Norman Rockwell's Economy Is Never Coming Back
Promising a return to a Norman Rockwell-esque past where everyone had great jobs, financial stability and a shot at the American dream makes for great politics, but terrible economic policies. The current and last US presidents, perhaps recalling an economy from their glory years, are both guilty of this. Donald Trump ran on the explicit promise to “Make America Great Again” by reducing dependence on international trade and re-shoring manufacturing. Joe Biden also lets nostalgia guide his economic policies, which attempt to bring back the glory days of unions while restoring an economy based in manufacturing.
The economy, though, has evolved and policies that might have worked during the heydays of our most recent presidents would have little impact now. The simple fact is that the US economy is no longer dominated by manufacturing, giving way to services. The way forward means policies that lead to a more dynamic economy by making it less burdensome to start a business, allowing for different kinds of work, offering education to workers of all ages and new models of unionization that provide independent workers insurance but still lets them negotiate their own wages and hours.
We tend to idealize the economy of the past because there was more unionized manufacturing employment that provided good, stable jobs which did not require a college degree. This was in part because, after World War II, the capital stock in other countries was destroyed, meaning American manufacturing could dominate and earn a large premium it shared with its workers. But the rest of the world caught up, the global economy became more competitive and upended trade, advances in technology led to efficiencies and the premium shrunk. In 1970, manufacturing accounted for about 25% of nominal US gross domestic product but had fallen to just 11% in 2020.
It may be tempting to fight these forces, especially trade and technology, and the change they bring, but doing so serves neither workers nor consumers. For consumers, it only means higher prices. And while shielding workers from global trade may benefit them in the short-run, it makes them less competitive and unable to work with new technology in the long run.