The 2020 Democrats are totally missing what's wrong with the American economy

Elizabeth Warren's presidential campaign flows from her notion that the American economy is "rigged." It's the way Warren's world works. Corrupt politicians and rapacious CEOs — the former doing the bidding of the latter — conspire to exploit the middle class and subvert democracy. Reform starts with better people operating in a better system. Warren's trade plan, for instance, assumes any downside from America's trading relationships stems from bad deals favoring bosses and investors over workers. President Trump blames the "elites." Warren blames "insiders."

But Warren's framework lacks relevance if America's big economic challenge is dealing with smart machines rather than corrupt humans. When moderators at Tuesday night's Democratic debate raised the issue of automation and technological unemployment, Warren was dismissive: "So the data show that we have had a lot of problems with losing jobs, but the principal reason has been bad trade policy." And then she pivoted to attacking disloyal multinational corporations and touting her Germany-inspired plan for "accountable capitalism."

It was a disappointing answer from a candidate pushing for "big structural change" in the American economy. One would presuppose such ambition is based on a deep understanding of the American economy. But Warren's clumsy pivot was especially awkward given her wonky reputation. It showed an inability or unwillingness to grapple with a problem outside her mental model and policy agenda. Or maybe talking robots is just off-brand for her.

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In any event, Warren blew it. The automation of U.S. factories has generally been a much bigger factor than foreign trade in the disruption of manufacturing jobs. For instance: A literature review by the nonpartisan Congressional Budget Office of the North American Free Trade Agreement found only a "small" labor market impact from the agreement. And while 2000s China trade may have caused sizable job losses in some regions, the "China shock" is pretty much over. Also, recall, the jobless rate is at a half-century low.

So from an economic perspective, we have now resumed normal programming. Looking ahead, it's automation, not globalization, that poses the far bigger challenge to the economic welfare of American workers. Time for policymakers to again focus on making sure the gains from technological progress are broadly shared.

Indeed, one could imagine Warren jumping all over that automation question with a combination of wit and scholarship. She could have mentioned a San Francisco Fed study out last month that suggested automation is partly to blame for the 20-year decline in the share of national income going to workers. "Having the option to automate jobs strengthens firms' bargaining power against workers," the study concluded. Seems pretty Warren-esque.

Or she could have referred to a fascinating study from earlier this year, "Automatic Reaction: What Happens to Workers at Firms that Automate?" where researchers showed that automation increases the odds of a worker leaving his firm and suffering income losses due to spells of unemployment. And then after outlining the problem, Warren could have delved into possible solutions — another plan! — such as radical worker training reform and the need for the federal government to better fund the sort of basic research that leads to job-creating innovation rather than job-displacing automation.

Yet if Warren is worried too little about the robots, her Democratic rivals are worried too much. Despite forecasts all over the map, the candidates seemed to wholeheartedly accept the premise that rapid innovation will soon lead to mass technological unemployment. And not just Andrew Yang, who has built his dark-horse campaign around that idea of implementing a universal basic income before the robots arrive en masse. Frontrunner Joe Biden agreed that "the fourth industrial revolution is costing jobs," while Julian Castro declared himself UBI-curious.

But an economy where robots were taking all the jobs would be one where productivity was soaring. And while output per worker has picked up somewhat of late, the longer-term trend has been moribund. That dismal performance is the greatest threat to workers because productivity growth is what drives higher living standards and greater economic opportunity. There was plenty of talk during all these debates about wealth redistribution, but almost none about wealth creation stemming from a faster-growing economy. Why? Maybe it doesn't fit into the Democratic campaign model, either. So maybe Warren and the rest need a new one.

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