Donald Trump has been vocally critical of American companies who have shipped jobs overseas. His victory in pivotal Rust Belt states cemented his status as a champion of the Reagan Democrats, blue-collar, union-affiliated, working class voters; a demographic normally inclined to vote for the Democrats for economic reasons, but who are open to the seduction by the siren songs of economic populism and nationalism.
Reagan blew Jimmy Carter (1980) and Walter Mondale (1984) away by appealing to this much-romanticized and long-downtrodden demographic. Trump shrewdly targeted large parts of his campaign message and strategy towards such voters, with demonstrable, even shocking, success. Trump won an estimated 42% of union voters: unions are typically one of the most reliably liberal voting blocs. If Trump wins nearly half of union voters, the Democrats are in trouble.
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How did Trump do this? To begin with, blue collar unionized voters are terrified of having their jobs shipped overseas. Last year when the Carrier air conditioning and furnace plant in Indiana announced that it would be relocating manufacturing to Monterrey, Mexico, in a bid to save USD $65 million a year, Trump, in full campaign swing, went on the warpath, using Carrier as a national punching bag to demonstrate the evils of globalization and free trade agreements. It is undeniable that for the hundreds of northeastern Indiana workers who were about to lose their jobs, many of them represented by the United Steelworkers union, this was catastrophic.
Yet, Trump fundamentally fails to view the far more important piece of this equation. For the 320 million Americans who do not work at the Carrier plants, they are going to be paying far less for their heating and air conditioning, thanks to Mexico’s lower labor costs.
Every time that the free trade argument comes up, special interest groups in the United States fight tooth and nail to protect their interests. But this is not beneficial for our democracy or for our economy. National economies should compete in their areas of strength. If Mexico is a more cost effective place to manufacture heating and air conditioning equipment, it should be manufactured in Mexico.
Unfortunately for all Americans, our political system often thrives on putting the interests of special interest groups over the interests of all Americans.
It is easy to see the hurt and the pain and the anger at an Indiana manufacturing plant where hundreds of blue-collar workers are informed that Mexicans are about to take their jobs. That makes for a great cut for the 6 o’clock news, or a soundbite for local radio, or even stump speech material for a presidential candidate.
It is much harder to palpably sense the benefit felt by all Americans, of paying less (most likely considerably less) for their heating and air conditioning: items that virtually every American household needs and uses on a regular basis.
It is hard to imagine, for example, a CNN reporter doing a story on outraged Americans forced to pay 20% more for their air conditioner because Carrier did not take advantage of cheaper Mexican labor costs.
I can picture it now: Anderson Cooper shows up at a local Walmart to interview an outraged consumer: “This air conditioner costs $149.99, but it would have cost only $119.99 if Carrier had relocated those jobs to Mexico. I am outraged that those Carrier executives didn’t ship those manufacturing facilities to Monterrey where labor costs are lower!”
Right…we will never see this story. To the local politician, union organizer, community activist, informed voter, it is very easy to hype isolated examples of the detriments of globalization. Yet, few champion the benefits that all Americans, indeed all the world, have experienced as a result of the free trade that lubricates the engine of the global economy.
When it comes to Mexico, Trump must understand that it is vital to the interests of the United States to have a prosperous, stable, and productive southern neighbor. Free trade agreements are hardly the enemy of the American worker. Even if you buy into the economic populism that seems to have taken the nation by storm, a recent study showed that during the 23 years of NAFTA‘s existence, only 600,000 jobs were “lost” to Mexico. As numerous economists have noted, the real manufacturing job killer is not Mexico, but the micro-chip, which has automated much assembly line work in recent decades.
A war is likely to rage in the coming months within the Trump administration. A war between those who adhere to the traditional classical liberal and/or libertarian economic outlook, and those who have been seduced by the seductive siren song of economic populism and nationalism.
Let’s hope that Trump, who has a degree from the Wharton School of Business, will ditch the foolish populism that seemed to captivate him during the campaign trail, and look at the bigger picture. Free trade is good for America. It is good for Canada. And it is good for Mexico.
Competition is at the very foundation of free trade in the context of a global economy. And that should be a persuasive argument for “the world’s most competitive businessman.”