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The Working Class Might be Shooting Itself in the Foot by Being Anti-Free Trade March 21, 2016

One of the explanations of the rise of Donald Trump is the concern by his working class followers about free trade, as well as immigration.  After thinking of just how and where their standard of living is declining, I wonder if they’d be only shooting themselves in the foot if high tariff walls were enacted!

Here’s why. As I’ve said before, the standard of living in terms of what one wage earner, working 40 hours a week, can buy, has declined.  [This is a fairer comparison than comparing a one income family in 1965 with a two income family today!]  Which is why wives ‘have to’ work.  But it has not declined evenly.  Since 1981 they say inflation has gone away; I think it is better to say that inflation has confined itself to three critical areas, which are housing, tuition, and health care.  It is the prices of these things that have soared far ahead of wages, and apparently continue to.  The prices of consumer goods, for the most part, kept pace with wages, at least until the crash of 2008, and may have lost a little ground since.  Then there is the high technology market; the price of iPhones and similar devices of that kind [and yes that includes flat screen TVs] actually tends to decline over time compared to wages.

Now we may be sending some of our routine medical work to Bangalore overnight to be worked on, but few of us will fly there, or to Shanghai, to go to the doctor, or to deal with traumas or chronic illnesses.  The cost of American health care, which is outrageous, is beyond my expertise, but it is pretty clearly a domestic issue. Same with tuition.  I suppose you could get an online education from Bangalore, and probably learn something; but I’m not sure how a degree from an online institution in Bangalore would sell on the job market.  And face it, the main interest of people in education is less ‘learning something’ than getting karma in terms of a degree with a high grade point average from an institution of prestige.  Like it or not, this is the main reason why people value education today, As I may have said, it’s the real reason why “Western Civilization has got to go!”

As for housing, there are areas where housing has gotten more expensive because foreign people are buying pied-à-terre.  But that’s only a few pockets of the country.  And I’m not sure that housing is that much cheaper in Bangalore, at least anything I’d want to live in.  If you want to live as a family in one room without plumbing or electricity, you might be able to afford that.  But even if good housing in Bangalore were cheaper, you ‘d have to live in Bangalore.

So here is my worry.  It’s the consumer goods you buy in stores that have more or less been tracking with the average wage; a lot closer than housing, or tuition, or health care. But this is precisely because the ‘globalization’ or ‘free trade’ that the anti-free trade people rail at has kept these items affordable.  If we closed our borders to foreign goods, the price of consumer goods, I fear, would rise in relation to wages the exact same way that housing, tuition, and health care have.  And thus high tariff walls would backfire on precisely the people that think they would be protected by high tariff walls.  Is this what they really want?

One Comments
Jack H 03/24/2016

Great insight into global economics so few people understand.

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