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On the campaign trail, Donald Trump promised to revive American manufacturing, get tough on trade with China, cut taxes and invest in infrastructure. Do those proposals recall other visions for economic development over history? Economics correspondent Paul Solman speaks with historian Adam Tooze of Columbia University to put the president-elect’s proposals into perspective.
When it comes to economics, president-elect Trump has promised to revive American manufacturing, get tough on trade with China, cut taxes and invest in infrastructure.
Our economics correspondent, Paul Solman, sat down with historian Adam Tooze to put Mr. Trump's agenda in perspective.
It's part of his weekly series Making Sense.
Columbia University's Adam Tooze, historian of the economics of World War II Germany in a book called "The Wages of Destruction," and more recently author of "The Deluge" on World War I and its economics, at the moment, he's working on a book about the crash of 2008, all of which qualified him, I thought, to put Donald Trump's economic plans in historical context.
ADAM TOOZE, Economics Historian:
Well, I think, as a historian, what strikes one the most about this program is just simply its nationalism, with his commitment to the redevelopment of American manufacturing and industrial jobs, providing jobs for the constituency that was so important in electing him.
But he's addressing that constituency?
That is certainly the promise of his campaign and the promise of his economic program.
This economic program is really the pickup truck of economic programs. It's the Ford F-150 of economic programs. It's about manufacturing. It's about oil, fossil fuels. It's a deliberate, forceful reassertion of an image of American industrialism that we have inherited from the 20th century.
As a historian, do you find that anachronistic?
Well, in some senses, I think it's almost deliberately anachronistic. There's a retro feel to the Trump program.
And one can understand the politics of that at this moment. It's an effort to buy time for a constituency of workers who have really been suffering in the last 20 years, and who need to be prepared and be given time to prepare for a transition to a very different type of employment that we may moving on to in the coming decades.
What will be interesting to see is whether or not we see from the administration initiatives on higher education for this work force, because if those kinds of training opportunities are not provided, then I do think this program begins to look like a defensive holding action, a rear-guard action, buying time for workers who might not otherwise find positions in the 21st century.
But this was the rationale for saving the auto industry, wasn't it, the Democratic Party's rationale, which is, we preserve jobs, at least for a while, to keep the people who have had them employed.
I think there's a real common ground here, in fact.
That was an exception within the Obama administration's economic policy, a crisis that he inherited from the previous administration, and felt it was essential to carry through on.
But, in a sense, I think one can see the Trump program as if it were that element of the bailout of 2009 writ very large, and now extended out towards both fossil fuels, and, on the other hand, the infrastructure program, which is such a key element of the spending side of the Trump program.
You're a scholar of the economics of the First World War, and the economics of the Second World War, and Germany in particular. Is there a connection in your mind?
Though you might as well have also said FDR and the New Deal.
I mean, the 1930s are the birth moment of modern public sector, government-driven infrastructure spending. The heyday perhaps of American public infrastructure is the Sputnik moment of the 1950s, the Eisenhower administration, for instance, which rolls out the modern interstate system. The highway system of the United States is built during this period.
This has a proud American history behind it, which Trump, in some sense, has seized ownership of.
But this is a program that has been associated with the Democratic Party, not the Republican Party.
Well, I think, there, you have to be careful, because, in the Trump stimulus package, there were two elements. One is the infrastructure investment program, which at this moment doesn't have the financing spelled out in any effective form.
What we do have is a gigantic matching tax-cutting program as a way of stimulating the economy.
How have these tax cuts worked, when you look back at economic history?
There's no doubt that they act as a stimulus. How could they not, in a sense? You're giving cash back to households.
But they have two aspects. One is that they're unpredictable, and that often rich and more affluent households are slow to spend the funds. The other thing about tax cuts is that they're redistributive. So they tend, naturally, to benefit those who pay tax.
And income tax in particular in the United States is concentrated on the top half of the income distribution, and very heavily skewed towards the top 10 or even top 1 percent. So, if you stimulate the economy by means of a tax cut, the people that you tend to be benefiting are the better off.
So much of president-elect Trump's economic policy is focused on unfair competition from China.
Is he not right to say that the competition has been unfair, and ought we not be doing something about it?
Viewing that complex relationship one-sidedly from the aspect of manufacturing and the impact of Chinese imports on the United States makes sense from the point of view of the Rust Belt of the United States. It may even make sense as a political strategy for a candidate running for office.
But a dramatic unwinding of that relationship, by way of an aggressive trade policy, is one of the nightmare scenarios for the global economy as a whole, because it would result in a spiraling depreciation of the dollar, a surge in American interests rates, a collapse in the market for American government debt.
It would be terrible both for the United States and China. The sorts of sectors which feature so largely in the Trump program, and its rhetoric, account now for perhaps only about 15 percent of the American work force.
And that's manufacturing.
That's manufacturing, industry, mining, construction, heavy manual blue-collar work.
The vast majority of Americans are employed in service sector industries, and many of those sectors are highly internationalized. The most high-value added sectors, notably the tech sector, is massively globalized. And, for them, it would be a disaster if America's trade policy was to go down a spiraling route towards protectionism.
Could the Trump constituency be seeing something that a lot of the rest of America simply denies, that is, that there aren't going to be that many good jobs in the future because of automation technology, and, therefore, there's a need, a social need, a moral need for the country to preserve their jobs for at least as long as we can?
What I think the appeal of the Trump program has been is that it offers some kind of concrete, specific, historically rooted, a familiar image of how ordinary Americans, regular Americans can earn their living.
In the here and now.
In the here and now, right now, in a way in which we understand and appreciate, and which gives people a sense of dignity and value.
And I think the niche, the gap which this program fills is one which previous Democratic administrations, for all their futuristic embrace of globalization…
Bridge to the 21st century.
There was a bridge to the 21st century, and yet, somehow, for very large number of Americans, it was unclear how you got from one place to the other, from being a manual working-class man to being some part of a Brooklyn-based sharing economy.
That lack of clarity is, in a sense, what this vision of manufacturing work rejuvenated fills.
Adam Tooze, thank you very much.
Been a pleasure.
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