Long time readers know I have recognized that U.S. Factory workers have suffered economically from globalization. What I didn't realize until a New York Times article this morning was how much it was influencing the outcomes for this primary election season.
I have been focused on Trump's birtherism against President Obama and all his other crude remarks towards various peoples. But it is really his anti-trade agreement stance that is fueling many of his supporters who are angry at the GOP establishment for not doing anything to protect their jobs.
This mistrust of trade agreements is also fueling some support for Bernie Sanders, including one Verizon workers (currently on strike) who says if Bernie isn't a candidate in November, he will probably vote for Trump. Now I can make a case that free trade has no effect on that Verizon workers employment prospects. His industry is a purely domestic one that is being buffeted by changes in technology, and he benefits from the lower cost of goods that globalization brings.
And overall, trade and globalization provide the revenues and profit margins that allow many companies to pay their workers very well. But the benefits of trade are spread across the whole population in a diffuse manner while the costs are concentrated in the lives of workers who lose their jobs.
Where I have been really really wrong is in my belief that people who have been sucking up their disappointment with what has happened to their livelihood without disrupting the overall trend would continue to do so, and allow time to equalize wages, at which point jobs will migrate back to the U.S. when it makes competitive sense for that to occur. And it is happening in some ways already.
But what Trump and Sanders have tapped into is that exact disappointment and there may be a sufficient numbers of votes for that concentrated issue that Congress will feel compelled to do something that I believe would be very dangerous to the overall health of the global economy.
And what is most interesting to me is that when the North lost these jobs to the South, the focus was on the roll of Unions in the North and the weakness of Unions in the South with costs being lower in the South. Now these Southern workers have lost their jobs and they are angry about it. And those workers in the North who are left are angry about it.
My tendency based upon my education in economics is to let the market and time force adjustment on capital and labor so that we have an efficient market economy. But individual people don't have the luxury of time as too much time just ends up with them being dead. And now they are rising up!
Will the people based in the global economy be able to protect the global economy? We shall see over the next 7 months. And it is no wonder the conservative blogosphere is so silent on this, this problem is not a point on the partisan spectrum so it is out of their framework. It is a bipartisan problem in need of a bipartisan solution.
I think the solution is some movement minimum wage increases (with different urban and rural levels) and infrastructure spending. With unemployment at 5%, you wouldn't need to export the 11 mm immigrants, you would need them to fill jobs. One benefit of that would be the Fed could raise interest rates and savers could return to the bond market with their investment capital.
Link to NYT article that motivated this blog
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