Trump Presidency Poised to Stagnate Middle Class

When “middle America” delivered a shocking upset this past November, the punditry proclaimed that this was the triumph of wage-earners and former industrial strongholds against an indifferent “liberal elite.”

The common idea goes as follows: the embrace of outsourcing and automation by corporations left Rust Belt neighborhoods in tatters. Politicians jumped into bed with the cosmopolitan mainstream media, leaving a “silent majority” with little voice in policy-making. Coastal elites swamped the country with job-stealing immigrants, welfare-sponging refugees, and tax-dodging foreigners. And so, on November 8th, “America’s heartland” bit back at the technocrats of D.C. and the eggheads of the Ivies.

This narrative, a melange of observable phenomenon, scapegoating, and impractical bluster, won the American presidential election. The panic-peddling Pied Pipers of Donald Trump’s snake-oil campaign won: the masses that fell for them have a hollow victory on their hands. Their victories are short-lived; political rhetoric will face economic reality.

Such realism will come from market forces: technology will not be kind to blue-collar communities. In what Klaus Schwab of the World Economic Forum calls the “Fourth Industrial Revolution,” advancements in computing will lead to an economy where algorithmic efficiency is prized above all else. In October, Uber-owned startup Otto successfully tested a self-driving truck; not good news for the 3.5 million Americans who are employed as truck drivers. This, and other improvements in supply chain management, gives trade an advantage by minimizing logistical costs.

Trump won West Virginia with a 42-point lead, but he will be hard-pressed to fulfill a campaign promise to save the coal industry in Appalachia. While many believe that environmental regulations under the Obama administration are the main culprit behind the demise of the coal-mining industry, coal will continue to struggle, thanks to cheap natural gas, decreasing costs of renewables, and low demand in Asia.

To reverse both trends, Mr. Trump would have to intervene in markets in a way that stands against decades of Republican orthodoxy and congressional lobbyists, by propping up industries and factories that will inevitably go the way of the stagecoach. Free trade and outsourcing has decreased prices for consumers and retailers; political theatrics such as the Carrier deal will face significant opposition. In any case, protectionism, import taxes and aggressive monetary hawkishness would generate significant economic and geopolitical tail risks; a black swan event would not be conducive to America’s bottom line. It seems as though the elites will fare better, as they always have.

-Ying Ka Leung ’18

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