Beware of Populists Bearing Jobs....

The 2016 U.S. presidential election campaign has been one for the ages-- although not for the best of reasons. Particularly among Republicans, the debate of the 2016 campaign has put on display some of the ugliest facets of American political campaigns (see last post).

However, you'll be happy to know that a far more acceptable form of populist deceit in elections remains alive and well in both parties; the politics of opposition to trade liberalization. There's no comfort in that for those who see the merits of trade liberalization (myself included), but it could be construed as comforting for those who seek some refuge in something that makes sense to them in this campaign. The latest candidate skirmish on trade policy took place in the Democratic Debate in Flint, Michigan the other night; a rust-belt state, and ground zero for this kind of rhetorical mush.

Yet, in my view, there's good news ahead. The populist protectionism of the campaign has, in the postwar period, nearly always returned to default liberalism. Unfortunately for those that really buy into the rhetoric of protectionism, I have bad news for you; you're being lied to.

Let me explain.
A Long and Undistinguished History

Admittedly, the politics of trade are very difficult. The distributional consequences of liberalization, as I have noted in multiple posts on this blog, are problematic for politicians of all stripes. There are winners and losers in the adjustment process. The winners are broadly distributed, the losers highly concentrated. As they run for office, politicians are more frequently confronted with concentrated groups of angry losers decrying the ills of trade policies that exposed them to foreign competition. Liberalization is a tough sell in such circumstances and only the most gifted and articulate politicians dare go there. I've spilled some ink on this topic here and here. Regrettably, this dynamic has given way to some of the ugliest forms of xenophobic scapegoating throughout history (not just American history, by the way). 

Indeed, our greatest presidents have regularly fallen into a political trap that is hard to reconcile with what they know intellectually. In the 1850s, Abraham Lincoln is reputed to have said:

I don't know much about trade policy. But I do know that when I buy a coat from England, I  have the coat and England has the money. When I buy a coat from America, I have the coat and America has the money.

Lincoln, of course, was no idiot nor was he prone to ill-conceived lines of reasoning (this is the Lincoln of Lincoln-Douglas Debate fame). Lincoln had undoubtedly encountered plenty of philosophy, including classical economists like Adam Smith and David Ricardo. In short, Lincoln probably understood the broad outlines of comparative advantage upon which trade efficiently internationalizes the division of labor. Yet, we can probably extend Lincoln a little rope here since it's possible he made these comments while standing in front of a group of American coat-makers facing import pressure from English coat-makers. It's politics, after all.

Sadly, there is a political imperative here that allows politicians to gloss over the intellectual dishonesty of what they are saying.

The Bait and Switch

On both sides of the political aisle in 2016, candidates are peddling promises most know they'll never be able to keep. Like Lincoln, it's implausible that the current crop of presidential candidates have never heard of Adam Smith. David Ricardo is a little more obscure, but the Smith/Ricardo case for free trade is widely known. Trump, as he is fond of reminding us, is really, REALLY smart. He went to the Wharton School of Business, you know? Clinton went to Wellesley College and Yale Law School. Ted Cruz attended Princeton, Harvard Law, and clerked for a Supreme Court Justice. They know. And yet they keep promising to do things with respect to jobs and the economy they know are neither possible nor necessarily in the national interest.

Among Republicans, Donald Trump has been the most bombastic (shocking, I know) on trade protectionism, but hardly out of the mainstream among his GOP colleagues.

Q: So, you would tear up NAFTA?
Trump: I think NAFTA has been a disaster. I think our current deals are a disaster. I'm a free trader. The problem with free trade is, you need smart people representing you. We have the greatest negotiators in the world, but we don't use them. We use political hacks and diplomats. We use the wrong people. Mexico is smart; they have out-negotiated us to a fare-thee-well. They're going to be the capital of automobiles pretty soon, the way they're going.-- CNN, June 28, 2015

And Trump on the TPP....

 

At Sunday night's Democratic debate in Flint, Secretary Clinton promised to tax American companies that outsourced jobs abroad and to "bring back" good jobs that will help rebuild the middle class. In the clip above, Sanders suggests Secretary Clinton found religion on international trade. Secretary Clinton is hardly alone in finding religion on international trade. In fact, she has had several religious affiliations where trade is concerned. In the 1990s, then as First Lady, Hillary Clinton was broadly supportive of her husband's economic policies, including those that concluded the NAFTA and China's entry into the WTO.

As I argued in an earlier post on this blog, President Obama has also professed several different faiths when it comes to trade policy. In fact, during the 2008 contest against Senator Clinton for the Democratic presidential nomination, Senators Obama and Clinton bitterly competed in Midwest states like Ohio to see who could be more virulently anti-trade.

Then, sometime in 2010, both Obama and Clinton became religious converts and supported America's involvement in one of the largest regional trade liberalization efforts since the NAFTA; the recently completed Trans-Pacific Partnership (see posts on that here and here). Then, last year, shortly after the TPP negotiations she had a hand in were completed, Secretary Clinton made an election season confession and disavowed the Agreement.

Those Jobs Are Not Coming Back

In April 2008, then-Republican presidential candidate John McCain was on a campaign tour through the equally rusty state of Ohio when he offered a strikingly candid assessment of the jobs situation:

I can't tell you that these jobs are ever coming back to this magnificent part of the country, but I will commit to giving these workers a second chance. They need it, they deserve it.

It was a candid admission from a politician in the midst of a campaign that didn't win McCain a lot of votes. But it was the truth. The problem for politicians is that the finer points of comparative advantage are difficult to turn into electoral sound bites. McCain was characteristically blunt-- after all, he was on his "Straight Talk Express" bus touring the Midwest. However, for most politicians, such candor on trade usually means a clear path to defeat. Indeed, Senator McCain's command of economic issues (or lack thereof) was a major contributing factor in his loss to Senator Obama in November as the financial crisis tightened its grip on the U.S. economy. Hence, we'll never know what he meant by "giving these workers a second chance." Yet, the substance of such comments is the key to overcoming much of the dishonesty about trade. 

In June of last year, I spent some time on this blog talking about measures designed to deal with the concentrated "losers" that arise from trade liberalization (linked here), especially so-called trade adjustment assistance. But the argument ought to go much further than that.

Global Labor Force and Creative Destruction

It seems cliche to suggest that the economy of the 21st Century will be typified by a truly global labor force engaged in a productive supply chain that is equally global. We ought to be preparing our national labor force to more fully compete in a global economy. I'm not sure pledging to repatriate manufacturing jobs that utilize yesterday's skill-sets is in our national interest. Even if we did, most wouldn't provide the same standard of living they once did. There was a time when a basic high-school education was enough to land you a job at the local steel plant or auto parts supplier at a salary high enough that you'd be categorized as part of the "middle class." No more.

Some of that is due to trade liberalization accelerating the speed with which manufacturing can be rationalized to other locations. However, as the economist Joseph Schumpeter noted long ago, capitalism itself chews up and destroys old jobs while simultaneously creating new ones. The pace of that "creative destruction" as he termed it, has been increasing rapidly. The skill-sets required of today's jobs may be obsolete a few short years from now.  Far more useful than lamenting the exodus of comparatively low-skill manufacturing jobs-- jobs which the expanding skill-sets of other countries can increasingly handle-- post-Fordist production in "developed" countries ought to focus on cultivating the conditions for skill-set development in 21st Century economy that will demand from workers flexibility, adaptability, and life-long learning.

Since displaced workers (losers) are unlikely to quickly transition from a declining economic sector to one that is growing, that suggests investing in people ought to be a public priority; education at all levels-- primary, secondary, post-secondary, and vocational. With the exception of Senator Sanders, none of the 2016 presidential candidates has made education a focal point of their campaigns; Ted Cruz wants to scrap the Department of Education, Donald Trump wants to eliminate "Common Core." While Sanders advocates tuition-free access to public colleges and universities for all qualified applicants, he doesn't explicitly link any of it to skill-set development aimed at preparing people for a 21st Century economy. 

Hence, what we get are politicians who know better making promises about repatriating jobs they know aren't the high-wage jobs of the future. Moreover, they also know they'll break their repatriation promise once elected. Is it any surprise the American electorate seems angry?

The Evangelical Silver Lining

The flip-flopping dishonesty on trade policy will not make the next President's job any easier as they seek to steer a rickety economy through choppy global waters. However, I can virtually guarantee the current crop of anti-trade protectionists in 2016 will have another religious conversion and be born again sometime shortly after their 2017 inauguration. 

As I have argued elsewhere in this blog, trade policy has become an essential part of any president's foreign policy tool chest (here and here). Whereas the incentives for pandering to voters on trade are extremely high while running for office, those same incentives reverse themselves once a presidential candidate is in office. Trade policy is about the broad health of the entire American economy, which presidents are responsible for in a way they are not as mere candidates. In other words, as a candidate for president, perhaps in the midst of your party's nomination process, you are seeking votes from a series of sub-sets of the national electorate, and in many cases, the "losers" from trade liberalization. However, as president, you are responsible for bringing the broad-based benefits of a healthy, liberal economy to all; the "winners." 

Moreover, it has been written that the fundamental dilemma facing presidents is that they have too little authority to satisfy public expectations of their performance (Kernell and Jacobson, The Logic of American Politics). Indeed, Article II of the Constitution outlining the authority of the executive branch is quite short. Hence, presidents are only too happy to accept the periodic delegations of Article I, Sec. 8 authority over trade from Congress as a major set of foreign policy tools. What modern president would be foolish enough not to try and preserve and extend that set of tools?

So, while I doubt the next president will engage the educational and skills-development questions at the heart of American competitiveness in the 21st Century, I'll bet the farm the next president will eventually worship at the alter of free trade.