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Even Freed from Regulations, Don’t Expect Coal Jobs To Return. Or Factory Jobs, Either.

Wednesday, March 8, 2017 12:41
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Two hallmarks of President Donald Trump’s plans to revive the economy are lifting regulations on coalmining and forcing companies to bring manufacturing jobs back to the United States via protectionist policies. Neither is likely to work, for related reasons.

Consider coal first. The Baker Institute writes at Forbes:

Government regulations have very little to do with coal’s problems. Repealing the CPP [Clean Power Plan, a regulation passed by President Obama] or opening federal lands to mining won’t rescue King Coal from the drubbing it is receiving at the hands of cheaper, cleaner natural gas and wind power….

The challenge is as Sisyphean as it is undesirable. His plan represents a broadside against the market and climate forces that have made great strides in modernizing American power generation. Even Trump’s stated grounds for his avowed goal, employment, would most likely be undermined by his intervention….

As my colleagues demonstrate, short of an improbable event that sends natural gas prices soaring, there is little chance of a coal renaissance in America. That’s a good thing, for plenty of reasons.

Natural gas and other forms of energy are more efficient and create less pollution. Coal mining employed just 66,000 in 2015, while newer methods of energy extraction, such as shale gas, employ more people. So anything that Trump does to stoke demand for coal in the current climate will have counterproductive impacts.

When it comes to manufacturing, Trump (along with many other politicians, including Hillary Clinton and Bernie Sanders) similarly overpromises. Manufacturing jobs—factory work, essentially—has been declining as a share of employment since 1943.

The red line, which runs left to right and captures the percentage of factory workers as a percentage of total employment, shows a straight-line decline from the 1940s until the 2010s, when it flattens out as it approaches zero percent. Apart from relatively small artisanal manufacturing shops scattered around America, there is no reason to expect a large reversal in a trend that has been in place for around 70 years. Trump and other “economic nationalists” may well try to bully, tax, and otherwise discourage companies from moving jobs overseas, but the jobs saved will be rounding errors and simply forestall whatever developments might actually jack up the economy for real.

Consider for instance the effects of occupational licensing rules and other certifications that create barriers to entry for new businessess, operators, and services. For all his talk about cutting regulations, Trump has had little to say about sharing economy ventures such as Uber or Lyft. Given his interests in conventional hoteling, I assume he is not predisposed toward Airbnb and other house-sharing services. But those are the sorts of come-from-nowhere services and companies the squeeze jobs and value out of otherwise dead assets.

Economies function more efficiently when the actors in them—consumers and producers alike—are generally free to act how they want. Vested interests will always be trying to screw over competitors and customers so they can maintain or grow their market share. One of the things I like about Trump is his willingness to talk about deregulating vast aspects of the economy. Unfortunately, his deregulatory zeal seems to be less about creating a wide-open economy that is characterized by creative destruction which “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one” and more about reviving some preferred industry from the past.

Unless we really get lucky, deregulation informed by nostalgia isn’t going to create a vibrant future.


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