A false distinction

Donald Trump's bizarre inaugural address prompted widespread condemnation in the liberal press, in the United States and around the world.  This editorial in the New York Times is typical,  arguing that the condition of America is nowhere near as dire as Trump portrayed it.  It's mostly indisputable, unless you're prepared to resort to "alternative facts", but some of the statements on the economy bear a closer look.  Here's a key section:

"Mr. Trump portrayed the nation’s closed factories as having needlessly hemorrhaged jobs to overseas companies. But even as production jobs fell by about five million since 1987, the country’s manufacturing output has increased by more than 86 percent, according to the Bureau of Labor Statistics. Trade is part of the complicated story, but so is automation."

No doubt that's true, but is it really possible to separate the two?  Is it possible to imagine that the massive wave of automation that swept over the US manufacturing sector in recent decades, and 
swept away so many jobs, would have taken place without the intensification of foreign competition, first from Japan, and then later from China and other newly-industrializing countries?  Is it even necessary to try to make the distinction?  International competition and free trade are supposed to compel domestic manufacturers to raise their game, and that will almost inevitably involve job losses in certain sectors.  In fact, unless that happens, the benefits of free trade that flow from the principle of comparative advantage (see previous post) cannot be realized.

This is not to dispute the virtues of free trade, or to question the numbers offered by the NYT, including that 86 percent rise in manufacturing output, or the steady and impressive decline in joblessness in the decade since the financial crisis began.  America is indeed better-off than it was in 1987, or in 2007. However, if you're a newly-unemployed worker, it doesn't make much of a difference to you whether your old job is now being done by a Mexican or by a robot -- or, more likely, by a Mexican operating a robot.  

As I've tried to express here a number of times before, even if the benefits from free trade are beyond dispute, the distribution of those benefits must still be seen to be fair, if popular support for open markets is to be maintained.  Donald Trump has managed to convince an awful lot of Americans that the distribution of the benefits has been unfair, and that's a large part of what got him into the White House.  The chances that he can really reverse what has happened are close to zero, and if he does, he may well do more harm than good, but that's what his supporters are looking for.

Whenever I write about free trade, I think of a woman who sometimes cuts my hair in our neighbouring city of St Catharines.  A couple of decades ago, she worked in a canning factory that processed local fruit into juices and preserves.  She had a union wage and good benefits.  Along came the NAFTA deal; she had to retrain as a hairdresser at her own expense, and now works for something close to minimum wage.

She's one among very many.  There were forty canneries in this area not that long ago.  Now there are none -- and it's not because we can't grow fruit in the balmy Niagara region any more.