Contradiction in US Economic Policy that Trump would need to address

Summary:
Two liberal ideas of “protecting domestic workers” and “removing trade barriers” are clashing.  Progress that we made in creating auspicious North America trade environment does not help Americans who are losing their permanent jobs and confidence. What Trump can do to help with jobs and yet preserve the international trade cooperation?

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America is great from many viewpoints and that is why we love it.   But one troubling thing  – it is steadily crawling towards bigger and bigger Government and overly regulated entrepreneurs.  What are the chances that Trump succeeds in reversing the trend and be a successful President?  He can be either a super great president, or completely useless and paralyzed by Washington bureaucracy. He simply cannot be a mediocre president.

In the heat of Presidential rallies and debates the actual problems facing the country got a bit obscured.  People are spending more time discussing the new great wall, illegal immigrants, the private lady’s parts rather than thinking about prosperity and future of this great country.

 

Conflict I - Economic Policy

 

Let’s look at contradiction in US economic policy that Trump would need to address.  This is a contradiction between
–  highly regulated and expensive labor market inside US and
–  less mature, less expensive, less regulated labor markets of our trade partners.

Many years Federal and State Governments introduced an extensive range of laws limiting the freedoms of business to actually do business in USA.  A wide range of laws (for example, minimum wage, product labeling requirements, export licensing, reporting, auditing) make American products more and more expensive, and less and less attractive on the global markets.  At the same time, an easy access to products produced overseas without such laws and regulations makes them more attractive and more desirable here in the US.

Essentially, this is a conflict between two very liberal, very sound old ideas:
(1) protect our workers
(2) remove trade barriers between countries.

At current stage of economic development there is a very painful conflict here. This conflict reminds me of a snow storm in New Hampshire on a Memorial Day weekend.  You know the summer is here.  You know the warmth is just days or may be hours away, but that knowledge doesn’t help you being trapped on the slopes.  The same is true for all the middle class workers who recently lost their jobs to cheaper labor markets, but that knowledge doesn’t help them to feed their families now.

Image above illustrates a painful conflict between century two old liberal ideas of (1) protecting workers and (2) opening foreign markets for growth and expansion.  Developed country today can’t pursue both these liberal ideas with no reservations.  Any politician would have to find a middle ground between these two, and Trump so far promised concessions on both sides of the conflict.

On the side of internal economics he is attracting business to stay and grow here in America.  He promised:
– to lower taxes
– to simplify laws and regulations
– to create a better economic climate to do business in USA.

He did not offer to put more qualified workers on welfare.  That step would help a few, but for most it will be a highway to poverty, dependence on Government hand outs, and ultimately another push for bigger, all mighty  Government.

 

On the side of opening foreign markets, he promised to be more scrupulous and
– renegotiate those free trade agreements that could be more harmful than useful at this particular moment;
– re-introduce tariffs.

There are  of course, problems with protectionism.  We all know, that tariffs create stagnation pools where everything is more expensive for customers and less efficient for manufacturers.  Tariffs usually used by young growing economies like Germany in last half of XIX century to protect against mature British Empire.  But what does it mean, when industrial leader (like USA) feels the heat and have to uses tariffs now?  I hope all that means is that opening up of trade barriers happened too fast, and millions of middle class US workers simply did not have time to re-train, relocate or retire yet.  I hope all we need is just to slow down the globalization process enough to reduce the pain of workers who were caught in this big game by politicians.

If Trump can somehow slow down or even reverse the rate of attrition,  it will create a time cushion for people to move to new industries or new geographic areas with less pain.  So let’s do not look at this protectionism move as a reversal of history.  Let’s look at it as an overdue reaction to middle class pain and suffering.

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Next  contradiction is in US International policy.  This is a contradiction between US very honest claim to be a defender of just, democratic causes all over the world, but constantly entering in local petty conflicts driven by access to oil and other big business interests.

 

 

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