We've Just Elected a Wartime President

Robb Smith
November 16th, 2016
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I'll get to the point. The United States has just elected a wartime president, a Commander in Chief who is already on a wartime footing and was on a wartime footing from the moment his campaign began last year. And he won because a significant portion of the country were the war's first casualties and they wanted a president who could help them stop losing.

This isn't a military war. It's a jobs war.

image00 We now know that Trump won because he effectively spoke to the massive grievances of the White Working Class ("WWC"), and he effectively exploited the enthusiasm problem of his opponent through a very smart, targeted and portentous voter-suppression campaign fueled by social media tools.

His supporters were hearing "I will help America win this war."  His opposition replied that "America is already great!" They weren't even in the conversation.

Here may be the scarier part: the WWC may be the canary in the coal mine of this war. The first battle of the war was waged over the past few decades as the professional classes, and especially the financial elite, actualized the neoliberal agenda with ever-increasing free trade, global capital flows and decimated labor movements. This first round of the war had clear results: the US upper class and the global working class won; the US lower and middle classes lost. The wealth of the lower and middle classes was almost totally stagnant for the 30 years between Reagan and Obama, while the upper class doubled its own wealth during the same period.

The election of Trump is the first major counterattack by the WWC, and signals that a new second battle is about to get underway in earnest. This battle will pit the WWC once again against the developed-world elites and developing-world working classes. As the New York Times, in a description of Trump senior advisor Stephen Bannon, summarized:

In an interview, Mr. Bannon, 62, rejected what he called the "ethno-nationalist" tendencies of some in the movement. His interest in populism and American nationalism, he said, has to do with curbing what he sees as the corrosive effects of globalization...That "arrogance of the elites," as Mr. Bannon has said, explains why most of the media and political class missed the rise of Mr. Trump. Mr. Bannon's disgust with the politics of the mainstream Republican Party burns just as hot as, if not hotter than, his animus toward liberals. He sees Republicans as the "party of Davos donors" and has scorned them for denigrating Trump supporters as the "vulgarians, the hobbits" and "the peasants with the pitchforks."

When a friend recently asked me why the White Working Class ("WWC") continues to vote against its own economic interests, my answer rests on fully understanding this position. As I point out in my essay The Great Divide:

Gallup chairman Jim Clifton writes in The Coming Jobs War that we are entering a jobs war where the 1.2 billion "good jobs" of today, which are currently sought by 3 billion workers, will decline to 800 million good jobs over the next few decades, a period when our population grows from 7 billion to 9 billion… And make no mistake, a lack of good jobs is the lifeblood of populism. In Gallup's global survey, Clifton writes that a good job is the single most important thing on people's minds around the world, transcending religion, race, credo and national interests.

Joan Williams, a UC Berkeley law professor, recently published a similar analysis in the Harvard Business Review, arguing that: 1) the WWC–which is really the middle class–believe they've been subsidizing the poor for decades, and they're furious about it, 2) there's an urban-rural divide such that geography is reflective of class and voting preferences and 3) the Establishment on both sides of the aisle has lost all credibility on their #1 priority–creating jobs that bestow some sense of dignity on their holders.

That is all true. But in several ways it either doesn't go deep enough, or far enough into the future.

First, the urban-rural divide has driven populism since the founding of our country. The populist movement of the 1890s was fueled by the agrarian class against the perceived-corruption of the city-based Establishment. Like today, it was really about highly unequal distribution of wealth and jobs.

"We meet in the midst of a Nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot box, the Legislatures, the Congress, and touches even the ermine of the bench... The people are demoralized...The newspapers are largely subsidized or muzzled, public opinion silenced, business prostrated, homes covered with mortgages, labor impoverished, and the land concentrating in the hands of the capitalists. The urban workmen are denied the right to organize for self-protection, imported pauperized labor beats down their wages... The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind; and the possessors of these, in turn, despise the Republic and endanger liberty."

Sounds familiar doesn't it? The quote above addresses all the dynamics and symptoms of our current political situation: a polarized and angry population that distrusts a press out of touch with everyday people; households buckling under the yolk of mortgage and personal debt pressures; massive wealth concentration in the hands of the few who are getting rich on the back of a defanged labor movement; an overbearing government that has put business under its thumb; and a renewed call for protecting the Republic, its principles and its liberty threatened by the forces of progressivism.

An incredibly powerful and (perhaps) accurate diagnosis of the world in 2016. Amazing, then, that it is from the Populist Party's platform of 1892 (quoted from Richard Hofstadter's classic Age of Reform).

We've seen this movie before.

Second, stagnating economic growth, due to slowing productivity gains and aging demographics (we'll come back to both in a moment), will likely be made worse by massive job losses from automation over the next decade. Act two of the jobs war may be far worse than what we've seen so far due to automation. Again, The Great Divide:

Let that sink in: well over half of all industries could see almost a third of their jobs get eliminated through automation in the next ten years… In each case, entrepreneurs and the capitalists who back them are attempting to create massive wealth for themselves by displacing jobs with industry-disrupting computer-based innovations. They are keeping most of the wealth created because many of the platforms are predicated on replacing human labor with much less resource-intensive computer power. Overall national wealth might go up but it becomes more unevenly distributed as a net positive share of workers either lose their jobs or are forced to seek other work. To the extent that every industry is going through some dislocation of this kind, the net effect is that a large proportion of workers are at best treading water in real income. It is through system dynamics like this that the rich simply get a lot richer.

Third, and finally, of the good jobs that are available more will be smart service jobs, not the "dignified" manufacturing jobs of yesteryear. Just as agricultural employment dropped as a percent of GDP since the 19th century, manufacturing has also been falling as a percent of global output for the past few decades. It's not just the U.S. losing manufacturing jobs: the entire world is shifting (or has shifted) from a manufacturing-centered economy to a service economy, which is a natural characteristic of the transition out of industrialism. In this one regard the world economy is not broken. It's evolving.

The job of the future is either very smart, service-centric, or both. These jobs are what Thomas Friedman calls "STEMpathic" jobs that combine science and technology knowledge with empathy-based people skills. If on one hand the WWC doesn't believe that people-centered service jobs–think healthcare, education, etc.–can fulfill their sense of dignity, or on the other hand they don't achieve the advanced education necessary to be the science-based creators of tomorrow, the WWC is setup to continue to struggle. (An obvious integral analysis here would be to look at the self-identity and hermeneutics of "work" for the WWC as they encounter a shift from concrete-tangible manufacturing output to human-centered service output. In other words, how can work be made meaningful throughout the spiral of self-identity?)

So, amidst this backdrop, is the WWC voting against its own economic interests?

Not in the short-run: a good job that allows them to outrun expensive housing, exploding healthcare costs and underfunded retirements for even a short while is enough to overcome all other objections. Nothing else has been working for them, so they're willing to take a chance on a self-made billionaire businessman even if he is obnoxious. That he is way outside the mainstream establishment is not the black mark globalists thought it was–it's precisely his most redeeming quality!

In any case, while one voter might see in Trump a huge risk of constitutional violation, a populist-voter might think he has nothing more to lose. Personally I think this is a failure of imagination, but I understand it: even if he has a good job, he's fed up with expensive healthcare, wealth disparities and the perception of a globalizing elite that wants to downsize his job on one hand and use identity politics to shut him up on the other.

Nevertheless, with Trump's proposed tax cuts for the rich and a trillion dollars in infrastructure spending, we're about to see one of the great transfers of wealth from the middle class to the wealthy in a generation. The jobs that Trump has promised, and his voters have demanded, are not created out of thin air–they're created by more borrowing. In the longer-run the increase in the national debt will likely be paid out of their own pockets, either through higher taxes, financial repression (i.e., debasing the currency/inflation), or faster growth. The first two are simply solving today's pain in exchange for tomorrow's suffering. And the third–the economy grows fast enough that our relative debt load decreases over time amidst stable taxes and inflation–represents the only way that new debt doesn't get passed on to all of our kids. So let's consider the possibility for higher growth.

Again this is a book-length topic so I'll try to summarize my understanding of where we are. Growth is driven by two factors: population growth (specifically, working age population) and productivity growth. The number of working people multiplied by how much they can produce is a pretty basic concept for understanding economic output. And here's how the U.S. has been doing since the 1960s, in real terms:


It's been a bumpy ride, but not an encouraging trend if we're banking on growth to be our saving grace.

The first major factor is an aging population. We're living longer, we're having fewer babies, and baby boomers are retiring. We have the largest demographic shift in this country in a century that's beginning to hit right now, with 10,000 people retiring a day. We'll experience population growth of just .25% a year over the next 50 years. This is a seismic change, and I'll take up the effects of this "greying of the northern hemisphere" in a future post (e.g., what happens to the stock market when net inflows/outflows shift and billions of dollars are withdrawn every week in order to pay for retirement needs?).

The second factor is slowing productivity growth. Theories abound on why we're seeing slowing productivity growth: measurement error due to new online services not capturing real gains in human output; payback for the strong productivity growth of 2009-10; weak business investment has slowed productivity gains; declining entrepreneurship and small business formation since the 1980s; and finally, technology innovations of the past decade have really been, well, silly in terms of their impact on our economic wellbeing (Facebook anyone?).

So the headwinds are stacked against robust economic growth. And that's before we consider other economic forces, whether it's a "monetary offset" to fiscal policy like rising interest rates, or decreased foreign trade.

Now let's throw automation into the mix. Even if we grant that we could see major productivity growth from automation, it may, or may not, flow to the creation of new jobs: it may instead just eliminate a good job and help the rich get richer on the difference. The assumption that productivity gains will grow the economy and therefore create jobs is only helpful to the job seeker if more new good jobs are created in place of the ones automation is making obsolete. I haven't seen evidence that this is projected to happen in the future on a net positive basis over the next decade. And when we look backwards over the past few decades, there is ample evidence that regardless of whatever else was happening in the job market, there were little real income gains in the middle class. (Again, from an integral point of view, this is exactly what's to be expected: as we increasingly automate the base of the pyramid of our needs–low cost food, manufactured goods, basic shelter etc.–our higher needs become a bigger part of our daily schedule but also less incrementally well-compensated on average, over time.)

In summary, in my view we're not likely to simply grow our way out of the increased debt we're taking on to buy these new jobs. Most people agree we could update our infrastructure, and it may yield significant downstream improvements on overall national productivity. But let's be clear that in the face of the rise of automation and the tidal wave of aging in the northern hemisphere, Trump's populism will face a series of difficult choices: do we borrow to drive growth at any cost? Do we erect the highest walls possible to global trade to try to "slow down evolution" and counteract these other inevitable forces? Do we continue to foment nationalism by placing blame for the middle class's struggle on the Establishment, even in the face of these deeper structural realities? Do we double down on or reject neoliberal orthodoxy in a world that might, just might, be entering a new paradigm where new policy responses might be called for (e.g., universal basic income)?

Whatever the case, one thing is clear (to me at least): a wartime president has been elected, and his simple-reductionist rhetoric notwithstanding, he's fighting an enemy that is incredibly wily, and almost invisible. Understanding and naming the enemy correctly has awesome implications on whether policy responses are effective or not. This is not a left versus right preference but a question of what's actually happening and likely to happen in the next few decades based on deeper, mostly apolitical realities.

Based on the pace of automation, the evidence of slowing productivity gains, the transition to a service economy, and especially the rise of zero marginal cost information dominance, there's good reason to believe we're are entering a postcapitalist era. If we're seeing a genuine beginning-of-the-end of the capitalist-industrial paradigm, a neoliberal strategy that lowers tax rates for the rich, borrows to create jobs, and privatizes governmental services (while rejecting neoliberalism in the erection of borders) may only increase wealth disparities and exacerbate WWC frustrations (indeed, I'd expect that their frustration would soon grow to include a very large majority of the entire population).

If, on the other hand, we're simply in a once-in-a-century reboot as late industrial capitalism adapts to its next growth phase, the focus might rightly be placed on spurring entrepreneurship, reducing regulation, increasing capital availability, enhancing education and job training, and investing heavily in future-generating innovation and infrastructure.

The differences between these two don't necessarily have to be in diametric opposition. But it's notable that no presidential candidate– and there were over twenty of them!–really pointed any of this out. Trump effectively spoke to the pain of the WWC, but he didn't prepare them for the possibilities of what comes next, or what happens if his worldview is outdated. They need to know that this might not work (and I think at some level they do). Then again, it's possible that politicians don't really understand these dynamics themselves or don't know how to tell the truth about it. Or maybe I'm the one who's wrong, something we'd all do better to remember.

I tend to think we're at the end of the industrial era. But I'm almost always biased towards the future. By looking within myself I acknowledge that it's hard for anyone to separate their political biases from their economic reality, their policy choices from their hopes for the future. The deeper truth though is that we're all more subject to big historical forces than we'd like to admit. We are in the midst of a global jobs war–or, as I'm more inclined to view it, the possible birth of a new postcapitalist era–and what seems true is that in the long run we'll need to be more united than divided to navigate it.

In the short run, however, I guess that's up to each of us. Maybe we each need to decide which future we want most, and then fight like hell to make it happen. After all, the Trump administration can only achieve what his national popularity allows, because a mid-term sensitive Congress might not want to deviate too far from the national mood. An active and vocal national opposition might be just what's needed, now more than ever.

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