Meeting with American corporate CEOs at the White House on
the first “working day” of his presidency, Donald Trump warned, “A company that
wants to fire all of its people in the United States and build some factory
somewhere else, then thinks that product is going to just flow across the
border into the United States . . . that’s just not going to happen.”[1]
The new president was up against “tectonic forces” in trying to bring back
“blue collar” manufacturing jobs to his base using tax policy. Yet the business
calculus goes immediately on the basis of financial advantage, and the contours
of the “game board” include the various tax and trade policies of countries.
Without an import tax of sufficient amount to render the
cost savings of moving a factory abroad, CEOs will naturally succumb to the
pressure “to increase earnings at a double-digit rate when the American economy
is growing by only 2 percent, and the quickest way to deliver higher profits is
by reducing labor costs, whether through automation or moving jobs to cheaper
locales like Mexico or China.”[2]
The push, in other words, is excessive. The cause, according to the New York
Times, “is the drive for bigger returns on 401(k) accounts, pension plans and
other retirement vehicles that depend on steadily rising corporate profits and,
in turn, a buoyant stock market.”[3]
Whereas a U.S. president has a term of four years in which to see his policies
realized, no such time-span is permitted where quarterly earnings reports are
all the rage. Simply put, CEOs must make sure their policies see results and
quick. With many emerging-market economies, as well as China, growing at more
than twice the rate of the U.S. at the time Trump took office, global—including
American—capital takes flight.
It is not as though the CEO’s of American companies who move
factories off-shore are unethical. Scott Paul of the Alliance for American
Manufacturing, told the New York Times, “I believe a lot of the C.E.O.s in that
room [with Trump] want to do the right thing and create jobs in America, but
the realities of Wall Street Pressure and a globalized economy leads [those
C.E.O.s] to off-shore a lot of these jobs.”[4]
One way to align the patriotic value with the business calculus is to alter the
“game board” in such a way that it would be cheaper for the companies to
manufacture products geared for domestic sale domestically rather than abroad;
products directed to the Chinese consumer could still be manufactured in China.
The key lies in raising the tariff or tax high enough and in adequately
enforcing it.
To be sure, automation would still mean that a return to the
manufacturing hay-days could not be expected. Herein lies a much more difficult
challenge: what to do with the remaining blue-collar workers who are not
oriented to moving to white-collar professions and yet cannot find jobs in
manufacturing. Behind the legitimacy of a tax on American companies moving
factories abroad is the hard truth that significant numbers of people in any
geographical region are not going to fit into white-collar jobs, for a variety
of reasons not limited to education and upbringing as well as values.
[1]
Nelson D. Schwartz and Alan Rappeport, “Call to Create Jobs, or Else, Tests
Trump’s Sway,” The New York Times,
January 24, 2017.
