What's really behind Trump's protectionism
Trump's trade wars have nothing to do with economics. It's all about populist politics.
Tell your average Republican member of Congress that President Trump has said or done something racist or flagrantly authoritarian and you're likely to get a response of stony silence. But mention the administration's policy of imposing aluminum tariffs and this same GOP member of Congress is likely to sputter with indignation about the foolishness of the president's trade policy.
Aside from showing us what really matters (and what doesn't) to the GOP, the difference in reactions points to something exceedingly rare in this highly polarized moment: a remarkably broad, bipartisan consensus in favor of free trade and open markets. Ask nearly any economist, most Democrats, an overwhelming majority of Republicans, and heads of state throughout much of the West and around the world, as well as the leadership of the European Union, and most of them will agree that a world with freer trade is vastly preferable to a world filled with trade barriers.
The reason for the consensus is simple: When trying to sell a product, it's better to have a bigger market than a smaller market. The greater the number of potential customers, the greater the potential for profit. And as profits increase, so does wealth. That's how free trade makes us richer.
But who is included in this "us"?
Even to raise that question is to diverge from a strictly economic outlook and enter, instead, the realm of politics. That's exactly how Trump's protectionist instincts need to be understood — not as an economically reasonable response to an economic problem but as a political response to one.
This can be hard for economists (and the many who view politics through a predominantly economic lens) to grasp. But it is essential that they try. Until they do, they will fail to understand the politically potent appeal of Trump's combative stance on trade — a stance that could (and in modified form, perhaps should) be co-opted by other, less reckless political actors.
Begin with the basics: In the aggregate, it's true that we do become richer as trade, capitalistic exchange, and market interactions proliferate. But it's a fallacy — one that social scientists dub the ecological fallacy — to assume that what is true of the whole is also true of the parts. When it comes to trade policy, the fallacy leads us to assume that we're all better off with free and open markets when that simply isn't true. On the whole, "we" do do better, but there are always some who do worse.
Economists know this very well, of course, but their focus on the aggregate combined with their discipline's emphasis on efficiency, rational calculations of costs and benefits, and competitive adaptability to the vagaries of the market strongly encourages a harsh moral judgment of those who end up on the losing side of economic dynamism: "Oh well, those are the breaks. Time to move on. Learn new skills. Remake yourself. Change is good. That's how we get technological innovation and higher standards of living overall. Sure, capitalism is sometimes destructive — of your livelihood and community — but it's also endlessly creative. So quit complaining and get with the program. It's pointless or lazy to do anything else."
The heyday of open markets that began in the 1970s and accelerated in the 1990s produced a lot of winners: those willing and able to acquire a college education that earns them specialized skills and elite credentials; those who are mobile, willing to move from heartland cities and non-urban areas to Silicon Valley, New York, Washington, and the various tech-hub cities, suburbs, and exurbs scattered across the country. That's where the post-industrial society predicted by sociologists in the mid-20th century and hastened by the nation's trade policies (and automation) is most advanced, and therefore where job and wage growth has been strongest.
Then there are the "losers" — the many millions of Americans and hundreds of cities, towns, and communities that have stagnated or declined over this same period. These are people who live in places left behind by the incessant churn of post-industrial capitalism. They tend not to acquire the education, skills, and credentials they need to thrive in a world that most handsomely rewards symbolic analysts (those who do work involving high levels of knowledge and creativity). That leads many of them to be unemployed, underemployed, or unemployable, living in regions of the country that increasingly resemble cultural and social wastelands, with alcoholism and drug addiction rampant and life expectancy falling so drastically that it's had a noticeable effect on the national mortality rate.
Over a century ago — during the 1890s — the original populists (the People's Party) tapped into and channeled the grievances of those from places left behind by industrialization. Trump, despite himself, is doing something similar today for those from places left behind by post-industrialization. Then as now, the response made little economic sense. It was important primarily as a form of political protest — a howl of rage against the overall direction of the country from those who had no reason to believe they were benefitting from rapid and destabilizing economic change.
The People's Party faded quickly, but its agenda and some of its policy proposals were soon taken up by new champions within the political mainstream (Theodore Roosevelt, the Progressives, the Democratic Party) who devised a more viable response to the concerns of the voters who rallied to the populist message.
The situation today is different, and more dangerous, because the populist has the power of the presidency in his hands, and the fact remains that protectionism is economically foolish. The global trade war Trump appears eager to provoke is far more likely to harm the nation as a whole and in most of its parts than it is to spark a resurgence in the regions of the county that most strongly support the president.
But politically? There it's simply too soon to assess the impact and importance of Trump's effort at championing the interests of those who have failed to thrive in the free-trade era. The proof will be found in who follows him in political power — and what of his agenda gets preserved, transformed, and refashioned for a more prosperous and equitable American future.