The Horror of Donald Trump Retrieving 'Lost Jobs'

Six years ago video rental giant Blockbuster filed for bankruptcy. Thousands of jobs vanished in the aftermath of the once-dominant company's demise. Though foreign imports didn't factor into Blockbuster's implosion, free trade surely did.

Dallas, TX based Blockbuster was felled by competition from Los Gatos, CA based Netflix. While customers of Blockbuster frequently incurred late fees for failing to return their video and DVD rentals to the chain's physical stores on time, Netflix sent DVDs in the mail to customers who could keep them for as long as they desired. Netflix gave its customers what they wanted, and in the process put a competitor out of business.

The competition that is a defining feature of capitalism only rates discussion insofar as the alleged negatives that spring from free trade are very much in the news right now. Republican presidential frontrunner Donald Trump has regularly inserted anti-trade rhetoric into his stump speeches. As he put it recently in Reading, PA, "Pennsylvania has taken harder hits on trade than just about anywhere else in the United States. Not good!"

Ok, but can Trump honestly say that the lower prices and better service offered by a company in California, and that vanquished a business in Texas, somehow weakened the U.S. economy? Did pricing pressure and better service from a company in Los Gatos set Dallas back irretrievably, and does anyone expect Trump or Bernie Sanders to show up at Blockbuster's former headquarters with promises to bring back jobs lost to out-of-state competition? Not very likely.

What the Blockbuster story reminds us is that "trade-related job losses" is a fairly redundant phrase, along with the happy truth that the instances of the latter are generally a sign of consumers benefiting from better service at a lower price. And since the U.S. economy is easily the most competitive in the world, it's safe to say that the greatest threats to the "American jobs" of the present exist within these fifty states.  A Pennylvania that Trump claims to have been "hit" hard by trade wouldn't look much different economically even if the U.S. were sadly walled off from the world's plenty.  

Americans work extraordinarily hard to compete away the profits of other U.S. businesses, and the occasional result is job loss. When he's thinking straight Trump calls this "winning." If he's to be believed, he's frequently out-competed his fellow New York City real estate developers on the way to a tidy fortune.

The screaming irony in all of this is that while Trump promises to protect his gullible flock from foreign trade, the greatest threats are stateside thanks to frenzied competition among American producers for profits. The trendy word for this feature of the U.S. economy is "disruption." American entrepreneurs and businesses are constantly looking for ways to disrupt the present commercial order, and as evidenced by all the wealth in the U.S., they're doing a very good job of it.

But has this American-job crushing competition from American entrepreneurs forced the American people into breadlines? Not a chance. To understand why, all readers need do is consider where they would invest an extra $10,000 today if their choices were a constantly evolving Netflix, or a stuck in the past Blockbuster Video. What's too often forgotten is that investors are the drivers of job creation, and investors loathe retreating economies. Not only are economies stuck in the past a fairly strong signal of consumer needs going unmet (would any reader happily go back to dial-up internet in order to save jobs at NetZero?), they're also an investor repellent. Blockbuster was stuck in the past, and domestic competition thankfully forced what wasn't working into bankruptcy.

Trump promises to bring 1950s manufacturing-style jobs back to the U.S., but considering how primitive the U.S. economy was back then relative to today, such a move would be disastrous. To paraphrase P.J. O'Rourke, if economically frustrated Americans really want to experience seriously high unemployment, simply elect a politician who promises (and worse, succeeds) to bring back yesterday's jobs. The investors who create all the jobs will disappear in search of better returns elsewhere. Reduced to the absurd, competition from Bentonville, AR-based Walmart has surely bankrupted a few American mom & pop stores, but would readers countenance Trump unleashing federal power on Walmart in order to bring jobs in now-defunct small-town grocery stores back? Don't count on such a scenario that would surely horrify investors.

Thanks to free trade within these fifty states, the companies that fail to best serve the needs of their customers don't last very long. That trade is wholly free within the U.S. is precisely what attracts a great deal of job-creating domestic and foreign investment, simply because lousy business concepts are allowed to fail so that good businesses can quickly replace them. In short, it's the constant destruction of jobs in the U.S. that enables the fast creation of much better ones.

Applied to the foreign competition that Trump decries, the happy fact that the U.S. is largely open to foreign production is similarly what makes the U.S. such an attractive destination for investment. Figure foreign competition, just like domestic, forces the very economic evolution that appeals so much to investors. Absent foreign trade, the U.S. economy would be quite a bit more depressed as a result of many more proverbial Blockbusters existing at the expense of more capable replacements like Netflix.

So often we hear about Americans "battered" by "foreign trade," but the certain truth about imports - whether from across the street or from around the world - is that they're the surest sign of a growing economy. As logic dictates, the fact that so many businesses - domestic and foreign - compete to serve U.S. consumers is the best indicator that open trade has been brilliant for the American people. If it weren't, we Americans wouldn't have the world's talented so aggressively working to serve our needs.

As individuals we know well that competition is what makes us better. An economy is just a collection of individuals, and thanks to competition from foreign and domestic players, the U.S. economy is the biggest in the world. The voluminous imports are the market signal revealing just how productive Americans are. Beware a presidential candidate who promises to block what makes the United States so wealthy.