Delivering on Promises

The previous blog post, Lessons of Brexit and Trump (, noted similarities in voter behavior in the United Kingdom vote to leave the European Union (EU) and the U.S. presidential election. Those favoring Brexit, the move to leave the EU, and those favoring Donald Trump over Hillary Clinton tended to be older, less educated, and white. Pre-election polls showed U.K. voters slightly favored remaining in the EU, and U.S. voters slightly favored Clinton.

People opposed to immigration, globalization, and international trade were vocal in both countries, and they voted. All three of these rallying points revolve around jobs. Globalization and international trade have resulted in well-paying jobs being moved to lower-cost production countries, while immigrants are seen as competitors for the jobs that remain. Jobs are a source of dignity, and only a discharge of the existing political establishment would satisfy those voters who saw the future looking more bleak not only for them but also for their children.

In both cases pre-election polling was rebutted, and in both cases there is a high probability that the winners will not be able to deliver on promises. U.K. voters wanted out from under the rule of EU bureaucrats in Brussels, who they regarded as unelected and unresponsive, but wanted to retain some of the benefits of EU membership. Following the Brexit vote, it was clear that British citizens would lose access to the EU single market for trade in goods and services if they did not accept the EU’s open borders among its members. When negotiations get fully underway, those favoring Brexit can expect to forgo some portion of what they expected to achieve.

In the U.S., Trump’s plan for infrastructure spending could employ thousands of workers. His plan to restore jobs in the coal industry, however, is less likely to succeed. The U.S. Energy Information Administration finds that natural gas is increasing its share of electricity generation while coal’s share is decreasing, and that is due to a market-driven response to lower natural gas prices. The cost of coal could be reduced if Trump removes some government regulations on mining, although adverse impacts on miner safety could result.

More importantly, imposing tariffs on goods from China and Mexico would have one of two effects: ether those imported goods’ prices will rise, or corporations may return manufacturing back to the U.S. where goods would be produced – largely by robots. The decline in manufacturing employment in the U.S. has more to do with increased productivity, largely through automation, than out-sourcing to other countries. While manufacturing employment in the U.S. peaked forty years ago, manufacturing output has increased; the U.S. produced more automobiles in 2015 than in 1990.

China has made it clear that heavy tariffs on Chinese imports would be met with a tit-for-tat response. A communist party newspaper, China’s Global Times, suggested what that response might be: “A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted.”

Plans have consequences which must be resolved by governments in both the U.K and the U.S. going forward.

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