How American populism is reshaping economic policy

JOHN YANG: During his presidential campaign
in 2016, President Trump often spoke about changing trade policies, including revamping
the North American Free Trade Agreement and imposing tariffs on imports. He argued these changes would protect American
jobs and the economy. That populist message struck a chord with
many voters, but why? Our economics correspondent, Paul Solman,
has a look at how growing public discontent has turned into a major political force. It’s part of his weekly series, Making Sense. DONALD TRUMP, President of the United States:
We have rebuilt China. They have taken so much money out of our country. PAUL SOLMAN: If President Trump has had one
consistent message since the beginning of his campaign, it’s been that America is getting
a raw deal in the global economy. DONALD TRUMP: Our factories were shuttered. Our steel mills closed down, and our jobs
were stolen away and shipped far away to other countries, some of which you have never even
heard of. PAUL SOLMAN: Now manufacturing jobs are ticking
up, the president has imposed a host of tariffs, that is, taxes, on imports and threatened
more. And reworking NAFTA, the agreement that regulates
trade with Canada and Mexico, is also on his economic agenda. DONALD TRUMP: We’re going to get it opened
up, or we’re not doing business with these other countries, right? (CHEERING AND APPLAUSE) PAUL SOLMAN: It’s playing well with the president’s
base, as evidenced by a recent rally in Michigan. WOMAN: He’s brought the awareness to getting
that trade back from China. MAN: And then we’re going to see undeniable
results. PAUL SOLMAN: The policy changes and the people
who support them are all part of an ideology known as populism. RAGHURAM GOVIND RAJAN, Former Chief Economist,
International Monetary Fund: Populism is generally a sense that the elite are corrupt and that
there is a group which stands for the will of the people. PAUL SOLMAN: Former chief economist at the
International Monetary Fund and later the head of India’s Central Bank, Raghuram Rajan,
thinks the recent populist wave has an economic basis, which, he says: RAGHURAM GOVIND RAJAN: Reflects to some extent
a frustration with the pace of economic growth. PAUL SOLMAN: So, slower growth than America
had been used to. Second, the economic gains, however modest,
have not been felt evenly across the country. RAGHURAM GOVIND RAJAN: The Midwestern towns
that are hurting clearly, those aren’t necessarily benefiting from this growth. PAUL SOLMAN: And those swing state towns,
long dependent on factories that have offshored and left them hanging, swung the election
to Trump. Were the free trade policies of previous administrations
to blame, as Trump supporters believe? Economist Teresa Ghilarducci says no. TERESA GHILARDUCCI, Economist: I don’t think
it was the fault of good-intentioned, good-hearted progressives. PAUL SOLMAN: Consider how the big auto bailouts
during the Bush and Obama administrations by their economic brain trusts helped the
Midwest. TERESA GHILARDUCCI: Those regions would have
fallen way — much further behind than they did. But, Paul, they still fell behind. PAUL SOLMAN: And that falling behind exacerbated
populist resentment, says economist Deirdre McCloskey, against those of us who complacently
benefited from the post-industrial economy. DEIRDRE MCCLOSKEY, University of Illinois
at Chicago: I guess we caused it because we didn’t keep up enough populist banter. PAUL SOLMAN: You mean we didn’t, we didn’t… DEIRDRE MCCLOSKEY: Say enough populist things. PAUL SOLMAN: And the message constantly portrayed
in the media, that economic inequality was growing, made matters worse, or so McCloskey
controversially claims. DEIRDRE MCCLOSKEY: It’s the politicians and
some academics indeed and some — a lot of journalists have emphasized it, have said,
oh, you poor people, your inequality has increased, which is dubiously true. PAUL SOLMAN: And so what you’re saying is
that when people like myself say look at the growing inequality, the people who might otherwise
have said, I’m doing OK… DEIRDRE MCCLOSKEY: I’m doing OK, not to worry. PAUL SOLMAN: … suddenly are now alerted
to their lower status; is that right? DEIRDRE MCCLOSKEY: Exactly. PAUL SOLMAN: And the resulting anxiety helped
fuel the populist fire. Well, maybe. But, even if not, a recent University of Pennsylvania
study concluded that — quote — “Change in financial well-being had little impact on
candidate preference” — unquote — and that, instead, Trump voters were moved by a loss
in status, for two main reasons. The first is globalization, that Americans
feel they’re falling behind, as other people, mainly the Chinese, surge ahead. And that has led many Americans to despair,
as highlighted by the opioid crisis in so many of the pockets of populism, or so argues
University of Michigan economist Lisa Cook. LISA COOK, University of Michigan: I have
lived in Europe and I have lived in Russia. And I think that I have seen the worst of
what populism can bring. PAUL SOLMAN: Including, says Cook, the heavy
drinking that followed the collapse and loss of international status in the former Soviet
Union. LISA COOK: All of a sudden, Russia was exposed
to these global forces. What happened? Life expectancy for men fell to rates that
we saw in developing countries. You could say that the opioid crisis is the
same kind of crisis, sort of placating the nervousness, the anxiety that people have. PAUL SOLMAN: So, opioids are the vodka of
America? LISA COOK: Yes. PAUL SOLMAN: A second cause of status anxiety,
according to the university of Pennsylvania study,growing racial diversity, which supposedly
undermines white Americans’ sense of primacy. That finding comes as little surprise to African-American
economist Darrick Hamilton, who thinks it explains much of President Trump’s success. ®MD-BO¯DARRICK HAMILTON, The New School:
If we’re just going to be blunt, he was signaling to white Americans that your relative position
will be restored with my presidency. DONALD TRUMP: Going out and voting, it’s your
last chance. It’s your last chance to make our country
truly, truly, truly great again. DARRICK HAMILTON: So, I’m coming in, and I’m
your last chance with this impending demographic change of all these non-whites that are going
to change the relative proportion of America. PAUL SOLMAN: The message that voters had more
to gain than lose resonated, says Teresa Ghilarducci. TERESA GHILARDUCCI: If a powerful white man
says, I am on your side, why not take a chance? PAUL SOLMAN: Whatever the explanation, President
Donald Trump, trying to restore America’s place in the world economy, has now targeted
Chinese trade practices. China has promised to retaliate. And fears of an escalating trade war fill
the air, stoked by President Trump’s recent tweet that — quote — “When you’re already
$500 billion down, you can’t lose.” Of course, many economists say there’s plenty
to lose. But the president’s populist supporters feel
they have lost enough already to take a chance. AUDIENCE: USA! USA! USA! PAUL SOLMAN: This is economics correspondent
Paul Solman, reporting for the “PBS NewsHour.”

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