Donald Trump’s “America first”
economic nationalism is finally crashing into the reality of America’s
shareholder-first global capitalism.
Last week, General Motors announced
it would cut about 14,000 jobs, most of them in the politically vital swing
states of Michigan and Ohio.
This doesn’t quite square with the
giant $1.5 trillion tax cut Trump and the Republicans in Congress enacted last
December, whose official rationale was to help big corporations make more
investments in America and thereby create more jobs.
Trump told Ohio residents “don’t sell your homes,” because lost automaking jobs “are all coming back.”
Trump told Ohio residents “don’t sell your homes,” because lost automaking jobs “are all coming back.”
GM got a nice windfall from the tax
cut. The company has already saved more than $150 million this year. But some
of those Ohio residents probably should have sold their homes.
Trump is (or is trying to appear)
furious, tweeting up a storm of threats against GM, including taking away its
federal subsidies.
In reality, GM gets very few direct
subsidies. Prior to the tax cut, the biggest gift GM got from the government
was a bailout in 2009 of more than $50 billion.
But neither last year’s tax cut nor
the 2009 bailout required GM to create or preserve jobs in America.
Both government handouts simply assumed that, as former GM CEO Charles Erwin “Engine” Wilson put it when he was nominated as secretary of defense by Dwight Eisenhower in 1953, “What’s good for General Motors is good for the country.”
Both government handouts simply assumed that, as former GM CEO Charles Erwin “Engine” Wilson put it when he was nominated as secretary of defense by Dwight Eisenhower in 1953, “What’s good for General Motors is good for the country.”
Yet much has changed since 1953.
Then, GM was the largest employer in America and had only a few operations
around the rest of the world. Now, GM is a global corporation that makes and
sells just about everywhere.
Moreover, in the 1950s a third of
America’s workforce was unionized, and GM was as accountable to the United Auto
Workers as it was to GM’s shareholders. That’s why, in the 1950s, GM’s typical
worker received $35 an hour (in today’s dollars).
Today, GM’s typical American worker
earns a fraction of that. The bargaining clout of the United Auto Workers has
been weakened not only by automation but also by the ease with which GM can get
cheaper labor abroad.
In 2010, when GM emerged from the
bailout and went public again, it even boasted to Wall Street that it was
making 43 percent of its cars in places where labor cost less than $15 an hour,
while in North America it could now pay “lower-tiered” wages and benefits for new
employees.
So this year, when the costs of
producing many of its cars in Ohio and Detroit got too high (due in part to
Trump’s tariffs on foreign steel) GM simply decided to shift more production to
Mexico in order to boost profits.
In light of GM’s decision, Trump is
also demanding that GM close one of its plants in China.
But this raises a second reality of
shareholder-first global capitalism that’s apparently been lost on Trump: GM
doesn’t make many cars in China for export to the United States. Almost all of
the cars it makes in China are for sale there.
In fact, GM is now making and
selling more cars in China than it does in the United States. “China is playing
a key role in the company’s strategy,” says GM CEO Mary Barra.
Even as Trump has escalated his
trade war with China, GM has invested in state-of-the-art electrification,
autonomous vehicles and ride-sharing technologies there.
Which brings us to a third fallacy
behind Trump’s “America first” economic nationalism. Trump accuses China of
stealing technology from American businesses. But big American corporations
like GM are eager to invest in China regardless.
In shareholder-first global
capitalism, technology doesn’t belong to any nation. It goes wherever the
profits are.
“Making America great again” has
nothing to do with making American corporations great again. Big American-based
corporations are doing wonderfully well, as are their shareholders.
The real challenge is to make
American workers great again. They don’t just need any job. They need good
jobs, akin to those that GM’s unionized workers had a half-century ago. Most
Americans haven’t had a raise in decades, considering inflation.
The difference between China and
America is that big Chinese companies are either state-owned or dependent on
capital from government-run financial institutions. This means they exist to
advance China’s national interests, including more and better jobs for the
Chinese people.
American corporations exist to
advance the interests of their shareholders, who aren’t prepared to sacrifice
profits for more and better jobs for Americans.
If Trump were serious about his
aims, he’d try to reduce the chokehold of Wall Street investors on American
corporations while strengthening the hand of American labor unions.
Don’t hold your breath
Robert
B. Reich is Chancellor's Professor of Public Policy at the University of
California at Berkeley and Senior Fellow at the Blum Center for Developing
Economies. He served as Secretary of Labor in the Clinton administration, for
which Time Magazine named him one of the ten most effective cabinet secretaries
of the twentieth century. He has written fifteen books, including the best
sellers "Aftershock", "The Work of Nations," and "Beyond
Outrage," and, his most recent, "The Common Good," which is
available in bookstores now. He is also a founding editor of the American
Prospect magazine, chairman of Common Cause, a member of the American Academy
of Arts and Sciences, and co-creator of the award-winning documentary,
"Inequality For All." He's co-creator of the Netflix original
documentary "Saving Capitalism," which is streaming now.
