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Bernie Sanders and Donald Trump on Jobs: Both Wrong

The champions are in the ring.  The crowd goes wild. 

Bernie Sanders, the likely 2020 Democratic candidate, says the problem with the economy is the fat cats who have rigged it for their benefit.  He wants to unleash a progressive tax schedule on them and use the funds produced to stuff the wild inequalities in American income back in their box.

Donald Trump, in the other corner of the ring, and the presumptive 2020 Republican standard bearer, says the problem with the economy is that the "swamp" in Washington sold American workers out in a series of one-sided trade deals that resulted in the massive job losses that have left those workers in the lurch.  He promises to bring those jobs back by negotiating fairer trade deals, erecting big trade barriers to keep out the goods of countries that resist, and stopping the immigration of people who want to take jobs away from the American middle class.

They are both whistling Dixie. 

Yup, the outrageous inequalities in income in the United States must be reduced and our tax system should be much more progressive than it is.  But the people who have benefitted from the growing inequalities did not cause them and taxing them at much higher rates will not come close to paying for the single-payer health care system Sanders wants, the free higher education system that he advocates for and the many other new costs that the Senator from Vermont wants government to pay for.  In his anger at real injustices and the real hurt experienced by a growing number of Americans, Sanders is striking out at the people who have it all.  I can understand that, but righteous sympathy is no substitute for sound analysis.  Striking out at the fat cats, taking from them and giving to the deserving poor and the middle class is very satisfying emotionally, but it is not going to solve the problem, as you will see in a moment.

The President's grip on reality is just as weak.  The steel workers' jobs are never coming back, or the textile workers' jobs or the coal miners' jobs.  No treaty anyone can write will bring them back.  If he thinks otherwise, he is misinformed.

What I am saying is that the two prevailing narratives about the economic crisis facing the American middle class are stories that are simply not true. Because they are not true, they will lead our country down the road to policies that are bound to fail.  A lot is at stake here.  Not just the economic futures of the middle class and poor, but also the political fabric of our democracy.

So here is the story I would tell about what has happened.  From the middle of the 19th century through the decades just following the Second World War, the United States led the world in educating our people.  It began with free public elementary schools.  It continued at the end of the 19th century with free, compulsory secondary schools.  It continued after the Second World War with the GI Bill, which produced the first mass higher education system in the history of the world.  By the 1970s, we had the best-educated workforce the world had ever seen.  And we used that enormous advantage to become the most successful economy and most successful country the world had ever seen.  We had the best-educated business leaders and the best-educated plumbers, the best-educated job foremen and the best-educated airframe designers.  The world was our oyster. That highly educated workforce was the best in the world at writing and reading the technical journals that advanced the state-of-the-art in their multitudinous fields.  It provided, for example, an enormous pool of highly educated farmers who could easily learn about and employ the most advanced agricultural methods.  The same was true in countless other fields. Indeed, as the soldiers returned to their countries after World War II, it was in the United States, and the United States alone, that a large fraction of those who went to war with a high school diploma went on to college and not just back to the jobs for which a high school diploma was credential enough.

But it all came unglued in the 1970s.  That is when inequality in American incomes took off (no, Bernie, this is not a new thing), the productivity of American workers stopped increasing at the rate it had been increasing for decades and the incomes of average American families began to level off, even as stay-at-home moms joined their husbands in the paid workforce to try to maintain family incomes.

Why did this happen?  There were two big reasons.  First, advances in shipping, air freight and communications had made it possible for a manufacturer to locate manufacturing operations anywhere in the world, completely independent of where the goods would be sold.  That's because it became as cheap and easy to communicate with your workers on the other side of the world as with your workers on the other side of town and the cost of shipping the finished product to the customer became trivial. 

The second reason it made sense to do this is never mentioned by the commentariat, but it is vitally important.  Many of the poor countries in the world were no longer illiterate.  In fact—and this is key to the argument—many of them were educating the majority of their future workers to the same standards of literacy that the United States was educating our future workers to. While no one was looking, they had caught up to us!

Think about that for a minute.  The President says our workers were done in by unfair trade deals.   Sure, I would change some features of these agreements, but that is not even close to the real problem.  The real problem is that the world's biggest manufacturing companies woke up one day to find out that, not only could they relocate their operations in countries with factories they could communicate easily with, but the workers in those factories were just as literate and skilled as the ones they could hire in the United States, and much, much cheaper.  

Bernie Sanders says the companies that took advantage of these things were too greedy.  But if they had failed to do what they did, they would have been competing directly with firms all over the world that did take advantage of these features of the new global economy.  Millions more American jobs would have been lost.  Trying to stop this in its tracks would have been like King Canute ordering the sea back from the shore.

So, our low-pay workers found themselves in direct competition with workers all over the world who had the same level of skills, but were willing to work for a fraction of the low-wages our workers had been getting.  The result was, predictably, devastating. 

And we did nothing about it—but it wasn't for lack of options. We actually had three choices.  We could have built tariff walls to keep the cheap stuff out, with appalling losses for our export trade and a plummeting GNP.  We could have lowered the price of our low-skill labor to match that of the low-wage competition, with appalling consequences for our poor and middle classes, who would be condemned to unprecedented poverty. Or we could have educated our people to a much higher standard to justify wages that would be far above the world average.  That is exactly what we did from 1850 or so to the 1970s, with brilliant results.

But these options were never presented to the American people and the achievement of American students remains mediocre as one nation after another outperforms the United States in education by ever-widening margins while our politicians gesticulate wildly trying to find someone to blame for the plight of the middle class.  We have only ourselves to blame.

But you ain't seen nothin' yet.  Four years ago, two researchers at the University of Oxford said that nearly half of the jobs in the American economy could be automated with currently available technology.  They were described as alarmists by sober voices like the analysts at McKinsey, who said that, actually, people and intelligent machines were going to lie down together, like the wolves and the lambs and make nice, each doing the work the other couldn't.  There would be plenty of work to go around. 

But McKinsey produced a new report last year that said pretty much what the Oxford report said a few years earlier.  Researchers are years away from creating the kind of powerful general intelligence that humans have, but they have already built machines with much more powerful specialized intelligence than humans.  In the near term, this is leading to the devastation of very large numbers of jobs that are the only kinds of jobs that the majority of high school graduates can do.  Coal might come back but the coal miner's jobs won't because the mining has been automated, getting the coal to the surface has been automated, getting it into the rail cars has been automated and loading it onto the trains has been automated.  The same thing is true in virtually every field of manufacturing.  Retail is well on the way, as is driving almost any kind of vehicle for a living. 

Time is running out for this country.  The truth is that a large fraction of the American labor force is becoming uncompetitive on the global labor market.  They are becoming too expensive for the skills they have to offer, whether compared to human workers elsewhere or the machines now coming onstream.  We can continue to blame it all on lousy treaties or greedy capitalists, or we can get back on the track we so successfully pursued between the middle of the 19th century and the 1970s, a track that enables all of us to live well as the best-educated people in the world.  To do that, we will have to reinvent our education system.

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