Blog post

It's Not About NAFTA

Aaron Benanav 1 January 2018

Nissan plant, Smyrna, TN

The 2016 election was primarily a referendum on US trade and immigration policies. Trump’s case, insofar as one could be found amid all his bloviating, was something like the following: the US sent jobs abroad at the same time as it let workers in from Mexico, and that has been bad for most Americans. It’s worth remembering that Trump began his campaign by attacking financial elites, who, he said, had paid off the politicians to keep this con act going. Since Trump is so rich, he won’t have to take their bribes. He’ll renegotiate.

Well, it doesn’t take a degree in political science to predict that Trump will fail to “make America great again.” In all likelihood, the real winners here will be the traditional constituencies of the Republican Party: big business and social conservatives. Everyone else will lose. Meanwhile, Trump will use the presidency to hound his enemies and expand his personal wealth. And that’s the best case scenario.

It’s easy to imagine worse down the road, due to significant shifts in the ways the Republican base is organizing and expressing its interests. Recent vigilante attacks suggest that white supremacists are feeling emboldened. The far-right may consolidate itself.

I’d like to focus on one particular aspect of the election, because it has some bearing on the main question on everyone’s mind: not what will he do, but more importantly, what should we do? Many people want to regroup around the Sanders campaign, which also railed against free trade and high finance, but from the left. According to many commentators, Sanders could have won the rust-belt voters in the Midwest who went to Trump seeking answers.

Manufacturing jobs are disappearing in the US and Mexico

The source of the popularity for both the Trump and the Sanders campaigns is not difficult to understand. Many Americans have been suffering for decades. But their suffering is not the result of NAFTA. Although the share of all US workers employed in manufacturing has fallen since NAFTA went into effect — from 15 percent in 1994 to less than 10 percent today — Mexico has deindustrialized at the same time: its manufacturing employment share fell from 20 percent to 15 percent. US jobs haven’t simply gone to Mexico.

In fact, most countries in the world are deindustrializing. As a share of total employment, manufacturing jobs have declined in the UK, France, Germany, and Japan too. Some of these countries ran trade deficits, like the US; others ran trade surpluses. Trade balances do affect the degree of deindustrialization in each country (and our deficit is by far the largest), but they do not explain the overall trend. Nor is deindustrialization just a disease of rich countries. The share of the total workforce in manufacturing jobs also fell in Brazil, South Africa, and South Korea. The Philippines and Peru are deindustrializing in spite of never having substantially industrialized in the first place.

So, did all the jobs move to China? Not quite. The truth is that between 1995 and 2000 China also deindustrialized, losing more than 10 million manufacturing jobs in the process: jobs disappeared in the old industrial heartland in Manchuria faster than they appeared in the Pearl River Delta area (much as, in the US, manufacturing jobs disappeared in the Midwest faster than they appeared in Southern right-to-work states).

It was only in 2003, as the US housing bubble took on air and US imports of Chinese goods soared, that total Chinese manufacturing employment began to expand rapidly. But by 2008, the US bubble feeding Chinese growth had popped. The world to which China was selling went into a deep recession, followed by a weak recovery. It will probably be a few more years before we see the consequences in China’s employment statistics, but the outlook is not good.

It’s not due to robotics

What explains these trends? Alarmist economists invoke the rise of the robots, but the jobs crisis that is supposed to result from computerization arrived decades ago. In the US, the manufacturing share of employment has been declining since the late 1960s. In Mexico, a 1982 debt crisis was followed by decades of deindustrialization.

The International Labor Organization estimates that today, only one-quarter of the world’s workers have regular jobs. More than one-half of the world’s workers languish in informal employment. This isn’t some future scenario. It has already happened.

The problem isn’t a coming age of technological automation but rather the present age of worsening economic stagnation. Since the 1960s, global economic growth rates have declined over each business cycle. According to the WTO, global GDP growth rates peaked at an average of 5.5 percent per year, 1960-69. Growth rates then fell over subsequent business cycles: to 4.3 percent in 1970-79, 3.2 percent in 1980-90, and 2.3 percent in 1991-2000.

Growth rates then picked up between 2001 and 2007 — linked the post-9/11 bubble in the US housing market — rising back to an average growth rate of 3.0 percent per year. This uptick was associated with a temporary diminution of the problems laid out above, but the years following the crisis saw a return to trend. In 2008-2014, growth rates bottomed at 1.6 percent per year, the lowest business cycle average since 1950.

This economic stagnation has fed deindustrialization. Technology has not replaced many workers. However, it has made them more productive — augmenting rather than automating production. The problem is that, when output is growing slowly, even moderate gains in efficiency will cause jobs to disappear. More goods are produced but with fewer workers.

Globalization is over

The truth is that in the past, global growth was manufacturing-led, with massive investments in plant and equipment driving demand and creating jobs. When labor markets tightened at the height of economic booms, all workers benefited, whether in industry or not. That’s what “made America great” for large portions of the working class in the 50s and 60s.

That era is over. Markets for manufactures are glutted. As Robert Brenner has shown, more and more countries have built up manufacturing capacity that duplicates rather than complements existing capacity. They had no other choice if they wanted to develop economically. As a result, it has become difficult for any one country to expand its manufacturing output quickly unless it does so at the expense of other countries’ growth rates.

In this environment, beggar-thy-neighbor economics is now the only game in town. It has worked well for China and the Western firms investing there. Not so long ago, it was South Korea and Taiwan that played the game. Before them, it was Germany and Japan. Between 1985 and 1995, even the US was a beneficiary. As with these other countries, China’s good fortunes are unlikely to last long.

What Do We Have to Offer?

Investment levels are declining as opportunities for expansion dry up. Huge numbers of people lack steady work, even as huge pools of capital churn in financial markets. The right-wing has its story to sell: “In the past, things were great for many Americans, particularly white Americans. If jobs are disappearing, then the old seniority rules should apply — last in, first out. Close the borders to goods and people. Make Chinese and Mexican workers suffer, not us.”

The right will always be better at selling this story than the left. Appeals to nationalism tend to trump appeals to internationalism. What do we have to offer instead? What story can we tell that doesn’t play by the beggar-thy-neighbor book? Here’s what I would offer.

Trump is lying to us. No matter what he says or does in the next four years, those jobs aren’t coming back. But they don’t need to come back. The problem we face today is not a scarcity of jobs. It’s a surfeit of goods. We suffer from overproduction.

Since 1973, US economic output per person has doubled. The average worker is substantially more productive today than in the past because American workers deploy vast amounts of knowledge and technology. If the gains of growth over the past four decades had been distributed evenly, everyone’s incomes would have doubled. In fact, production and non-supervisory workers saw their wages stagnate while the top 10 percent (and even more so the top one percent) saw their incomes rise substantially. Why did that happen?

We believed that jobs were scarce, and they profited.

We don’t need more jobs — we need to work less.

This country is rich. Average gross income for a family of four is $200,000, although most of us see only a fraction of that. There is so much competition for jobs today because less and less work is required to produce this income. There’s so much money sloshing around in financial markets because the rich are running out of ways to get solid returns.

The future we wanted, the future that our parents and grandparents sacrificed to build, is already here. Yet people in urban areas are still scrambling for 60-hours-a-week jobs while those in rural areas languish in under-employment. What’s the solution?

First, a lot of us need to work less, so we have more time to spend with the people we love — not just the twilight hours when we’re burnt out after working long days. Second, we need to share the work that remains, so each individual can contribute to the common benefit of all. Universal basic income is an interesting idea, but we also want to share in the dignity that comes from playing an active role in making the world we inhabit.

When we work less, many activities can devolve to communities. Cooking, cleaning, and taking care of children and elderly parents — these shouldn’t be the responsibilities of overworked American women, both on the job and off. Caring for ourselves and others is so much of what it means to be human. We should all do our share.

Once we’re no longer running this economic rat-race, maybe Americans will finally be able to respect each other. We can focus on the real challenges that face humanity, challenges that can only be solved when we are not fighting amongst ourselves. We can solve the climate crisis, help raise global living standards, and explore the stars.

The path forward to a work-less future

Of course, none of this is going to happen without a major shift in politics. How could we possibly make this shift, given the current political climate? In some ways, our situation is not as bad as it seems. Post-election think pieces are mostly spinning yarn.

First, it’s not true that huge numbers of people voted for Trump; it’s that, in the Midwest, they didn’t vote for Clinton, which skews relative voting shares. Second, many white workers stopped voting Democrat in the 1970s — how is this news in 2016? Third, for decades now, no Washington insider has won a presidential election save George HW Bush: every other winning candidate, since Carter, has run as a Washington outsider who promises and then fails to deliver change.

It’s worth remembering, too, that the average voter is not the average American. Poorer Americans vote less often than richer Americans. That’s due to voter suppression, to be sure, but not exclusively. Across the West, countries with higher levels of inequality, like the US, generally see lower turnout than countries with lower levels, like Sweden. In the former countries, poor voters feel they have nothing to gain from voting.

In the coming years, we will find our constituents among the 74 percent of the voting-age population who did not vote for Trump, as well as among those who did. Right now, the bigots are emboldened. Attacks on Muslims and LGBTQ people are rising. To fight this hate, we must have a vision. We have to win the future, or we will lose.

Aaron Benanav is Harper-Schmidt Fellow and Collegiate Assistant Professor in the Social Sciences at the University of Chicago. He is the author of the forthcoming A Global History of Unemployment, 1949-2010. His writing has appeared in New Left ReviewSouth Atlantic Quarterly, and Viewpoint