Friday, October 20, 2017

Where Trump won

We may attribute Donald Trump's win to his dark, xenophobic messages, where the culprits are immigrants and minorities. But with the election tabulation coming to an end it is Hillary Clinton who is winning the popular vote. Thus, we would be wrong. We cannot say that Trump inspired racist sentiments. Racism is built into the American cloth. Trump or no Trump it will be there. The Black Lives Matter movement antedated Trump.

As I pointed out in a recent column in this newspaper, geography is a very good proxy for understanding what's underneath voter sentiment in American presidential elections, and in this one, indeed, geography is what upended Clinton. Trump understood this better than her, and late in the campaign he made his way to Michigan. This seemed like wishful thinking, going to what was supposed to be a sure state for her. But he won it. Indeed, Trump won the election because he won the “rust belt”, that is, the upper mid-western states that once used to be the heart of the old American economy which used to be based on manufacturing, driven by widespread coal mining, and at the centre of which was steel making.

It was not just Michigan where the Democrats got a surprise; it was also Wisconsin, and the unkindest cut, Pennsylvania, where on the eve of the elections there was a convergence of stars, and the Obamas joined with the Clintons on the same stage, in Philadelphia. Indiana is a part of this, but it has been traditionally a Republican state.

This defeat for the Democrats was decades long in coming, and was triggered by the decline of US manufacturing, which was overtaken in the 1970s by newly industrialised countries such as South Korea, Japan, Singapore, Hong Kong, and Taiwan.

The alarm for this was raised in the book The Deindustrialisation of America by Barry Bluestone and Bennet Harrison (1982) in which they articulated a thesis showing these Asian countries had devised smarter ways of manufacturing, driven by technology and by quality processes and production floor techniques such as teamwork and quality circles. They had overtaken America in steel making, electronics, and automobile production. Indeed, they had taken over manufacturing. American gas guzzlers were overtaken by efficient Japanese cars such as Datsun, and Toyota that were fuel efficient. Workers on the shop floor had to be more educated. The high school graduate now had a difficult time keeping up with technological change.

The result of deindustrialisation was the crumbling of old industry. The automobile companies had to re-tool, trying to keep up with the Japanese whose cars were more popular in America. Some American automobile companies were driven out of business. The energy crisis had made efficient cars an imperative and the Japanese had taken the lead.

The decline of manufacturing, and mining, in America, led to factory closings across the upper Midwest, especially in Ohio. Michigan, Indiana and Pennsylvania as well as Virginia. Add this to environmental concerns about coal-based energy and the result was the closure not just of factories but of whole communities. The deterioration in the form of abandoned factories and old machinery in ghost towns led to the “rust belt” characterisation.

America had to fight back, and did so via Steve Jobs and Bill Gates with the invention of the micro-chip and microcomputers. As these became popular and cheaper the US gained competitive edge in the global economy. Facebook has helped to consolidate this edge.

Deindustrialisation led to job losses and with that the base of blue collar unions eroded. The percentage of union workers in the US is now about 11 per cent, compared to 20 per cent in the early 1980s. With the decline of unions, the Democratic party lost a significant part of its working-class base.

The new American economy requires highly educated people. Those whose highest credential is a high school diploma have a difficult time in the economy. Firms need workers with symbolic-analytic skills.

Barack Obama was attuned to this deindustrialisation shift and offered education as the remedy. His aim was to make community college education (two years beyond high school) the baseline for all. Obama bailed out General Motors after the 2008 economic meltdown, saving an iconic automobile maker. This single act caused him in 2012 to beat Mitt Romney in both Michigan and Ohio, which Clinton could not do against Trump.

The economies of these two states are very tightly intertwined. They share a border. At the core of the economy of the upper Midwest where these states are located is the automobile industry of Michigan. Linked to it in concentric circles are secondary and tertiary economies which serve the auto-industry. So, for example Akron in Ohio manufactures tyres which are key to motor cars. In the same way Ohio has industries making things like batteries and brakes, that are upstream of cars. If you drive on the highways linking Ohio and Michigan at night you will experience an unrelenting flow of 16-wheeler trucks timed to arrive just in time in Michigan automobile factories to drop their batteries, mufflers etc directly onto moving assembly lines.

Donald Trump is promising to make America great again, but his solution here—the refurbishing of infrastructure—is reflective of old industrial America. Rebuilding bridges and schools will put the blue-collar worker with secondary education back in play, but it will not make America competitive—not with China, Singapore or India. Trump promised coalminers that the mines will be re-opened. Hillary Clinton had better long-term solutions here—more education, and new clean-energy industry.