Why Donald Trump Will Win
Written by Dr. Seshadri Kumar, 03 September,
2016
Copyright © 2016 Dr. Seshadri Kumar. All Rights Reserved.
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Executive Summary:
Donald Trump will win the US elections in
November. The main reason is that the American people have been hit hard
because of job losses due to globalization over the last 16 years, and trust
neither mainstream Democrats nor Republicans to have any solutions – because
there are none and both parties have lied to them. Trump will win, not because
of his ideas, and despite his outrageous behaviour, because he is an outsider.
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The Republican
National Convention (RNC) is over for a month. Donald J. Trump is the
Republican nominee for President of the United States of America.
A lot of Americans are
very surprised at this development. You could even say that they are stunned.
When Donald Trump
entered this race, he was considered to be only a distraction and a source of
entertainment. But today, he has left his rivals in the dust, and has won the Republican
Party nomination by a huge margin. Figure 1 shows a chart of poll numbers from
Huffington Post that
tracked the candidates in the Republican race. Donald Trump polled 3.7% on
April 2, 2015. By July 6, he had taken the lead, and never relinquished it
since.
It is fair to say
that, other than perhaps Trump himself, no one in America expected this win.
And yet, there is
little serious analysis of why this has happened. Most of the analysis in the
media is shockingly flippant in nature, and reveals more about the writers’
biases than a serious attempt at fact-finding. For example, the Washington
Post, in an article on February 26, by which time Trump was very clearly in the
lead, postulated that the reason Trump was winning was that no one took his
chances of winning seriously. This kind of conclusion seriously insults the
intelligence of the American voter.
Donald Trump said all the things one would not expect a Presidential candidate to
say. He said he would
build a wall on the Mexican border and expect Mexico to pay for it. He referred
to a woman as “a piece of ass.” He called Mexican immigrants drug dealers,
rapists, and criminals. He called for a complete ban on Muslims entering the
USA. He publicly expressed his support for torture methods like waterboarding.
He made personal attacks on his opponents, like saying Hillary Clinton could
not satisfy her husband. He bragged about his penis size. He even suggested that if Ivanka were not his
daughter, he would date her. He hinted that he would not come to the aid of NATO
allies if they were attacked – a statement that shocked allies over the world. There are many more.
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| Figure 1. Poll Numbers of Candidates in the Republican Primary |
And yet, despite all
this, not only has Trump won the Republican nomination, he is within 5% of Clinton at the time of
writing, and has even led in the polls briefly – this after both parties have had their
conventions and after Hillary Clinton got the post-convention bounce. Again,
analysts in the media are unable to understand the reason behind the rise and
rise of Trump. Some have suggested that many Americans are being racist and
this is the reason for Trump’s rise. There is some truth in this conclusion, but it is not the entire
truth. Some have talked about Hillary Clinton being a weak, unlikable, and corrupt candidate, and there is truth in this statement as well
– but it is not the complete story. It is not complete because Hillary also has
many advantages over Trump, which were clearly highlighted in the DNC. And yet
Trump continues to rise.
The Democratic National
Convention made it a point to talk about
Hillary Clinton’s “qualifications” for being President and contrasted them with
the Donald’s virtual lack of the same. They ridiculed his un-Presidential demeanour, his misogyny, his
racism, his political incorrectness, his exaggeration of his own abilities and his
covering up of his business failures, and so on. They are completely correct
about all of those. During the DNC, Donald Trump made a statement asking the Russians
to hack Hillary’s email account and retrieve 33,000 missing emails – a statement that appalled many Americans for
involving a foreign and adversarial power in American domestic matters.
And yet, all of that
is irrelevant.
Trump will win, and will win big,
in November. I expect a landslide victory, around 360 electoral votes.
The reason why Trump will win is that Americans do not trust either the Republicans or the Democrats.
In the present circumstances, only an outsider – a Donald Trump or a Bernie
Sanders – could inspire the American voters.
Bernie had a similar rise in the Democratic Party primaries, as can be seen in Figure 2, again from the same Huffington Post source mentioned earlier.
Bernie had a similar rise in the Democratic Party primaries, as can be seen in Figure 2, again from the same Huffington Post source mentioned earlier.
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| Figure 2. Poll Numbers for Candidates in the Democratic Primary |
Bernie Sanders might
have also pulled off a Trump in the Democratic Party, but various factors
conspired to defeat him.
First, he was an outsider – an Independent who
joined the Democratic Party to contest in the primaries. This automatically
meant that he did not get the automatic support that Hillary got by being a
party veteran. This manifested itself in many ways, one of the chief ones being
the fact that most of the super-delegates threw their weight behind Hillary
Clinton early on, a fact that would definitely have had a strong psychological
impact on the Democratic voters in the primaries – that the Party organization
viewed Clinton as a more bankable candidate.
Second, Sanders is a socialist,
which would have turned off many traditional, rich donors away from him,
because the policies he was advocating ran counter to their interests. The fact
that he could still have a substantial war chest was only because of loyal
rank-and-file Democrats, and is a testimony to the strength of the movement he
built. People sometimes misinterpret the fact that he was able to amass this
war chest as evidence that he was not affected by the loss of powerful
supporters. That is a myopic view. One must remember that all the influential
media is in the hands of rich and powerful people; and if they view a candidate
as unfavourable, there are a million ways to undermine his or her campaign.
Power cannot be measured by money alone.
Third, as the DNC email scandal showed, the Democratic Party organization itself was
working to defeat him. The full scale of the manoeuvres against him will never
be known – we know only what is known from the WikiLeaks expose.
The consequent defeat
of Bernie Sanders in the Democratic Primary left Donald Trump as the only
outsider choice. One could argue that many of these disadvantages were shared
by Donald Trump as well – being an outsider and not being liked by many leading
Republicans. But a crucial difference was that Trump was wealthy, and belonged
to the same economic class as the rich and powerful donors who fund both
Democratic and Republican parties. And that, as we will see, makes a
difference.
Globalization and the Collapse of the American Working Class
The rise of Trump (and
Sanders) is a direct consequence of the globalization of business. Since 2000, America has lost as many as 5
million manufacturing jobs. Millions more have been lost in the service sector, such as call centres
and service centres. Not only have the number of American jobs dropped
drastically, the quality of what jobs remain has also
dropped. Many of the
jobs available today are part-time jobs or contract jobs with no benefits, and
many are minimum wage jobs. The available government data on the percentage of
unemployed is also not completely reliable because it does not measure the
large number of people who have completely given up looking for jobs. Home ownership dropped in the second
half of 2015 to its lowest levels since 1967.
In all, it is a very
perilous situation for the blue-collar American.
Why Has This Happened?
All this has been an
inevitable consequence of the globalization of business. It is an inevitable
consequence of capitalism.
Capitalism seeks to
get the cheapest and highest-quality inputs for any business and produce the
highest quality goods and services for achieving the greatest profits for the company
shareholders – mainly the promoters of firms, as they are usually the largest
shareholders.
For decades, Americans
enjoyed very high standards of living relative to the third world. This was
sustainable for a long time because of two reasons: 1. most countries had
barriers to trade, and 2. the technology for conducting international trade
were very primitive.
This meant that
Americans developed technologies in America (for example, the Wright Brothers
building the first airplane), built factories and employed Americans to build
products (like the Ford Motor Company did), and sold cars and other products worldwide
by shipping them abroad. The profits were retained within America, and the
workers who benefited were American. This was true in every country. Both the
workers and the company paid taxes to the American federal government and to
local and state governments, financing the upkeep of public works and public
services.
But then, American
capitalists realized that they could make more profits if their input costs
were lower. Initially, they achieved this by getting the government to
encourage immigration to the US from all over the world. The constant influx of
new labour kept the costs of labour low and kept American manufacturing robust.
However, even this was
not enough, because any workers in America would have to be paid according to
American labour laws, including rules like minimum wage. It would be much more
profitable if American companies could establish overseas operations and employ
workers in foreign countries with much lower wage requirements, as well as
lower environmental standards and worker safety standards. But this came with
two major constraints, and in some cases three.
How Early Barriers to Globalization Were
Overcome
One, products made in
distant countries like India or China needed to be shipped back to the USA for
consumption by American consumers, because America was the largest prosperous
country and consumed the most goods. Transoceanic shipping is expensive and
adds significantly to product cost. In spite of this, for decades, clothes
commissioned by American designers were mass-produced in sweat shops in India,
Bangladesh, and Pakistan, and sold in American malls. The fact that these
workers were paid pennies to the dollar offset the costs of transportation.
Two, communication
between the headquarters in America and the satellite offices in India, China,
or anywhere else were very poor. In the old days, a transoceanic trunk call
would be very painful. Mail would take weeks. For a top executive to fly to the
satellite operation was a costly and time-consuming affair.
Three, in many non-English
speaking countries, language was an issue.
The communication
issue was overcome by rapid advances in communication technology. In 1990, very
few people outside of Universities in the US had email accounts. Today, almost
everyone who is in business worldwide has an email account. Telephone
communication has become ubiquitous and extremely efficient, and the growth in
mobile telephony has revolutionized business. Combine this with the power of
e-mail, and now colleagues in the US and in India can seamlessly exchange
information, edit common documents, and even have teleconferences with
technology that makes you feel the other person is in the same room. So doing transoceanic business has become
much easier.
Language issues do
exist in a lot of countries, such as China, where English is not as easily
understood. In India, it is not a problem at all, as most Indians do study in
the English language. Even in China, people have realized the advantage
of learning English, and the movement to learn English is very big.
The third issue, or
rather the first in my list, which was the issue of transportation costs, also
changed decisively because of decisions by countries like India and China on
liberalizing their economies.
China was a completely
closed economy since the Communist revolution in 1949, until Deng Xiaoping
opened the country to business with the west in the 1980s. He offered
incentives to western companies to set up manufacturing plants in China, so
that Chinese workers would get employment and an income. Over the last 35
years, China has moved from an impoverished country to the second-largest economy
in the world. The economic prosperity has created a booming middle-class with a
huge appetite for consumers goods, cars, luxury items, housing, and the like.
A similar
transformation occurred in India. In 1991, faced with a balance-of-payments
crisis, India agreed to liberalize its economy in return for an emergency loan
by the IMF. 25 years later, India has a staggering 250 million plus
people in the middle class alone – equal to the entire population of the United States – again with a
huge appetite for consumerism. And this is expected to double by 2025.
The net effect of
these changes is that the biggest market for American businesses is no longer
America but Asia. So the old idea of making goods in a China or an India for
America does not make economic sense any more. You needed to make for India or
China. If the main buyers of products were living in India and China, what is
the point of making something in America and shipping it across the oceans and
incurring a huge shipping cost?
So, for American
businesses, making a profit now meant changing the location of their factories.
This is no longer just a question of getting cheap labour. It means having the
manufacturing units where the consumers are. There was no need to ship products
back to the US, since the markets were in the same countries the factories
were.
So American companies
started shipping factories, and thereby jobs, overseas. And since
communications were now excellent, they could manage entire factories in
third-world countries from the US with just a few people sitting in
headquarters in the USA and a few business trips now and then.
Consequences of Accelerated Globalization
All this was (and
still is) true not only for America, but for any industrialized nation, be it
Germany, France, Italy, Japan, or the UK. And it is true not only for
manufacturing, but also for a range of other professions, from software to
medical transcription.
In Bangalore, where I
used to live, there is a place called Electronics City, which is full of companies from over the
world, in every imaginable business domain, having back offices, service
centres, and R&D operations – including GE, 3M, Amphenol, HP, APC
(Schneider Electric), Continental AG, Bosch, and Siemens. Another location in
Bangalore, with bigger units, is Whitefield, full of companies with
R&D operations and technical headquarters. The main software development centre of SAP
is located here, as is the main back-office of Tesco, as are the huge R&D
operations of General Electric, General Motors, Daimler Benz, Dell, Shell,
Schneider Electric, UTC, and a host of other companies.
The southern city of Chennai is the biggest automotive
hub in India. It is
home to the manufacturing operations of several foreign automotive and
automotive ancillary companies, including Ford, Hyundai, Renault, Mitsubishi,
Nissan, BMW, Daimler Benz, Datsun, BorgWarner, Caterpillar, and Visteon, to
name just a few.
Pune, where I live today, is another
major hub for the automotive industry in India. Every major automotive company and automotive
ancillary company has a presence here, from GM to Fiat to Piaggio to Daimler
Benz to JLR to Volkswagen to John Deere. A big reason for this is that sales of
cars in India are booming because of the growing middle class. John Deere sells
its tractors to the huge farming sector in India.
Local governments are
keen to have foreign investment in their states, and so offer plenty of
incentives to western companies, such as tax holidays and cheap land to help
them establish their units in India. This makes opening overseas manufacturing
facilities extremely profitable for American companies. And it shows in their
balance sheets and in their stock prices. If you were working for a company
like Ford and had shares in the company, your shares probably appreciated when
they laid you off along with 2000 of your fellow-workers, as they closed down
the Detroit plant in which you worked, and relocated the plant to Pune.
Each time a company
lays off people, shuts down factories in the USA, and moves manufacturing to
India or China, the company’s bottom line looks better, because it has traded
expensive workers for cheaper workers, and it has established a factory closer
to the intended market, reducing its labour and transportation costs. And of
course, the Dow Jones Industrial Average (DJIA) will probably go up as a result
of these transactions which may have resulted in the company becoming “leaner.”
But it is an easy calculation as to whether you are better off by your stock
portfolio appreciating $10,000 this year or by not losing your job.
The stock market is
one of the common distortions of reality that is highlighted extensively in the
media. People are made to think that the country is doing well when the NYSE
index is higher, though all that number does tell you is how profitable companies are. The idea that profitable companies translate to more prosperous citizens is a major and deliberate
misconception that mass media actively indulges in perpetuating. This is true
worldwide. In India, too, the media obsessively focuses on how the Indian stock
exchange index, the SENSEX, is doing, tracking its performance intra-day,
weekly, monthly, and yearly. A layoff, which actually means misery for the
people laid off, usually helps a company shed unprofitable businesses and
employees, and boosts the NYSE (in the medium term; in the short term, the
company takes a hit because it needs to make severance payments to the
employees who are laid off). The public trading of company shares gives rise to
the illusion that the public at large benefits from a bullish market; in
reality, only a small percentage of the total stock is traded by common people,
the rest being held by very wealthy investors. So while the DJIA going up will
push up your stock value, it helps rich investors orders of magnitude more than
someone from the middle class.
Loss of jobs sets up a
vicious cycle for the country as a whole. If people do not have jobs, or have
low-paying jobs, they cannot pay as much in taxes into the system. If the
government does not earn revenue in taxes, it becomes hard for it to provide
services.
Of course, the
government does earn in corporate taxes, and this could make up for the
shortfall in taxes from common people. But how much do corporates pay by way of
taxes? The nominal rate in the US is about 35%; however, due to various
deductions and loopholes in the law, the actual amount paid is much less. In a report published this April, the US
Government Accountability Office made the following points:
1.
At least
two-thirds of all active corporations had no federal income tax liability.
2.
Among
large corporations (more than $10 million in assets), 42.3% paid no federal
income tax in 2012.
3.
Of those
large corporations whose financial statements showed a profit, 19.5% paid no
federal income tax.
4.
Even
though the statutory rate for corporate tax is between 15% and 35%, between
2008 and 2012, profitable large corporations paid only an effective rate of 14%
on their pre-tax income.
Does it make sense
that profitable companies should pay no taxes at all? Or that they should pay a
tax rate that is significantly lower than what many salaried workers pay? What
this means is that there are clearly many loopholes in the tax code which allow
companies to legally evade paying tax.
Globalization and the
relocation of American manufacturing has not happened by accident or by a
natural process of economic evolution. Quite to the contrary, they have been
actively promoted by the government in Washington at the urging of corporate
bigwigs. The example of job exports to India will make this very clear.
How the American Government has Lobbied for
Jobs to Be Exported
India was
traditionally (since independence in 1947) a socialist government, which means
that it did not believe in the free market. Instead, India believed in tight government control on
every sector of the economy for a very long time. The government decided how much of a product
could be produced, which products be produced, and where they could be
produced. This changed in 1991, when India
liberalized and opened up its economy, forced by the US-dominated International
Monetary Fund (IMF), which agreed to loan India money to solve its
balance-of-payments crisis only if India agreed to its conditions.
But the story does not end here. In spite of the push, India only partially liberalized its economy. But even this half-hearted liberalization allowed a lot of American companies to come in and set up shop, mostly in joint ventures with Indian industry, because the rules at that time were still quite restrictive and did not allow American companies to fully own Indian subsidiaries. But American companies immediately saw the huge business potential of opening shop in India, and have been lobbying the US government to put more and more pressure on the Indian government to keep opening up its economy.
But the story does not end here. In spite of the push, India only partially liberalized its economy. But even this half-hearted liberalization allowed a lot of American companies to come in and set up shop, mostly in joint ventures with Indian industry, because the rules at that time were still quite restrictive and did not allow American companies to fully own Indian subsidiaries. But American companies immediately saw the huge business potential of opening shop in India, and have been lobbying the US government to put more and more pressure on the Indian government to keep opening up its economy.
India has come a long
way since 1991, and most sectors of the Indian economy now allow companies from
foreign nations like the USA to open fully-owned subsidiaries in India. Yet
American business continues to lobby the US government to operate even more
freely in India. When President Obama visited India
on a state visit in 2015, he was accompanied by 150 top executives of American
companies seeking
closer business relationships with India and more concessions from the Indian
government.
Since the Obama visit
in 2015, the Modi government in India has further reduced restrictions for
American companies (and companies from other countries) to establish operations
in India. One important change is the fact
that now American defence companies can start 100% owned subsidiaries in India. The same is true of civil aviation. These
will be established not only to sell defence equipment to India, but also to
use Indian labour and engineering skill to produce aircraft, tanks, and other military equipment that will
be sold to other countries as well, including even possibly the USA. This has
happened because of concerted lobbying by companies like Lockheed Martin,
Boeing, and others with
the American government in order that their profitability can improve.
And Obama has
delivered for American industry by pushing for and obtaining concessions from
the Indian government. What does this mean for Americans? It means that Boeing
can now build airplanes in Gurugram in India (as an example location) in
addition to Seattle, and sell those planes to India as well as to other
countries in Asia, Europe, and Africa from its India plant. It means that Lockheed Martin can set up a plant
in Pune to build F-16 aircraft and export it to customers worldwide, in addition to the Indian
government.
What does that mean for the employees of Boeing in Seattle and the
30,000 employees working there? Or for the employees of Lockheed Martin who
make the F-16 aircraft at its plant in Texas? For a few years, probably
nothing. But once the management of these companies is able to confirm that the
plants in India are successful and working efficiently to produce the same
quality airplanes that are being made in their American operations, they would
have to downsize their American operations. Lockheed Martin has already
indicated that it intends to close down its American plants that currently
manufacture the F-16 if
it can move those factories to India. There is no economic sense is maintaining
an expensive operation in the US when one can make the same product for a
fraction of the cost in India. Apart from the key management and the top
technical staff, who would still be based in the US and directing all
operations in India, most of the blue-collar American workers would probably be
given pink slips.
None of this is a
secret, and this does not involve only the President. US lawmakers –
Congressmen and Senators – have actively lobbied the President to help open up
India more to benefit American businesses. In a letter to President Obama before his
2015 visit to India, several American Senators urged the President to create
more favourable conditions for American business in India, also noting the
potential of such actions to help create more jobs in India:
They also focused on the job-creation potential of such liberalisation, they said, noting, “It also has the potential to increase competition in India by providing less expensive goods and creating 250,000 jobs directly, with the potential for more than 1 million jobs in customer service, IT, logistics, transportation, and administration by 2021.”
They also focused on the job-creation potential of such liberalisation, they said, noting, “It also has the potential to increase competition in India by providing less expensive goods and creating 250,000 jobs directly, with the potential for more than 1 million jobs in customer service, IT, logistics, transportation, and administration by 2021.”
So the export of jobs
outside the USA has been actively promoted by American lawmakers, both
Republican and Democrat, with the express intent of helping American
businesses. But helping American businesses is not the same as helping ordinary
Americans. In fact, there is a direct contradiction between the two when it
comes to globalization. Because of the high wages of American labour relative
to the developing world, helping American-owned businesses with globalization usually
means getting rid of expensive American jobs.
Helping American
companies, even at the cost of ordinary Americans, is not unique to Obama.
George W. Bush did the same thing, as every American President has done. When Bush visited India in 2006, he also
brought in a huge contingent of business executives with him to expand opportunities for those companies to
establish base in India. Helping big business is not a partisan issue.
So why do American Presidents,
Congressmen, and Senators act so explicitly against the interest of American
people and in the interest of American businesses? Because it is campaign
contributions from American businesses that help parties finance expensive
elections. In return for all that cash, elected representatives and Presidents
have to pay them back, and the way to pay back big business is to do whatever
possible to help the businesses prosper – by creating the right conditions in
the USA or elsewhere in the world – even if that ends up hurting ordinary
Americans.
It should be
remembered that corporations in today’s world have no national loyalties. Most
global multi-national companies earn a significant portion of their revenue
from overseas operations. A US News report from 2011 stated that, for example, Exxon-Mobil earned 45% of
its total revenues of $342 billion from overseas operations, and GE earned 54%
of $149 billion from overseas operations. The figures for several other
prominent large corporations, from the same source, can be seen in Table 1.
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| Table 1. Percentage of Total Revenue From Overseas Operations for Major US Corporations (from 2011) |
Looking at this table,
could anyone say with a lot of conviction that Dow Chemical, IBM, Intel,
McDonald’s, GE, and Nike are truly “American” companies? Their loyalty is not
to America, but to their shareholders; their only sacred duty is to ensure
year-on-year profits to their shareholders, increase in share values, and
greater dividends. Even if their CEOs are American (not always the case), the
most they can do is express sympathy for the American jobs that are being
slashed as the company looks to greater and greater profitability for that
amorphous mass called “shareholders.”
Why Voters
Support Bernie and Trump
With that background
on the consequences of globalization, we can come back to the main premise of
this article: why do I think Trump will win, and win big, in November?
Since 2000, there have
been four American Presidencies – two terms of Mr. George W. Bush, and two
terms of Mr. Barack Obama. Time and again these Presidents, along with their
party lawmakers, have told the American people that they will bring back jobs
to America.
Time and time again, they have
lied. The jobs will never return.
And now, finally,
after 16 years of job losses, the American people have figured out they were
being lied to. This was the reason for the Occupy America protests as well –
people realized that the policies of this country were being set to help the
top 1% of Americans prosper, not the remaining 99%. More realistically, it is
the top 10%. Needless to say, these are the wealthy people who benefit the most
when American industry is helped, and when stock prices go up. The top 1% own
35% of all stock in the US. The next 9% own nearly 46% of the total stock,
leaving only 19% for the remaining 90% of the people. This can be seen in Table 2 below.
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| Table 2. Distribution of Wealth in the US by Type of Asset |
Political parties need
to cater to those who help them win elections and run campaigns. Ultimately,
money talks, and the parties pay back by helping businesses.
For the disenchanted
and unhappy American middle-class and lower-class workers, what remedy do the
mainstream parties have? Nothing whatsoever.
This is what has led
to the rise of Donald Trump and Bernie Sanders – disillusionment of the
middle-class American with the mainstream parties. Both of them, as outsiders,
correctly identified the main problem – free trade. It is free trade that has
brought America to this pass. And free trade is an essential component of
capitalism.
But there is one more
reason. America has been a victim of its own success. It is because it was so
successful in the days past when it was insulated from the world that it is now
too expensive a destination to do business in a globalized world.
Why are Republicans
and Democrats unable to provide a solution to the problem?
Because there is no good solution
for ordinary Americans.
In a free market
system, the only way for things to turn is for an equilibrium to happen. Right
now, things are far from equilibrium. There are people in America who live in 2000
sq. ft. homes and still want more while making $60,000 a year, and there are
people in India who live in 400 sq. ft. homes and are grateful for $5,000 a
year. When the gulf is so great, jobs will
move from the US to India, China, Vietnam, Romania, and a host of other
countries until the world is more equitable, unless artificial barriers are
imposed. The fact is that if free trade were allowed to continue, the process
will take perhaps 20 or 30 years to equilibrate. And for that long, things are going to be bad in America. The
American standard of living will need to drop and the standard of living in the
rest of the developing world will have to rise, until they reach the same
level.
No American politician
has the guts to say this bitter truth to the American people. American leaders
have floated ridiculous and unrealistic solutions to what is (in the short
term) an unsolvable problem. It is understandable, though – no politician will
ask for voters to elect him while saying, “Things are going to get worse for
you.”
One example of an
unrealistic solution was when President Obama said in a speech that the way out for Americans was to excel
in math and science so that students in Beijing and Bangalore do not
out-educate them. The
flaw in this speech is that it is not that Indian or Chinese kids are particularly
smarter than American kids. There is a bell curve for intelligence in any
country. What American businesses get by coming to Bangalore is not smarter
students necessarily, but a much larger talent pool. India has a population of
1.2 billion people, as against 250 million Americans. That means more
engineers, more scientists, etc., merely from a numbers perspective. And this
is the case today, when many Indians do not have proper access to good
education. As India’s prosperity improves, this is only going to get better for
India. So right now, the ratio of educated and skilled Indians to Americans will
be less than the 1.2/0.25 ratio, but it will get there eventually. And it will
only get harder for Americans then.
The solution is not,
and cannot, be for Americans to get more educated in math and science. These
things cannot be forced. In any population, there are only a certain percentage
of people who will do well in math, science, and engineering. India will have
more skilled scientists and engineers in the long run simply because it has a
bigger population. You cannot force an artist or a cook to become a scientist.
But yes, economic competition can incentivise someone to go for science and
engineering. That is what has happened in India. Engineering has been seen for
decades as the means to a good life, and so most Indian students try to become
engineers. But the problem in the USA is not that there are no engineers for
the jobs there; the problem is that the high standard of living in the USA has
made them unaffordable for companies to hire them.
Do the
Candidates Have Solutions to the Problem?
So, do the
“outsiders,” Trump and Bernie, have solutions to this problem? They did
identify it, but what is the solution? Can we find the answer in their
positions (I only discuss the published positions dealing with the export of
jobs)?
Donald Trump’s Proposed Solutions
Let us first examine Donald Trump’s positions, because they are much easier to analyse:
1.
Build a
wall on the Mexico border. Like I said, the Trump part is going to be easy.
First of all, it won’t be that easy to make Mexico to pay you, and second, you
cannot stop the remittances. People will find ways. There will be a huge black market.
Third, even if you did build that wall, people will find ways to smuggle
people. There are already miles of barbed wire, watch towers, searchlights, dogs,
and lots of police. It has not stopped illegal immigration. This is a
hare-brained idea.
2.
Reforming
the US-China trade relationship. The details contain a lot of adversarial
language, but they fail to understand the key issue: US businesses are going to
China because they find it lucrative, despite
all the problems that Trump highlights. For example, Trump talks about how
China forces companies to part with their IP rights and how this is unfair.
True, but what does it tell you when China informs companies of this
requirement up front, as a condition
for investing in China, and companies still go in? It means companies know all these
things and still think investing in China is a good deal. As for lax labour and
environmental standards – yes, stopping that will make labour in China costlier
and can make American companies re-calculate the cost of doing business in
China, but good luck trying to get China to comply. Environmental change in
China will not happen because of external pressure; it will happen once the
prosperous middle class in China, having sated its immediate consumerist needs,
starts to think of quality of life issues, such as Beijing’s polluted air and
its effects on their life spans.
All in all, utterly
worthless ideas. But Trump has skilfully turned this debate around and found a
scapegoat for America’s problems: immigrants. He has channelled Americans’
frustrations about their economic condition into anger against immigrants,
because that is a problem he can suggest solutions to. It is like replacing a
difficult question in an exam paper that you don’t have an answer to with an easy
question that you can answer. He has over-simplified the problem and turned it
into a war against “the other” – be they Mexicans or Muslims. It is a smart
strategy, because the solution is easy to grasp.
Many have complained
that Trump has led to the rise of racism in the United States. But that would
be putting the cart before the horse. Trump did not make the US a more racist
country. The fact that Trump’s racist ideas have traction tells us that he is a
person in the right place at the right time. The problem is that America has become more racist. This is not a surprise. A country
that is prosperous will be more tolerant of others and be willing the share the
wealth. One that is in economic crises will be angry, be willing to blame
others, and become more intolerant. And that is what has happened.
Bernie Sanders’ Proposals
Let’s come now to Bernie, because the man has clearly put more
thought into his proposals:
1.
Sanders
does get the corporate tax theft, and proposes to be stricter about this. I
believe this is probably why he lost in the primaries – the big corporates who
fund the Democratic Party would never approve of a man like Sanders.
2.
But the
corporate tax reform, while it might give the government more money, does not
address the jobs problem. What has Sanders to say about that? Well, he has an
FDR New Deal-type plan to revive the economy through massive public spending.
Not a bad idea.
3.
Go back on
trade deals like NAFTA, etc. Not a practical idea. If the US went into
isolationism, American corporations would collapse. Let’s take an example. Let
us say that GE pulled out of the world and stuck to America and only hired
American workers with their high wages. Siemens, one of GE’s biggest
competitors, being a Germany-headquartered company, does not follow suit. What
happens? Siemens continues to have its plants in India and China, producing
goods much cheaper than GE. GE becomes unprofitable and shuts down, and all its
employees are out of a job. You cannot put the free trade genie back in the
bottle. Free trade cannot be ended until everyone
agrees to end it and go back into their isolationist bubbles, and that
clearly is not going to happen.
So both Trump’s and
Bernie’s ideas on getting the jobs back are unreasonable. On most other issues,
Bernie is a lot more sensible and his positions are well thought-out and
well-argued.
Hillary Clinton’s Solutions
For completeness, let
me also bring in what Hillary Clinton has to say about this issue:
1.
A $10
billion investment to help manufacturing in the US. Businesses that take part
will pledge not to ship jobs overseas.
2.
Make China
behave (similar to Trump’s idea, which we have already discussed.)
3.
Tax
incentives for hard-hit communities.
4.
Crack down
on companies that ship jobs overseas.
5.
Create
incentives for companies that create jobs in the US.
6.
Create
apprenticeships and training to improve American manufacturing skills.
Seriously, who writes
this stuff? You probably noticed that I had very few
comments. What do you comment? This is such vague stuff that it is mostly not
worth commenting about – still, I’ll try.
Okay, so you give me
money so I don’t ship jobs overseas. Are you going to compensate me adequately
to the extent that my competitor is saving by operating a factory in India or
China? How long will that work? Plus, if you do that, how different are you
from China? How will you defend yourself in the WTO? After all, your complaint
against China is that it gives its home-grown companies unfair advantages. How
different would this be?
You are going to
“crack down” on companies that ship jobs abroad to stay competitive? Then what?
Force them to operate in the US and be uncompetitive? And eventually shut down?
Are you even thinking about the economics of this thing? If China is giving
unfair advantages to companies there, you cannot make them stop. You have no
leverage. You stop your companies from dealing with China, you are only
disadvantaging them. The most you can do is complain against China in the WTO.
The US is already doing that, and that takes time. It is hard to fight China on
trade. China is very powerful economically. If you try things like sanctions,
they have plenty of ways to retaliate.
And American
manufacturing skills are not the problem. There is nothing wrong with American
manufacturing skills. They don’t need specialized training. This is a problem
of economics, not skills. The Chinese are beating the Americans not because
they are more skilled than the Americans. It is because they are willing to
work for much lower wages. Often, their skills may not even be up to American
standards. And they are still worth it because of their low cost.
So Hillary is clearly
clueless. This “manufacturing plan” seems to have been written only to tick off
a box – so she can say “I have a plan.” But I kind of expected that, because
that is the lie that the American people have figured out by now. That neither
the Republicans nor the Democrats really have a plan. They come up with nonsense
like Hillary did, and do not have the guts to level with the American people on
just how serious the problem is and how there is no real solution.
Why Trump
Will Win
So if all the
candidates’ plans to stop the basic problem of the American economy – the
export of jobs – are unrealistic, why are Americans in support of Trump and
Bernie?
Because, having been
fooled by both the Democrats and Republicans, the American public now has deep
distrust of both parties. At this point, it is not about logic. It is about
emotion. Ordinary people don’t have the time and energy to analyse every
position and figure out if the candidate is talking nonsense. Beyond a point,
they go with emotion. At this point, only an outsider can win. Hillary is
untrustworthy because she is part of the same establishment that has created
the status quo and fooled them into thinking there is a solution where there is
none. That only leaves Trump.
Had the Democrats
voted Sanders as their nominee, he would have the same advantage that Trump
has, of being an outsider. Most of his ideas are sensible, with the exception
of pulling America out of free trade agreements. That one can never happen.
With Sanders as a nominee, the Democrats might have had a reasonable chance of
winning the Presidency. But with Trump as the nominee, it is clearly advantage
Trump. The strike against Hillary is that with all that experience in government,
she could not solve these problems in spite of being in the establishment.
Trump may talk
nonsense, but at least he is not trying to bullshit people with management
mumbo-jumbo like Clinton; and he is untested in politics, so there is no record
on which to attack him. In fact, the more outrageous he can be, the better for
him, just to draw the distinction between him and an establishment candidate. I
strongly suspect he is being deliberately outrageous to make this point – using
blunt and coarse language to convey the impression that he is a man who says it
like it is and does not sugar-coat his responses. And more and more people are
loving it – the idea that he may be rude, crude, and definitely not a prude,
but that he is honest. (I am talking about the image he is projecting, not the
reality.)
To add to all this are
the already well-discussed issues like Hillary’s basic un-likeability, her
email scandal which will keep haunting her, her corruption scandals with her
husband, and the fact that, very likely, the fact that Sanders Democrats will
not forget the way their candidate was out-hustled in the primaries, and in any
case do not see Hillary as being able to deliver on their agenda – as a person
who has sold her soul to the big corporates.
If all of Sanders’ supporters
were to stay home on Election Day, it would hurt Hillary a lot more than it
would hurt Trump if all of Ted Cruz’s and John Kasich’s supporters stayed home.
A lot of this is going
to be about who can get the vote out. And I doubt if Hillary can get the
Sanders Democrats to come vote for her in sufficient numbers. I wouldn’t blame
them. This is a demoralized electorate.
One of my friends said
to me that Trump could not win because “fear can only take you so far.” She was
referring to fear of Muslims, of Mexicans, etc., that you can hear in the Trump
rhetoric. But I’d like to turn it around and tell Hillary the same thing: Fear
– fear of Trump – that voting Donald Trump in as the President of the USA will
be a catastrophe and utterly destroy America – will only take you so far. The
British realized this truth in the recent Brexit vote. The Remain campaign
indulged in as much scaremongering as they could – on how leaving the EU would
be disastrous for the UK and sink the economy – and still the Leave campaign
won handily, by a 52%-48% margin. The same thing is true here. Hillary does not
have a positive agenda on how to solve the problems America is facing. Scaring
voters about Trump only goes so far.
And all that is why I predict a
landslide victory for Donald Trump in November.
360 Electoral Votes.
I realize that what I am predicting now is going against the tide. Most people expect Hillary Clinton to win the Presidency in November. To illustrate, Nate Silver's highly respected website, Five Thirty Eight, has put Donald Trump's chances of winning at the time of writing at 27%. However, that number is based on the current percentages that support Trump and Clinton, and how things have played out from this point in past elections. I do not believe that past elections are a good guide to the results this elections, because I believe the fundamentals have changed, as I have discussed in this article. That is why I am being bold enough to offer my prediction - I believe the political fundamentals are conducive to a Trump victory in November.
I realize that what I am predicting now is going against the tide. Most people expect Hillary Clinton to win the Presidency in November. To illustrate, Nate Silver's highly respected website, Five Thirty Eight, has put Donald Trump's chances of winning at the time of writing at 27%. However, that number is based on the current percentages that support Trump and Clinton, and how things have played out from this point in past elections. I do not believe that past elections are a good guide to the results this elections, because I believe the fundamentals have changed, as I have discussed in this article. That is why I am being bold enough to offer my prediction - I believe the political fundamentals are conducive to a Trump victory in November.
Acknowledgments
I would like to thank
my wife, Sandhya Srinivasan, for reading a draft of this article and giving me
her feedback. I would also like to thank Swapnil Pathare for some helpful
discussions on a few select topics that have helped make this article clearer.
*********************************
Disclaimer: All the opinions expressed in this article are the opinions
of Dr. Seshadri Kumar alone and should not be construed to mean the opinions of
any other person or organization, unless explicitly stated otherwise in the
article.
