16.12.16

THE MESSINESS OF MARSHALLIAN IMPROVEMENTS.

The supporting details.  Tim Duy's Responsibility, at Economist's View, gets down to an important case.
Sometime during the Clinton Administration, it was decided that an economically strong China was good for both the globe and the U.S. Fair enough. To enable that outcome, U.S. policy deliberately sacrificed manufacturing workers on the theory that a.) the marginal global benefit from the job gain to a Chinese worker exceeded the marginal global cost from a lost US manufacturing job, b.) the U.S. was shifting toward a service sector economy anyway and needed to reposition its workforce accordingly and c.) the transition costs of shifting workers across sectors in the U.S. were minimal.

As a consequence – and through a succession of administrations – the US tolerated implicit subsidies of Chinese industries, including national industrial policy designed to strip production from the US.
Yes, the comparative advantage of the United States might rest with knowledge-intensive, advanced-technology goods (and developing these modifies the concept of comparative advantage away from David Ricardo's resource endowment examples).  But it's in that modification that bad stuff can happen.  People equipped to work with heavy machinery (the advanced technology of a century ago) might run into troubles adapting to keyboards (the alleged advanced technology these days.)  And thus does what looks like a Marshallian improvement on a whiteboard turn into something less pretty in fact.
Yes, technological change is happening. But the impact, and the costs, were certainly accelerated by U.S. policy.

It was a great plan. On paper, at least. And I would argue that in fact points a and b above were correct.

But point c. Point c was a bad call. Point c was a disastrous call. Point c helped deliver Donald Trump to the Oval Office. To be sure, the FBI played its role, as did the Russians. But even allowing for the poor choice of Hilary Clinton as the Democratic nominee (the lack of contact with rural and semi-rural voters blinded the Democrats to the deep animosity toward their candidate), it should never have come to this.

The transition costs were not minimal.
Come to this it did, and the attitudes of coastal elitists toward marginalized people burdened by insufficiently many oppressions didn't turn out well.
My take is that “fair trade” as practiced since the late 1990s created another disenfranchised class of citizens. As if we hadn’t done enough of that already. Then we weaponized those newly disenfranchised citizens with the rhetoric of identity politics. That’s coming back to bite us. We didn’t really need a white nationalist movement, did we?
Disentangling the white nationalist component from the economic populist component from the cultural collapse component will produce lots of books and doctoral dissertations.  I suspect that pizzas and wedding cakes and bathrooms and all the other metrofexual hobbyhorses might have had something to do with it.

Ultimately, though, if the Trump victory gets policy wonks to be more modest about social engineering, once the idea goes from whiteboard to Main Street, that might be for the good.

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