On disappearing bookstores

One of my favorite telling details, in the ongoing story of the vanishing of New York’s bookstores, is from a 1926 review by Edmund Wilson of the then-new uptown location of the bookstore Brentano’s:

One finds in the new Brentano’s the same admirable features as in the old: the varied and enormous stock, the easily accessible galleries, the comprehensive foreign departments, with clerks who are at home in the languages of the literatures to which they are accredited, and the fascinating display, in the basement, of the tables of periodicals from all over the Western world.

Working in a bookstore will always be cool, but in Wilson’s day, it was apparently reasonable to expect the staff of a top-of-the-line bookstore to be conversant in multiple languages. No doubt there are a few such staff still in New York today—McNally Jackson has very smart-looking foreign-language sections—but I’m pretty sure that such standards long ago ceased to be de rigueur. An article in The Guardian today by Oliver Conroy charts the decline, more plainly, in numbers:

In 1950, Manhattan had 386 bookstores, according to Gothamist; by 2015, the number was down to 106. Now, according to a count by the city’s best-known bookstore, the Strand, there are fewer than 80.

“Why are New York’s bookstores disappearing?” Conroy wonders. As possible explanations he cites competition from Amazon, a secular decline in the habit of reading (which I’ve written about before), and spikes in retailers’ rents, which are sometimes caused by real estate speculators. All of these are likely contributing—indeed, McNally Jackson’s Soho store is seeing its rent hiked from $350,000 a year to $650,000—but there’s another cause that I suspect is more powerful.

The economist Steven E. Landsburg spells it out in Can You Outsmart an Economist, a new book that hides key economic ideas inside the Trojan horse of dad-friendly mind-benders. After challenging readers to explain such mysteries as why people stand still on escalators, Landsburg offers a puzzle relevant to bookstores: “Why doesn’t Sony wants its TVs sold at a discount?”

Sony is far from the only company that insists on what’s known as “resale price maintenance” or, less charitably, “vertical price-fixing.” Most big-ticket consumer electronics items in America can’t be bought cheaper from one retailer versus another. Want an Apple I-phone? Want a Fujifilm digital rangefinder? Try to shop around, and you’ll quickly discover that the prices offered by all retailers uncannily coincide. The practice is completely legal. Antitrust law won’t allow a manufacturer like Canon to coordinate its pricing decisions with a rival like Fujifilm, but Canon is free to dictate independently the prices of all its brand-new Canon goods. All it has to do is require retailers to sign pricing agreements and refuse to supply stock to any who fail to follow instructions.

As Landsburg points out, it isn’t obvious why a company like Sony should “care about the retail price of its TVs.” Sony, as a manufacturer, only gets paid the wholesale price of its TVs, after all. If a retailer is willing to lower the retail price, cutting into its own profit share, why should the manufacturer mind? In general, a manufacturer expects to sell more units when the retail price is lower, or so the simple math of the supply-and-demand curve predicts. Why then do so many of the most successful companies selling in America think different on this question?

Landsburg explains:

If retailers are free to set their own prices, you’ll walk into Best Buy, latch onto a salesperson, ask questions for an hour, spend another hour playing your favorite You Tube videos on all the different display models, ask a bunch more questions, and then go home and order from Amazon, where the price is lower. Best Buy will soon enough get tired of this and either stop carrying Sonys altogether or stop displaying them.

Or go out of business, one might add, though Landsburg doesn’t mention that alternative. If price is invariable, on the other hand, retailers, instead of competing on price, have to compete by offering better service. If, as a manufacturer, you take pride in the quality of what you make, you want customers to have a chance to become more knowledgeable. In the corporate world, in other words, it’s widely understood—it’s a commonplace—that the only way to create a network of pleasant, thriving retailers is to control pricing.

So if the economic principle is so obvious, you’re no doubt asking, then why haven’t the publishers of America instituted vertical price-fixing?

Maybe books are different? They don’t seem to be. For a quick proof, consider that “Germany, France, the Netherlands, Italy, and Spain allow the vertical price-fixing of books,” as I wrote in this 2012 blog post, reporting on a conference about the future of books and copyright, and bookstores in those countries are prospering. If you’re a reader and you’ve visited one of those countries recently, you’ve probably seen them and wept. Maybe, as I constantly worry, reading itself is in decline, but it seems that bookstores needn’t be in a decline quite as steep as that in America and the United Kingdom.

Note an important difference in the kind of argument used to justify the laws that allow (and in France, require) publishers to set retail prices. Laws are passed for the common good, not to ensure that the customers of a manufacturer have a pleasant retail experience. The rationale for laws allowing publishers to control their books’ prices, therefore, is public-spirited rather than hard-headed. As I wrote in 2012,

The nations that allow for “resale price maintenance” . . . in publishing justify the legal exception for three reasons. They believe that it brings a bookstore to every village, that it makes possible a wide selection of books in those bookstores, and that it enables less-popular books to be subsidized by more-popular ones. In other words, the argument for resale price maintenance rests largely on the contribution that local, independent bookstores make to cultural life.

Online bookstores like Amazon might seem to undermine these rationales, because an online bookstore can bring a wider variety of books to a broader geographic range of citizens than any network of brick-and-mortar bookstores can. There’s an objection to this objection, however—an asymmetry. If a combination of uncontrolled pricing and online bookselling drives a brick-and-mortar bookstore out of existence, the special benefit to consumer-citizens that was provided by that well-managed brick-and-mortar bookstore is destroyed. The reverse, however, is not true. That is, if publishers were to control control prices, thereby supporting brick-and-mortar stores, the market share of online booksellers might well shrink, but it’s improbable that all online booksellers would for that reason go out of business, and as long as even one reputable online bookseller remained, the boons of wide variety and wide geographic distribution would remain available. If you believe that these boons are worth preserving, you needn’t necessarily oppose allowing publishers to set the retail prices of their books. Amazon remains in business in France even though it’s against the law there for online booksellers to undersell their brick-and-mortar rivals.

It isn’t exactly a surprise that a number of social democratic European nations have held onto the belief that bookstores contribute to cultural life and deserve protection, while in America and the United Kingdom, where the legal and political elites tend to be more market-fundamentalist, the consensus seems to be that cheaper book prices are worth more than the affordances of a nice bookstore. None of these ideological preferences alters the underlying economics of price-setting, however. Publishers needn’t wait wait for politicians, or for abstract moral argumentation, if they believe that well-run brick-and-mortar stores are the most congenial environments for introducing their books to readers. And in my experience, especially if one is looking to discover new books of high literary quality, nothing surpasses handling, sniffing, and leafing through ink-on-paper volumes in a well-curated brick-and-mortar store.

If Penguin Random House (to name the mega-conglomerate that happens to be publishing me this August) wanted to adopt Sony’s corporate strategy on the pricing of its TVs, it could do so tomorrow. Alas, there would be enormous risks. Federal antitrust regulators would be watching skeptically, because American publishers did adopt that strategy with e-books, as a roundabout way of supporting the price of ink-on-paper books, and got caught colluding with one another, in violation of antitrust law, when they did so. In the end, the publishers did get their way in the pricing of e-books, as Mike Shatzkin and Robert Paris Riger explain in The Book Business, a new primer on the behind-the-scenes economics of publishing. The results were mixed. Amazon decided to “let the big publishers be hoisted with their own petard,” Shatzkin and Riger write. While publishers kept the retail price of their e-books high, Amazon cultivated an alternative supply of e-books that were in the public domain or by authors who were self-published or who had taken their copyrights back from their original publishers. “The big publisher share of the e-book market appears to have steadily diminished since agency pricing began,” Shatzkin and Riger report, but “publishers take some comfort in the fact that print book sales have stabilized.”

I’m skating perilously close to turning this into an endless blog post about economics and the future of literature, so I’ll cut it short: Brick-and-mortar bookstores remain invaluable for publishers hoping to reach consumers who discriminate for literary quality and are interested in new titles, and as best I can figure it, vertical price-fixing is the only way to support an ecosystem of brick-and-mortar bookstores in the long term. The first publisher to attempt vertical price-fixing, however, will risk being undersold by rivals who delay adopting the strategy and being attacked in some way by Amazon, who will see it as a threat to market share. There will also be a more general risk, if prices are set too high, of spurring consumers to defect to cheaper alternatives.

Notes, 2018

“Je voyais tout en noir avant les élections, je vois tout en noir depuis.” [I saw everything black before the elections, I see everything black since.] —Ernst Renan, quoted by Henry James in a letter to William James, 14 March 1876

I dreamed there were two new hobo symbols, one for “You already know everything I need for you to know” and one for “Felonies.”

“I sat without stirring and gazed, gazed with effort and perplexity, as though I saw all my life before me, as though scales had fallen from my eyes. Oh, what have I done! my lips involuntarily murmured in a bitter whisper.” —Turgenev, “A Tour in the Forest”

“Is treatment, particular bad treatment, ever given to a person?
“No. It is always meted out.
“Is anything else ever meted out?
“No. The only thing that is ever meted out is treatment.” —Myles na Gopaleen, The Best of Myles

“I heard Émile Zola characterize his [Droz’s] manner sometime since as merde à la vanille [vanilla shit].” —Henry James, reporting Zola’s diss of Gustave Droz in a letter to Thomas Sergeant Perry, 2 May 1876

What could Bitcoin possibly be good for other than money laundering and tax evasion? There’s an op-ed in the NYT today that maintains that it will help the poor with their banking and help the Federal Reserve manage the money supply. Surely these are the last things on earth that it would ever do—the things that it is least likely ever to do even accidentally. Governments refuse to allow gift cards that are dischargeable in multiple currencies, so it is inconceivable that they will not eventually be obliged to criminalize cryptocurrencies.

“To fear being ridiculous—is not to love truth.” —Turgenev, “A Correspondence”

equipollent (adj.): possessing equal power, identical in meaning

The two narratives are not equipollent.

—Gareth Dale, Karl Polanyi: The Limits of the Market

“It appears that my stuff has been over the heads of the readers. Imagine their stature!” —Henry James to Arthur George Sedgwick, 29 September 1876

“I believe fully, in spite of sneers, in interpreting the French Revolution by anecdotes, though not every diner out can do it.” —Emerson, journal, August 1849

“Eizenstat famously rebuked [Alfred Kahn] for publicly suggesting that rising inflation could result in a ‘very serious depression.’ Kahn responded by continuing to issue warnings of inflation-induced depression, but with the word ‘depression’ replaced with ‘banana.'” —Stephanie Mudge, Leftism Reinvented

At first depression seems to make one’s vision of the world sharpen. After all, narrowing the aperture for light increases the depth of field.

punnet (n.): small, light basket for strawberries, mushrooms, etc.

But there is a much more overwhelming sense of the strange beauty of tiny moments, such as [Oliver] Sacks’s response when Hayes dropped a punnet of cherry tomatoes on the kitchen floor (“How pretty! Do it again!”).

—Alex Clark, reviewing Bill Hayes’s Insomniac City in the TLS, 16 March 2018

semibreve: a whole note (under this terminology, a half-note is a minim, a quarter note is a crotchet, and an eighth note is a quaver)

The vaults and arches seem really to swing above you in great semibreves of rhythm.

—A. S. G. Butler, Recording Ruin

rani (n.): a Hindu queen, a rajah’s wife or widow

She had been there, unrememberingly, before, when she was small enough to ride in a backpack, little ranee on a jogging elephant, her view of the paintings relieved by the back of her father’s neck.

—Alan Hollinghurst, The Sparsholt Affair

“I don’t want to do so difficult a thing as dying without any chance of applause after having done it.” —Edward Thomas to Gordon Bottomley, quoted in Edna Longley, ed., Annotated Collected Poems

“The high, thin nose was a little lonely, a little sad, but the bud of her lips opened and closed smoothly, like a beautiful little circle of leeches.” —Yasunari Kawabata, Snow Country, trans. E. G. Seidensticker

shaw (n.): a thicket; the strip of trees or bushes forming the border of a field

. . . a law
Which was of old when one, like me, dreamed how
A thousand years might dust lie on his brow
Yet thus would birds do between hedge and shaw.

—Edward Thomas, “February Afternoon”

stook (n.): a shock; a group of twelve sheaves placed upright to support each other as the grain dries and ripens

The wheat, tawny with ripeness, had been cut and stood in tented stooks about the fields.

—Iris Murdoch, The Bell

“You make me want to bound about you and about the idea of you like an excited dog.” —Iris Murdoch to Michael Oakeshott, 4 November 1958

“One more step, and he would bid the dying gladiator be comforted by the stanzas of Childe Harold.” —Edward Thomas, critiquing the aestheticized “spectatorial attitude” of Walter Pater, quoted in Edna Longley, ed., Annotated Collected Poems

cagoule (n.): a thin waterproof hoodie

Both were swaddled in layers of fat, shiny nylon—what Alan now thought of as engorged cagoules.

—James Wood, Upstate

Believing in the Kool-Aid does not make it a good idea to drink it.

“Compared with a true artist’s conscience, Tamerlane is tenderhearted.” —Walter de la Mare, foreword to Edward Thomas’s Collected Poems (1920)

Butterflies must sometimes wish they could go back to being caterpillars.

thrawn (adj.): perverse, contrary, cross-grained, ill-tempered

He had some bread and cheese in his pocket, and this he began furtively to toss to the dogs, singling out for his favors those that seemed most thrawn in appearance.

—Gavin Maxwell, The Rocks Remain

“Inside the hall, the faces of the students and the lecturer were equally indistinct, which made everything somehow mystical, like eating a bean jam bun in the dark.” —Natsume Soseki, Sanshiro

What does it say about me that when I play fetch with the dog indoors, instead of saying, “Fetch,” I say, “Bring me the head of John the Baptist.”

Philosophy is a representation in language of what it is like and what it means to be in the world. Therefore it will always be impossible finally to distinguish it from literature and it will never be finished.

daedal (adj.): inventive, ingenious; rich, variously adorned; complex

. . . all the living things
that dwell within the daedal earth.

—Shelley, “Mont Blanc”

“And my relatives, moreover, were beginning to feel that this oldness in him was abnormal, excessive, shameful, and the sort of thing bachelors deserve, as do all those of whom it seems that the great day that has no day after is longer than it is for others because for them it’s empty, the moments in it adding up, from morning onward, without ever having to be divided later with children.” —Proust, Du côté de chez Swann

Listening to Nina Simone, I realize that I miss hearing people ask God to damn something.

How far away is Joan Didion from the character in Play It as It Lays who talks about “third-string faggots”?

Oh, ’tis a joy divine on summer days
When not a breeze is stirring, not a cloud,
To sit within some solitary wood,
Far in some lonely wood, and hear no sound
Which the heart does not make, or else so fit
To its own temper that in external things
No longer seem internal difference.
All melts away, and things that are without
Live in our minds as in their native home.

—Wordsworth, fragment 3 from the Christabel notebook

solatium (n.): a sum of money given to make up for loss, inconvenience, or injured feelings

The master in Osaka (Okubata’s older brother) had given him a modest solatium upon his being disinherited, and he had been eating into his capital ever since.

—Junichiro Tanizaki, The Makioka Sisters

To revisit the past is to say good-bye to it again, which is unbearable.

“Is it possible that any editor should endure any inconvenience without meditating an article?” —Trollope, Phineas Redux

A friend’s counsel to Phineas Finn, after he is slimed by Quintus Slide, the 19th-century version of an internet troll: “I don’t see what you can do. You have encountered a chimney sweeper, and of course you get some of the soot.”

Humans vs. AI: Our disadvantage is that we’re all essentially programmed the same, but we’re building many different AIs. There’s only one kind of “us” to be figured out, but every day someone puts together a new kind of “them.”

Arthur Russell sings in the key of heterosexuality with the same acceptance of generic constraint that ABBA sings in the language of English. One’s appreciation is in both cases heightened by the awareness that it isn’t natural.

“In a world where we are all transparent—unable to deceive each other—it might be rational to deceive ourselves about rationality.” —Derek Parfit, Reasons and Persons

“She began crying and laughing. This conflict of tears and laughter always reminds me of the flickering and spluttering of a brightly burning candle when one sprinkles it with water.” —Chekhov, “The Privy Councillor”

“It feels ominous to drive through West Texas with a clean windshield. Road trips always used to be accompanied by the incessant splatter of death. . . . The absence of insects seems to be part of a general diminution of life.” —Lawrence Wright, God Save Texas

clout (adj.): cloth, rag

But whenever did a pan or a clout—when kept clean and tidy—refuse to do its duty, or rebel against its lady?”

—T. F. Powys, Unclay

Music continued for a decade or two after it ended, but unless you already knew the provenance of one of these later songs, you couldn’t figure out when it had been recorded. You couldn’t even write an algorithm that could figure it out. The songs were already outside of music’s history.

After one has learned to manage the isolation and poverty, there is still the challenge of writing itself.

slane, or slean (adj.): a long-handled spade, with a wing or two wings on the blade, used for cutting peat

The men-folk were going to the turf-bogs with their sleans on their shoulders.

—Patrick Kavanagh, The Green Fool

barm (vi.): mix with yeast or leaven; rise in froth or fermentation

The porter was beginning to barm in bellies.

—Kavanagh, Green Fool

creel (n.): large wicker basket

The pot of potatoes was turned out on a creel.

—Kavanagh, Green Fool

Bassani captures perfectly the way that the mere visibility of a victim or former victim spurs in a fascist (or a fascist-leaning bystander) the impression of being unfairly attacked.

The word “mother” is always to some extent in the vocative.

The sonorous, etymologically spurious second “o” in the word “reportorial” is the reason one likes to say it so often.

“Be nice,” the man growled to his dog.

limber (n.): detachable, two-wheeled forepart of a gun-carriage, used for transporting ammunition

“And also, your honour, Artemyev got drunk yesterday, and the lieutenant ordered him to be put in the limber of a spare gun-carriage.”

—Chekhov, “The Kiss”

“And certainly this doesn’t mean that M. Legrandin was insincere when he thundered against snobs. He was incapable of knowing—on his own, at least—that he was one, because we only ever know the passions of other people, and insofar as we manage to know of our own, it’s only from others that we’re able to learn it. On us the passions only act in a secondary way, through the imagination, which substitutes for primary motives intermediate ones that are more decent. Legrandin’s snobbery never advised him to go see a duchess frequently. It charged his imagination with making this duchess appear to be arrayed with all the graces.” —Proust, Du côté de chez Swann; the passage also seems to describe the operation of unconscious racism

“The ferocity of the financial crisis in 2008 was met with a mobilization of state action without precedent in the history of capitalism. Never before outside wartime had states intervened on such a scale and with such speed. It was a devastating blow to the complacent belief in the great moderation, a shocking overturning of prevailing laissez-faire ideology. To mobilize trillions of dollars on the credit of the taxpayer to save banks from the consequences of their own folly and greed violated maxims of fairness and good government. But given the risk of contagion, how could states not act? Having done so, however, how could they ever go back to the idea that markets were efficient, self-regulating and best left to their own devices? It was a profound challenge to the basic idea that had guided economic government since the 1970s. It was all the more significant for the fact that the challenge came not from the outside. It was not motivated by some radical ideological turn to the Left or the Right. There was precious little time for thought or wider consideration. Intervention was driven by the financial system’s own malfunctioning and the impossibility of separating individual business failure from its wider systemic repercussions. Martin Wolf, the Financial Times‘s esteemed chief economic commentator, dubbed March 14, 2008, ‘the day the dream of global free-market capitalism died.'” —Adam Tooze, Crashed

“I once heard a filmmaker say that in order to be truly creative a person must be in possession of four things: irony, melancholy, a sense of competition, and boredom.” —Lisa Halliday, Asymmetry

“He who undertakes anything, thinking he is doing it out of a sense of duty, is deceiving himself and will ruin everything he touches.” —Auden, The Prolific and the Devourer

There is a charm in solitude that cheers,
A feeling that the world knows nothing of;
A green delight the wounded mind endears
After the hustling world is broken off,
Whose whole delight was crime—at good to scoff.
Green solitude, his prison, pleasure yields,
The bitch fox heeds him not; birds seem to laugh.
He lives the Crusoe of his lonely field
Whose dark green oaks his noontide leisure shield.

—John Clare, “Solitude”

House-breaking capitalism

A new essay of mine, “Merchants of Doom” (with the online title, “Is Capitalism a Threat to Democracy?”), appears in the 14 May 2018 issue of The New Yorker. It reviews Robert Kuttner’s new book Can Democracy Survive Global Capitalism? (Norton), and also takes note of Barry Eichengreen’s The Populist Temptation (Oxford) and Dani Rodrik’s Straight Talk on Trade (Princeton).

Americans may not have been better off in the 1950s, but they made more progress

In this morning’s New York Times, David Brooks, citing a new book by Steven Pinker, claims that there’s been more economic good news in America lately than has been appreciated.

Brooks (or Pinker) sets up a bit of a strawman by claiming that a “smothering orthodoxy” of economic observers have been wrongly idealizing the 1950s. In fact it isn’t the 1950s per se that gets idealized, in the tracts I’ve read; it’s the progress that the American economy made following World War II, which abruptly stopped in about 1973. And if you kick the tires on some of the numbers in Brooks’s article, this “pessimistic” assessment holds its own.

Brooks writes, for example, that “Between 1979 and 2014, . . . the percentage of poor Americans dropped to 20 percent from 24 percent.” I don’t have Pinker’s book, so I’m not sure what the underlying source for this claim is, but it is contradicted by the US Census, which reports that in 1979, the percentage of Americans living in poverty was 11.7 and by 2016 had risen to 12.7. By the word “poor,” therefore, Brooks and Pinker must mean something other than “living in poverty.” For a fuller picture, here’s a quick graph I made, using the Census’s data, of the proportion of Americans living in poverty between 1959 and 2016:

Source: Table 2, Poverty Status of People by Family Relationship, Race, and Hispanic Origin, U.S. Census Bureau

It seems to me that the natural inference to be made from this graph is that the Great Society programs of the 1950s and 1960s did an amazing job of combating poverty, but that progress has stagnated since the early 1970s—which happens to be the “gloomy” (as Brooks terms it) consensus among most economists studying such problems, however hopelessly conformist and noncounterintuitive that consensus may be.

Again relying on Pinker, Brooks writes that “we should not be nostalgic for the economy of the 1950s” because at that time “A third of American children lived in poverty.” The US Census numbers do confirm that in 1959, 27.3 percent of Americans under the age of eighteen were living in poverty. However, by 1969, that proportion had fallen to 14.0 percent, rising again to 22.3 percent in 1983 (hi, Reagan!), after which it dithered for decades. It was at 18.0 percent in 2016. Which sounds to me, again, as if the Great Society accomplished wonders, and as if no serious progress, and in fact some retrenchment, occurred after that. Here’s a graph of American children living in poverty, 1959 to 2016:

American children living in poverty, 1959 to 2016

Source: Table 3, Poverty Status of People, by Age, Race, and Hispanic Origin, U.S. Census Bureau

Brooks writes that “Sixty percent of seniors had incomes below $1,000 a year” in the 1950s. Again, I’m not sure what the underlying source for his claim is, but a flat number like that isn’t all that telling. Once more then, this time with feeling, here’s a graph of the percentage of American seniors living in poverty over the years. (I’ve combined it with the same percentages charted just above for all Americans and for American children):

Americans living in poverty, 1959 to 2016: all, children, and seniors

Source: Table 3, Poverty Status of People, by Age, Race, and Hispanic Origin, U.S. Census Bureau. (Note: There are no data for seniors between 1960 and 1965.)

America has done better by its seniors than it has by its children or by its citizens generally (hi, Social Security!), but still, what the shape of the green line here tells me is that the yeoman’s work of ending poverty among seniors was done before 1973, and that further progress has only been incremental (and in the past twenty years, negligible).

Bonus round: Brooks, channelling Pinker, also claims we shouldn’t look back fondly to the 1950s because back then “only half the population had any savings in the bank at all.” Again, I don’t know the source of this claim, but unless we know how much was in those savings account, the statistic probably doesn’t reveal much except changes in banking habits. More suggestive, I think, are the data that Edward N. Wolff has assembled about the median wealth of US households. Here is a hasty chart I made from some of Wolff’s data:

Sources: Edward N. Wolff, “Household Wealth Trends in the United States, 1962-2013: What Happened over the Great Recession?” NBER Working Paper No. 20733, December 2014, and “Has Middle Class Wealth Recovered?” presentation at the ASSA Meetings, January 6, 2018. (Note: In his 2018 presentation, Wolff gave his numbers in 2016 dollars, so I divided his 2016 number by 1.03 to put it into 2013 dollars in the graph here.)

Was the typical American household in the middle of the economy wealthier in the 1950s? Full disclosure, the 1950s aren’t on this chart, so there’s no saying. But pace Brooks and Pinker, the “gloomy refrain” about the American economy—the reason observers feel pessimistic—isn’t that the economy has gotten worse since the 1950s, but that in about 1973 it stopped improving the lives of average Americans. And that seems to me to be confirmed by the blue line here: the middle-of-the-road American household made steady progress in wealth during the golden age, but the last few decades took it on a bubble-and-burst ride that left it no richer than it was in the late 1970s.

 

Free trade, jobs, rage, and policy

After a week of missteps, the Republican National Convention concluded on Thursday night with a speech by Donald Trump that was strong and persuasive. Unusually, for Trump, most of the statements in the speech were actually true. Trump’s character is so flawed that his election would, I think, be devastating; the success of his speech therefore terrifies me.

In this post, I want to revise an earlier post of mine, in which I tried to explain Trump’s appeal and how hard it is for an upper-class liberal to reply to it. I agreed, in that post, with the widespread notion that Trump is channeling the rage of the working class, and the class just above it, about the migration of American jobs to other parts of the world. Like others, I suggested that the rage may be justified even if Trump’s proposals offer no real solution. I wrote that Trump seems to be offering to restore workers’ dignity by arranging for the nation’s borders to do what a union’s picket line used to do—keep out competition that would erode labor’s earning power. At the end of my post, I mentioned, as a caveat to my own argument, that Trump’s proposal wouldn’t work, because a trade war would in fact destroy American jobs, and that American manufacturing, somewhat puzzlingly, is “at an all-time high, if measured in dollars rather than jobs.”

A few weeks later, I un-published my blog post, because it seemed to me that my caveats carried more weight than the post they were attached to. It also seemed to me that in the post I had underestimated the importance of dog-whistled racism to Trump’s appeal. But I’ve now republished that post, with a half-disavowal, and I’m adding this one, because I think it’s worth continuing to try to figure out what’s going on—even if all I really manage to do in this post is think out loud.

From the top, then: Trump’s RNC speech contains two appeals. The first is to fear of violence. As most members of America’s beleaguered fact-based community already know, Trump is exaggerating the dangers posed by civil unrest and terrorism. No policy could guarantee complete safety from either threat, but both are being handled relatively well by ordinary policing. Could they be handled better? Sure. But with the exception of 11 September 2001, terrorism-related deaths of American citizens seem to have been lower this century than they were in the 1990s, and the outcomes of America’s wars in Iraq and Afghanistan hardly suggest that a more militant approach would improve matters. Trump’s fear-mongering has a racist color here, frightening and worth paying full attention to. His demagoguery on this point seems fairly straightforward, however, at least to those willing to see it, and for the rest of this blog post, I want to focus on his second appeal.

That appeal takes the form of a promise to restore earning power to Americans in the working class and the class just above it. Trump claims that he, unlike Clinton, cares about American jobs rather than American money-making, and that he will bring back to America jobs that have been lost through free-trade agreements to foreign manufacturers. He calls Clinton a “puppet” of big business and the moneyed elite, and for his RNC speech, someone on his speechwriting team had the canny idea of reviving a term deployed by Franklin D. Roosevelt during the Great Depression: he called American workers “the forgotten men and women of our country.” This is a remarkable reversal of the historical alliance of the Republican party with business and finance, but then, it probably doesn’t make sense to think of Trump as a Republican. He took over the Republican party the way a parasite might take over its host. He’s a new breed, and he won’t be defeatable by old methods.

In my earlier post, I tried, at the risk of seeming more sympathetic to Trump’s message than I’m entirely comfortable with, to explain why Trump’s message might resonate with people who feel shut out from the prosperity of the last couple of decades. The opportunities for class resentment and misunderstanding here are rich. The meritocratic ethos of America’s elite is galling if you happen to be living beneath it. The gall, to be specific, is in the extra little fillip of hegemony that makes the lives of the rich not only superior in luxury but also, at least seemingly, superior in virtue. Organic milk may be too expensive for your budget, but conventional milk, you’re told, is cruel to cows. You may not be able to afford an apartment close enough to your job to allow you to bike to it, but you nonetheless have to hear that bike lanes are saving the world from climate change. It’s irksome to hear injunctions to save the world if you’re having a hard time just surviving in it. (I write this, please understand, as a vegetarian who buys organic milk and bikes daily. And yes, I know that bikes alone won’t save the world from climate change.) Political correctness begins to seem like another of the elite’s purchases—another display of the ability of the rich to afford nicer things, one of those things being a nicer soul. And there’s a niggling suspicion, in the person who can’t afford the nicer things, that the financiers, lawyers, executives, and consultants who can afford them have drawn much of their wealth, in the last few decades, from offshoring—from the separation of the design, management, and marketing of products from the actual making of them, which has been in many cases shipped abroad.

Trump is saying to his audience, You’re right to be angry; you’re right to feel that it’s unfair; they betrayed you. “America has lost nearly-one third of its manufacturing jobs since 1997,” he said, last Thursday night in Cleveland—a statement that a fact-checker at the Washington Post confirmed with the words, “This is true.” As the Post reported in 2013, America had 17 million manufacturing jobs in the 1990s, and two decades later only had 11.7 million. Though Trump doesn’t mention it, manufacturing jobs seem to pay better than others, making their loss particularly hard.

An economist might reply that jobs are not the same as profits, and that manufacturing is actually doing okay if you count the dollars. Like almost everything else, the real value added by American manufacturing crashed during the Great Recession (2007–2009), but since then it has mostly recovered. Why so few jobs, if the dollars are still coming in? As the Post noted in 2013, “the price of robots relative to the cost of human labor has fallen 40 to 50 percent since 1990, and that trend is expected to continue.” In other words (and this is more or less the official story, according to American manufacturing’s boosters), maybe American manufacturing has gone high-tech and now relies more on mechanization than it used to. Maybe the nature of American manufacturing has changed, nudged by competition with low-wage countries like China, and maybe American manufacturers now simply need fewer workers than previously. After all, classic economic theory predicts that free trade is always in a country’s interest, despite anecdotal evidence to the contrary.

But in a 2015 report titled “The Myth of America’s Manufacturing Renaissance,” the nonpartisan Information Technology Innovation Foundation (ITIF) reported that in fact free trade hasn’t had the beneficial effect on America’s manufacturing sector that classic theory would predict. “U.S. manufacturing lost 11 times more manufacturing jobs in the 2000s than in the 1990s despite similar rates of manufacturing productivity growth in both decades,” the report’s authors write. The acceleration suggests that the loss of jobs can’t be entirely explained by robots. According to another common explanation for job loss in manufacturing, it’s natural, as a nation’s economy matures, for its service sector to grow as its manufacturing sector shrinks. Maybe so, writes the ITIF, but “Consumption of manufactured goods as a share of U.S. GDP, when measured in inflation-adjusted terms, is the same today as it was 40 years ago.” If we’re still paying as much we used to for manufactured goods, that suggests that the economy itself hasn’t altered in a fundamental way; we’re just making fewer manufactured goods than we used to, compared to our trading partners. Just to make sure that their news is perfectly depressing, the ITIF also explains that though there has been a small rebound in manufacturing in the past few years, it has probably been caused by people finally getting around to making purchases that they postponed during the Great Recession. The rebound won’t last.

It’s worth spelling out that the ITIF report doesn’t disprove the official, boosterish narrative about the inevitability of job loss as productivity rises. Of course that’s happening, the report admits. (Though, woe to the politician who tells the people. The disappearance of your job is a sign of American manufacturing’s progress and rising efficiency is probably not something that it is in the interest of any politician in a democracy to say.) It’s just that something else is happening, too, on which a cheerful face cannot be painted.

What is it? It’s probably beyond the capacity of a literary critic moonlighting as a political blogger to give an answer. My suspicion, based on little more than reading the morning paper over the years, would be that in their rush to save money by offshoring, America’s corporate managers inadvertently dispersed centers of expertise, including supply chains, that had long anchored particular manufacturing sectors in the United States—thereby destroying what the Harvard Business Review calls “industrial commons.” No manufacturer can be self-sufficient, especially not a high-tech one; making complicated things well requires a community of other skilled makers. If the only source for needed parts is in Japan, an American automaker may feel obliged to shutter an American factory.

What is to be done? Trump’s proposal to scrap free-trade agreements is unlikely to bring any centers of manufacturing excellence back home. In fact, as the New York Times has reported, Obama actually tried a Trump-style tariff in 2009, slapping a 25 to 35 percent tariff on Chinese tires to protect American tire-makers. Three years later, Obama claimed that he had saved a thousand American jobs, but in the meantime, Americans had spent more than $1 billion more on tires than they otherwise would have, and a retaliatory tariff from China cost America another $1 billion in lost chicken sales. The Los Angeles Times adds, moreover, that as the market adjusted to the tariff, “shipments from South Korea, Thailand and Indonesia doubled in value, more than offsetting the decline in Chinese-made tires,” and that while sales of American-made tires did rise after the tariff, employment in American tire-making “continued a long and steady decline.” Not quite a win-win outcome.

If the American government were to try to nurture a particular industry, in an attempt to restore a manufacturing nexus, the effort might risk being condemned as a subsidy by one of the free-trade organizations that America belongs to. (Industry-specific subsidies are sometimes allowed, but only in developing nations.) And then there’s the danger of betting on the wrong horse; cf. Solyndra.

Economists like to complain that voters fail to understand that free trade is worth the costs. In fact, however, according to the Pew Research Center, a majority of Americans still believe that free trade is on the whole a good thing, 51 percent to 39 percent (though Trump supporters consider free trade a bad thing, 67 percent to 27 percent). And Gallup finds that 58 percent of American adults consider foreign trade an opportunity, and only 34 percent consider it a threat.

To trade freely or not to trade freely . . . It seems to be hard to think outside of this particular box. Trump doesn’t. Sanders doesn’t, either, really: he voted against every free trade agreement that came through the Senate. Clinton voted for some free-trade agreements and against others, depending on her assessment of the protections afforded by each agreement to workers and the environment. That may sound too nuanced for this election cycle, but I have even worse news. I’ve spent a day and a half now puzzling over this blog post, and just now I googled for “Hillary Clinton industrial policy,” to see if she had gone on the record with any ideas. It turns out that there’s a fact sheet on her campaign site, corresponding to a speech she gave in December 2015, that proposes investing in America’s “industrial commons.” I swear I didn’t know this until I reached the paragraph you’re now reading. Her fact sheet is hopelessly nerdy, a bit verbose, and rather bland—not unlike this blog post. But Clinton got there ahead of me. Never let it be said that she doesn’t do her homework.