The best way to understand Donald J. Trump’s shocking victory in the 2016 U.S. presidential election is in the light of recent American history. Much of Trump’s success is rooted in a failed bargain with the American people.
Around 30 years ago the American political and economic elite made an interesting bargain with their people. The compromise was as follows: “allow us to make dramatic changes to some aspects of the U.S. political and legal fabric and in return you will get greater prosperity.”
The dramatic changes were reversing restrictions on immigration and tariffs, some of which had stood for nearly a century. The idea was that less restrictions on immigration and free trade would bring prosperity. In particular Republicans abandoned their historic opposition to unrestricted immigration and free trade to sign off on the deal.
The economic data indicates that the bargain did not work out very well for the American people. Although it did pay off for those lucky enough to be working in certain industries.
Some Numbers that Explain Donald Trump’s Victory
Here are some numbers that explain Trump’s victory.
The rate of growth in the gross domestic product in third quarter 2016; 2.9%, better than most nations but hardly great.
The number of Americans on Food Stamps; direct federal cash assistance to the very poor, in February 2016: 46 million, according to Bloomberg. It’s called food stamps because the government used to distribute coupons called food stamps the poor would use to buy groceries. Today it’s usually done with a card, but it’s still what the British would call the “dole.”
The percentage of able*bodied American men not participating in the labor force: 12% according to data from the Brookings Institute.
Number of US factory jobs lost between 2000 and 2015 – five million.
Number of US manufacturing jobs lost in October 2016; the month before the election, – 9,000 according to the US Bureau of Labor Statistics.
Number of mining and logging jobs lost in October 2016 – 2,000.
Number of “service” jobs (everything from waiting tables to computer repair) created in October 2016 – 43,000, according to CNBC.
The US Economy is not working
As you can see the economy is not working many Americans. The Great Bargain Americans made with their leaders turned out to be a pretty poor deal for the working man.
This explains the victory of a politician that promises explicitly to rip up the bargain and go back to the old status quo. Trump’s trade and immigration proposals are hardly original; they were the basic policies of every Republican president from William McKinley (1896-1901) to Herbert Hoover (1929-1933).
Trump’s bet is that he can make America’s economy work for average people again by restoring the old fashioned trade and immigration regime. That won him the election but it might doom his presidency to failure.
Has Trump Doomed Himself to Failure?
The danger facing Trump is an obvious one: what happens if his policies do not work. If there is no economic recovery; or if the economy gets worse, Trump will suffer the same fate as Hillary Clinton a staunch advocate of free trade.
Trump’s promise was to restore the mass industrial employment America enjoyed from the 1950s to the 1980s. The hope is to bring back the high-paying factory jobs many Americans enjoyed in those decades. The popular theory in America is that free trade doomed those jobs; because U.S manufacturers were unable to compete with products from low-wage countries like China.
The drawback to that theory is that much of the manufacturing job loss appears to be caused by automation rather than foreign competition. In 2015, American factories produced twice as many goods as they did in 1984, yet employed one third fewer workers, Marketwatch writer Rex Nuting noted. Production of many items in the US; including airplanes motor vehicles and electronics, in the United States was at an all-time high in 2015, data from the US Federal Reserve indicates.
Will Technology Doom Trump?
The data shows that technological unemployment; replacement of workers by machines – might be the real cause of manufacturing job loss. Yet Trump has no plans to deal with that problem. Instead he refuses to even address the issue, which might be one of the greatest problems facing America.
That problem is about to get much worse because machines are beginning to replace workers outside of manufacturing such as retail and trucking. Walmart (NYSE: WMT) is eliminating 7,000 accounting positions and replacing those office workers with digital invoicing and cash-recycling machines. To make matters worse an Uber subsidiary recently tested a self-driving semi-truck in Colorado.
Some of Trump’s policies might even drive more technological unemployment. Companies that bring manufacturing back to the US will have a strong incentive to use robots and other machines in lieu of highly-paid workers.
Therefore it is doubtful that Trump’s policies will lead to large numbers of new manufacturing jobs, or any kind of jobs. Instead America will be doomed to four more years of anemic economic growth and increasing income inequality. Voters will need a scapegoat for that situation; and Trump who promised but failed to restore prosperity will be the obvious candidate.
The paradox of Trump is that the circumstances that brought him to office might doom him to be a one-term candidate. Like those who preceded him; Donald might not be able to keep his bargain with the American people, and find himself as hated as the corrupt elites he professes to oppose.