FORGET THE LOSERS

Even though they clearly overestimated the extent to which the market would take care of those directly affected by trade, trade theorists have always known some people would get hurt.

Autor, Dorn, and Hanson looked at the extent to which the government stepped in to help the regions ill-affected by trade with China. They found that while they received somewhat more money from public programs, it was much too little to fully compensate for the lost incomes. For example, comparing the residents of the most affected commuting zones to those of the least affected, incomes per adult went down by $549 more in the former, whereas government welfare payments went up by only approximately $58 per adult.⁵²

Furthermore, the composition of these transfers may have contributed to worsen the situations of the workers who lost their jobs. In principle, the primary program to help newly unemployed workers who have lost their jobs due to trade is the Trade Adjustment Assistance (TAA) program. Under the TAA, a qualifying worker can extend unemployment insurance for up to three years as long as they receive training to work in other sectors. They may also get financial help to relocate, to search for jobs, or to get health care.

TAA is a longstanding program, in place since 1974, and yet it provided a minuscule share of the already small transfers toward the affected counties. Of the $58 in additional transfers that went to the more affected regions, only twenty-three extra cents came from TAA. A very big part of what did grow was disability insurance; out of every ten workers who lost their jobs due to trade, one went on disability insurance.

The huge increase in disability insurance is alarming.

For workers who need to resort to disability benefits to survive, being classified as disabled adds insult to injury. When they go on disability, workers who have spent their lives in a physically demanding job lose not only their occupation, but their claim to dignity. So not only did the United States not come close to compensating the workers who lost out, but what little help people could get through the existing social protection apparatus seemed designed to make them feel denigrated.

Partisan politics has played a role in this disaster. When someone who has lost their job needed healthcare, a recourse was supposed to be Obamacare. Unfortunately, many Republican states like Kansas, Mississippi, Missouri, and Nebraska decided to make a show of resisting the federal government by denying their citizens this option. This pushed some people to apply for disability status in order to get healthcare. Indeed, after the adoption of the Affordable Care Act (a.k.a.

But the causes run deeper. US politicians are wary of subsidizing specific sectors (since others would feel slighted and would lobby for their own protection), which is probably partly the reason why TAA has remained such a small program. Economists have also traditionally been unwilling to embrace place-based policies (“help people, not places” as the slogan goes). Enrico Moretti, one of the few economists who has actually studied such policies, actively dislikes them. For him, channeling public funds into regions doing poorly is throwing good money after bad. Blighted towns are meant to shrink while others take their place. It is the way of history. What public policy needs to do is to help people move to the places of the future.⁵⁶

This analysis seems to give too little weight to the facts on the ground. As we know, the same reasons that make clusters develop also mean they fall apart quickly. Theoretically, the obvious response to this wholesale unwinding ought to be for a lot of people to leave, but as we saw already, they don’t. At least not nearly fast enough. Instead, when their county was hit by the China shock, fewer people got married, fewer had children, and of the children who were born, more were born out of wedlock. Young men—and, in particular, young white men—were less likely to graduate from college.⁵⁷ “Deaths of despair” from drug and alcohol poisoning and suicides skyrocketed.⁵⁸ These are all symptoms of a deep hopelessness once associated with African American communities in inner cities of the United States but are now replicated in white suburbs and industrial towns up and down the Eastern Seaboard and the eastern Midwest. A lot of this damage is irreversible, at least in the short run. The school dropouts, the drug and alcohol addicts, and the children growing up without a father or a mother have lost a part of their futures. Permanently.