Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Jeff Gundlach thinks that a Stocks Bear Market has started. Is he Right? - 18th Dec 18
Gold’s Not An Investment – You Won’t Get Rich - 17th Dec 18
Stock Market At Medium-Term Lows, Which Direction is Next? - 17th Dec 18
This Stock Will Drive America’s 5G Buildout - 17th Dec 18
Stock Market Turn In The Tide - Have a Happy Bear Market! - 17th Dec 18
How A NASA Scientist Could Trigger The Next Cannabis Boom - 17th Dec 18
iShares Russell 2000 IWM Leading Stock Market Decline - 17th Dec 18
Where is the Dow Stock Market Santa Rally? - 17th Dec 18
With Weaker Climate Consensus, Expect Elevated Climate Change - 16th Dec 18
SMIGGLE Advent Calendar 2018 UK Contents - What You Get Look Inside Review - 16th Dec 18
Is there a Lump of Coal in Santa's Stock Market Bag? - 16th Dec 18
This Market Will Drive Gold in 2019… - 16th Dec 18
Gerald Celente:Central Banks Can’t Stop a 2019 Debt Disaster - 16th Dec 18
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Why Protectionism Won’t Save Unskilled Labor

Economics / Employment Aug 15, 2016 - 01:48 PM GMT

By: John_Mauldin


I just read a policy paper from the German Marshall Fund of the United States. It defends the present trade model. The authors do a good job, but in the process, they describe the problem.

Take a look at this part. (I bolded a few key points.)

The global economy is no longer about making a product in one country, and shipping and selling it somewhere else. It is about complex supply chains that weave together activities all over the globe, supported by investment, technology, and skills that know no borders.

Creating an even playing field is no longer just about reducing external tariffs and quotas, but about coordinating and sometimes revising what have traditionally been seen as domestic policies to “stabilize” agriculture, promote national culture and identity, encourage innovation, protect health and safety, and ensure citizens a certain minimum quality of life.

Critics of the Trans-Pacific Partnership (TPP) argue it is no mere “trade” deal, and they are right: more accurately, it is a package of integrated economic policies that will increasingly fuse several national economies into a single marketplace.

Here’s the issue with global deals like TPP. While they may be good for economies as a whole, citizens see that the “good” is unevenly distributed.

That’s why Trump calls them “a job and independence threat.”

After supporting the TPP for years, Clinton now says she won’t sign. Both candidates know the problems caused by the uneven distribution of globalization’s benefits over the last 30 years.

Globalization isn’t the only thing causing people to lose their jobs.

Robots are eliminating jobs and businesses

We are actually in the process of bringing manufacturing back to the US. But just because factories are coming back doesn’t mean jobs are.

A factory that relies on robots has an edge if it is near its markets. When Foxconn in China puts robots in a factory and reduces the number of workers from 110,000 to 50,000, you know the labor arbitrage game is coming to an end. And that’s just one factory.

Self-driving trucks and cars will clearly affect truck and taxi drivers. But think of the impact on insurance companies. Estimates are that revenues will drop by as much as 75% in the coming decades. And we won’t need as many small local businesses to fix vehicles after accidents.

Many related industries will see disintermediation (the elimination of middlemen and the displacement of labor). And that’s just one industry.

Workers and businesses have to adapt quickly to survive

The changes that occurred as work shifted from the family farm to urban manufacturing took place over decades and generations. While the move was hard, there was time to adapt.

Today, things change ever faster. And most of this angst-producing change has happened in the last 30 years.

Adapting to such rapid change has been tougher. A surprising reversal of trend in mortality statistics is that white middle-aged males are now dying at an increasing rate due to drug and alcohol abuse and depression.

Disintermediation is doing more than just making voters mad. It is stealing the hopes of significant subsets of entire generations. When your well-paying job goes away and you can’t find another, the loss hits your sense of self-worth along with your bank account.

As whole new industries develop, technology will continue to create jobs. But these are not jobs that will require old skills. Humans have always had to adapt, but the speed at which we must adapt is accelerating.

In the past, it was the young who did most of the adapting, as they learned new skills for new jobs.

In the future, the young will still be part of the adaptation process but so will those in their 40s, 50s, and 60s.

Postponing the inevitable

The elite or Protected class is right to feel discomfort. The anger of the Unprotected is not just an election-year, flash-in-the-pan trend. It is a movement that will grow as the wall of protection gives way for more and more people.

The presidential candidates offer radically different ways to restore protection. But they are fighting the last war, with the tools of the last war. The impulse of both political parties is to spare their supporters unwanted change.

Unfortunately, protection from change for a few comes at a price. The price is less choice and reduced freedom for all. In an increasingly globalized world, regulators act as prison guards.

The FCC wants to run the Internet like a utility. It’s just one of thousands of government bodies that wants to increase its power because some constiuency is lobbying for protection from its competitors.

In the future, the only way to protect yourself will be to learn to constantly adapt.

It’s not just workers that must learn to surf the waves of change. Businesses will too. Elon Musk may be a visionary, and his battery gigafactory may change that whole business.

But I’ll make you a side bet: Whatever the first set of batteries looks like, the entire process of battery design and production will continue to change dramatically. And by 2030, Elon’s factory will be obsolete.

The only way Elon will survive is to adapt. He must stay on the bleeding edge of innovation—making his own factory obsolete if necessary.

A Glimpse of the Future in Aug. 23 Q&A Session with John Mauldin

If you wonder what the future might hold for the US and global economies and stock markets, get answers in the free Q&A session “When the Future Becomes Today” with John Mauldin and his colleagues Patrick Watson and Robert Ross, on Aug. 23, 2:00 PM EDT. Click here to register for the call and to submit your questions.

John Mauldin Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules