Donald Trump promised to “make America great again” by bringing back the good manufacturing jobs that had been lost to the rest of the world.
The reality is that most of the the manufacturing jobs lost were lost to automation, not to other countries. But the even bigger truth — a truth that no politician will tell you — is that America will never again dominate the world economy as we did for decades after World War II.
After the war, the rest of the world’s industrial powers had been devastated. The U.S., on the other hand, had built up its industrial capacity during the war, and was quickly able to convert to producing products to satisfy consumers’ pent-up demand.
A basic law of economics, the law of supply and demand, greatly improved labor’s bargaining position. However, Western Europe and Japan were rebuilding. China lagged behind because of a civil war, and then Mao’s “cultural revolution.” Now they are well on their way to surpassing us as the world’s dominant economy.
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Globalization, a process driven by international trade and investment, is the new reality. The rich, with the skills and resources to invest, get richer and the rest are left to face a bleak future where robots can do most of the work both better and cheaper than humans.
Looking backward will not make America great again. Only innovation, both technological and social, will enable us to overcome the growing inequality that we are headed toward.
Hilton Head Island