President-elect Trump received a lot of good publicity for his claim that he saved 1,100 jobs at a United Technologies / Carrier (UT/C) plant in Indiana. Although the focus of his claim and effort – to keep good, middle income jobs in the US – is laudable, the facts of this case and the implications for the larger, systemic policy issue are not very favorable.
In fact, only about 730 jobs that were slated to move to Mexico were kept in the US. The other 350 research and development jobs at the facility were never slated to move to Mexico. Meanwhile, another UT/C plant in Indiana will close and roughly 700 jobs will be lost. [1]
UT/C responded to the President-elects’ strong-arming because it has $56 billion in federal contracts it didn’t want to jeopardize and it received $7 million in taxpayer-funded subsidies from the state of Indiana, where Trump’s vice president, Mike Pence, is Governor. [2]
We do need to change the mindset and incentives that make it not only acceptable but a preferred and successful business strategy to ship American jobs overseas. We need to do this through systemic changes in policies. However, what Trump is doing isn’t policy-making and it doesn’t change the underlying market incentives. Furthermore, it’s a drop in the bucket in terms of jobs. [3]
Many economists have been very critical of Trump’s actions because they undermine the rules, predictability, and consistency on which companies and our economy rely. These economists, including former Treasury Secretary Lawrence Summers, argue that the resultant uncertainty could lead to reduced investment, fewer jobs, and slower economic growth. [4]
Trump’s ad hoc, company-by-company approach reflects the arbitrary and capricious use of the personal power of the President’s bully pulpit. While it can affect individual company’s actions – through effects on stock prices, public opinion, federal government contracts, etc. – it is driven by random, autocratic whims. The result is a bullying style of ad hoc capitalism that reflects a personal agenda and a person who wants corporate America to be beholden and deferential to him. [5]
The likely result is that corporations and their senior executives will work to curry favor with Trump by contributing to his re-election campaign and taking other actions that will please him. This is pay-to-play crony capitalism and plutocracy; it is not how a democracy is supposed to work.
My next post will present some systemic, policy-based approaches that we should be taking to counter incentives for offshoring American jobs.
[1] Nichols, J., 12/8/16, “Chuck Jones is a better president than Donald Trump will ever be,” Common Dreams (http://www.commondreams.org/views/2016/12/08/chuck-jones-better-president-donald-trump-will-ever-be)
[2] Greenhouse, S., 12/8/16, “Beyond Carrier: Can Congress end the green light for outsourcing?” The American Prospect (http://prospect.org/article/beyond-carrier-can-congress-end-green-light-outsourcing)
[3] Reich, R., 12/7/16, “The Art of the Autocrat,” Common Dreams (http://www.commondreams.org/views/2016/12/07/art-autocrat)
[4] Greenhouse, S., 12/8/16, see above
[5] Reich, R., 12/7/16, see above
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