To perform an economic miracle and revive the US economy, Trump needs to:
(1) implement protectionist policies to re-industrialise America;This is, more or less, what he has promised or what will be the consequences of what he has promised, even if Trump himself does not understand Keynesian economics.
(2) increase government spending on a massive infrastructure program and cut taxes (preferably for the working and middle class) in order to run huge Keynesian deficits, and
(3) radically reduce legal and illegal immigration, and indeed – as hostile as the Left is to this – start to deport illegal immigrants, so that US workers can enjoy labour market protectionism and a return to rising wages.
So can he do it? He will need to throw aside the deficit hysteria and smash the Republican Congressional opposition. In essence, Trump needs to tell the Republican libertarians and fiscal hawks in Congress to shut the hell up and support huge deficits. If he is smart, and given the mandate he has, he might just be able to do it too.
Best case scenario is democrats aligning with trump on economics issues pushing his religious crazies racist out of the picture before any Supreme court picks come into the picture.ReplyDelete
Worst case scenario is trump gives up on the whole economics thing and just panders to his crazies.
I kind of hope with the Clintons gone sanders style democrats can take the reigns.
How is protectionism, at this point, supposed to re-industrialize America?ReplyDelete
Is there any evidence of this ever happening in a developed, first world country?
The research on protectionism that you yourself cite as 'successful' are based on examples of 'infant industry protectionism' and industrial policy deployed in *developing* economies.
America is not a developing economy where the manufacturing sector has not 'reached parity' with other, more advanced countries; it does not have 'infant' industries, it has the most advanced industries in the world. Industries so advanced that their supply chain is now entirely globalized. Where is the evidence protectionism 'reverses' this process? Or has any real benefits in developed nations?
The developed economies that still have a sizeable industrial base--Germany and Japan, for example--didn't retain them through protectionism.
Furthermore, the manufacturing jobs that left the US and other advanced nations were not just lost to the third world--they were lost to technology. Automation and AI has made it possible to make the same cars, planes, computers, etc. with half the people. Protectionism isn't going to change that--indeed, it could arguably provide greater incentives for employers to find ways to automate away labor.
"Furthermore, the manufacturing jobs that left the US and other advanced nations were not just lost to the third world--they were lost to technology. Automation and AI has made it possible to make the same cars, planes, computers, etc. with half the people."Delete
You forgot the low wages in China and Mexico?
Bravo. You can expect no cogent answer.Delete
R Minsky@November 11, 2016 at 4:59 AMDelete
Of course, you can reshore manufacturing, even if actual manufacturing employment is not so easy to restore. Impose:
(1) tariffs on imports
(2) cut taxes on corporations who will reshore or are thinking of offshoring, and
(3) subsidise application of automation and robotics to manufacturing so that they can become internationally competitive over the next 10 years or so.
It's not rocket science. This can work and is analogous to infant industry protectionism. Supply chains can be rebuilt.
As usual, free trading cuckservative losers like Ken B will scream: "It can't be done!".
Just like hordes of people who said:
(1) Trump can't win the Republican nomination.
(2) Trump can't get political funding and will implode
(3) Trump can't survive the groping tape scandal
(4) Trump can't win the presidential election.
Actually I told my friends he might very well win. I was more accurate than anyone but Michael Moore. But you stille seem to think abuse counts as a cogent response. I trust r minsky notices your failure to answer his points.Delete
I answered all his points, cuckedDelete
"The developed economies that still have a sizeable industrial base--Germany and Japan, for example--didn't retain them through protectionism."
B.S. It is well known that both Germany and Japan employ subtle protectionism to protect their manufacturing, e.g., non-tariff barriers and cultural preferences for their own products.
If I may chime in here, I do believe I once heard Thom Hartmann say that Japan passed a law that said "If you want to sell a car here, you have make it here." Something to that effect. Sounds like protectionism to me.Delete
Forgot to check the Notify box.Delete
The same guy who said trump could win figures there will be a trump impeachment. And free traders controlling everything from the House to the Court, not to mention Social Conservative issues rekindling identity politics. Not a new age of renationalization, just a resetting of the board.Delete
Seriously unless people can retake the smaller instruments of government that make up rest trump is an easily manageable problem for the establishment.
What on earth makes you think he's going to renationalise anything?Delete
That's a good question, and I would have to look into this a little bit. One that comes off the top of my head would be the Netherlands, who is the most famous for having "Dutch Disease", where their natural gas industry in the 1970s led to them losing much of their manufacturing industry. I haven't looked at their numbers or policies since then, but they are now running massive trade surpluses against the rest of the world, which would suggest a strong manufacturing component of their economy.Delete
Wouldn't a job guarantee make large tariffs superfluous? Run the trade deficit and use the idle labour however you wish. If the rest of the world wants to export to you just take advantage of it.Delete
"(1) tariffs on importsDelete
(2) cut taxes on corporations who will reshore or are thinking of offshoring, and
(3) subsidise application of automation and robotics to manufacturing so that they can become internationally competitive over the next 10 years or so."
None of these policies will make labor costs in Vietnam, China, Subsaharan Africa, etc. competitive with first world nations like the U.S. or the UK nor make the latter's environmental and business regulations looser--at the end of the day, producers would still rather build their factories in developing countries for those reasons. Penalizing them for doing so won't change those underlying conditions and incentives and so won't change the fundamental dynamics of global trade. Producers will just factor the tariffs into their prices and cut costs elsewhere. They can get around the change in cost structure within a given nation because they have the capacity to shift resources all around the world and distribute the supply chain globally--no amount of tariffs will change this, because it is enabled first and foremost by technology, not law.
"B.S. It is well known that both Germany and Japan employ subtle protectionism to protect their manufacturing, e.g., non-tariff barriers and cultural preferences for their own products."
Barriers willingly incorporated into a culture are entirely different than barriers imposed by law against the will of producers, because in the former case the producers have *willingly* accepted these "barriers", and built their supply chains and business models around them. In essence, they are not even really viewed as "barriers" at all. They are organically incorporated into the way these producers do business. Penalties imposed from without as an aggressive reaction by governments to changes in global trade conditions are different; producers will find their way around such legally imposed barriers and any rigidities they create, because they have not voluntarily and organically incorporated them into their methods of production and built their supply chains with them in mind.
The fact of the matter is that a giant producer like General Motors is not going to change the way it does business at the behest of a government. Global producers like GM are altogether more powerful and more flexible than any government on Earth, and cannot be effectively pushed around by government regulators.
And in the case of Germany, the retention of manufacturing actually has little to do with any "subtle" trade "barriers", and much more to do with the excellent relationship between the country's labor unions and its producers. Germany's labor unions have consistently held down labor costs to keep them acceptable to the country's biggest producers, and this has made the latter less willing to offshore, because said producers can then make use of Germany's highly educated labor force without sacrificing competitiveness. Because they get a big discount on highly educated labor, they are not incentivized to relocate to developing countries with less educated labor forces. i.e., Volkswagon knows it would cost more to train a bunch of poor Chinese citizens to become as productive as Germany's highly educated laborers than to simply employ German laborers, because the latter group of laborers come at globally competitive prices.
In all the developed first-world nations where a sizable manufacturing base still exists there is one common ingredient: good longstanding relationships between labor and capital. Deindustrialized countries like the UK and the US have far more antagonistic relationships between labor and capital, and have had them for a long time; the imposition of trade barriers will only worsen this antagonism, and further incentivize off-shoring.
Sounds like a plan! I hope there's no catch... "If he is smart, and given the mandate he has, he might just be able to do it too." Ah, of course, there's the catch. Never mind...ReplyDelete
LK, not really related, but figured you may enjoy this interview from someone involved in the US programs assisting the "Syrian" "Rebels":ReplyDelete
The interviewee touches on something that Robert Irwin observed-the people being listened to on these issues have little to no experience or background on the region, whether military or academic.
Trump wants to privatize the infrastructure program, which will be a disaster (see here: https://newrepublic.com/article/138674/beware-donald-trumps-infrastructure-plan). I don't see how Trump can "reindustrialize" certain sectors like, say, coal mining (see here: http://www.forbes.com/sites/timworstall/2016/05/05/like-manufacturing-jobs-to-china-whatever-trump-says-mining-jobs-are-not-returning-to-w-virginia/#fe0c6b06f48b). Many of those jobs are gone for good.ReplyDelete
Trump is not a fool, however mistaken his views on trade. He knows that those jobs are not coming back and he won't tie his fate to their doing so. He will concentrate on preventing future outsourcing, not a quixotic quest to have Nike move factories to Des Moines.ReplyDelete
Ellis Winningham nails it. He tells the truth in no uncertain terms what Trump's promise to spend on infrastructure would entail:ReplyDelete