Tuesday, June 28, 2016


Brexit and the US

Americans were shocked that Donald Trump won the Republican nomination. UK residents were shocked that the UK will be leaving the European Union.

But... why were these things shocking? They were the result of open and fair elections.

They were shocking to elites who discounted the way that globalization has alienated significant parts of the population in two places. Specifically, two aspects of globalization: free trade and immigration (which really is free trade in labor).  Both serve to depress the price of labor for manufacturing and some other types of work, typically the kind of work that was traditionally done by unionized workers.

Now the people who did that type of work are unemployed or underemployed, and often stranded in areas with little opportunity. Globalization is a boon to places focused on technology, trade, education, and financial services, such as New York, Los Angeles, Minneapolis, London, and Edinburgh.  It is not so great for places like Detroit, Cleveland, and West Virginia-- at least for the hourly workers in those areas.

So now it is shocking that those same people are susceptible to the (true) claim that free trade and immigration have hindered their personal success? It shouldn't be. But both parties need to do a much better job of addressing this issue rather than dismissing it.

I left Romania in 1989 and every year since then I went back to visit my family. And every year I got to see it fumble, living up Lenin’s old cliché of one step forward, two steps back. After Romania joined the European Union institutional improvement started to happen at a much faster pace. The fluidity of movement, employment and opportunity offered by the Schengen area was palpable. My comments about a new home or a renovated façade would often be explained with “they went to work in Spain or Italy or Germany” …It may not be mutual for all Europeans, but those people eager to earn a better living, ready to learn a new language and make a difference in their lives are now free to do so. Last year I visited around harvest time and have come across charter bus companies taking seasonal workers to Western Europe. I’m not sure that would have been the case with say…unemployed people in Wales organizing charter buses to make some extra money picking crops in Spain. Just as I have yet to see idle hands in California snatching up all those back-breaking jobs they want to throw Mexicans out for. Globalization has many complex angles but an important one should be that angle which points back to ourselves and how much we are willing to adapt or demand change.
I agree that people have to adapt. Government and industry must be responsive, but at the end of the day, no matter what the LEAVE people promise, the immigration problem is not going away for the U.K., nor are high paying manufacturing jobs returning. The auto industry and steel industry are deader in the U.K. than they are in the U.S. Rust Belt.

Some cities in this country, like Pittsburgh, had strong political and business leaders that worked together to change the culture and create new paradigms. Others, like Detroit, did not.

Here's my fear... you know what stimulates economy, "defense spending" and military expansionism. As ties between Western nations weaken, this may become an attractive.. and dangerous option. One that countries in the rest of the world often choose
IPLG: don't forget road building. Military spending and infrastructure represent the most effective stimuli. We've already got an autobahn (but we could certainly expand and repair and improve roads and bridges and airports and perhaps even build a railroad that ran on time)--and just think of all the grand buildings we could construct under a Trump administration. Don't be dumb. Be a smarty. Come and join our fabulous new party.

NOTE: as obviously sarcastic and silly as the above paragraph is intended to be--it is also half serious and mostly true (and also offered in a 100-percent friendly tone).

BTW: Mark, I think you are on to something. This is part of a conversation about the 1-percent versus the rest of us. What are the real cost of trans-nationalism and free trade? I am not ready to offer answers. But, unlike I was during my twenties, supremely confident in my free trade ideology, I am now very much ready to listen to this conversation.
Oh absolutely infrastructure. Trouble is, that doesn't stir nationalistic pride... and justify tax increases.
Defense spending is at the bottom the list of projects that give a return that stimulates the economy. It is tax dollars spent on products that are usually not used and at a high cost per job. There are many programs that are beneficial, create jobs and tax revenue. Unfortunately they are not as profitable for the friends and supporters of our politicians.
Military spending, when it ends leaves nothing but despair in the communities who have become dependent on it.

Hi John. Intriguing. Please share the data behind your assertion that military spending does not stimulate the economy, as it runs counter to the conventional wisdom that WWII spending (not the New Deal) finally broke the Great Depression, that Cold War spending including R&D helped to fuel the post-war "economic miracle," and that Reagan's military buildup contributed to a return to prosperity during the 1980s.

I have heard the point you make here before, of course, but I would like to run down the source and examine it for myself.
Side note on infrastructure…it took a Vice President’s visit to notice La Guardia airport looks like a dismal place in India. He actually didn’t use India as a reference…I did. That is because I think it fits so well, the only difference being that the crumbling infrastructure in India dates back to the British Raj and the crumbling infrastructure here dates back to those distant times when public works was America’s main investment, not the war machine of the past two decades…and counting.
Just to make clear, I think infrastructure spending is good, although the opportunities for graft are rampant. The Big Dig in Boston, for instance.

The problem is that nationalistic demaguogues like to spend money on defense spending (war machines). They can inflame passions and justify tax increases. This turn to Nationalism scares me because I fear that's next.
Marta--interesting about La Guardia and Biden's (?) visit. I can report that even India is doing better building some of its infrastructure, at least in Bombay/Mumbai. I was there last summer for the first time after leaving in 2006 (I'd worked there for three years), and they'd built a new international terminal that rivals any in the world. It's one of the most beautiful things I've ever seen.

The U.S. needs infrastructure repairs badly, i.e. bridges and highways and many schools . . .


I think your observations on Globalization are both accurate and incomplete. I'm not qualified to discuss the topic well, but the theory is that a rising tide lifts all boats.

That hasn't happened, but it doesn't follow that we would be better off taking a protectionistic approach, or starting a trade war.

Most mainstream progressive politicans support free trade. It is up to them to deliver on the promises of free trade, and it is up to us to hold them accountable to doing so.

But the protectionist ideas of Donald Trump and others are deeply misguided, and will likely harm the very people he says he intends to help.

In much the same way that capitalism generally works, but its excesses must be trimmed, especially the terrible excess of unregulated 19th and 20th century capitalism, so too must policies be put in place that are designed to more equally distribute the benefits of free trade. In the most general sense, a more progressive tax combined with policies that benefit those left out can do this; things like student loan forgiveness, lower student loan interest rates, and greater access to training in high-skill blue collar jobs and the like.

Again, I'm not expert. But in general, I am convinced that the solution is to make free trade work for everyone, not to do away with free trade.
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