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America First Leaves Americans Behind

President Trump more than any President in decades has embraced industrial policy. He not only wants government to favor manufacturing, but vows to use the tax law to prevent manufacturers who are here from shifting factories overseas. And auto manufacturing seems to be his particular focus. To be sure, in this respect his policy has some continuity with the Obama administration, which intervened in extraordinary ways—including bending the bankruptcy laws—to bail out U.S. auto companies.

Industrial policy fails to reckon with the ignorance of government. Central decisionmakers lack the information to choose the best services and products in which Americans should specialize. The past shows that what is best produced here tomorrow will not be what is best produced here today: many of our most productive lines of work did not even exist 20 years ago, let alone 50 years ago. An industrial policy that puts up barriers to companies from moving factories abroad creates a more static economy here at home, one less responsive to the seizing of future opportunities in an era of technological acceleration.

That policy clearly makes American consumers and American shareholders in American companies worse off, because companies will fail to locate where they would be most profitable and to deliver products to consumers at the lowest possible cost. But a government-directed industrial policy is also not good in the long run for the American worker, because the industries that can provide good jobs for the long run change over time, and change faster as technology speeds up.
For instance, in a recent discussion sponsored by the Federalist Society, a panelist suggested that the Trump administration would renegotiate NAFTA so that it would strongly encourage auto factories to open here rather than in Mexico. Such a revision rests on the proposition that the auto industry is going to be a source of many good jobs for years to come.

There are many reasons to doubt this premise. First, manufacturing in general is becoming more high tech and less labor-intensive: the auto factories of the future will employ fewer people than those of the past. Second, we are likely on a cusp of an era of self-driving cars. This means fewer cars, as drivers can summon a ride whenever they want one rather than buying cars for themselves. Third, the legacy auto makers on whom the President is leaning may well lose out to more technologically nimble startups.

Luring workers into a declining industry does them no favors. By distorting market signals it also misleads our young people about what skills to learn and what employment to pursue. Devising policies that help Americans take advantage of those signals rather than muffling them provides a better future for shareholders, consumers, and workers alike.

Reader Discussion

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on January 26, 2017 at 00:54:16 am

I think your example of cars is good, but it only looks at one side of the coin. Take another example - shirts. Everybody buys them, everybody wears them, but nobody makes them. So, we are going to return shirt factories to the US. It may not be in the plan, but when tariffs increase on other trade goods, retaliation could raise the price on shirts, so inevitably the price of shirts will go up. So we start making shirts in the US. OK, Who knows how? Who even knows how to run that kind of business anymore? More importantly who *wants* to make shirts? Will someone wearing a government hat say, "Hey you! Go make shirts"? Can it even be done at a price anyone can afford. A shirtless society may be forced on us. Other areas are as bad or worse. Wonderful. We'll start making tech goods again. Good old American cell phones and computers, and TV's.... it'll be great again!..... Except we can't. We don't even make the parts anymore. While global government may not ,have caught on, global markets did in a big way. The global market is now so complex, we can't afford the kind of protectionism that "America First" seems to indicate.

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David Hammack
on January 26, 2017 at 08:02:39 am

i share McGinnis's perspectives here. I find his arguments sound. But people who embrace rationality are not really the Trump base.

Rather, the phrase Make America Great Again emphasizes not the future, but the past. People think Trump will restore some idealized version of the past, when they felt they had a social role and status. People who embrace a vision of growth are open to hear McGinnis's words. People who believe we live in a world of declining options and scarcity merely want to know that government will be on their side, helping to hoard the shrinking supplies of opportunities for themselves and members of their tribe. In their defensiveness, they don't identify as a worker; they identify as an auto worker, and won't respond to appeals grounded in any other vision.

While I bemoan the narrowness and conservativeness of this vision, I cannot dispute one of its major tenants: Well-paying jobs for low-skilled workers are scarce, and likely to remain so. And, indeed, I suspect that job in general will become less plentiful, as the combined effects of automation, globalization, and women entering the workplace cause the demand for labor to grow more slowly than the supply.

So while I think Trump is selling people a mythical remedy for their problems, I harbor the suspicion that McGinnis is, too. This nation--indeed, this world--has never been wealthier. The problem is not a lack of wealth. The problem is a lack of mechanism to permit workers to capture an appropriate share of that wealth.

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nobody.really
on January 26, 2017 at 12:59:35 pm

Agreed on both the falsity of the protectionism scheme AND the *reality* that there may not be as many jobs available in the future. Even McGinnis' argument itself demonstrates that this may be the case. Yes, automation will continue to account for an ever greater share of the industrial output, i.e., cars, phones, and the all important circuitry that controls all these devices. (I could share info from my own manufacturing experiences but...).

I recall an old friend repeating the remark:'' Well, all those old wheelwrights did not go hungry, they became autoworkers, etc"

What to do when those new "autoworker" jobs are already taken. In short, when there are not many new jobs available, or if those jobs provide a less likely means of attaining a *decent* (whatever that means) standard of living? I don't know.

But I must admit to some frustration with, as you say, "rationality" arguments. i.e., ideological / theoretical peaens to the wonders of the "market system".

Adam Smith's *invisible hand* is not likely to provide much comfort to he / she who, through no fault of their own, is compelled to have their hand out looking for assistance. Doubtless, it is, that they may even recognize that hand, however, visible one may wish it to be.

Again, I repeat, we are not, and ought not to be, "homo economicus" - with that in mind, perhaps we would be better engaging in bi-lateral trade agreements suited to the advantages of the parties EVEN if it means that consumer prices may be a bit higher and total industrial output is lower. After all, how great is a massive GNP figure, if we can not manufacture those items necessary for our defense.

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gabe
on January 26, 2017 at 23:36:56 pm

Let's be clear on the subject - INDUSTRIAL POLICY:

Definition

Government policy to influence which industries expand and, perhaps implicitly, which contract, via subsidies, tax breaks, and other aids for favored industries. The purpose, aside from political favor, may be to foster competitive advantage where there are beneficial externalities and/or scale economies

So far, the new administration has NOT proposed an industrial policy.

External "trade" policies of domestic businesses are at issue; not industrial policy.

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R Richard Schweitzer
on January 30, 2017 at 16:38:02 pm

The problem is that we only have a choice between two broken economic models.

Protectionsim or progressivism.

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jbsay
on January 31, 2017 at 10:59:26 am

Again, I repeat, we are not, and ought not to be, “homo economicus”....

Oh, here we go again: We are not homos...! We ought not be homos...! Get over it already.

(Yes, I'm joking.)

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nobody.really
on January 31, 2017 at 19:50:31 pm

I am shocked, shocked I tell you to find that there is homophobia going on here - and Bogey just laughed!

How could i not know you were joking.

BTW: Good to see you are back at First Things.

seeya

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gabe

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.