In the wake of Brexit and Donald Trump’s place at the top of the GOP ticket, along with the continuing threat of far-right parties across the rich world, the internet these days abounds with explanations of this phenomenon. Last week’s post here reflected on this. But I will add one more that is relatively US-focused, as I have not seen these particular ideas fleshed out yet. Motivating this are two charts that have been making rounds through various blogs in the past few months. The first, originally published in the Washington Post from Branko Milanovic’s data, shows that, relatively speaking, the working class in rich countries have seen far fewer income gains between 1988 and 2008 (keep in mind that this series ends before the Great Recession). The world’s wealthiest people and the emerging global middle class saw tremendous gains in their income during this time. Even the world’s poorest workers did well, with hundreds of millions of people leaving absolute poverty. I should note that the Post is quick to associate the entire pattern with globalization, and, while that may be true for some groups (like the global middle class), I think there’s more going on for the so-called “losers” in this chart. There has been a complex interaction of offshoring, automation, and public policies that have consistently disadvantaged workers over the past several decades. Let’s look further. Using data from the Economic Innovation Group, we can see the number of business establishments added in counties by population level during the past 3 economic recoveries, demonstrating a clear trend. The major headline here is that in the latest recovery, small counties actually lost businesses, where in the recovery of 1992-1996, they added relatively more businesses than larger counties. Digging a little deeper reveals that only 20 counties in the US added half of the new establishments from 2010 to 2014. And thus a picture begins to emerge, especially when paired with what we know about social indicators from rural America. These economies are simply not what they once were. A combination of automation, outsourcing, and lack of investment in infrastructure and education have left them with little to offer and few opportunities for their citizens. Wage growth has been poor, even in the face of rising costs of healthcare and education (and, in some areas, housing). In the 1950s, an unskilled worker earning a typical salary could generally afford a house (though keep in mind that mortgages were typically just given to white borrowers then). Years of anti-union propaganda have poisoned efforts to organize workers and left them struggling as industries that have remained in some areas, such as coal, begin to die.
One can, of course, argue that support for figures like Trump is not entirely founded on economic angst; after all, likely Trump voters have higher average incomes than likely Clinton voters. However, in recent polling, Trump leads Clinton among whites without a college degree by a margin of 30 to 58%. This is the group that has not only (and deservedly) lost some of the privilege they once had, but they have been buffeted by economic forces for which they are inadequately prepared. Call me a materialist, but perhaps they would be coping with the loss of privilege in society better if they were not anyway facing terrible economic prospects. Unfortunately for them, the economic policies that Donald Trump advocates, such as massive (I mean, massive) tax cuts for the wealthy paired with huge spending cuts, dismantling environmental regulations, and throwing up trade barriers, would do little to improve this outlook. Jobs that have moved overseas tend to be low-paying and low-quality jobs in industries such as textiles; few workers could earn a decent living doing that even if they did come back. And this assumes that the returning jobs would be as labor-intensive as before, which is unlikely. US manufacturing output is at an all-time high, meaning that firms just need fewer workers than before to make more things. Instead, changes in government policies can help, though it will take time and massive action to improve a situation that has been worsening for years. Government can promote investment in infrastructure, which is clearly needed, along with renewable energy to help meet climate policy goals. It can get more serious about employment and job retraining program, which have largely been laughably inadequate so far. These are just three examples of initiatives that could start to make a difference. Until things like this are tried or technological changes begin to once again call for greater use of unskilled labor (which is unlikely), these more rural areas of the country will continue to have a bleak outlook, and the voters living in them will continue to look for answers. I should note, too, that all of this has real implications for climate and energy policy, as we’ve seen with the closing of the UK’s Department of Energy and Climate Change when Theresa May took office recently. The department is being folded in to the Department of Business, Energy, and Industrial Strategy. Democracies that contain large numbers of workers under economic strain will be hard-pressed to pursue aggressive and long-term climate commitments, which makes the stakes of these contemporary political battles even higher.
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AuthorEconomist. Professor. Environmentalist. Archives
July 2017
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