Commentary: Americans want to return to a place that no longer exists
11/07/2024 05:00
The US economy doesn't need the return to industrial-era policies Trump is planning.
Americans voted in the 2024 elections for a return to the past. But the past may not welcome the visit.
Donald Trump’s sweeping victory in the 2024 presidential election was a roaring endorsement of his “Make America Great Again” theme, which promises the restoration of grandeur from some storied point in the nation’s history. Trump never pinpoints the exact time when America was last great, but he doesn’t have to. Voters fill in the blanks by recalling the best times in their own personal pasts and imagining themselves there.
What Trump doesn’t do is account for everything that has changed since America’s glory days, whether they were in the 1950s or the 1980s or early 2000s. Service and information jobs, rather than blue-collar ones, now dominate the economy. The fossil fuels Trump so dearly loves have caused global warming that is beginning to raise the cost of insurance and home ownership across the nation. The world is becoming more dangerous in ways no American president can control. Consumers have gotten used to cheap goods, even if they come from problematic countries.
Trump’s promises to raise tariffs on imports, deport millions of immigrants, shun clean energy in favor of more oil and gas, and put billionaires in charge of government aren’t going to make America better. Trump, of course, will claim the opposite, despite any evidence to the contrary. But the old standards Trump wants to restore are gone forever.
Trump wants to rebuild US manufacturing, for instance, even though US manufacturing doesn’t need rebuilding. US industrial output is 63% greater than in 1990 and close to record highs. But manufacturing has declined as a portion of the overall economy as services have become a greater part. The manufacturing sector in 1947 accounted for 26% of GDP. Today it’s around 10%. Manufacturing employment has fallen as well, from a peak of 19.6 million workers in 1979 to about 12.9 million today.
This is the way economies evolve. Old industries slide down the value-added chain while new industries replace them at the top. The services sector has grown from 47.8% of GDP in 1947 to 72% today and includes some 137 million jobs in healthcare; hospitality; finance; real estate; transportation; professional services like insurance, law, and accounting; and many other types of businesses. Many jobs involve technology and the cutting-edge skills of developers, systems analysts, and people adept at deploying artificial intelligence. The growing part of the economy is where jobs tend to pay the most and workers with the right skills get furthest ahead.
Trump is focused on a declining part of the US economy that constitutes just 10% of GPD while ignoring most of the other 90%. To get what he wants — more manufacturing jobs — Trump will have to persuade investors to start or expand businesses employing manual laborers when the real money is in more efficient, highly automated factories that help business owners offset the generally higher costs of operating in the United States. Nobody wants to own or invest in a business that’s less efficient and more labor-intensive than it needs to be. It’s hard to see how Trump will coax anybody to invest in a 50-year-old business model.
By the same logic, Trump could go on a crusade to Make Farms Great Again by reinstating the hordes of field workers who have now been replaced by machines. The share of workers employed in agriculture has dropped from 90% in 1790 to less than 2% today. Yet farm output goes up and up because of productivity gains. It would sound absurd to hear a politician today say we need more farming jobs, simply because we used to have more. Yet that’s basically Trump’s argument on manufacturing.
The appeal of Trump’s MAGA pitch has a lot to do with education. Factory jobs once offered workers a decent living even if they had little education, and Trump wants people to think they can once again get ahead with a high school degree or less. But this assumes businesses will be willing to hire less-qualified workers and endure the lower productivity that comes with that. Not likely.
Tariffs, of course, are Trump’s main tool for boosting US manufacturing. By raising the cost of imports, tariffs are supposed to raise the return for building stuff in America, even if costs are higher and productivity is lower. Trump draws inspiration from William McKinley, an ultra-protectionist politician who became the 25th US president in 1896. McKinley later softened on tariffs, however, and became an advocate of greater trade, but maybe Trump never got to that part of the Wikipedia entry.
The tariff heyday of the 1890s was also the peak of the robber baron era, when rapid industrialization allowed a certain class of entrepreneurs to build generational fortunes with little burden from regulators or the tax man. That, too, could be a model for the second Trump administration.
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Trump vows to put billionaires such as Elon Musk in charge of reforming the federal bureaucracy and other government policies while keeping taxes low for the wealthy and maybe cutting business taxes even further than he did in 2017. If America was great back in the 1890s, however, many Americans didn’t get the memo. The unemployment rate hit 19% amid a deep recession, and the excesses of the Gilded Age ultimately led to the adoption of the dreaded income tax.
America had another moment of greatness in the 1950s, when the Eisenhower administration launched “Operation Wetback” — no kidding — to deport millions of immigrants out of concern they were taking jobs that would be better filled by Americans, including soldiers leaving the service. But that effort was largely viewed as a policy and PR flop that didn’t nab that many immigrants and left those who did get rounded up in horrific transport conditions some likened to slave ships.
Trump has cited this operation as a model for what he might do in a second term, but there’s a catch this time around — it’s not clear who would step into the jobs of suddenly deported migrants doing essential work. Farms and dairy operators could end up woefully short of workers, either pushing prices up or causing shortages. It's not as easy getting rid of workers — even undocumented ones — when there's no reserve labor force.
Voters elected Trump to a second term for a number of reasons, including simply acknowledging the plight of some Americans who are falling behind and don't see a way out. Going back won't solve their problems, however. The winners are the ones who can adapt to the future, and that's not something Trump is offering.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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