An Urban's Rural View

The Rise of Economic Nationalism

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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Remember when the only fault line that mattered in American politics was liberal versus conservative? Now there's a strong rival for that honor in the divide between economic nationalists and free marketeers. Nowhere was this more evident than in the reaction to President-elect Donald Trump's jawboning to keep a Carrier plant in Indiana.

Liberals of an economic-nationalist bent applauded Trump's intervention; other liberals condemned it. The move drove an especially sharp wedge between different kinds of conservatives, like columnists Peggy Noonan and George Will.

Noonan welcomed the Carrier incident, calling it "a very good thing." The headline on her Wall Street Journal column saluted "Trump's Carrier Coup" (http://tiny.cc/…).

Will, writing in the Washington Post, attacked the president-elect's move as an embrace of "unconstrained executive power," indistinguishable from the "executive swagger" Will finds so deplorable in President Barack Obama (http://tiny.cc/…).

Where Noonan sees smart politics, Will sees deplorable economics. Here's Noonan: "This is called economic nationalism but whatever its name it suggests a Republicanism in new accord with the needs of the moment, and a conservatism that sees a shrinking manufacturing landscape and, rather than quoting Adam Smith and wringing invisible hands says, 'Hey, I know -- let's start conserving something!'"

Here's Will: "Although the president-elect has yet to dip a toe into the swamp, he practices the calculus by which Washington reasons, the political asymmetry between dispersed costs and concentrated benefits. The damages from government interventions are cumulatively large but, individually, are largely invisible. The beneficiaries are few but identifiable, and their gratitude is telegenic."

Judging by the polls, Americans are with Noonan on this by a 60-40 margin (http://tiny.cc/…). Many farmers are with her, too -- or at least that's what I overheard in the hallway conversations at the DTN/The Progressive Farmer Ag Summit. One said he'd swallow hard and accept lower prices for his crops if it furthered bringing back manufacturing jobs.

It may be too early to call this a political realignment, but the reaction to the intervention brings together Milton Friedman Republicans with centrist Democrats and pits them against supporters of Bernie Sanders and Donald Trump.

Noonan noted approvingly that the New York Times "semi-complimented" Trump on the intervention, calling him a different kind of Republican. Will grumbled that Republicans now share "one of progressivism's defining aspirations—government industrial policy," in which the "political classes" rather than the market decides how capital gets allocated, which Will calls "the essence of socialism."

Government industrial policy has long been a fact of life in agriculture, for good reason -- food is among the population's most basic needs. Yet however much they've benefited from farm programs, farmers have often voted in favor of free markets and free trade.

As practical businesspeople, farmers may ask a question that's unrelated to the Noonan-Will debate over political philosophy. Will intervening a la Trump actually work? Will it really save American manufacturing jobs?

A columnist who writes about economics rather than politics, the Wall Street Journal's Greg Ip, thinks not. Under the apt headline, "When Presidents Defy Economic Gravity, Gravity Usually Wins," he cites example after example of how presidents in the past have tried and failed to save jobs with Trump-like interventions (http://tiny.cc/…).

Businesses found ways around them. They had to. "Any company pressured into keeping a high-cost plant open will have to choose between subpar profits to match the price of cheaper imports, or losing market share," Ip says.

If companies go along with the intervention, as Carrier did, it is, Ip says, because taxpayers subsidized the saved jobs or because there was a quid pro quo, like the promise of government contracts—or both. Ip considers a Carrier-style intervention a step down a slippery slope to crony capitalism. Though he favors free trade, he'd prefer tariffs to be raised across the board to presidential jawboning. Raising tariffs, he says, "would hurt consumers and could start a trade war, but at least they'd be transparent."

More than liberal versus conservative, the new divide may be between those who care about whether something plays well politically and those who care about whether it makes economic sense.

Urban Lehner can be reached at urbanity@hotmail.com

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Urban Lehner
12/16/2016 | 4:54 PM CST
Those are great points. The figure I keep seeing is that automation accounts for about 80% of the manufacturing jobs the U.S. has lost. Globalization has more political salience but it's responsible for 20% of the lost jobs. I've not done independent research to confirm those statistics but at some point I'd like to. Throughout history technology has killed many jobs but created more new ones. Will robotics track the historical pattern? And even if it does, how does society deal with the short-term dislocations of people who lose jobs and may not be so easily re-slotted into the new ones?
wgf@walnutgrovefarms.com
12/15/2016 | 11:11 AM CST
As always thought provoking. And enough questions to fill a years's blogs. Are economic theories written in stone or clay The Carrier issue is only the tip of the iceberg. Automation has cost more manufacturing jobs than free trade. We have a possible Secretary of Labor that includes robots as his constintuancy. ( wants to automate fast food) soon we will no longer need taxis, truck drivers, tractor drivers, lawyers. bankers,journalists, and etc. None of us are immune. The smug sit back and say how terrible that factory workers are losing their jobs They will soon be us. Is labor no longer a resource but a liability? Is Adam Smith relevant? Huge changes coming and leaders have their heads in the sand about small issues Hope to see your thoughts on our new society