The scope of the vision of America
presented by President-elect Trump yesterday is breathtaking. In both social
and industrial policy he is changing direction and challenging the consensus
fashioned and maintained by business, financial, academic and political
elites. He is rewriting the social contract binding Americans, and
challenging trade and industrial policy orthodoxy head-on.
Charles Krauthammer of Fox News now gets
it about Trump, after over a year of dismissing him as unserious. Kudos to the
good doctor for discovering that facts invalidated his conceptual framework and
then fundamentally re-thinking how he understands Trump and the political
phenomenon he has created, or taken advantage of. Yesterday on Special
Report, he explained Trump's new social contract concisely:
“These conservatives have to accept the
fact that you have to sacrifice economic efficiency accept for equity. If you
don’t you’re going to lose the country. And in the end it’s worth it to create
social peace. That’s what the model is here.”
But what is emerging as the Trump
industrial policy may find a way to minimize or even eliminate
the economic cost of this new deal (sooner or later, Trump will come up with
his own catch-phrase, because FDR already appropriated “new deal”). He
has announced that, reigning globalist economic theory to the contrary
notwithstanding, the United States must maintain a manufacturing sector. The
shift of manufacturing to low wage countries is not a law of nature, not an
inevitability, and not a path that America will take in the future. We cannot
abandon the regions of our country that have devoted themselves to
manufacturing. He has not mentioned the national security dimension of
such a policy, but it is obvious to all but a few theorists that you cannot
maintain a strong nation if you depend on others to do your manufacturing.
While the Rust Belt is the heart of this
phenomenon, in fact manufacturing has been devastated nationwide. California
used to be a major manufacturer of automobiles with multiple assembly plants in
Northern and Southern California, but all that’s left now is heavily subsidized
Tesla, occupying a small portion of the former General Motors Assembly Plant in
Fremont, California that once employed over 5000 highly paid workers who needed
only a high school diploma or GED to support a middle class life. That
lifestyle has all but vanished all over America, not just in the Rust Belt.
The combination of information technology,
robotics, new materials, and many other advances (including management advances
such as lean manufacturing and continuous improvement organizational
disciplines) has squeezed low value labor out of manufacturing. Global
companies that locate within their most important market are able to create
serious competitive advantages over companies assembling products in low wage
companies through flexibility and rapid response time.
There are many factors that affect the
attractiveness of such strategies to companies. Too many to enumerate here
completely. But two near the top of the list are already changing thanks to
policy changes President-elect Trump has announced.
The cost of capital
Depending on the cost of capital,
investment decisions change. There is well over a trillion dollars in
corporate wealth sequestered from the American economy by our
highest-in-the-world corporate profits tax that will be enthusiastically
repatriated under the new tax regime being promised.
Regulatory obstacles
Starting with environmental impact
statements that delay projects – a serious negative factor, aside from the cost
of the consultants and executive manpower consumed – American environmental
regulations are serious obstacles.
But there are many other regulatory burdens
that are expensive and unnecessary. Trump has promised sweeping reform, and
yesterday emphasize how he had learned from executives at Carrier that
regulations were even more expensive than the wage differential, in costing out
the option of the Monterrey factory versus investing in next-gen manufacturing
in the USA.
Read more: http://www.americanthinker.com/articles/2016/12/trump_offering_a_new_social_contract__and_industrial_policy.html#ixzz4RhYtmmsF
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http://www.americanthinker.com/articles/2016/12/trump_offering_a_new_social_contract__and_industrial_policy.html
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