Donald Trump and the Big Con (Part 1)

As depicted in the 1973 movie The Sting, the big con is successful if the mark, or target, doesn’t realize he’s been taken until well after the con is completed and the con men are long gone.  In the movie, Doyle Lonnegan (Robert Shaw) “escaped” from the betting saloon oblivious to the fact that the saloon was a facade, and that the pair he just saw “killed” had gotten up, wiped off the fake blood, and divvied up the loot.  Lonnegan was out $500,000, but didn’t know who to blame.

American voters willingly, energetically, have thrown their hopes and trust to a man who offers grand promises of jobs and prosperity, to be delivered by someone who supposedly has unparalleled business acumen and deal-making abilities.  According to Mr. Trump, he will be “the greatest jobs president that God ever created.”  He will “bring back our jobs from China, from Mexico, from Japan, from so many places.”

Slowly but surely over the following 4 years, America will realize that it has been conned.  By the time reality sets in, however, Americans won’t be able to do much about it.

Results of the American election were split in so many ways –race, sex, age group, education level, urban vs. rural, income level. There’s one major theme that seems to have decided the race, however: older, mostly white voters enthusiastically responded to Trump’s message that he was going to bring back the jobs that had migrated to other countries – well-paying manufacturing jobs that had left the rust belt and middle-America years ago.  Well, I have news for those voters; high paying jobs for unskilled/semiskilled labourers are not coming back.  Donald Trump lied to you.

Trump told the lie so often, and with so much conviction, that impressionable voters believed him.  Unfortunately, when it comes to industrial job growth and international trade, he doesn’t really know what he’s talking about – as with many other subjects, Trump’s simplistic message repeated at top volume substitutes for real knowledge and analysis.   He can’t turn back the clock to a time when the US dominated world manufacturing, and he can’t reverse global trends in manufacturing.  His jobs promise is much the same as other Trump boasts – it’s just a big con, based on some rather fundamental lies.

Lie #1: American manufacturing jobs will come back

Trump’s first lie is that American manufacturing has been gutted over the past several decades due to American jobs being shipped overseas.   The truth is that the manufacturing sector in the US has actually grown substantially, but this growth has been accompanied by sharply increased labour productivity.  Since 2000, US manufacturing output grew by approximately 40%.  Manufacturing employment, however, fell by 30%.   Since 1994 (the year NAFTA went into effect), labour productivity in the US manufacturing sector increased by over 200%.  Far fewer people are producing more things.

What do these statistics mean?  They mean that the job losses are mostly due to technology-enabled efficiency improvements rather than off-shoring of manufacturing jobs.  They also mean that unless Donald Trump wants to initiate a national program of Luddite machine-breaking, the jobs lost to automation and technology are not returning.   They no longer exist.

Convincing people that Trump can turn the clock back and recreate the labour market of 20-30 years ago is a major part of the con.

Lie #2:  Revised trade agreements and tariffs will fix things

Trump delivered a very simple message – that trade agreements such as NAFTA are “a disaster,” and that he will break or renegotiate them to create middle-class American jobs.   He threatens 45% tariffs on goods from China.  Voters lapped up the message that free trade kills American jobs, and he`s about as anti-free-trade as they come.

Here`s what more knowledgeable parties say:

The National Association of Manufacturers (NAM), which you would think has some expertise in matters of building the manufacturing industry, included as a key part of their agenda, “Competing to Win,” a clear statement advocating free trade.  The NAM stated, “open trade distinguishes a successful nation,” and “Manufacturers of all sizes can no longer rely on the U.S. market as the primary source of growth. To grow and thrive in today’s competitive global markets, manufacturers must increasingly reach new customers and seize new opportunities overseas.“  If manufacturing returns to the U.S. as a result of new tariff barriers, it will be a much smaller sector unable to compete in global markets.

Perhaps Mr. Trump should have stuck with golf courses.  Perhaps he should have spoken to people who have some knowledge of economics and trade.  Or, perhaps it’s just part of the con.

Lie #3:  It’s a simple matter

Trump’s transition plan states that American companies were incented to make things abroad, where “environmental and labor protections are minimal and wages are low.” To listen to Trump, one would believe that bringing high-paying manufacturing jobs back is, therefore, a very simple proposition of reversing trade agreements and instituting protectionist policies, so as to avoid direct competition with low wage countries with lax regulations.  It`s not that simple.  Consider Apple, and when Barack Obama once asked Steve Jobs about the possibility of making iPhones in the US rather than China. Jobs’ response was that “those jobs aren’t coming back.”  The view was that China offered not only a lower cost work force, but one that was highly skilled and eminently flexible.  Moreover, the infrastructure necessary to support a large manufacturing enterprise, up and down the supply chain, was already in place, highly subsidized by the Chinese government.  The conditions for success, therefore, were not easily replicated in the US.

Others have noted similar requirements for infrastructure and an educated, skilled work force.  The NAM, for instance, notes that manufacturers need competitive infrastructure to thrive in today’s global economy, and laments a “widening skills gap” and “a severe shortage of manufacturing skills.”  Many economists and industry experts have also described the need for high-skill talent, and agree that governments have a key role to play in developing a nation’s talent and infrastructure.

Has Donald Trump committed to improving the skill base of America as part of rebuilding the manufacturing sector?  No.  What little he has said about education hints at an abandonment of federal involvement in favour of the states.    His proposals, according to the president of the American Federation of Teachers, would mean the “decimation of public education.”

Has Donald Trump committed to infrastructure spending?  Yes and no.  He says he is going to rebuild the country’s infrastructure, but this is a gargantuan, hugely expensive (more than $3 trillion) task and his fiscal plans leave no money to pay for it.  He has made some pronouncements about private sector involvement, but it’s all very vague.  And, spending driven by the private sector would certainly not be targeted at depressed areas most in need of investment.

If bringing high-paying manufacturing employment back to middle-America was a simple proposition, it would have been done years ago.

Donald Trump was a somewhat successful developer of residential properties and golf resorts.  His real genius, however, has always been in shameless self-promotion.  He has now convinced people that he is an expert in global economics and trade and can resurrect US manufacturing, despite proposals and pronouncements that betray a complete lack of understanding of the sector.  His ability to deliver on his jobs promise depends on reversing policies he’s already announced as key components of his platform, investing in capabilities he can’t afford, and increasing federal government involvement in areas he wants nothing to do with.  He either knows his jobs promise is impossible to fulfill, or he is making the promise based on a reckless assumption that it will work.  Either way, it’s all part of a big con.

The American people will realize they’ve been conned too late to do anything about it (they’re stuck with The Donald for 4 years).  However, unlike Doyle Lonnegan they will know who conned them, and they will know where he lives.  They can voice their displeasure at will.