It’s unusual that we’re having a national discussion about outsourcing in the wake of the Carrier plant deal with the Trump administration. The dominant political approach to American manufacturing losses has been silence; Rust Belt rage has supplanted that consensus with the appearance of action.
Those two approaches don’t really represent the dividing line in this debate. I see four separate paths playing out, two for each party. And who triumphs will determine to some degree the next stage of U.S. politics.
Until 2016, the Republican laissez-faire approach was to never mention the steady flow of jobs moving overseas. It just wasn’t presented as a necessary or important topic. If GOP politicians ignored outsourcing, CEO donors could keep pursuing it. Tax breaks and job-killing regulations were fair game, but the economic forces that provoke outsourcing were off limits. After Donald Trump’s takeover of the Republican Party, this approach is no longer relevant, though it quietly echoes in Trump’s strategies, as we’ll see.
The establishment Democratic approach is similar, albeit with more rationalization. Before his inauguration, President Obama attributed flat-lining wages and incomes in part to “forces that are beyond everybody's control: globalization, technology and so forth.” This June, he told a Carrier employee that some jobs “just aren’t going to come back,” mocking the idea that Trump could save them.
This isn’t just bad public relations, or an inability to tout successes like the auto bailout. Saving an entire industry — including its executives — does not correspond to saving a thriving company’s U.S. factory. Obama pursued the former but has resisted the latter, preferring to point to underlying economic forces driving de-industrialization. In his view, automation means manufacturers employ less people to produce the same number of goods, and globalization unleashes forces that cannot be suppressed. You can train people for the future, but trying to stop offshoring meddles with the primal forces of nature.
I reject this implication that politicians are innocent bystanders, incidentally. The same people shrugging at the inevitability of globalization made the dubious choice to trade American labor for global stability. They now plead no alternative, but they shoulder blame for pursuing free trade policies while ignoring those who lost out in the bargain.
It’s also worth fact-checking Obama’s claims. Running a persistent trade deficit clearly has an impact on manufacturing employment, one that is not pre-ordained so America can maintain global social order. The alleged manufacturing productivity growth is mostly centered in the building of computers, a small sub-sector. Anyway, we’re in the midst of an historic productivity slowdown, the opposite of a world where robots are making everyone’s jobs obsolete.
But even if you believe Obama, this approach is political poison, functionally identical to Republican neglect and abandonment. If you strip away Obama’s personal likability and charisma, you get a Democratic Party that is currently in its worst position since the 1920s. Lecturing that an entire region’s way of life is outdated and must be written off bred this backlash.
That leads us to Trump’s deal-cutting approach. Crucially, Trump only “saved” 800 Carrier jobs; 1,300 more will go to Mexico. And one alleged core element of the deal, $700,000 a year in state-based tax incentives for a decade, still pales in comparison to Carrier’s estimate of $65 million in annual savings from moving plants to Mexico. Anyway, those tax breaks had already been offered and rejected. They’re simply not why the deal got done.
I’m not even certain threats to Carrier parent company United Technologies’ $6 billion in federal contracts were determinative; contractors know mere presidential whim cannot fully influence the procurement process. Trump’s bluster about a 35 percent tariff on any goods produced with outsourced labor is certainly a sideshow; notice he’s not threatening it on the air conditioning plant Carrier is taking to Mexico.
The real Trump approach combines loudmouth tactics to convince the public that he’s fighting for them combined with the familiar tax cut-and-deregulation GOP playbook. Carrier admitted this: Its statement emphasized Trump’s “commitment to support the business community and create an improved, more competitive U.S. business climate.” Every CEO in America understands that code. Trump made it more blunt it in his Carrier speech: “We’re going to do great things for business, there’s no reason for them to leave anymore… your taxes are going to be at the very, very low end and your unnecessary regulations are going to be gone.”
In other words, this was about corporate welfare. Carrier keeping 800 jobs in Indianapolis is like them throwing a buck in the tip jar after hitting the lottery.
Laissez-faire Republicans whine about a “shakedown” and decry “crony capitalism.” Laissez-faire Democrats, like Larry Summers, warn of dangers to capitalism (seeing Summers fret about the rule of law after he did nothing as 9 million families lost their homes based on fraudulent foreclosure documents is quite rich). But they’re only responding to Trump’s mostly irrelevant public bluster. This lets Trump get away with a corporate enrichment strategy while selling it as a crackdown.
The laissez-faire crowd knows this and dutifully plays their role, distracting from their solutions’ lack of success. Less than half the jobs were saved, showing clear limitations to this type of bribery. Cities and states try these tax breaks all the time; there simply aren’t enough available to compete with a global framework that punishes workers for seeking dignified wages and privileges the movement of capital.
The fourth way, exemplified by Bernie Sanders, is the democratic approach. It does not resort to bribery, and it does not tell workers their days are numbered. It says simply that when you benefit from doing business in America — from our legal system and infrastructure and educated workforce and proximity to the world’s biggest purchasing power — you will play by a defined set of rules that protect workers and advance the economy. The corporation (or the shareholder) should not be in control; the people, through their elected government, should determine what’s best for the nation. And you can write those rules into law.
This has the advantage of actually attacking the drivers of outsourcing, which include much more than just cheap labor. The strength of the U.S. dollar is a much larger cause of job loss; other countries evading international law and manipulating their currency unimpeded can be targeted. Offshoring allows multinationals to achieve on-paper shifts of profit to the lowest-tax regions; that can be dealt with, too. Allowing slave labor, child labor and environmental degradation abroad — indeed, covering for trade partners who do this — unlevels the playing field for U.S. workers.
These ideas run up against rules in trade pacts that disallow the U.S. to discourage outsourcing. To that I say, good. That’s the debate we must have: Whether it makes sense to discourage U.S. employment in favor of capital mobility. Who is in charge, the owners or the voters?
To those claiming a Sanders-style policy would drive corporations from America, presumably market access to 320 million, many with disposable incomes, has value. This argument is also an expression of blackmail, that the race to the bottom can never be stopped. But enforceable global worker standards, instead of the piteous version in our modern trade regime, can cut off that tactic.
Trump may or may not borrow some of these ideas; at least by early indications, he’s a laissez-faire Republican in autocratic clothing. But the Democrats have a choice to make. Twenty-five years of Clinton/Obama policies have concentrated capital and increased corporate political power. Moreover, they posit the government as powerless in the face of underlying forces. The progressive insurgency rejects this as a false lack of choice. Progressives believe the law can be harnessed to produce fairer outcomes. Maybe there’s a little bluster in there too, to try and change corporate norms of behavior. But really it reflects a simple rule: Let the people govern.