President Elect Trump ran on anti-tech platform designed to get US jobs back that have been sent overseas. Although our tax and trade policies have hurt developed country workers, especially in the US, the vast majority of job losses are because of technology, not outsourcing.
Trump’s talked about putting tarrifs and fining companies that outsource. He’s “succeeded” in getting a few companies to stay. But these companies are staying grudgingly, and demanding massive tax breaks to do so. Trump is using the power of the presidency to influence markets and potentially pick winners and losers. He’s sending the message that you have to play ball, or risk losing government contracts or being made uncompetitive.
Trump’s policies are going to make US companies think twice about outsourcing and moving factories. But they won’t go back to hiring US workers like they did in the 70s and 80s. An example in the West Virginia coal industry:
Business owners are going to go all in on technology. Look at Elon Musk’s $5B Tesla Gigafactory. It’s doubling world lithium ion battery production by ~2020. And it’ll have ~6000 employees. The batteries are made in the US, but with some human specialist supervisors, not by 100,000 hard working Americans like car factories of old. Trump’s “protectionist” policies will push business owners to emulate companies like Tesla and put tech in their companies even faster, killing of jobs at a faster rate than ever before.
As Greg Hayes, CEO of United Technologies, Carrier’s parent company put it, they’re going to use the $16m in tax breaks that Trump gave them to automate away jobs:
“We’re going to…automate to drive the cost down so that we can continue to be competitive,” he said on an interview on CNBC earlier this week. “Is it as cheap as moving to Mexico with lower cost labor? No. But we will make that plant competitive just because we’ll make the capital investments there. But what that ultimately means is there will be fewer jobs.”
To be clear, automation isn’t all Trump’s fault. It will happen no matter who is president. But he’s clearly accelerating the change. The tech is here. Now owners have the incentive to invest right now, not more slowly over time.
Business owners will borrow money at our super low interest rates or use the record $1.64 trillion in cash on their balance sheets to move employee compensation, a recurring expense, and magically turn it into a depreciable investment, killing jobs faster than ever.
Our politicians (and those in the rest of the world) world pander to populism that makes people feel good, but are at best short sighted. Trump might be pursing this path because he’s a tech luddite who doesn’t even email, or at worst cynically, calculatingly taking advantage of people to gain power. He’s telling them what they want to hear, knowing that these jobs that peaked in the 70s-80s aren’t coming back and AI will accelerate job losses, no matter any government policy that’s currently on the table.
4 Comments
Anyone up to a heated debate with Masters in Economics pre-Reagan error. You leftist clowns
With regard to the above mentioned article, this is a regurgitated from the college that some writer left. Free trade is different than fair trade. I worked in China for 15 years, they don’t like us, and yes devalue currency with monetary concessions so they don’t get hurt, and guess what and who is worse, Taiwan. The Maquiladora of the Mexican border is a haven for cheap labor, no unions, and even to build factory plants even cheaper (I think that is what people don’t realize); its quite expensive to build a manufacturing plant in the US. Ask me, I built 16 supermarkets in 6 months and every country, district, municipality all have different rules and enforcement practices that make it nearly impossible to make a deadline and certainly not under budget. Let’s forget for a moment the cost of labour as this is over-simplified. Its the cost of maintenance, the cost of regulations from every angle imaginable. I have lived it ! Paid it and found it unimaginably anti-business. Now this is retail. Not manufacturing. It truly is a pay to play country.
Now if we want to be a country of gizmo producers, I believe there is a lifecycle for iphone gizmos, or the internet of things. All still made in large quantity out of the country.
Now my business, (and this is not a plug) is 3 pronged and I am just as bad. I due conceptual and industrial design in Argentina, I do my pre-sale engineering in Tel Aviv, I do my prototyping with another engineer and production/procurement manager in China to ensure that BOM (Bill of Materials / Qty/Scope/leadtime is all in alignment with my long time China partner. I take a procurement approach as we approach closing the sale, of 3 bid of qualified, and properly paired factories with the same capabilities / outuput yield and quality.
I choose, as my client chooses as an agency. We together with full transparency make a determination and MAKE THE FACTORIES put up a performance bond – again pre-sale with a letter of intent from client.
I won’t go further, but as a NVOCC and FMC / HAZMAT certified freight forwarder, procurement professional who understands (Demand Management, Supplier Leverage, and Operational Efficiencies) as the 3 tiered mother of making a grand scale / pan-regional project come together neatly; one needs to understand the complexity as a job moves forward, or contract. Yes, Trump is pandering to the group that certainly doesn’t understand the sales cycle, but IT IS DO-ABLE in the US. I know generally more than my clients. The just move products for off shoring with little of no other consideration for the plant down the road.
Nothing is out of bounds. Living in Chile is great, the quality of product (consumer products) suffers and I do see a huge difference.
So the outstanding point is this: If one needs to simply sell at the cheapest price, do what you do. If you want to build an economy made on the shoulders of Innovation (ya even AI – someone has to fix them) have the cojones to do the right thing and explore your neighbors or free trade zones for light manufacturing (Zofri ?)
Apologies for the long winded rant.
Kelly (in Chile)
Chile lithium is going is about ripe for joint ventures from other countries. Read up on the Maricunga Lithium project between Canada (ASX: LPI) (“LPI”) and Minera Salar Blanco SpA (“MSB”)