What if we imagined a world where president-elect Donald Trump’s plan to “make America great” really worked?
That might be hard for many who remain focused on the unsavoury elements of the campaign and its sometimes frightening aftermath.
From an economic perspective, continuing to harp on Trump’s unsophisticated turns of phrase and his often simplistic crowd-pleasing rhetoric of the “build a wall” type is only useful to those who want him to fail.
Because no matter what you think of Trump the man or the xenophobia his campaign has unearthed in the North American heartland, a United States where the economy recovers and starts making well-paying jobs will be much better for the entire world than one where workers’ anger continues to fester.
A plan that works?
After every change of regime, in nations or in business, at some point it is the job of thinkers and technocrats to stop playing the role of opposition and to begin to translate the sometimes muddled schemes of any new leader into a policy that actually works.
So rather than sniping and pointing out every flaw, is it possible to see a path that will embrace the most productive elements of the Trump prescription?
The world is a very different place from what it was only a few years ago. The U.S. has failed to adjust.
“As late as 1999, [the U.S.] was partner to 50 per cent, by value, of all international deals; nine-tenths of all cross-border money flowed between developed countries,” write Ian Goldin and Chris Kutarna in their recent book, Age of Discovery.
The authors roll out a series of statistics showing how much that has changed.
In 1990, for instance, 60 per cent of trade was between the world’s rich countries and six per cent between poor countries. Now the percentages are equal.
All the biggest ports in 1990 were in the developed world. Now seven of the top 10 are in China.
The United States is still running itself under the illusion that its economy is the entire world. In the years after the Second World War, that was very close to being true. But it’s not anymore.
Although sharing its capital and its domestic market with the world helped to spur a global explosion of wealth overseas, it is reasonable for the U.S. now to follow the path of so many successful economies, from Germany to Taiwan, and begin to invest in its own industrial economy first.
Just as Britain had to adjust to its new circumstances from global hegemon to mere country in the decades after the First World War, the U.S. must look to its own domestic knitting.
There is no reason why changed circumstance must lead to collapse.
When Europe lost its place as the focal point of global trade to the New World, it did not dry up and blow away. It reinvented itself to become richer in absolute terms than it had ever been before. The U.S. must do the same.
As Federal Reserve chair Janet Yellen has observed, the U.S. has lost its way on productivity — the amount of value created by each worker. Since about 1980, the share of productivity increases going to labour has plunged.
She told Congress last week that, perversely, the country’s last big burst of productivity was during the 2008 financial crisis.
“Firms found their sales collapsing and they took measures that they thought essential for survival, and that meant firing every worker that a company could possibly do without,” explained Yellen.
It increased productivity. But at a terrible cost.
Since then, companies just haven’t been investing in the United States.
“Capital investment has been weak and that’s one reason productivity growth has been as depressed as it is,” Yellen said.
Trump’s plan to convince U.S. companies to bring their capital home and invest it could help change that. Unlike the time when production moved abroad to benefit from low labour costs, the trend toward robotics means labour is a far less significant factor.
A U.S. labour market that is already tight means companies must invest to make workers productive, allowing them to earn higher salaries.
Good jobs not racism
As Germany has shown, the important ingredient in making your products desirable is not cheap labour or an inexpensive currency, but quality.
In a fascinating interview on CBC’s The Current, philosopher Kwame Anthony Appiah said that what now shows itself as racism in the United States is really a cry of economic pain.
“Part of what’s going on is that there is a genuine underlying problem that people are responding to, which is the breakdown of the old economy, which was generating most of the jobs,” he told host Duncan McCue. “So they blame immigrants, they blame people from their own country of other races, they blame companies for exporting jobs.”
Critics have observed that the U.S. cannot go back to a time when its economy was the only game in town.
But by enlisting the power of its industry to invest in its own country, by tapping its pride as a maker of some of the world’s most innovative products and by pulling people of all races and religions together to reinvent its economy, there is no reason the United States cannot be greater yet.
And that is better than the alternative.
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