Can Trump make U.S. industry great again?

Donald Trump in his campaign promised to reverse the decline of American manufacturing.

Can he do it?  I’m willing to be pleasantly surprised, but I don’t think so.

President-elect Trump’s proposed economic policies are the same as what most Republicans and many Democrats have been advocating for 30 years or more—lower taxes, less regulation, fewer public services.

None of these things has stopped the increase in U.S. trade deficits or the increase in economic insecurity of American workers.

Trump did speak against the Trans-Pacific Partnership agreement, promised to renegotiate other trade agreements and threatened to impose punishing tariffs on China and Mexico in retaliation for their unfair trade policies.

I myself am in favor of rejecting the TPP and renegotiating trade treaties.  This would be a step forward.  But it would take more than this to rebuild the hollowed-out U.S. manufacturing economy.

China, Japan, South Korea and most nations with flourishing industrial economies use trade policy as a means of strengthening their economies.

Their leaders, like Alexander Hamilton in the early days of the United States, seek to build up their nations’ “infant industries” under those industries are strong enough to stand on their own feet.

When foreign companies seek to sell these nations their products, their governments demand that the foreign companies not only set up factories in their countries, but that they employ native workers and transfer their industrial know-how to the host countries.  The USA does nothing like this.

One reason for rejecting the TPP, the Transatlantic Trade and Investment Partnership and other proposed trade treaties is that they would effectively prevent the United States from adopting such an industrial strategy.

Source: CNN Money

Source: CNN Money

In the absence of an industrial strategy, all that tariffs would do is raise the cost of certain products to American consumers and raise the cost of certain needed raw materials and components to American manufacturers.

The other danger of starting a trade war with China is that the Chinese can do enormous damage to the U.S. economy by simply refusing to roll over their portion of U.S. government debt.

Wilbur J. Ross, who is Trump’s choice for Secretary of Commerce, had a successful business career in restructuring failed and bankrupt companies.  He’d buy them cheap with borrowed money, sell or close the failed and unnecessary parts, and then sell what’s left at a profit.

Restructuring is a useful and honorable business activity.  But Ross’s work was salvage, not construction.  He is an expert in the management of decline.   He is not an expert in building for the future.

There is nobody in the future Trump administration, so far as is known today, who has experience in building up a successful manufacturing company.  There are no academic experts in manufacturing or productivity.

Most of his future appointees appear to be financiers and lobbyists—alligators in the swamp Trump promised to drain.

LINKS

The Free Trade Fallacy by John Michael Greer for The Archdruid Report.  Excellent article on how to think about trade policy.

Stemming the Rot in American Manufacturing May Defeat Even Trump by Eamonn Fingleton for Business Post (Dublin).  Another excellent article, this one by a Trump supporter.

Trump’s Economic Plan: This Isn’t Going to Work by Mike Whitney for Counterpunch.

Trump: What the Market Is Really Saying by Jeff Madrick for the New York Review of Books.

Beware Donald Trump’s Infrastructure Plan by David Dayen for the New Republic.

Donald Trump’s infrastructure plan wouldn’t actually fix America’s infrastructure problems by Brad Plumer for Vox.

Wall Street Wins Again As Trump Picks Bankers, Billionaires by Max Abelson for Bloomberg News.

‘Vulture’ or ‘Phoenix’?: Wilbur Ross, Risk-Taker, Is Eyed for Commerce Post by Matthew Goldstein for the New York Times.

Who is Wilbur Ross, Trump’s selection for commerce secretary? by Gretchen Frazee for PBS News.

Trump Presidency Could Be Worth $14 Billion to His Troubled Lender by David Dayen for The Intercept.   A little off topic, but interesting.

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