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Trumping globalisation & inequality.

Tony French.

trump-tower

Trump Tower. Brad. flickr cc.

Will the presidency of Donald Trump herald the slowing down or even reversal of US social inequality? I doubt it. Highlighted awareness of the gross social inequality in the US clearly had him elected, however.

The Donald has grandiloquently promised that, from ‘Day One’ of his presidency, he will “bring back our jobs”. By “putting America first” in “making steel, building cars, and curing disease, American innovation will create wealth and with it jobs for American workers. The middle class will be rebuilt, and the result will be that America will be great again – for everyone”.

We know only too well that manufacturing jobs have been lost, and incomes stagnated, not only in the US, but here too. Blue collar and less-skilled workers have suffered most, while on the other hand, some workers have profited at the expense of the many. Wealth has become increasingly concentrated in a minority, while whole towns and communities have been pushed into casual work or jobless poverty. Think rust belt. Observe regular riots.

Reaction to globalisation’s inequality

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Stop the TPP by Land and by Sea. SumOfUs. flickr cc.

The reaction of the rejected has been to blame globalisation, and with it free trade and immigration. Their revenge has been expressed in Brexit, Hanson, and now Trump.

Also on Day One, the Donald has promised to withdraw the US from the Trans-Pacific Partnership, the latest and most highly visible example of the movement towards increasingly globalised trade. Or, as more colloquially put and felt by many, it would have been increased volumes of cheap Chinese goods and increased numbers of workers out of work.

But will ‘push-back’ tariff walls and restricted bilateral agreements re-employ blue collar workers and replenish the middle class? Probably not. The days of trade protectionism have long passed. Protectionism in the past has provoked war more often than peace.

Yet trade globalisation is not completely Scot-free: it has not reduced social inequality. Classical free-trade theory predicts imports will cost local jobs, but exports will create new ones, while competition acts to keep prices low, so everyone benefits.

Only it hasn’t quite worked out that way. Blue collar workers have suffered disproportionably, While skilled workers recover in new jobs, the lesser-skilled have not. And the poor-skilled tend to be concentrated geographically; the American lower classes have been penalised. The new jobs in the new economy have not materialised for them. They have not risen into the middle classes, that heartland of American dreams.

You need only think of our redundant auto workers. Many have not been able to find new work – perhaps a third if they’re lucky – and it’s low paid.

What type of free trade?

Globalisation is easy to blame, particularly as the promised benefits of free trade agreements have not materialised for all. It’s arguable how much we benefited from the US-Australia free trade agreement. We receive lots of their Jeeps, but are proscribed in exporting beef and sheep products to the US. And it’s been ‘goodnight’ to our auto industry.

Even without globalisation, manufacturing jobs could have been expected to decrease. It’s called automation, even robot manufacturing. Output is up, but job numbers are down. Cheap Chinese imports hasten automation, to the point presumably where there is no longer any difference between the cost of a Chinese robot-produced product and one made robotically in the US or here.

Ironically, skilled American manufacturing is flourishing – but with greatly reduced numbers of workers. And this despite the fact that world trade has been in sluggish recovery since the GFC.

What matters is how quickly businesses and workers can recover from economic disruption brought on by technological change and innovation, as machines replace workers.

The pushback is curbing immigration, too. Immigrants actually boost the economy; they buy things, they create demand, but are too easily viewed as stealing traditional jobs. And they show wage flexibility by being underpaid and unprotected. And it’s easy to indulge in racism if they are Mexican or Muslim.

As the new economy evolves, those sidelined need to be re-engaged. And to neo-liberal disdain government intervention is required. The market, if left to itself, is too slow, or unlikely any time soon to re-engage those who have lost their jobs.

Trump has proposed investment in infrastructure building as a way of re-engaging these workers. Long overdue, you may think if you visited the US recently, noting its poor roads, ancient bridges, and overcrowded old airports. This is a back-to-the-future return to those public works programs of the past, now dressed up as private-, or public-private-funded infrastructure.

And it’s just what we are doing here – well, if only we can agree on which infrastructure projects to build. And then what happens to the workers once the building boom is over? At best, it’s a medium-term solution.

Trump & the threat from growing inequality

If nothing else, Trump is a welcome reaction to growing social inequality. It’s interesting how our own opportunistic politicians have suddenly tuned in, too. Inequality in Australia is accelerating; currently it’s higher than the average for members of the OECD. As Shadow Treasurer Andrew Leigh claims, since the mid-1970s Australian real earnings for the top tenth of income earners have risen 59 percent, while for the lowest tenth a mere 15 percent.

Picketty would see this trend as a returning to nineteenth-century gross extremes of income and wealth.

Inequality erodes egalitarianism, resulting in a polarised population comprising a ‘cognitive elite’, educated, well off, and insulated (who, with the press, presaged a Hillary victory). And a lower-class, undereducated and under- or, more likely, un-employed. It was they who won the campaign for Trump, starkly revealing a country economically and culturally Coming Apart, as described by Charles Murray in his 2012 book of the same name.

Inequality will not be solved by erecting crude trade barriers, banning immigrants, or anti-Muslim rhetoric. Nor will inequality be solved by public works programs alone, or even by increased military spending.

Short of a war, and don’t rule that out yet. Trade deals, as the Guardian editorial of 20 November points out, need to show nations are open for business by putting people’s interests – not corporate interests – at their heart.

This may be a turning point in the nature of capitalism, but that may not be such a bad thing.

In the meantime, buckle up; the Republican Party’s populist s ride might be rough.

Tony French is a Melbourne lawyer, and a regular contributor to the SPC newsletter.

Posted by on Dec 8 2016. Filed under Economic issues, Feature, Global poverty, Politics, Recent articles by SPC members. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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