The Demographics of Politics

by Fred Smith on February 23, 2012

in Economy, Politics as Usual, Zeitgeist

Political campaigns are rarely useful in raising the level of public discourse. The current one is no exception. There is great concern over the “loss” of U.S. manufacturing capacity, a charge often blamed on “outsourcing to other nations.” Few consider whether state or federal tax, regulatory, or other policies might have encouraged this “loss.” Rather, most assert it’s due to exploitation of developing countries and demand “fair” trade policies or some form of national industrial policy (bolstered by similarly misinformed claims that this is the policy of once Japan, now China — and IT WORKS!).

Capitalism is a vibrant system and continually finds new ways to meet old needs and new ways to do old things better — which sometimes results in the decline of certain sectors of the economy. All market sectors trend towards fewer inputs (labor, energy, materials) to produce a unit output. Thus, while output increases, employment (or energy use, for that matter) may decrease. This is not a “loss” but the natural consequence of the creative destruction of capitalism. Even employment “losses” are often illusory. Note that for a period, many manufacturing sectors (steel, auto) were organized vertically — everyone associated with that sector was classified as a “manufacturing” worker. Over the last few decades, this vertical structure has transformed into a series of contractually linked firms with some (transportation, office services, maintenance) now classified under separate categories. Jobs weren’t lost (although the dominance of unions is probably less), they’ve simply been renamed.

Manufacturing is less dominant element in the U.S. economy and this decline might well increase. We’ve also experienced a shrinking agricultural sector. The economy does change over time but why do those changes create such political outcries?

Let me suggest a demographic explanation: Established industries are better understood. Of note are their relationships with politicians. Those working in the most prevalent sectors are known constituents who vote and pay taxes. Politicians also take note of the novel firm promising a breakthrough in an industry. Thus, we often have a competing mix of politicians promoting “grandfather” clauses to protect older industries from new legislation and subsidies to “infant” industries.

Those left out of this process (thriving established firms — too new to be pitied, too old to be viewed as “exciting” — and entrepreneurial firms that would threaten the existence of the Grandfathers) bear the costs of supporting others.

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