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The economic lessons of Donald Trump’s victory

In order for genuine good to come from Trump’s win, we must dig into the economic and social angst that led so many people to choose him as their champion


 
The shuttered BorgWarner factory in Muncie Indiana, U.S., August 13, 2016. The factory once employed thousands of people. Picture taken August 13, 2016. REUETRS/Chris Bergin

The shuttered BorgWarner factory in Muncie Indiana, U.S., August 13, 2016. The factory once employed thousands of people. Reuters/Chris Bergin

In the United States and around the world, millions of people are now asking “how could this happen?” How can we make sense of an America in which Donald Trump becomes the next president? Discovering the real answer to this question will be good for America—and for Canada, too.

Many people who are now angry and perplexed focus on Donald Trump, the man. They argue that he is the real problem America now faces—that he is not temperamentally capable of being president and that he cannot be trusted in the White House. Those skeptical of this view point out that Mr. Trump may surround himself with knowledgeable people and that the famous checks and balances in the U.S. system of government will prevent him from doing crazy things. Only time will tell.

Donald Trump is certainly unlike any American presidential candidate we have seen in a very long time. His policy ideas range from highly simplistic to completely illogical, and sometimes they are outright dangerous. But to focus on his rhetoric and his favoured policies is to miss the much bigger point. At the most basic level, Donald Trump won the election because his tone and message resonated powerfully with many millions of Americans. Understanding this resonance is the real task at hand.

Why did so many Americans choose as their next president someone with so little knowledge of key policy issues, someone so openly hostile to many different groups in society, someone so bombastic and narcissistic and crude? Answers to this question take us toward two alternative conclusions.

The first conclusion is easy—probably too easy. Mr. Trump won the election because he appealed to millions of Americans who admire him and what he stands for; some are outright sexists, maybe even misogynists. Others voted for Mr. Trump because he dislikes immigrants, and this appealed to racist and xenophobic voters. And Mr. Trump clearly doesn’t trust the Chinese and Mexicans to play fair in the arena of international trade, so American protectionists voted for him as well.

According to this argument, Mr. Trump will be the next U.S. president because he appealed to a whole constellation of voters with highly questionable views. He is a bad person and he only got to the White House because there are many similarly bad people among the electorate. It takes one to know one.

The problem with this view is that it misses far too much. All countries have some racists and sexists and xenophobes, and the United States is certainly no exception. But it is probably wrong to attribute his victory only to this. There is much more going on in America today, and it matters for understanding why Mr. Trump won the election.

The second conclusion is more complex, but probably offers a better overall explanation. Mr. Trump won the election because his tone and message indicated to millions of Americans that he was aware of their legitimate concerns about everyday economic life. Maybe his proposed policies were sensible, maybe they weren’t—these will be debated a lot over the next few years. But at least he appeared to be listening to their issues and to believe they were real.

Here are just three of these issues, each one about the serious economic challenges faced especially by America’s middle class.

Many Americans have seen their jobs disappear, local factories close, and their towns and cities lose their prosperity. At the same time, they know that China and other Asian economies have become large manufacturing centres over the past twenty years, and the United States is now habitually importing their products. In this situation, it’s pretty reasonable to wonder whether free trade, especially with lower-wage developing countries, really is such a great idea. Economists who argue that freer trade is good for the country as a whole miss the point that no individual sees or cares about the “macro” benefit to the nation; they live the very “micro” impacts occurring to them and their friends in their own neighbourhoods. And if there is a perceived connection between freer trade and their own job losses, why shouldn’t the president rip up a few trade agreements? These are legitimate questions, raised by people with genuine worries.

Americans in the middle of the income distribution are also increasingly finding their jobs destroyed through technological change and automation. As the labour market is “hollowed out” in this manner, only two options appear available to displaced workers. One is to pursue lower-wage jobs, resulting in greater job competition and thus even more wage declines. The other is to go back to school and retrain for higher-wage jobs, but this costs money and takes a lot of time. Neither option seems easy, but doing nothing is a losing proposition. Economists and politicians are usually quick to sing the praises of technological progress, and they are right to do so because the overall economic gains are real, and over the long run are enormous. But they also need to recognize the dark side of such progress, and politicians’ promises to offer better training programs may be seen as too little and too late. For those workers whose jobs have been displaced, these are very real problems that can’t be brushed aside.

Facing the everyday challenges of paying their monthly bills and sending kids to college, many Americans also wonder whether large inflows of immigrants are really that sensible. Don’t immigrants take jobs that would otherwise be ours, and also push down wages? Why are we so sure that immigrants create more jobs than they take themselves? And is it really true that new immigrants can gain access to social programs beyond the reach of most ordinary Americans? Economists and policymakers who argue that immigration is good for economic growth and provides much-needed labour in certain sectors of the economy may be correct. But they pay too little attention to the fact that the process of integrating immigrants into American society is often anything but smooth, and some of the rough edges cut ordinary people rather than the policymakers. Even worse, if some immigrants don’t share basic American values, or maybe even present a threat to security, doesn’t it make sense to slow things down while we make a careful assessment of the system? It is not racist to pose such questions; they stem from legitimate concerns of reasonable people.

The point is not that Donald Trump had good policy solutions to these problems; he didn’t. And my ardent hope is that many of his policy proposals never see the light of day.

The real point is that Mr. Trump appeared to hear these concerns and to believe that they matter. The contrast with his Democratic opponent couldn’t have been starker. By claiming that Mr. Trump’s policy solutions were simplistic or unworkable or ineffective or wrong-headed, Hillary Clinton stood the risk of appearing that she didn’t even recognize the legitimacy of the underlying economic concerns. She appeared tone-deaf to millions of Americans. This perception was only reinforced when she labelled as “deplorables” the collection of Mr. Trump’s supporters.

Many people across the political spectrum, in the United States and around the world, are now trying to figure out what happened, and why. This figuring will probably go on for a long time. The lazy ones will stop with the first set of answers, those based primarily on a racist and sexist U.S. electorate.

The genuine good that will follow from Mr. Trump’s victory will occur when the popular conversation and analysis advances to the second set of answers—when we dig into the underlying economic and social angst that led so many people to choose Mr. Trump as their champion. Only when we really understand those issues, including their magnitude and distribution across the population, will we be on a path toward real and effective solutions. Only then will we be able to respond in a sensible way with policies that can successfully address the concerns of the middle class without losing the overall benefits of globalization, technological change, and immigration.

And what is the relevance of all of this for Canada? No Canadian voter or politician should think that these problems are unique to the United States. The same economic angst that occurs across wide swaths of America exists in many parts of Canada, too, and for mostly the same reasons. We need to come to terms with this reality, and to make sure that our policies are well-designed, so that our economic prosperity can be broadly inclusive.

Only then will we avoid having our home-grown version of Donald Trump.

 

Christopher Ragan is an associate professor of economics at McGill University, a member of the federal finance minister’s advisory council on economic growth, and a research fellow at the C.D. Howe institute.

 


 

The economic lessons of Donald Trump’s victory

  1. Americans have been warned for years….there are no jobs for the uneducated.

    The latest studies show that Repubs don’t have college degrees and Demms do

    In this particular case, factories are shut down because Americans want cheap goods…so now they come from China. Cut off those imports, and hire Americans……and the price of everything will skyrocket.

  2. Because Americans (and Canadians) expect a higher living wage (thank you, Unions who fought so hard for us), the cost of manufacturing – from obtaining the raw materials, to delivery of same to factories, to making the whatevers, to delivery of same to stores, to employees selling those whatevers to consumers – has risen dramatically since the last time America was “great”. This means the cheap stuff from WalMart won’t be so cheap anymore, and THEN the complaining will start that things are just too danged expensive, and how can we possibly afford whatevers now?

    Food prices have risen to unbelievable levels just in 10 years. Will people stop growing lawns and start growing veggies? Probably not. Will people stop eating cows once/week to stop climate change? Probably not. We’re happy as long as things don’t impact our pocketbook and as long as we see IMMEDIATE change for the better to the changes we make in our lives.

    Instead of looking back on the ‘good old days’ and offering nothing but vague “It’ll be great, I guarantee it!” because srsly, his ‘guarantee’ means nothing, why not give us a road map for the future? Instead of ‘factory’ jobs churning out steel at three times the cost of overseas steel, turn the factory into creating solar and wind powered items, battery plants, etc, so that our dependence on fossil fuels lessens. We’ll always need petroleum products, but not to support our vehicles (or margarine). Instead, we can use other means to transport ourselves around.

    There are so many solutions out there to increase the workforce and our standard of living… but no one is willing to take the step because they’re afraid that they won’t be able to have that hamburger every.single.day anymore. It seems no one likes change… unless it’s the kind jangling in their pockets.

  3. Everybody has something to offer to society. But society has to learn how to harvest/value their skills. Currently we reward some of these skill sets through recognition ceremonies but it doesn’t put food on the table. Unfortunately society only values certain types of labour. Labour where someone can make a profit. And profit is measured in dollars. When governments play only to this measure of their GDP good decisions are not always made. I like the idea of increasing the minimum wage to a level where someone working full time can maintain a certain basic lifestyle. Covers a roof over their heads, food on the table, expenses necessary to earn a living (clothes and transportation) and something left over as a cushion for savings (for their kids education, for their retirement, etc.)

    • Minimum wage jobs are for students…part-time work

      You are not meant to make a career out of MacDonalds.

  4. So ten days after the shock I am finally starting to see op-eds trickle in saying ‘wait a minute, maybe it’s not all redneck racists that voted in Trump, there’s simply not enough of them to be the single cause’. Bravo. That this piece is written by an associate prof of economics at the prestigious McGill University has me seriously questioning the value of a university education. The ignorance and complete insularity enjoyed by reporters, media types, political analysts, political scientists and phd’s from the economic ‘sciences’ has been shown in all it’s incredible glory with this election of the latest American president. I suppose that many live in gated communities and prestigious condos and commute to their respective ivory towers to spend their days pondering the intricacies how many angels can dance on the head of a pin whilst the great unwashed toil away at God knows what.

    For me, what is more shocking than Trump being elected is just how absolutely clueless and out of touch the analysts were, how far removed from reality Hillary Clinton really is and how deep the disconnect is between media and what middle America has really become. I still am not really convinced that this was a simple matter of ignorance, I am becoming more convinced that Corporate America which basically owns all of mainstream media dictates that there shall be no admission of a trampled down middle class whatsoever. These are indeed disturbing times.

    • You had a great head of steam going until your final line

      Left-wingers blame ‘corporate America’ for everything

      Right-wingers blame government.

      Everybody wants the ‘good life’…nice comfy-wumfy middle class living……with no work. And no striving to get ahead. And no education. And no taxes.

      Americans….and a great many Canadians…..still believe in magic

    • “how deep the disconnect is between media and what middle America has really become. I still am not really convinced that this was a simple matter of ignorance”

      Follow the dotted line from Clinton campaign, to MSM, to Soros. Google is your friend. Disturbing times, indeed.

        • Soros did not donate millions to Clinton campaign? Soros did not “advise” Clinton – is not close Clinton associate? Soros does not have hefty financial ties to corporate media? MSM-connected journalists (CNN, NYT, MSNBC, WP, HP, etc) were not clearly exposed by Wikileaks as colluding with Clinton campaign in order to sway public opinion in Clinton’s favour?

          “Plot” implies secrecy. In the presence of publicly available facts (and assuming an absence of willful ignorance), ‘agenda’ becomes the suitable term here.

          • Soros has done nothing illegal

            He’s just wealthy, and that bugs you..

  5. Trump’s win and the sorry state of middle class and lower households in both Canada and the U.S. could not be more clearly explained. Mr. Ragan you have totally “got it”. Is there any hope for the lower 75 % of the income spectrum ?

  6. I wonder if Macleans Magazine could arrange an interview with Naomi Klein and Avi Lewis, authors of the Leap Manifesto, their Canadian response to climate change, in order to get their reaction to President-Elect Donald Trump’s unexpected election victory.
    I’m sure followers of Macleans in both print and electronic form would be interested in their views.

  7. Here’s a sobering thought for all Canadians concerned about the economic lessons of President-Elect Donald Trump’s victory: The de facto leader of the U.S. Democratic Party is now a 74 year-old communist curmudgeon by the name of Bernie Sanders.
    That’s even more frightening to contemplate than a Trump Presidency as we head into the future, is it not?
    Ominous dark political clouds are suddenly appearing on Justin Trudeau’s Canadian horizon from our southern neighbor, casting serious doubts on the future his sunny ways.

  8. I need to explain how I got here before I criticize this article..

    As a Canadian I was bombarded with Media relating to everything Anti-Trump for the better part of a year thru my browser news feeds. So I read the articles. Hit piece after hit piece after hit piece. Now understand something.. I don’t know much about Donald Trump, never watched his TV shows.. never really liked or disliked the man. I knew he was blunt, didn’t always choose his words properly and has that 70s non politically correct male bravado thing going for him. But.. whatever celebrities build an image they sell.

    Anyway.. Then you have Hillary Clinton, who I actually liked.. getting one helluva boat load of favorable press. Very similar to what we saw with Justin Trudeau. Hmm… Ok, So I read those articles to.

    Then I started reading the comments. Which lead me to many different alternative sites which started to suggest Hillary wasn’t all that, and Trump was just someone the media and establishment didn’t want in. I even checked out the youtube videos circulating around and all the Trey Gowdy stuff.. I came away with.. I don’t really like Clinton anymore and certainly don’t believe she was electable.. and actually while I still don’t like Trump I don’t see him as a fascist, a misogynist , or a racist.

    You say people ask the question “how did we get here” hmm.. Well, Look in the mirror. perhaps MacLean’s should do a new article stating why we are where we are at. A lot of this the media is to blame for. While I expect opinion pieces to have partisanship inserted in here and there.. I sort of demand that the majority of articles are not that way but written by journalists that are neutral or at the very least willing to try and appear that way.. and unfortunately there is still a slant to all this with the doom and gloom beginning and crocodile tears of a election that media got wrong…

    … A lot of people didn’t get it wrong though. Many of us were saying months and months and months ago he’d win… right up to election days and ignored every poll and every article saying otherwise.

  9. Oh and btw… the big losers in all this? The Media.. How did we go from marching in solidarity for slain journalists in France and really all the media who we believed deserved the special rights and privileges our society has given them as champions of information to being disenfranchised and distrustful in such a short amount of time? We see it in climate, economics, progressivism and yes politics. How did we get here? That’s a question the media is going to have to ask itself… and it should concern you all.

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