President trump believes that under the slogan “America first” foreign policy will provide income Americans and jobs, and help rebuild the country. If you put aside the danger of moral and diplomatic plan related to the arrogant assertion trump the superiority of their own interests of America over the global welfare, we should admit that ideas trump there is one economic truth, but also a few dangerous myths.
The truth lies in military Affairs. The United States is too overextended militarily. If will be greatly reduced military spending overseas and the costs of endless war with the aim of regime change, the United States can save billions of dollars a year, that is up to 2% of GDP per year within the overall spending on security, and this money could be redirected to investments in the United States. Does trump actually to cut military spending is an open question, since it calls for reducing commitments abroad, but also stands for a new arms build-up.
Of course, we can and should cut military spending abroad. America currently has military bases in about 70 countries, and annual maintenance costs amount to 1% of GDP or 5% of the Federal budget. If we consider America’s war aimed at regime change (recent examples of Afghanistan, Iraq, Libya and Syria), the foreign military spending will grow about 1% of GDP. And finally, if we add the costs and tensions with Russia — including the American-led efforts aimed at the promotion of NATO to the East in the direction of Ukraine, then the U.S. burden and risks will increase even more.
If trump has terminated the participation of the United States in the wars in the middle East, and lowered tension in relations with Russia, refusing for the sake of NATO expansion to the East, he, in fact, would be able to save a considerable to America sums of money which could be reinvested within the country. But if trump will take these savings and use them to a new arms race, as he sometimes said, in this case, the economic benefit will be exhausted and it will put America in an even more dangerous situation, since other big powers to join the arms race.
More questionable the idea of trump on the program “America first” applies to other areas, namely trade and investment, migration, taxes and policy assistance. In each of these cases, trump has greatly exaggerated the benefits that can be achieved through implementing the policy of “America first,” and they downplay the associated costs.
The most provocative and inaccurate statements trump associated with the policy of America in the field of international trade and investment. He constantly says that a rigid attitude to U.S. companies transferring their production to China and Mexico, will allow him to restore jobs and prosperity at home. In this case, trump pointed to the correct phenomenon: the withdrawal of jobs abroad, but he exaggerates its importance and also makes a shot on the wrong goal.
American manufacturing company, indeed, transferred jobs to China and Mexico, and they do so in order to benefit from the low wages in those segments of the production process, where intensive manual labor. According to a recent study, in 2014 the enterprises of the multinational firms in Mexico employed approximately 665 thousand people employed in the production of employees and 827 thousand in China in foreign affiliates in which American firms have controlling stakes in, and a total of 1.5 million workers. Made in Mexico products sent to the U.S. in accordance with the North American agreement on free trade (NAFTA), whereas the Chinese-made goods intended for the United States and the rest of the world.
Sure, 1.5 million is not a trivial number of workers, but it is only 1% of the workforce in the United States. And furthermore, jobs in manufacturing are not so numerous in America. In 1970, jobs in the manufacturing sector accounted for 25% of the total workers. And today they make up only 8.4 percent. This does not mean that jobs in the manufacturing sector moved to other countries. They just gave way to automated production. Place workers on the Assembly line today is industrial robots. And the remaining workers in the manufacturing area tomorrow will be replaced by artificial intelligence systems.
There is another misconception. The return jobs will not be able to create the same 1.5 million jobs inside the United States. Located in America, manufacturing is much more capital-intensive than in China or Mexico, and this is explained by the higher level of wages. 1.5 million jobs in China or Mexico can turn into 750 thousand jobs inside the United States. It’s only 0.5% of the us labour market. And even this estimated increase in the number of jobs does not account for the significantly higher cost of production located within the United States companies, which will emerge with the return of jobs — as a result, American firms will lose international competitiveness, which will affect the work is located in United States businesses, including those engaged in research and development and which support overseas production.
Of course, not all jobs will be returned to the United States. Some of the foreign productions have nothing to do with the American market. And even the production for export for the American market is not so easy to lure back.
Suppose, for example, that trump realizes his threat regarding the introduction of a “border tax” (border tax) or import tax that will be imposed on goods exported to the United States by American companies operating in China and in Mexico. In response, these companies are likely to close their foreign clients and will acquire the same products from unaffiliated companies that are not subject to border tax. Suppose trump will impose restrictive tariffs on all goods coming from China and Mexico. In this case, it will start a giant trade war, which will cause huge damage to the American and world economy.
What can you say about the recent statements of the representatives of the Ford Motor Company which promised to invest $ 700 million in Michigan and not in Mexico? Ford said that this step, presented as a response to the call of the trump, will retain 700 jobs, that is about one job for $ 1 million investment. In any event, trump will not be able to advance far in regard to 152 million U.S. workers.
Instead of blaming China and Mexico in the existence of very real problems faced by American workers, Trump would have to tax the rapidly growing incomes of owners of capital (today the stock market indicators are at record levels). Unfortunately, he is going to do just the opposite — to give even more tax breaks to corporate capital and is justified by the fact that the tax cuts on corporate income will also facilitate the return to the country of jobs. According to reports, trump wants to reduce taxes from 35% to 15%. The estimated loss of revenue would amount to per year about 1% of GDP, while benefits from tax cuts will mostly get rich. As for jobs, the increase will be small for the reasons already given, whereas the profit loss would be significant.
And how trump offers to compensate for the loss of profit? Partly, it seems, he expects to prevent the formation of large budget deficits, and in this case, the burden would fall on the shoulders of the young people of today who will inherit a mountain of public debt. However, hoping to get support for its program “America first”, he proposes to reduce foreign aid and to cut funding for the UN. Here is the biggest myth. Reducing the cost of the assistance, and the UN will save only a small amount of money in terms of dollars, but will cause huge damage to the global interests of America and the national security of the country, not to mention the moral reputation of the United States in the world.
Trump and his supporters constantly engaged in discrediting foreign aid and financial contributions to the UN, calling the expenditures for these purposes are heavy and unjust burden on the American people. This opinion is based on prejudice, and nothing more erroneous it is impossible to imagine. Much more arguments you can give to support our increasing costs in both cases.
U.S. foreign assistance is about $ 31 billion per year, or approximately 0.17 percent of the national income. Thus, even if all foreign aid will be terminated, the proceeds can compensate for less than 1/5 of the sum which is formed as a result of the proposed trump tax cuts. But the result brings the U.S. foreign aid?
For example, thanks to the leadership of George W. Bush, had saved the lives of millions of people infected with human immunodeficiency virus. Provide assistance saves the lives of hundreds of thousands of young people who otherwise would have died from malaria. Foreign aid protects America from epidemics of diseases that begins abroad and then reach the shores of the United States. It allows you to feed the hungry and to help people affected by typhoons, floods, drought, famine and conflict.
Will the administration trump is so heartless? And would that make it to the American people to abandon long existing and successful efforts to combat the deadly disease, hunger, and extreme poverty?
Quite the contrary — the United States should do much more in partnership with other countries. For a very small price, the United States together with other countries can help to end the spread of HIV and AIDS. Through innovative steps Bush made 15 years ago, as well as numerous new technologies, trump could establish partnerships with other countries in order to prevent almost all new HIV infections.
In addition, based on the long-existing commitments of the UN and the commitments of other countries, a small increase in aid can lead to the fact that every girl and boy in the poorest countries will have the opportunity to finish high school. Thus, children from poor families will not become child soldiers or unemployed youth who can be easily radicalized. All these objectives can easily be achieved and this requires only a portion of those funds that otherwise as a result of reductions of taxes will be at the disposal of the rich.
Trump also claims that the America can result in significant savings if you reduce their contributions to the UN, and, as they say he is already preparing on this account, the corresponding order of the President. In this case, the savings would be negligible in us dollar terms, however, such a solution is extremely dangerous in its consequences. America pays two contributions to the UN. The first is the “fixed payment” to the regular UN budget. We are talking about funds for financing of core operations of the UN. Says a lot about what contribution the United States is 22% of the regular budget, and this is the biggest proportion in comparison with all other countries. However, the regular budget is modest in scope and is only $ 2.7 billion a year, and set the share of the United States equals to 600 million dollars a year.
In addition, America spends per year an additional 7 billion dollars or so, and in this case we are talking about the so-called “voluntary contributions”, that is, funding for such UN organizations as UNICEF (United Nations Children’s Fund), and peacekeeping operations. These contributions are not only vital to save lives, but also for global security and America’s security, but they also allow the United States to save money. In each of these cases, the United States combine their funds with funds of many other countries, and thus divided the global burden. Many of the donor countries provide much larger share of its GDP in aid and support of the UN than the United States.
The main question is what it is. Even if it stopped all foreign aid of the United States and all contributions to the UN, the financial savings will not exceed 0,2% of GDP, which is approximately 1/5 of the amount that is formed by trump’s proposed reduction of corporate tax, and only a hundredth part of total Federal spending. The idea that saved funds thus to significantly improve the situation of American workers or taxpayers is, in fact, a hoax. As a result of such budget cuts will make the world more dangerous and more vulnerable to epidemic diseases and other natural disasters.
The results are in — the “America first” is correct in one key respect, that is, as the recommendation to reduce spending on overgrown armed forces of America. In all other respects it is deeply flawed. America will not be able to resolve the crisis with jobs, with incomes crisis or infrastructure crisis with threats to American companies, or the imposition of tariffs; America will not be able to bring back jobs from China or Mexico by reducing corporate taxes or reduce the amount of aid for development and contributions to the UN. Such suggestions are completely unfounded, and they won’t do any good for the American people, not to mention the potentially high price that will be forced to pay the rest of the world.
To cure the ills of America can with greater justice, integrity and honesty within our borders; it largely depends on how we divide the benefits from using such advanced technologies as robotics and artificial intelligence, and also the huge incomes that they provide. The real reason for falling revenues of the American working class is not the income of Mexico, and the vast profits and gains attributable to the 1%. Major decisions for American workers are just at home, not in foreign military adventures, a new arms race or doomed to lose the trade wars.
Jeffrey Sachs is a University Professor (University Professor) and Director of the Center for sustainable development at Columbia University and the author of “the Age of sustainable development” (The Age of Sustainable Development).
