What happens if Donald Trump's America starts producing everything at home?
Updated
There's a conflict at the heart of Donald Trump's radical economic agenda.
Unlike conventional leaders, the new President was elected on the twin platforms of being a champion of the working class and a friend of big business.
At some stage, he's going to have to choose between the two unless, as is likely, Congress chooses for him.
With Republicans dominating both houses, the odds are firmly stacked in favour of Corporate America.
That risks further alienating an already restless middle America.
Trying to boost employment through business-friendly policies is not exactly revolutionary.
Our own Government has a similar trickle-down strategy. Mr Trump, however, has taken it to an entirely new level.
Whereas the Turnbull mantra of jobs and growth at least gives a nod to the future by acknowledging the importance and impact of innovation, Mr Trump appears determined to deliver America to some point in the past, to a time that perhaps never existed.
While Mr Trump may have a clear view of his destination, it is the means of transport that is certain to land him in trouble.
Until recently, big business loved the idea of deregulation and slashing tax rates. A huge infrastructure spend was seen as icing on that potentially very rich cake.
But delivering on his campaign rhetoric to a dejected working class that he would bring industry home, involves raising protectionist barriers and isolating US firms or, at the very least, making it far more difficult for them to straddle the globe.
America's industrial heartland may have been depleted by globalisation but its firms have done quite nicely out of it.
That's where things will begin to get tricky for the new administration and where the conflict threatens to undermine the new President's power.
The country's biggest and best firms rely on a free flow of, not just global capital, but global expertise.
When it comes to worship, return on investment takes precedence over religion and race, and the immigration ban sounded a warning sign to Wall Street that the new administration may spell trouble.
What would Trump's 'America First' look like?
Let us just pretend for a moment that he pulls it off; that the new President slaps massive import duties on Chinese goods (and Japanese and German for that matter too) and forces his country to start producing everything at home via the magic of 'America First'.
Let us also ignore the potential for a global recession as a trade sensitive and debt laden Chinese economy spirals out of control through the loss of American income.
Initially, Americans — even those employed in the newly reopened factories — would find themselves unable to afford the goods to which they have become accustomed.
That would spark demands for wage rises. And that would encourage firms to push even further into the world of automation, robotics and artificial intelligence as they desperately seek ways to cut costs.
Where once corporations scoured the globe for low-cost labour, and duly shifted their operations, they now seek ways to eliminate labour altogether, particularly in manufacturing but to a greater extent into the world of professional services.
It's a trend that will have as much impact on workers in China, India and South East Asia as America and Europe.
Where the likes of Mr Trump and former UKIP leader Nigel Farage fed on the insecurities and indignation of those whose lives had been laid waste and forgotten as industries left town, they now face the harsh reality of never being able to deliver on their promises of economic salvation.
Billionaires jolted by political turmoil
A fortnight ago in Davos, Switzerland, the world's wealthiest gathered for their annual gabfest.
For years a celebration of the wonders of free trade and the enormous profits to be made from Asia's burgeoning middle classes, this year's was a far more sombre affair.
Jolted by the political turmoil of 2016, and the potential ructions in global trade, the billionaires convention was consumed and concerned by the concept of inequality — of income and wealth distribution.
One of their main concerns was the impact of new technology, particularly artificial intelligence (or AI as it is commonly referred), which has the capacity to lay waste to vast numbers of jobs in areas like financial services, health care, accounting and even the law.
For many at the conference, the penny appears to have dropped.
Innovation cannot be stopped
A population with high levels of household debt, low income with little potential for wages growth, and reduced working hours may not have the means to buy goods and services. That means crimped profits.
Salesforce.com chief executive Marc Benioff summed up the fears.
"This is the moment, I think, when we have the highest level of anxiety because we can see advances in AI that are beyond what we had expected," he told the Financial Times.
"It's happening at a rate and a capability that we are worrying about how it will impact the everyman, the broad range of workers around the world ... there is no clear path forward."
Not everyone was so downbeat. Not surprisingly, IBM boss Ginny Rometty was not at all perturbed, and predicted AI would not be a job killer.
Innovation cannot be stopped. Technological breakthroughs long have driven economic development, and with each change there have been winners and those left behind.
But the pace is accelerating and with the potential for mass social dislocation.
Like America, Australian manufacturing has long been in decline. As old jobs evaporate, new ones have taken their place.
The vast majority of Australians are now employed in service industries like retail and finance, and it is by far the biggest part of our economy.
But as the high-cost industries that paid high wages have departed, many of the new jobs that replaced them have been less secure and lower paid.
Wealth and income has become increasingly concentrated, particularly in the past decade after central banks inflated financial and property markets through ultra-low interest rates.
Those low rates also encouraged household borrowing as the developed world en masse brought forward future spending to make up for low productivity.
We are now in a world of excess capacity, low inflation and extraordinary debt — both private and government — with the prospect of massive disruption in labour markets and governments incapable of supporting displaced workers.
That is an unsustainable mix. And it is a conundrum that few political leaders globally are even interested in addressing. Certainly not the new president of the United States.
Topics: donald-trump, world-politics, globalisation---economy, trade, united-states
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