US economy

Status Anxiety Is Blowing Wind Into Trump’s Sails

The three economists wrote:

Consistent with German experience, we find a link between right-wing political extremism and economic conditions, as captured by the change in G.D.P. Importantly, however, what mattered for right-wing anti-system party support was not just deterioration in economic conditions lasting a year or two, but economic conditions over the longer run.

Many of the U.S. counties that moved toward Trump in 2016 and 2020 experienced long-run adverse economic conditions that began with the 2000 entry of China into the World Trade Organization, setbacks that continue to plague those regions decades later.

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Hanson and his co-authors, David Autor and David Dorn, economists at M.I.T. and the University of Zurich, found in their October 2021 paper “On the Persistence of the China Shock”:

Local labor markets more exposed to import competition from China suffered larger declines in manufacturing jobs, employment-population ratios, and personal income per capita. These effects persist for nearly two decades beyond the intensification of the trade shock after 2001, and almost a decade beyond the shock reaching peak intensity.

They go on:

Even using higher-end estimates of the consumer benefits of rising trade with China, a substantial fraction of commuting zones appears to have suffered absolute declines in average real incomes.

In their oft-cited 2020 paper, “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure,” Autor, Dorn, Hanson and Kaveh Majlesi, an economist at Monash University, found that in majority-white regions, adverse economic developments resulting from trade imports produced a sharp shift to the right.

Autor and his co-authors describe “an ideological realignment in trade-exposed local labor markets that commences prior to the divisive 2016 U.S. presidential election.” More specifically, “trade-impacted commuting zones or districts saw an increasing market share for the Fox News Channel, stronger ideological polarization in campaign contributions and a relative rise in the likelihood of electing a Republican to Congress.”

Counties with a majority-white population “became more likely to elect a G.O.P. conservative, while trade-exposed counties with an initial majority-minority population became more likely to elect a liberal Democrat,” Autor and his colleagues write.

They continue:

In presidential elections, counties with greater trade exposure shifted toward the Republican candidate. These results broadly support an emerging political economy literature that connects adverse economic shocks to sharp ideological realignments that cleave along racial and ethnic lines and induce discrete shifts in political preferences and economic policy.

The trade-induced shift to the right has deeper roots dating back to at least the early 1990s.

In “Local Economic and Political Effects of Trade Deals: Evidence from NAFTA,” Jiwon Choi and Ilyana Kuziemko, both of Princeton, Ebonya Washington of Yale and Gavin Wright of Stanford make the case that the enactment of the North American Free Trade Agreement in 1993 played a crucial role in pushing working-class whites out of the Democratic Party and into the Republican Party:

We demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses relative to other counties. These losses begin in the mid-1990s and are only modestly offset by transfer programs. While exposed counties historically voted Democratic, in the mid-1990s they turn away from the party of the president (Bill Clinton) who ushered in the agreement and by 2000 vote majority Republican in House elections.

The trade agreement with Mexico and Canada “led to lasting, negative effects on Democratic identification among regions and demographic groups that were once loyal to the party,” Choi and her co-authors write.

Before enactment, the Republican share of the vote in NAFTA-exposed counties was 38 percent, well below the national average, but “by 1998, these once solidly Democratic counties voted as or more Republican in House elections as the rest of the country,” according to Choi and her colleagues.

Before NAFTA, the authors write, Democratic Party support for protectionist policies had been the glue binding millions of white working-class voters to the party, overcoming the appeal of the Republican Party on racial and cultural issues. Democratic support for the free trade agreement effectively broke that bond: “For many white Democrats in the 1980s, economic issues such as trade policy were key to their party loyalty because on social issues such as guns, affirmative action and abortion they sided with the G.O.P.”


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