As the first year of Donald J. Trump’s presidency is finally done, it is time for a review of his presidency and a check of whether he is on track to keep his campaign promises.
The main drive behind Trump’s electoral victory was his success in the manufacturing states: Pennsylvania, Ohio, Michigan and Wisconsin. With the votes of economically frustrated factory workers, who call themselves the ‘silent’ majority, Trump collected these swing states and got himself into the Oval Office. While the support of the silent majority was strong enough to get the Donald in the Oval, whether his promises are realistic enough to satisfy them remains a question.
Why Did the Silent Majority Vote for Trump?
After the 2008 Crisis, the global economy has seen a significant recovery from the damages caused. The unemployment rate of the USA hit 10 percent in 2010, but nowadays the American economy is cruising near full employment. Moreover, whilst the post-crisis GDP growth rate reached as low as -8%, currently the American economy is expanding with a GDP growth rate of 2.6%, which is expected to rise further with the new tax cuts. As all of these economic parameters are positive, as almost all of the speakers at Davos were optimistic and happy with the economics of the globe, why did the silent majority become so pessimistic as to vote for Trump to ‘Make America Great Again’.
All the economic signals – the global GDP, the global GDP growth rate and unemployment rates – demonstrate that wealth is being created and that is growing. But with the fourth industrial revolution and hyper-globalization, the feedbacks of wealth that has been created have changed a lot. In the 1980s, if you owned an iron manufacturing factory in Pennsylvania, you would mostly produce iron for the American market. Those days you would employ thousands of low skilled workers to work at your factory, and when you saw your profits rise, you would open new factories in the US or increase the size of your operations. Those days the ‘butterfly effect’ of wealth used to work but why doesn’t it work in 2018?
Firstly the increasing globalization, with the opening of markets like China and India into foreign investments, have made these countries attractive for manufacturing jobs, with high demand for their workforce. These countries have extremely low labour costs, populations exceeding billions, and also they host not only American companies but also other companies from developed markets. So they are an almost unbeatable destination for manufacturing businesses, causing the jobs that the silent majority used to have to fly to Asia, directly causing unemployment in these states.
In addition to the attractiveness of emerging markets for manufacturing jobs, all sorts of manpower have started to get outsourced as autonomous production systems, with this becoming the new trend. With the exponential growth rate of AI, we should expect that production, with or without manpower, will become even trendier in the upcoming years.
This competitiveness for jobs globally and the development of autonomous production systems have reduced the level of American manpower employed for production. These two are normally the reasons behind the economic pessimism that resulted in the Trump presidency.
But has Trump made progress in these two big problems that have arisen as factors of unemployment?
The Avengers: Robotic Manufacturing
No obstacle in front of Donald Trump seems easy to tolerate, but the employment outsourcing caused by non-human manufacturing remains the only intolerable amongst these. This is not only an American problem that blocks full employment but also it is a global problem behind finding every citizen a well-paying job. There have been speculations that the fourth industrial revolution would create new job opportunities for the unemployed, but we have not seen this job transition, partially because of the lack of skills that the conventional manufacturing employees have. The orthodox manufacturing workers do not possess the skills needed in the services sector, therefore we couldn’t see them moving from these low skilled manufacturing jobs to services jobs.
His Negotiating Power
Mr Trump is definitely a good businessman who knows about negotiating, marketing and sales. Many people voted for Trump to see him use the skills that made him a billionaire in order to restore the American dream. And he has used these skills to save jobs, as can be seen from the outsourcing of Carrier and Ford, but its effect still remains limited. If Trump wants to make his silent majority happy and keep their votes, he has to expand his efforts and brand America as a good place to make business, as he did in Davos.
Weak Dollar: A Solution?
Even though we have seen conflicting messages from the administration, it seems that a weak dollar policy might help American jobs. As the reason behind companies’ outsourcing is the high cost of operating in the US in terms of exporting, a weak dollar would increase the purchasing power of countries importing American goods, resulting in a higher tendency to import such products.
The biggest political success of Trump is, without question, his new tax plan. His tax cuts are not only a political success for saving the first year of his presidency, but also represent an act that Republicans have awaited for years since the Bush tax cuts. It has been a Republican theory that top-down tax cuts would save jobs, enhance the economy, and ‘pay itself’. The only thing we can do is wait and see its consequences. Yet, these tax cuts do not seem that bad for the economy, as reports from Goldman Sachs and other banks suggest that these tax cuts would raise the GDP growth rate by 0.6% or more. So the tax cuts are most probably going to make American soil more business-friendly and even more profitable.
Trump got himself into the White House by getting the support of those states and voters that traditionally voted Democrat. He also used the economic frustration of the so-called ‘silent-majority’ – however, these voter groups are dynamic as they use their economic situation as their main indicator of success. So it will not be easy for Trump to keep their support and survive the mid-terms and his second term election. The problems behind the economic frustration of this group is not uniquely American; mostly they have global problems, such as the fourth industrial revolution and the cheap labour markets of Asia. These problems are not easy to deal with and the real question is ‘Did Trump give promises that he can keep?’. His tax cuts, a weak dollar plan and his business skills do give hope to us but, still, time is the answer for us.
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