Protectionism didn't work

 Current American Enterprise Institute visiting scholar and former Senate Banking Committee chair Phil Gramm and current Pennsylvania Senator Pat Toomey have a right-between-the-eyes-takedown of the protectionism that was a defining characteristic of Trump-era economic policy on the opinion page of today's Wall Street Journal.

I'll be excerpting at length, because this is supremely important to share far and wide.

What Trump was trying to do was sell a return to some mythical golden age that, to the extent it really existed, cannot be replicated:

Donald Trump was America’s first post-Depression presidential nominee to make protectionism a major plank of his platform. During the 2016 campaign he presented it, along with tax cuts and deregulation, as an antidote to President Obama’s weak economic recovery—the weakest of the postwar period. In his first two years as president, Mr. Trump lifted regulatory burdens and pushed through a major tax cut, which triggered a broad-based rise in income and employment. He then turned to his protectionist agenda, which reduced economic growth and failed to deliver Michigan, Pennsylvania or Wisconsin in the 2020 election. Protectionism failed both as economic policy and political strategy.

Much of the allure of U.S. postwar protectionism comes from nostalgia for an enduring myth: the “golden age of American manufacturing.” There was a manufacturing bonanza in the 1950s and ’60s, but it wasn’t engineered by policy makers then and couldn’t be replicated now. It was an unsustainable anomaly created by World War II. 

The U.S. emerged from the war with an almost totally new industrial base, a carry-over from a wartime role as “the great arsenal of democracy.” With much of the rest of the developed world in rubble, America enjoyed a virtual monopoly in heavy manufacturing for a quarter-century. In the 1950s, real average hourly earnings in manufacturing leapt 34.5%—seven times their growth in the 1970s.

By the mid-1970s, Europe and Japan had risen from the ashes of the war and South Korea and Taiwan had industrialized. By 1976, U.S. manufacturing exports had returned to prewar levels, as a percentage of global exports, and after 1979 U.S. manufacturing employment fell in absolute terms as a push was undertaken to automate, reduce labor costs and regain competitiveness. While manufacturing jobs declined from 32% of total employment in 1953 to 8.7% in 2015, manufacturing as a share of real gross domestic product has remained virtually constant due to increases in productivity.

The job increases resultant from Trump's tariffs on steel and aluminum associated with their production were negated by losses in industries further down the supply chain. The reason is simple: those industries were paying higher prices for raw material.

There was further fallout:

The uncertainty concerning which industry would be hurt next caused private investment to decline across the economy. GDP growth, which had been accelerating in 2017 and 2018, fell 20% in 2019, from 2.9% to 2.3%, in line with the Congressional Budget Office estimates of the negative effect of the protectionist policies.

Protectionism even hurt manufacturing in the states it was supposed to help. According to the Bureau of Labor Statistics, manufacturing employment in Michigan, Pennsylvania and Wisconsin, which had increased in 2017 and 2018, started to fall in 2019 as the trade war intensified.

Populist/nationalist types speak disparagingly of "globalism," but the fact is that supply chains in the twenty-first century are irreversibly international, and that's a good thing. It's the free market playing itself out. Economic actors are playing to their strengths, each one doing what it does best, resulting in a whole that is high-quality and conducive to further advancement. 

What got Trump his blue-collar votes in 2016 was a vague appeal to hope rather than confidence in specific results:

If Mr. Trump’s trade message helped him in the 2016 election, it was because he was expressing concern about the plight of working people who had suffered disproportionately during the Obama “secular stagnation,” not because protectionism itself was popular. Even among Trump supporters, a post-2020 election poll by YouGov showed that 60% believed foreign trade helps the economy. The voting pattern of Lordstown, Ohio—where Mr. Trump promised in 2017 to save local factory jobs—suggests that it was the concern Mr. Trump expressed, not his ability to save the General Motors plant, that attracted their votes in the first place. The plant closed anyway, and the area voted for Mr. Trump in 2020 by an even bigger margin than in 2016.

Ironically, Biden seems to want to continue this approach, as evidenced by his use of the term "made in America."

The broad lesson to be gleaned from this is that, once again, we see that politicians telling voters that government can do things to make their lives better is nothing but snake oil. As free human beings, creatures imbued with agency, we are largely responsible for our destinies. 

The task before those who understand this is to convince the public at large that they shouldn't want it any other way. That's a tall order. The opposite mindset is pretty entrenched.

This op-ed is a good move in the right direction.