Vox/CEPR: The IT revolution and the globalisation of R&D | VOX, CEPR Policy Portal

https://voxeu.org/article/it-revolution-and-globalisation-rd#.XW_jfyBtVNM.gmail

https://voxeu.org/article/it-revolution-and-globalisation-rd  

Despite rising globalisation after WWII, corporate R&D spending remained highly concentrated in the same small group of advanced industrial countries that dominated it for decades – until recently. Since the 1990s, the distribution of US multinational R&D investment across countries and industries has shifted dramatically toward non-traditional R&D destinations like China, India, and Israel (Kerr and Kerr 2018). Today's leading US multinationals have developed a global innovation system that increasingly relies on emerging market talent to propel innovation for the global frontier. 

Why these emerging markets – and why now? In new research, we argue that the rising importance of software and information technology as drivers of innovation and new product development across a wide range of industries led to a shortage in software/IT-related human capital within the US (Branstetter et al. 2018a). This has driven US multinationals abroad in a search for talent. 

To support this argument, we show:

• the extent of globalisation of R&D by US MNCs,
• the growing importance of software and IT in firm innovation across industries, 
• the rise of new R&D hubs, and 
• the differences in the type of activity done there. 

We also document that IT-intensive and software-intensive firms were more likely to conduct R&D abroad, and that foreign R&D is most pronounced in IT-intensive and software-intensive countries. 

The increase in demand for an IT and software workforce

Software and IT patents have been growing in importance since the 1990s; Figure 1 shows the share of all USPTO patents that are based on software. The share grew from 5% in 1990 to nearly 40% by 2015, and from 10% to 45% for IT. This growth in the IT intensity of invention was explored by Arora et al. (2013) and Branstetter et al. (2018b), who interpret the rise in IT intensity as the emergence of a 'general purpose technology' in new production development that applies across manufacturing industries. 

The advent of powerful microprocessors, memory chips, sensors, and digital control systems has enabled new generations of devices to become smarter and more responsive to their environment. Improvements in product functionality can often be achieved through better software alone. This has made IT, and especially software engineering, more central to success in innovation and new product development, increasing demand for IT and software engineering talent.¹

Figure 1 The growing IT/software intensiveness of US MNC invention

Importing talent from abroad

According to the National Survey of College Graduates, the IT/software workforce – made up of programmers, computer scientists, and electrical engineers – grew by 112% between 1993 and 2010, while the overall workforce grew by 70%. The foreign share of IT workers grew from 16% in 1993 to 32% by 2010. This phenomenon has been documented by Bound et al. (2015). These changes suggest an extremely large increase in demand that was partially met by importing talent from abroad, through mechanisms like the H-1B programme. 

Wage comparisons provide evidence that the foreign talent supply did not meet demand in the software and IT sectors. Figure 2 shows average compensation per worker for US multinationals across different countries, using publicly available Bureau of Economic Analysis data [https://www.bea.gov/iTable/index_MNC.cfm]. 

Figure 2 Average compensation per employee at US MNC foreign affiliates

Source: Bureau of Economic Analysis.

For average compensation per employee in aggregate, the US is in the middle of the country distribution. If we consider IT-specific industries² like Electrical Equipment Appliances and Components, or Computers and Electronic Products, however, the average compensation per employee at US headquarters was much higher than pay for employees at a foreign affiliate. Average compensation represents many functions within US parents and affiliates, the wages of skilled R&D personnel are likely to be relatively high in both the US and in other countries. Nevertheless, these numbers are clearly consistent with the view that:

• demand has outpaced supply of IT and software workers in the US, and
• raw engineering talent of high quality is available in large quantity and at relatively low prices in emerging markets – especially India and China. 

Interviews with the R&D managers of leading US multinationals both inside and outside the US supported the perception that there is a global shortage of IT and software talent. We also confirmed the need to move abroad to gain necessary access to large foreign supplies of skilled engineers. 

New R&D destinations have an abundant supply of human capital 

The supply of technically skilled workers is abundant in many of the same countries in which we found an increase in US MNC foreign R&D activity – notably India and China. Applications for Indian and Chinese high-skilled workers made up 85% of H-1B visa applications in 2017 (US Department of Homeland Security 2016), and Indian and Chinese students combined made up 18% of doctorates in science and engineering from US universities in 2016.³This share was even larger in some key disciplines. 

If we view the large number of Indian and Chinese students pursuing graduate education at American research universities as the extreme right tail of a distribution of science and engineering talent, most of which remained at home, then this suggests a massive amount of software- and IT-trained human capital available in China and India. Indeed, Arora and Gambardella (2005a and 2005b) record an abundant supply of engineering and technology graduates in emerging economies. 

The types of activity done in new R&D destinations like China, India, and Israel suggests why they have been chosen as R&D hubs. Bureau of Economic Analysis data shows that R&D-performing affiliates in China, India, and Israel are concentrated in computer and electronic production manufacturing and professional, scientific, and technical services. In more traditional destinations like Germany, Japan, Canada, the UK, and France, R&D is concentrated in traditional manufacturing. 

This suggests the need for human capital to meet the demand of software- and IT-intensive US multinationals has motivated US MNC decisions to do R&D in these locations. Figure 3 shows that patenting and the R&D investment of US multinationals outside the US has grown disproportionately in those regions where IT and software skills are well developed. 

Figure 3 US patenting and R&D investment growth is increasingly concentrated in regions specialising in IT and software

In the two graphs, the horizontal axis measures the degree to which local inventors in a country tend to specialise in IT and software invention, as measured by their USPTO patent grants. This obviously tends to be places in which local IT and software skills are well developed. Regression analysis also implies this positive relationship, which is robust to the inclusion of control variables. 

Conclusions and implications

Our analysis suggests that the increasing reliance on IT and software in innovation, and the growing endowments of specialised human capital in countries like India and China, have induced US MNCs to conduct more R&D in these locations. This has important implications: 

• It suggests that there is a constraint on the supply of IT and software human capital in the US, and that these human resource constraints limit the invention possibilities for US-based multinational firms, even for those firms in which innovative activity and technological opportunity seem to be at the highest levels.⁴ 
• Global flows of investment, people, and ideas can help relax these constraints through open immigration policies and liberal trade and FDI policies. When successful, these flows raise growth, productivity, and consumption possibilities around the world. When US multinationals are able to import talent or export R&D work to the regions in which talent resides, this reinforces US technological leadership. Conversely, politically engineered constraints on this response clearly undermines the competitiveness of US-based firms.

We do not directly explore the impact of immigration policy in our paper, but existing evidence suggests that the openness of the US' labour market to immigrants in the 1990s allowed US-based firms to quickly adapt to the software-biased shift in technological opportunity. This created an unexpected and sharp increase in demand for software engineers, met at the height of the internet boom by importing more software engineers than the US was training in its own universities.⁵ 

Since the early 2000s, however, the US labour market has become more closed to immigration. Caps on high-skilled visas like the H-1B visa programme have grown more restrictive, and evidence from Glennon (2018) shows that these restrictive high-skilled immigration caps drove US MNCs to shift some high-skilled activity abroad in an effort to address these constraints. 

Relatively liberal trade and FDI policies have allowed MNCs to address their human resource constraints by sourcing from abroad, but an open immigration regime for highly skilled workers would further ease this constraint. 

• Finally, in addition to open immigration and liberal trade and FDI policies, the constraint on the supply of IT and software human capital in the US could be addressed with education policies that expand the supply of domestic IT and software human capital. 

Authors' note: We gratefully acknowledge financial support from the National Science Foundation through two grants: 1360165 and 1360170. The statistical analysis of firm-level data on US multinational companies was conducted at the Bureau of Economic Analysis (BEA), United States Department of Commerce under arrangements that maintain legal confidentiality requirements. The views expressed do not reflect official positions of the US Department of Commerce or the NSF.

References

Arora, A, L G Branstetter, and M Drev (2013), "Going Soft: How the Rise of Software-Based Innovation Led to the Decline of Japan's IT Industry and the Resurgence of Silicon Valley", Review of Economics and Statistics 95(3): 757–75.

Arora, A and A Gambardella, eds (2005a), From Underdogs to Tigers: The Rise and Growth of the Software Industry in Brazil, China, India, Ireland, and Israel, Oxford University Press.

Arora, A and A Gambardella (2005b), "The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries", Innovation Policy and the Economy 5: 1–32.

Bloom, N, C Jones, J Van Reenen, and M Webb (2018), "Are Ideas Getting Harder to Find?", working paper, Stanford.

Bound, J, B Braga, J M Golden, and G Khanna (2015), "Recruitment of Foreigners in the Market for Computer Scientists in the United States", Journal of Labor Economics 33(S1): S187–223.

Branstetter, L, B Glennon, and J B Jensen (2018a), "The IT Revolution and the Globalization of R&D", in Innovation Policy and the Economy, Volume 19, edited by J Lerner and S Stern, University of Chicago Press.

Branstetter, L, M Drev, and N Kwon (2018b), "Get With the Program: Software-Driven Innovation in Traditional Manufacturing," Management Science.

Glennon, B (2018),How Do Restrictions on High-Skilled Immigration Affect MNC Foreign Affiliate Activity?, working paper.

Jones, B (2009), "The Burden of Knowledge and the Death of the Renaissance Man: Is Innovation Getting Harder?" Review of Economic Studies 76(1): 283–317.

Kerr, S P and W R Kerr (2018), "Global Collaborative Patents", The Economic Journal 128(612).

US Department of Homeland Security (2016), "Characteristics of H-1B Specialty Occupation Workers", Fiscal Year 2016 Annual Report to Congress.

Endnotes

[1] Arora et al. (2013) presented evidence that superior access to software engineering human resources enabled US IT firms to out-innovate their Japanese rivals in the 1990s and 2000s. Branstetter et al. (2018b) found evidence that firms better positioned to exploit technological opportunities realise higher returns to their R&D investments.

[2] Classified using the industry of the foreign affiliate.

[3] National Science Foundation, National Center for Science and Engineering Statistics, Survey of Earned Doctorates.

[4] This is consistent with research by Jones (2009) and Bloom et al. (2018), documenting the rising human resource requirements of innovation.

[5] Arora et al. (2013) argue that Japanese firms were constrained in their ability to respond to this shift, as a result of their rigid and closed-off labour market, and that part of Silicon Valley's evident resurgence vis-à-vis their Japanese competitors was based on American firms' greater access to immigrant talent.

Trump taunts China as trade war rattles economy [feedly]

Trump taunts China as trade war rattles economy
https://www.asiatimes.com/2019/09/article/trump-taunts-china-as-trade-war-rattles-economy/

Amid fresh signs his trade wars are rattling the US economy, President Donald Trump on Tuesday sent stern warnings to China, urging the Pacific power not to drag its feet in trade negotiations.

After a month of escalations in the year-long battle with Beijing, Trump fired off another Twitter blitz, saying Chinese negotiators may be holding out for a better deal in hopes he will be voted out in next year's presidential elections.

The latest invective from the White House ended the more conciliatory tone struck last week by both sides, which had helped soothe markets.

"While I am sure they would love to be dealing with a new administration … 16 months PLUS is a long time to be hemorrhaging jobs and companies," Trump said, claiming China's deteriorating economy could ill afford to wait.

"And then, think what happens to China when I win. Deal would get MUCH TOUGHER!"

While Trump pointed to China's weakening economy, a survey showed Tuesday that the US manufacturing sector – which Trump has long championed – had contracted last month for the first time in three years.

While this does not necessarily mean a US recession is now on the horizon, economists said Tuesday it is a worrying sign.

Senate visit to Beijing

"The canary in the mine may be falling off its perch," economist Joel Naroff told clients in a note.

Wall Street sank into the red early Tuesday, the first trading session since Trump jacked up duty rates on more than $100 billion in Chinese imports over the weekend.

The benchmark Dow Jones Industrial Average fell 1.1 percent. Yields on 10-year US Treasury notes briefly touched three-year lows.

The grim results for the US manufacturing sector were only the latest sign of a softening US economy, which has seen slower hiring and a sharp drop off in investment by businesses.

Forecasts still call for growth of about two percent in the third quarter, however.

Chinese state media reported Tuesday, meanwhile, that Republican Senators Steve Daines and David Perdue had met in Beijing with Vice Premier Liu He, China's top negotiator in the trade talks.

Liu said China hoped for a negotiated resolution based on "equality and mutual respect," according to state news agency Xinhua.

US and Chinese negotiations are due to resume this month after a sharp deterioration in the year-long trade war in August. But Bloomberg reported Tuesday the effort may be faltering.

Officials are having difficulty scheduling a time to meet after Washington rebuffed Beijing's demands to hold off on imposing the weekend's latest round of tariff increases, the news agency said.

Thomas Donohue, head of the US Chamber of Commerce, long a powerful Washington voice, told CNBC on Tuesday that lifting the latest tariffs would have instead allowed for a resumption of the talks.

But a White House strategy that involves creating such high levels of uncertainty could take the United States in a direction he said was unacceptable.

"Uncertainty leads to eventually no good," he said.

AFP

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PK: The Great Tax Break Heist [feedly]

The Great Tax Break Heist

Paul Krugman, NYT

https://www.nytimes.com/2019/09/02/opinion/trump-tax-opportunity-zones.html

Tax scams are the tribute policy vice pays to policy virtue.

A few days ago The Times reported on widespread abuse of a provision in the 2017 Trump tax cut that was supposed to help struggling urban workers. The provision created a tax break for investment in so-called "opportunity zones," which would supposedly help create jobs in low-income areas. In reality the tax break has been used to support high-end hotels and apartment buildings, warehouses that employ hardly any people and so on. And it has made a handful of wealthy, well-connected investors — including the family of Jared Kushner, Donald Trump's son-in-law — even wealthier.

It's quite a story. But it should be seen in a broader context, as a symptom of the Republican Party's unwillingness to perform the basic functions of government.

First of all, the opportunity-zone debacle isn't the only example of abuse enabled by the Trump tax cut, which is full of destructive loopholes. That is, after all, what's bound to happen when you ram a multitrillion-dollar bill through Congress without a single hearing, presumably out of fear that it would have been rejected if anyone had had time to figure out what was in it. The bill's drafting was so rushed that many provisions were actually written in by hand at the last minute.

Among other things, the bum's rush meant that much of the bill was drafted by lobbyists on behalf of their clients. Given that, it shouldn't be a surprise that a provision sold as a policy to help the poor has actually ended up being a giveaway to hedge funds and real estate developers.


Beyond that, however, the opportunity-zone affair reflects the reality that Republicans are no longer willing to spend public money in the public interest.

I don't mean that the G.O.P. is committed to limited government, which would at any rate be coherent. If Republicans were willing to say, "We don't care about the poor," or even, "We care about the poor, but don't consider fighting poverty an appropriate role for government," at least they'd have the virtue of intellectual consistency.

In fact, however, the modern G.O.P. pretends to share traditionally liberal goals, like poverty reduction or expanded health coverage. But it refuses to spend money on these goals, trying instead to bribe private investors into serving those goals by offering targeted tax breaks.

You can see this syndrome in many areas. Take, for example, the problem of America's crumbling infrastructure, which Donald Trump claimed he would fix, and is one area in which he might have expected bipartisan support. Why hasn't anything happened on that front? Why has "infrastructure week" become a punch line for political jokes?

A large part of the reason is that neither the Trump administration nor Republicans in Congress have been willing even to consider the idea of building infrastructure by, you know, building infrastructure.



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You might think that right now there's an overwhelming case for engaging in old-fashioned public works spending. After all, the need for new spending is obvious, and the government's financing costs are extremely low. (Inflation-protected 10-year bonds are actually paying negative interest.) Why not just borrow some money and get to work on those bridges?

But that's not how modern Republicans do things. The closest thing we've seen to an actual Trump infrastructure plan was a proposal, not for public spending, but for huge tax credits to private developers. And in practice the plan would have been more about privatizing public assets than about promoting new investment.

As far as I can tell, the last time Republicans were willing to spend serious amounts of public money for the public good was 1997, when they agreed to the creation of the Children's Health Insurance Program, which was, by the way, highly successful. Since then it has all been about policy by tax break — which consistently fails, for at least three reasons.

First, such policies rarely "trickle down" to the people they're supposedly intended to benefit. Opportunity zones aren't the only part of the 2017 tax cut that is notably failing to deliver; remember how slashing corporate tax rates was going to lead to a surge in ordinary workers' wages?

Second, the main beneficiaries of targeted tax cuts tend, consistently, to be a small group of wealthy individuals. Another provision of the 2017 law was a provision supposedly intended to help small businesses; in fact, 61 percent of the provision's benefits are flowing to the top 1 percent of households.

Finally, selective tax breaks often end up mainly providing new and improved ways to dodge taxes. Rich people with smart accountants don't have a hard time pretending to be small-business owners, developers serving poor communities or whatever else the creators of those tax breaks are ostensibly trying to promote.

The point, again, is that you shouldn't think of the opportunity-zone fiasco as an isolated mistake. Things like this are inevitable when one of our two major political parties has basically turned its back on the very idea of productive public spending.

The Times is committed to publishing a diversity of letters to the editor. We'd like to hear what you think about this or any of our articles. Here are some tips. And here's our email: letters@nytimes.com.

Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography.  -- via my feedly newsfeed

How well is the American economy working for working people?: EPI researchers reflect on the state of labor in the United States

https://epi.org/174081#.XW0jweM2vd8.gmail

The Jobs Really Most Threatened by Machines [feedly]

The Jobs Really Most Threatened by Machines
https://prospect.org/article/jobs-really-most-threatened-machines

Cashiering is the third largest occupation in the United States, according to 2019 data from the Bureau of Labor Statistics, and 73 percent of cashiers are women. 

In August, Amazon opened two more of its Amazon Go cashierless stores—one in San Francisco, the other in New York. The high tech convenience stores, which were first introduced in 2018, represent one of Amazon's newest campaigns to alter the brick-and-mortar retail experience. To shop at Amazon Go, customers have to scan in with their Amazon Go app simply to enter; once inside, hundreds of cameras and sensors identify products that customers take off the shelves and put into bags. Their Amazon accounts are then docked accordingly based on the merchandise with which they exit the store (a process Amazon has dubbed "Just Walk Out" technology). No checkout, no cashiers, no waiting in line. 

The company has announced plans to unveil a London location in the near future; in the longer term, they've set their sights on opening 3,000 such grocery and convenience stores by 2021. So far, there are just 15 of these stores in operation.

For a company with such imperial ambitions, spanning sectors from web hosting to freight logistics, 15 stores may not seem a particularly consequential project. But Amazon is not the only company pursuing automated retail. Such grocery giants as Carrefour, Tesco and the Walmart-owned Sam's Club (which rolled out a 32,000 square foot cashierless operation in Dallas in late August), are also setting up cashierless locations. Tech companies like Microsoft, and a smattering of startups, have gotten themselves in the game as well. 

In fact, according to a recent survey by the advisory firm International Data Corp, 28 percent of retailers are currently testing or piloting cashierless systems. According to The Wall Street Journal, the firm found roughly 100 companies worldwide currently engaged in the process of going cashierless.

The looming threat of automation encroaching from all sides has become a dominant theme in the media. Impending automation in factories has become a regular feature of doomsday McKinsey reports, and has been blamed for the closure of the GM plant in Lordstown. It's been a staple of the conversation about driverless cars, which were supposed to imminently replace the fleets of Uber and Lyft. It has threatened to radically reshape the trucking and freight industries. A 2017 Pew study found that 72 percent of Americans are worried about the threats to job security posed by automation.

All of that has fed into the "robot apocalypse" being prognosticated by presidential candidate Andrew Yang, who prophesies a profound mass unemployment to which the only logical response is his $1,000/month universal basic income proposal. "All you need is self-driving cars to destabilize society," Yang has told The New York Times.

But Yang mistakes the immediate risk for a more distant one. In fact, few of these threats have actually come to fruition. The timeline for driverless vehicles continues to be extended. GM shifted much of its Lordstown operation to Matamoros, Mexico, not for its robot density, but for a more traditional reason: its exceptionally low wages.

The real epicenter of the automation crisis has been the check-out line. 

While it may not convey the stark visual jolt of a fleet of driverless semis barreling down the highway, the impact of cashierless automation could be huge. According to 2019 data from the Bureau of Labor Statistics, cashiering is the third largest occupation in the United States, employing 3.6 million workers, just a hair less than all food services and preparation. And these cashier jobs, which tend to be low wage, are disproportionately held by women and people of color. Indeed, 73 percent of cashiers are women. 

With the retail sector already in the midst of major job losses brought on by private equity raidership, as in the case of Sears, and the rise of e-retail, cashier jobs were already under threat. Inroads made by automation are only exacerbating that crisis. "Cashiers are the canary in the coal mine," Marc Perrone, international president of the United Food and Commercial Workers International Union, told me.

The concern isn't just that Amazon Go will become the next big thing. It's also that Amazon, by dint of sheer size, is the trendsetter in the retail sector. Even if the thousands of cashierless stores Amazon has predicted don't materialize, the fact that Amazon has developed the technology—a cocktail of data analysis, image processing, and artificial intelligence—means that it will likely be made available (for a fee, of course)  to other retail stores in the future. "It's a crisis without a clear solution," said Mark Cohen, the director of retail studies at the Columbia School of Business.

There are still plenty of obstacles to implementation. Walmart trotted out a cashierless system based on scanning barcodes for roughly 100 of its stores, but discontinued the program in April 2018. And theft remains a big issue: spend just a few minutes at a self-checkout kiosk at any CVS and that should become clear. For the time being, the high powered data analysis the startup world has to offer has been unable to solve that problem entirely.

Crucially, it's unclear if customers will like cashierless stores. So far, self-checkout has not proven to be much of a crowd pleaser. With mounting concerns over privacy in the tech sector, there may be good reason to be distrustful of the technology. 

There are also consumer access issues when it comes to cashless-only transactions. Some cashierless stores, like the aforementioned Sam's Club in Dallas, don't accept cash at all, while the Amazon Go store requires a smartphone with the Amazon Go app to permit entry. That means that those without phones, credit cards, or formal banking, which is a meaningful percentage of the country's population, won't be able to shop in these stores. That's caused multiple cities, including New York and Philadelphia, to outlaw cashless retail altogether. Amazon has since softened its cashless dictum accordingly.

Even with all those complications, the proliferation of cashierless stores may come down to a simple analysis of cost. If the technology is cheap enough to subsidize the occasional shoplifter, it would be no surprise to see such stores spread. For an economy oriented around retail, the fate of cashiers—not drivers or assembly line workers—could soon become the real destabilizing force at the center of our great automation debate. 

 -- via my feedly newsfeed

Krugman: The Frauding of America’s Farmers [feedly]

The Frauding of America's Farmers
https://www.nytimes.com/2019/08/29/opinion/trump-trade-farmers.html

Donald Trump is unpopular, but he retains the loyalty of some important groups. Among the most loyal are America's farmers, who are a tiny minority of the population but exert disproportionate political influence because of our electoral system, which gives 3.2 million Iowans as many senators as almost 40 million Californians. According to one recent poll, 71 percent of farmers approve of Trump's performance — which is down somewhat from previous polling, but remains far above the national average.

Yet farmers are hurting financially. Investors are worried about a possible recession for the economy as a whole, but the farm recession is already here, with falling incomes, rising delinquency rates and surging bankruptcies. And the farm economy's troubles stem directly from Trump's policies.

This apparent contradiction — Trump is inflicting the greatest harm on the people who supported him most — isn't an accident. Farmers' past support for Trump was predictable: The demography and culture of (white) rural America make it fertile ground for politicians promising to restore traditional society, and especially traditional racial hierarchy. But farmers' financial distress should also have been predictable: While rural America may dislike and distrust cosmopolitan elites, the U.S. farm economy is hugely dependent on global markets, and it has inevitably been a major victim of the Trumpian trade war.

The questions, looking forward, are whether farmers understood what they were getting themselves into, whether they understand even now that their distress isn't likely to end anytime soon, and whether economic pain will shake their support for the man who's causing it.


At one level, it's not hard to see why farmers supported Trump. Hostility to nonwhite immigrants was central to his campaign, and such hostility tends to be highest in places where there aren't actually many immigrants. So rural America, with its still tiny immigrant population, was a receptive audience for his fear-mongering. More generally, Making America Great Again — which was basically about setting back the clock racially and culturally — was a message that played well in places that still tend to think of themselves (and are told by politicians to think of themselves) as the Real America, as opposed to the big metropolitan areas where most Americans actually live.

On the other hand, while farm country may be notably lacking in ethnic diversity and feels generally distrustful of globalists, the farm economy is in fact deeply integrated with and dependent on world markets. On the eve of Trump's trade war, America exported 76 percent of its cotton production, 55 percent of its sorghum, half its soybeans, and 46 percent of its wheat.

Overall, U.S. agricultural exports are almost 40 percent of the value of farm production, up from just 15 percent circa 1970. Globalization hurt some parts of U.S. manufacturing, with particularly harsh effects on some small industrial cities. But the rise of China and the growth of world trade have been nothing but good news for farmers.

And here's the thing: It shouldn't have been hard to predict that Trumponomics would be bad for farmers. Trump's desire for a trade war was out in the open from the beginning; protectionism is right up there with racism and anti-environmentalism as one of his core values. And a trade war was bound to hurt farm exports. Did anyone really imagine that China, an economic superpower with its own fierce nationalism, wouldn't retaliate against U.S. tariffs?

So what were farmers thinking? My guess is that they let the will to believe override their judgment. Trump seemed like their kind of guy. He certainly seemed to share their dislike for urban elites who, they imagined, looked down on people like them. So they convinced themselves that he knew what he was doing, that he would win his trade war and that they would be among the victors sharing the spoils.



Even now many farmers seem to believe that the pain will end any day now, that Trump will soon announce a deal that restores all the old markets and more.

In short, farmers' support for Trump should be seen as a form of affinity fraud, in which people fall for a con man whom they imagine to be someone like them.

And as is often the case in such frauds, the con man and his associates actually have contempt for their marks.

Recently Sonny Perdue, the agriculture secretary, let the mask slip during a meeting with farmers complaining about their plight. "What do you call two farmers in a basement?" he snarked. "A whine cellar."

Trump's own remarks about trade with Japan were even more telling. According to a White House transcript, Trump complained that while Japan sends us millions of cars, "We send them wheat. Wheat. (Laughter.)" Do farmers realize that their president considers their livelihood a joke?

So what will happen as the trade war drags on? Don't expect farmers to suddenly exclaim en masse, "Hey, we've been had!" Real life doesn't work that way. But they have, in fact, been had, and they may finally be starting to realize it.
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America’s future of work [feedly]

from McKinsey, a consulting firm, a provocative read on job shifts. Bad news for rural and slow growth areas, mixed for urban centers, where connectivity (human and digital) is much greater.

America's future of work
https://www.mckinsey.com/featured-insights/future-of-work/americas-future-of-work

https://www.mckinsey.com/featured-insights/future-of-work/the-future-of-work-in-america-people-and-places-today-and-tomorrow  

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