Revolution

In the 1950’s the US produced 60% of the worlds consumer goods. These were things like appliances, electronics, clothes and cars. A lot of innovation led by research and development gave rise to the industrial base that produced these goods. This meant good paying factory jobs where wages went up each year a little more than inflation and the American dream became a reality. Beginning in the 1970’s and accelerating in the 1980’s and later, foreign markets began to compete with the US, most notably China especially after China entered the World Trade Organization in 2000. Take the case of widgets. The US was making most of the widgets but China first off, stole the technology (intellectual property) and then used cheap labor including child labor and sometimes slave labor to lower cost. They had no worker protections regs or environmental regs and used cheap coal energy which polluted their cities. The government provided cash incentives and also manipulated the currency to help lower cost. The widgets produced in the US cost $1,200 but those imported from China cost only $1,000. The free market being what it is, caused the US consumers to buy widgets from China. US companies quickly saw the price difference and begin to ship production to China to take advantage of the lower cost. In time the US widget industry was replaced by imports. Enter Trump. His goal was to bring back manufacturing jobs. Recall that in October of 2012 Obama said, “manufacturing jobs aren’t coming back, no matter who’s president”. Trumps plan is to place tariffs on widgets, so that they will cost more, which means the US consumer will pay more but if the tariff is 30% then the Chinese widgets will cost $1,300, which is more than the US made widgets. As the US builds new facilities with the latest technology, aided by AI, the cost of widgets will be less than China’s and the US consumer will once again buy American. During the time of transfer there will be disruptions and markets will jump around while things adjust but long term the industrial base will expand and once again American companies will be making American widgets, for American consumers and the good jobs will be back. The establishment will fight this since companies have been making profits at the expense of the working people. If Trump is unable to make this change, then things will reverse back to the old ways of globalization and the working people will once again go back to low paying jobs. This is revolutionary but is not likely to succeed because too many forces are against this change. Globalization has put profits into companies and the workers suffered. It is the old story. The rich got richer and the poor got poorer.