Trump is going to be the next President of the United States

Of course we don't count retired people as being unemployed. Just like last time, a Democratic President is going to leave a Republican successor a decent economy and a shrinking budget deficit, and by the end of the Republican's reign of terror, everything has gone to pot. Won't be any different this time.

 

It's quite important to note that the same time period for the latest US trade liberalisation overlaps with both the automation of manufacturing and the increased digitalisation of service industries. I am very much a supporter of free trade and liberal market economies, but I recognise that not enough was done to soften the blow of liberal economic policies to manufacturing communities.

The Chinese 'pieces of crap' you're referring to look like $3 pairs of socks, cheap toothbrushes, plastic cutlery, affordable porcelain, tins and tupperware. There is inarguably a large demand for those things. Generally, American manufacturers can't produce many of those low-cost goods at a price consumers expect.

The automation of industry means that manufacturing low-cost goods in the US, with US labourers getting pay that meets America's standard of living, is just not possible. That is, the costs of running a business with old-style labour intensivity are far higher than the automated business that does the same thing. Those businesses either don't make profit or offload costs on consumers, who will go to the alternatives and drive that manufacturer out of business. Or, alternatively, if for some reason every business decided to be inefficient, consumer costs rise, which means that same working class is left out of pocket.

The transition to a more capital-intensive manufacturing sector over the past decades has caused those job losses more than anything else. Even where free or freer trade meant that those workers were more exposed to competition from similarly advanced economies (Canada, Australia) or from lower-cost labour-intensive countries (Mexico, China (the latter with which the United States does not have free trade)), all it did was quicken the pace of those inevitable job losses which would occur under domestic pressure over a longer period. That structural weakness of manufacturing economies would have manifested itself eventually, regardless of trade.

So given that you can't revive those jobs, perhaps it's good to note the positive aspects of trade. Automated manufacturing has only a handful of necessary workers and is far more productive than labour-intensive manufacturing, which means that those remaining workers can be paid quite well and still not push prices up. Those manufacturers rely on overseas demand for those products.

I don't have a link to it, but I did read an IMF report which identified around 985,000 job losses in the United States related to Chinese competition, but also identified 940,000 jobs reliant on trade with China. The net job loss of trade with China ends up being in the tens of thousands. Job losses due to automation number over four million. But on top of that, making trade more difficult (increasing tariffs, say, which of course causes reciprocal punishment) would put those jobs at risk without necessarily bringing back the other jobs. If the cost of American goods and services go up in China, then Chinese consumers will turn to other economies which can provide those same services. If the United States shuts itself off, then other countries can trade with each other, meaning American exporters suffer.

The TPP, now dead, is a perfect example of that. Beef producers in the United States were some of the deal's biggest supporters, because the Japanese-Australia free trade agreement meant Japanese consumers were buying Australian rather than American beef, because American beef was more expensive due to tariffs. The TPP was an attempt at multilateralism that would have made that relatively arbitrary, politically-caused advantage of one country's producers over another's a thing of the past for 40% of the world's economy.

And, finally, given the United States is now largely a services economy, it's worth noting that even on the off-chance manufacturing jobs could come back, service workers have to put up with a higher cost of living and job losses as the same policies that (don't actually) reinvigorate manufacturing prevent services from being sold globally, which is an enormous part of the US economy. And it just means that there would be a smaller, poorer domestic consumer base anyway, which defeats the whole purpose of domestic production for domestic consumption.

It also favours a smaller, whiter segment of the US population over a larger, more diverse segment. That, I think, was why the combination of racial sentiments and protectionism worked so well for Trump in white rust-belt communities. But the problem is, as I've explained, those communities just won't get back all their jobs. But limiting trade will cause new-style manufacturing to suffer as well as causing an even larger sector of the economy to wither. That's just not feasible.

There are also the geopolitical issues of trade being a vessel for stable relations and allowing the US to exert pressure for countries to democratise, but I've written enough already.

Basically, this post can be summed up as:

1. Automation causes job losses that trade only speeds up.
2. Without trade, costs go up for poorer consumers.
3. The US economy now relies on trade for the remaining manufacturers as well as services.
4. Shutting down trade harms the much large number of services workers there are than hypothetical manufacturing workers who could get jobs by limiting trade.
5. Services workers are the consumer base manufacturing would need in a trade-unfriendly environment, but blocking trade would make them less able to consume.

And the Democrats fucked up this election by not stepping that process out to the public - having a clear economic vision was one of Trump's best cards to play, and he won in part because those lies about trade went by without being contested well enough.

---------- Post added 17th Nov 2016 at 01:32 PM ----------

But all administrations have worked with that metric, so if there's a baseline of unreported unemployment, the figures can still be used with some degree of accuracy to say one administration has a better unemployment rate than another did.

 

You sure do like writing overly long posts don't ya?

First of all you made some assumptions about my position that I never said, so I'm not sure why you are writing so much in response. Second, your points at the bottom of your posts are terribly flawed. Automation doesn't cause job loss, it frees people up to go do things that are actually beneficial to society. Trade costs can't touch inflation. Eventually consumers won't be able to afford even cheap crap from China, though I will admit this is a worse case scenario. Best case the U.S. mimics the Japanese style 20 year recession. Finally, consumption doesn't grow an economy. Savings does.

 

"Finally, consumption doesn't grow an economy. Savings does."

Saving doesn't grow an economy because it simply locks money up that could be spent on consumer spending. Unless you are talking about financial services but that doesn't lead to job creation or sector growth. Economies grow when consumers spend money not when they save it.

 

If trade costs increase, then you expect less supply of certain products domestically (if these products are imported). Supply and demand curves illustrate easily that less supply leads to higher prices when demand doesn't change. So, if this change is gradually, then we will see a gradual price increase and thus the rate of inflation is affected for that product.

Similar reasoning (product cannot be exported anymore, could lead to dumping) can be made for deflation. It depends on the good, but saying that trade costs can't touch inflation is not correct at all.

Barbatus is right. Your final statement is wrong as well.

 

You don't understand the concept of savings. Savings does not necessarily equal "locking up money".

---------- Post added 17th Nov 2016 at 03:31 PM ----------

I'm talking about inflation of the money supply. An imported product going up in price due to trade costs is a moot point when that product is going to go up in price anyways due to inflation of the money supply. Inflation of the money supply is a large reason why so many people play the stock market. To keep ahead of inflation and keep the value of their money consistent from year to year.

This is basic stuff guys.

 

So you're not using the common definition of inflation in the economical sense. In this case, you mean "expension of money supply"? So you're arguing that trade costs do not directly influence the expension of money?

Sadly for you, it can. You see, when inflation happens, the government might want to correct this (if it gets out of hand). There are several instruments to fix inflation and controlling the money supply is one of them. Saying that there's no relation to that is simply incorrect, again.

You're saying is basic stuff, but you cannot grasp basic economics here really. This is one of the first things you learn when taking courses in economics.