 percent of the population were farmers at the time of the American founding. Today fewer than 1 percent of Americans farm.
Why don’t we have 94 percent more unemployment as a result? Because dynamic economies create new, different, but more productive jobs. Unfortunately, our economy has been far from dynamic since the 2008 financial crisis.
The good news is that some of Trump’s other campaign promises, such as freeing up our energy resources and paring down the crippling regulations and corporate taxes that put a drag on the American economy, could do what tariffs and trade wars cannot. They would make it much easier for entrepreneurs to start new businesses, which is the best source of new and better jobs.
Any innovation will make some job obsolete. That is the human cost of capitalism’s creative destruction. But stagnation and crony capitalism—the live alternatives—are worse. Economic policy should not try to freeze yesterday’s jobs in amber, or drag jobs from a previous era back to U.S. shores.
If Trump enacts policies that allow American businesses to become more competitive, he will do far more for American workers than if he engages in a self-defeating campaign to turn back the economic clock.
Jay Richards, Ph.D., is Assistant Research Professor in the Busch School of Business and Economics at The Catholic University of America, executive editor of The Stream, and author of the forthcoming book, “Free to Create” (Crown Business).
The views expressed by contributors are their own and not the views of The Hill.