Economy and Trade: the next 20 years

There is a shift afoot.

The election of Donald Trump means a change is coming in economic thinking at the policy level. Globalization has defined the trading order for the last 25 years or so, but like a rusty freighter it is starting to show its age. Assembly line workers who saw their jobs outsourced have always felt cheated. Replacement jobs and training haven’t been there for laid off men and women hoping to replace big incomes. It isn’t just Donald Trump who is pulling back from economic entanglements; the Europeans are seeing a rising tide of nationalism. This is bound to change the international thinking on economics and determine trade policy for the next 20 years.

Economics is theory, the big picture stuff. It won’t explain why cotton prices suddenly jumped up in June or why steel prices dropped in December, that’s business. It can give you scenarios where prices might swing, or historic trends where political and social pressures existed on the market. Economics is a snapshot of the existing trading system and a historic record of how it got that way.

It isn’t a surprise that it’s changing; the dismal science is due a makeover. Economic Nationalism is on the rise in America and across Europe. Economic Nationalism is a phrase used by Steve Bannon (one time Trump advisor) to explain his view that the U.S. government should support American companies through tariffs, subsidies, tax breaks and quotas at the expense of other countries. So basically everything once thought of as anti-competitive Steve is for. Did you hear the president’s inaugural speech in January? That was Bannon. He wrote it. It pitted ‘elites’ against regular folks, politicians against citizens and nations against nations. It wasn’t exactly nasty but it laid out a case (in some minds) for a government that hasn’t valued its citizens. It has chased after foreign investment and low wage workers.

 Like multiple theories of economics though, there is some good and some bad.

Why do protectionist policies lead to sluggish growth? because any business or industry that isn’t pushed to keep prices low gets lazy. Companies that rely on regular installments of federal money tend to relax their research and development side and pay higher wages. The downside is Uncle Sam just took away the small firm’s ability to compete. 

The wild tiger is more likely to hunt than one in the zoo.

I always go half-way with Bannon. Foreign countries like China play a different version of trade than we do. The economic models we learned in school that show how trade benefits everyone are seriously lacking. You remember the Ricardo ones don’t you? Country A has sheep and makes wool clothing, country B grows gapes and bottles wine. Instead of country A growing grapes and bottling their own wine and country B doing the same with sheep and wool, they trade. This trade creates an advantage for both nations since they specialize and gain the comparative lower costs.

The model works well on a mathematical level but there are too many missing pieces that throw off the balance. The missing pieces get chalked up to ‘elites’ benefiting themselves at the expense of hard working Americans. But it's really tough to draw a straight line between jobs going to China and long term unemployment in the US. The gains are spread out, more diffuse. They mean lower prices at Target and Kohls but lower wages for workers. Gains for some, losses for others.

 It’s a tough sell for politicians: “Vote for me and you’ll probably lose your job but don’t worry, the gains will be marginal and spread out.”

Trade is anything but fair. Modern economies have all sorts of clever ways around straightforward competition. Tariffs aren’t used a lot anymore since a lot of work has been done to eliminate them. Countries still use subsidies to prop up their industry. Agriculture in the US couldn’t survive without them, neither could Chinese steel manufacturers or Japanese car makers. So the Economic Nationalists are right about foreign cheaters either helping their companies or propping up the currency.

“Why bother playing by an old trade model where we get screwed every time? How about instead we help our own companies first and trade later”? He figures.

Mainly because in order to grow big companies need overseas markets and blocking tires from Mexico means they’ll refuse to buy machinery from us. Also, I don’t think Steve realizes that certain manufacturing jobs don’t pay what they used to. Everyday market forces make it impossible. Foreign car companies like Honda, Nissan and Volkswagen started getting better and cheaper, right around the early nineties. Americans began buying them and putting a squeeze on Detroit. Putting up tariffs on Japanese and Korean car makers would have held off the onslaught for a while, but GM and Ford couldn’t compete overseas forever. Legacy costs also hampered the American companies; paying ruinous fees to retired workers would have undercut their ability to be competitive anyway. 

Banon and Trump are right to be skeptical about Chinese business and current iterations of ‘free trade’. For both Republican and Democrat lawmakers any international trade deal was considered good, because ‘free market’ equals good—or something like that. 

The Trump version of economics, which is really Bannon’s, insists companies look first ‘in country’ for tax deals and breaks before leaving for a low wage environment. As to how the policy toward economics will be affected it remains to be seen. Most supporters of globalization (free trade) sound a little humbler these days as populist politicians get elected all over the Western world. They admit that the benefits of trade have been gradual and slow while the downsides have been immediate and ugly—losing a job always is. Globalists aren’t ready to change their belief in the free market (neither am I) but admitting to missteps is a start. Agreeing to reconsider, and walk away from, large scale trade bills is a good move.   

"If Grace than Deeds"

Depression is a strong word for occasional ‘funks’ in life that drag us down.

 It suggests clinical, medical problems that demand attention and action. I fall into these shallow pits occasionally and have found the quickest way out is through selfless behavior, good works. No this isn’t one of those “So what is your biggest weakness?” interview questions where I get to pretend my weakness is actually a strength. “Well you know..I just love everyone so much, I don’t know when to say no.” This actually helps. Focus on someone in need. Any need. Just get involved with helping others and stop focusing on self. That clears up the funk clouds quicker than anything.

Good works allow others outside the faith to see a healthy example of love. That love exemplified through Christ’s death and resurrection is the goal, salvation is the point. Lead them to Jesus.

Good works have gotten a bad rap the last couple of years. Works are constantly juxtaposed with grace, as if humans must choose between them. Like the scene from Indiana Jones and the Last Crusade where a totally subjective grail choice determines the drinker’s fate. If it’s been a while since you’ve seen it, Donavan the antiquities collector goes for the shiniest most bejeweled cup to drink ‘eternal life’ from. He sips from the wrong one mistaking it for the holy grail. Tthe Knight deadpans “He chose poorly” as Donavan’s rapidly aging body decomposes seconds after his sip. He got one chance and picked the wrong cup.  

We think our choice is limited to accepting grace and eschewing deeds. Grace and deeds are not mutually exclusive, they exist together. One is a gift and the other constitutes action--if grace than deeds.

 Ephesians 2:8-9 “For it is by grace you have been saved, through faith-and this is not from yourself, it is the gift of God—not by works so that no one can boast.” (NIV)

Paul uses ‘deeds’ so Christians see an obvious contrast between something offered and something earned. He is saying that no one can earn it so don’t even try. Good works are still an essential part of Christianity and witnessing to the lost. Again, the best way to show the character of our Father is through good works and generosity. Don’t imagine deeds aren’t critical to winning souls and touching lives.

James 1:27 “Religion that is pure and undefiled before God the Father is this: to visit orphans and widows in their affliction, and to keep oneself unstained from the world.” (ESV)

There can be no doubt that ‘widows and orphans’ falls comfortably under the works category. Works are encouraged in order to show the Father’s love. Just don’t imagine works can be traded in for credit at any time. Salvation through grace is free. Isn’t that wonderful?

The knowledge alone should get you out of your funk.

Overgrowth

I like to prune my landscaping area for overgrown weeds.

Actually I don’t like it but I have to, if only for a couple times a month. I am that guy who really wants a decent looking yard with trimmed plants and hedges but balks at having to do the work. Once I start it isn’t so bad to keep going but the work is never done. It seems to get worse every year. I realized this today while pulling weeds out of the exact same spots as always. I’ve never put in the time to prevent them from coming back. Not really. In one case I dug a small trench on the back side of the fence to prevent crabgrass from jumping from the lawn to my evergreen area.

 Oklahoma has these strange weeds that grow horizontal instead of straight up. If they grew straight up it would be easy to yank them right out of the ground. Because they run along the ground it’s impossible to see them until they’ve grown a couple feet long. They get through mulch and wrap around plants and bushes, entangling themselves and making it tough to pull out. Keeping them away requires serious dedication because they grow without water and seem to thrive everywhere. 

The quick fix is to rip out the existing weeds and wait till the plants are covered again next month. A better way is to put in place barriers that prevent encroaching brush from taking over. It takes longer though and requires more attentiveness. It’s worth it but mostly I just don’t like working that hard.

 Keeping my yard nice takes more diligence than I often can muster. The Christian life feels this way too often. Those unattended areas of life become havens for all types of unwanted growth. Zones that get ignored, un-managed and open to influence become the areas overrun with messy problems. Only when we put real effort and attention into stopping the weeds of life from getting through do we make any progress. Most of us get lazy though. We deal with the results of overgrowth. We apologize for angry outbursts aimed at family; we break off disastrous relationships after serious emotional damage. We clean up the mess. We clean up the mess because it’s easier than preventing the problem. It takes work. We hate work. 

Many get comfortable dealing with the overgrowth convinced it isn’t a big deal. “Everyone has issues, after all” we tell ourselves so we can keep going without putting in any real work. It isn’t until the weeds become unmanageable and we get exhausted with the process that we make a drastic change. We dig a trench, cut the grass, remove excess roots and pay attention to unwanted growth. 

Only by setting a plan and sticking to it with all the diligence we can muster does our life begin to change. Real change. Change that sticks. The kind others see and learn from. One effective lesson from Alcoholics Anonymous is to do a ‘fearless inventory of ourselves’ in order to progress. Another way to say that is to do an honest assessment of past behavior and evaluate potential trip wires. This doesn’t just have to be about drugs and drinking, or even alcohol related triggers. Chances are most of us need to clean up areas where behavior often gets out of control. Like the weeds it comes back stronger if ignored. Be targeted and honest about the problems.

Tempted to rob the bank? Maybe use the drive through instead—and leave the ski mask at home. Have trouble staying faithful to your wife? Keep away from nude beaches and massage houses on your ‘cultural appreciation’ trip. Seriously though, for every hang-up there exists ways to avoid traps and keep the weeds from getting out of control.

Besides, we aren’t alone.

“I have told you these things, so that in me you may have peace. In this world you’ll have trouble but take heart! I have overcome the world.” John 16:33 (NIV)