Howes: Sanders, Trump peddle tired economic half-truths
Bernie Sanders is half right.
In a state that knows a thing or two about making things and the global economy, the self-declared democratic socialist Thursday laid blame for a jobs reckoning on Republicans and “too many Democrats” who support trade deals that “are resulting in the disappearance of the American middle class.”
The Vermont senator is not blind. Nor are the legions backing Sanders and billionaire Donald Trump for the Republican nomination. Anxious for solutions, would-be voters hear both candidates flogging a simplistic narrative that, stripped to its essence, implicitly promises a return to the golden days when half the world was a closed market, the United States ruled the other half and all was good and just.
Good luck with that.
In the generation since President Clinton signed the North American Free Trade Agreement into law, the world and its economy have changed fundamentally. China and India, Russia and Eastern Europe, Vietnam and Latin America are members of the global economy. They’re open to foreign investment, and some of their companies are investing directly in the United States — often saving jobs that corporate America would happily eliminate.
That’s conveniently overlooked if you’re predicating a presidential run on economic victimization. Or if you don’t work for Nexteer Automotive in Saginaw, whose majority shares are owned by Chinese investors and traded on the Hong Kong Stock Exchange. Or if you weren’t working the mill at defunct Rouge Steel Co. in Dearborn when the Russians behind OAO Severstal saved the plant and related facilities from closure by prospective American owners.
Still, the anger and economic anxiety motivating support for Sanders and Trump is real, even if it focuses on just a portion of a complex reality. The nuanced rationales underpinning global trade — or the fact that freer trade does, by definition, pick winners and losers — are barely relevant if the only reality that matters is whether you still have a job in your own country.
For too long, and for way too many, that rationale disproportionately benefited those least directly affected by it. For every Nexteer- and Severstal-style foreign rescue, there are more deals running the other way and more rules apparently favoring foreign markets at the expense of U.S. players:
There’s the closure of American Axle & Manufacturing Holdings Inc.’s Detroit complex. Or the bolting of an Electrolux AB appliance plant from Greenville, Michigan, to Mexico in former Gov. Jennifer Granholm’s first term. Or Carrier Corp.’s recent decision to close its Indianapolis plant and move to Mexico.
There are the moves by each of Detroit’s hometown automakers to bolster their operations in Mexico, implicit recognition that one of their post-bankruptcy assumptions is flawed: namely, that the automakers and the United Auto Workers could profitably build small, low-margin vehicles in the United States.
There are rules governing investment in China that require such automakers as General Motors Co. and Ford Motor Co. to enlist Chinese joint-venture partners. Rules in places like Russia require foreign-brand vehicles assembled there to contain as much as 50 percent worth of Russian-made parts, hardly the kind of thing you see in the good ol’ USA.
Reversing those rules is more difficult than a would-be President Trump would have his supporters believe. In response to Ford’s plans to expand operations in Mexico, Trump says he would slap a 35 percent tariff on Mexican-built Fords coming back into the United States. How we would do that unilaterally is not clear — because he couldn’t, by himself.
Sanders is right when he says business backed trade deals like the NAFTA so they could pay employees less, particularly employees in other countries. Hello? Managing business is about managing cost, continually, be it purchasing and engineering, manufacturing and personnel. And any business that is not cost-competitive with its rivals is a business that is not built for the long term.
Nowhere has that lesson been more harshly learned than by Michigan, Detroit and its auto industry. Generations grounded in Detroit’s post-war success and affluence needed humbling bankruptcy, the loss of thousands of jobs and the closure of plants to understand that mediocre is not good enough, or that dismissing the competition can come with a steep price few would pay willingly.
Second, middling products and bad management can be as dangerous to middle-class jobs as any trade deal. Just ask the thousands of hourly and salaried employees who lost their jobs when GM and Chrysler Group LLC collapsed into bankruptcy, or as Ford furiously restructured to avoid the same ignominy.
They paid a price more directly attributable to failed management and grasping union leadership than trade deals. This is not your father’s global economy, and neither Sanders nor Trump do their supporters any favors by peddling them only half of the truth.
Daniel.Howes@detroitnews.com
(313) 222-2106
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.