Trump can’t run America by yelling at people. Who knew?
By Paul Krugman
Opinion Columnist
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Let’s face it: Make America Great Again was a brilliant political slogan. Why? Because it could mean different things to different people.
For many supporters of Donald Trump, MAGA was basically a promise to return to the good old days of raw racism and sexism. And Trump is delivering on that promise.
But for at least some Trump voters, it was a promise to restore the kind of economy we had 40 or 50 years ago — an economy that still offered lots of manly jobs in manufacturing and mining. Unfortunately for those who trusted Mr. Art of the Deal, Trump never had any idea how to deliver on that promise. And even if he had a clue about policymaking, he couldn’t have changed the long-term trajectory of our economy, which is moving steadily away from making physical stuff and toward providing services.
As a result, Trump, who cares above all about image, is now getting headlines that make a mockery of his campaign posturing — headlines about closing auto plants and lost jobs. Now, autos are a special case; overall manufacturing employment is still rising, although not especially fast. But relative to his grand promises, what’s happening is an embarrassing bust.
Why was the vision of revived manufacturing nonsense? Talking about what Donald Trump doesn’t know is, of course, a vast task, since his ignorance is both broad and deep. But he seems to have misunderstood three specific things about manufacturing.
First, he believes that trade deficits are the reason we’ve shifted away from manufacturing. But they aren’t.
To be fair, those deficits have played some role in shrinking U.S. industrial employment. If we could eliminate our current trade imbalance, we’d probably have around 20 percent more workers in the manufacturing sector than we actually do. But that would reverse only a small part of manufacturing’s relative decline, from more than a quarter of the work force in 1970 to less than 10 percent now.
Indeed, even countries that run huge trade surpluses, like Germany, have seen big declines in manufacturing as a share of employment. Trade just isn’t the main story. What’s happening instead is that as overall spending grows, an increasing share goes to services, not goods. Consumption of manufactured goods keeps rising, but technological progress lets us produce those goods with ever fewer workers; so the economy shifts toward services.
By the way, if you want to know what “services” means: Of the four occupations the Department of Labor expects to add the most jobs over the next decade, three are some kind of nursing (food workers are the fourth). And if you can’t imagine how a prosperous economy can be built on services, bear in mind that health care is a large source of middle-class jobs, and could provide even more with the right policies.
Still, even if trade deficits are a distinctly secondary cause of manufacturing decline, can’t Trump help a little by getting tough on foreigners? That brings us to his second fallacy: No, trade deficits aren’t caused by unfair foreign trade practices.
The truth is that while tariffs and so on can affect trade in particular industries, the overall trade balance mainly reflects exchange rates, which in turn are mainly driven by capital flows: The dollar is strong because foreigners want to buy U.S. assets. And Trump’s policies — tax cuts for corporations, big deficits that drive up interest rates — are so far making the dollar even stronger.
Finally, Trump’s angry reaction to auto plant closings is a reminder of his third big policy misunderstanding: He believes that you can run the economy by yelling at people.
Why is he wrong? It’s not just that businesses have learned to discount his threats. More important, our economy is too big to make policy by singling out individual companies and ranting. How big is it? Around 1.7 million U.S. workers are fired or laid off every month. So even a president who spent less time golfing couldn’t bully or threaten enough employers to make a significant difference to the labor market.
Or to put it differently, running America isn’t like running a family business. It has to be done by setting broad policies and sticking to them, not by browbeating a few people whenever you see a bad headline.
So Trump’s promise to restore U.S. manufacturing was doomed to fail. Why did he make it in the first place?
For what it’s worth, I suspect that in this case Trump wasn’t actually trying to scam voters. My guess is that he genuinely believed that he could bring manufacturing, coal mining and so on roaring back, that others had failed to do so only because they weren’t tough enough.
You might wonder where his confidence came from, given how little he obviously knows about economics. The answer, probably, is the Dunning-Kruger effect: inept people are often confident in their abilities, because they’re too inept to know how badly they’re doing.
But the real question isn’t whether Trump will ever realize that he doesn’t know how to MAGA. It’s whether and when his supporters will figure it out. I guess we’ll learn the answer in the months ahead.
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Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman
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