Showing posts with label Outsourcing. Show all posts
Showing posts with label Outsourcing. Show all posts

Saturday 3 September 2016

Why Donald Trump Will Win

Why Donald Trump Will Win

Written by Dr. Seshadri Kumar, 03 September, 2016

Copyright © 2016 Dr. Seshadri Kumar.  All Rights Reserved.

Executive Summary:

Donald Trump will win the US elections in November. The main reason is that the American people have been hit hard because of job losses due to globalization over the last 16 years, and trust neither mainstream Democrats nor Republicans to have any solutions – because there are none and both parties have lied to them. Trump will win, not because of his ideas, and despite his outrageous behaviour, because he is an outsider.


The Republican National Convention (RNC) is over for a month. Donald J. Trump is the Republican nominee for President of the United States of America.

A lot of Americans are very surprised at this development. You could even say that they are stunned.

When Donald Trump entered this race, he was considered to be only a distraction and a source of entertainment. But today, he has left his rivals in the dust, and has won the Republican Party nomination by a huge margin. Figure 1 shows a chart of poll numbers from Huffington Post that tracked the candidates in the Republican race. Donald Trump polled 3.7% on April 2, 2015. By July 6, he had taken the lead, and never relinquished it since.

It is fair to say that, other than perhaps Trump himself, no one in America expected this win.

And yet, there is little serious analysis of why this has happened. Most of the analysis in the media is shockingly flippant in nature, and reveals more about the writers’ biases than a serious attempt at fact-finding. For example, the Washington Post, in an article on February 26, by which time Trump was very clearly in the lead, postulated that the reason Trump was winning was that no one took his chances of winning seriously. This kind of conclusion seriously insults the intelligence of the American voter.

Donald Trump said all the things one would not expect a Presidential candidate to say. He said he would build a wall on the Mexican border and expect Mexico to pay for it. He referred to a woman as “a piece of ass.” He called Mexican immigrants drug dealers, rapists, and criminals. He called for a complete ban on Muslims entering the USA. He publicly expressed his support for torture methods like waterboarding. He made personal attacks on his opponents, like saying Hillary Clinton could not satisfy her husband. He bragged about his penis size. He even suggested that if Ivanka were not his daughter, he would date her. He hinted that he would not come to the aid of NATO allies if they were attacked – a statement that shocked allies over the world. There are many more.

Figure 1. Poll Numbers of Candidates in the Republican Primary

And yet, despite all this, not only has Trump won the Republican nomination, he is within 5% of Clinton at the time of writing, and has even led in the polls briefly – this after both parties have had their conventions and after Hillary Clinton got the post-convention bounce. Again, analysts in the media are unable to understand the reason behind the rise and rise of Trump. Some have suggested that many Americans are being racist and this is the reason for Trump’s rise. There is some truth in this conclusion, but it is not the entire truth. Some have talked about Hillary Clinton being a weak, unlikable, and corrupt candidate, and there is truth in this statement as well – but it is not the complete story. It is not complete because Hillary also has many advantages over Trump, which were clearly highlighted in the DNC. And yet Trump continues to rise.

The Democratic National Convention made it a point to talk about Hillary Clinton’s “qualifications” for being President and contrasted them with the Donald’s virtual lack of the same. They ridiculed his un-Presidential demeanour, his misogyny, his racism, his political incorrectness, his exaggeration of his own abilities and his covering up of his business failures, and so on. They are completely correct about all of those. During the DNC, Donald Trump made a statement asking the Russians to hack Hillary’s email account and retrieve 33,000 missing emails – a statement that appalled many Americans for involving a foreign and adversarial power in American domestic matters.

And yet, all of that is irrelevant.

Trump will win, and will win big, in November. I expect a landslide victory, around 360 electoral votes.

The reason why Trump will win is that Americans do not trust either the Republicans or the Democrats. In the present circumstances, only an outsider – a Donald Trump or a Bernie Sanders – could inspire the American voters. 

Bernie had a similar rise in the Democratic Party primaries, as can be seen in Figure 2, again from the same Huffington Post source mentioned earlier.

Figure 2. Poll Numbers for Candidates in the Democratic Primary

Bernie Sanders might have also pulled off a Trump in the Democratic Party, but various factors conspired to defeat him. 

First, he was an outsider – an Independent who joined the Democratic Party to contest in the primaries. This automatically meant that he did not get the automatic support that Hillary got by being a party veteran. This manifested itself in many ways, one of the chief ones being the fact that most of the super-delegates threw their weight behind Hillary Clinton early on, a fact that would definitely have had a strong psychological impact on the Democratic voters in the primaries – that the Party organization viewed Clinton as a more bankable candidate. 

Second, Sanders is a socialist, which would have turned off many traditional, rich donors away from him, because the policies he was advocating ran counter to their interests. The fact that he could still have a substantial war chest was only because of loyal rank-and-file Democrats, and is a testimony to the strength of the movement he built. People sometimes misinterpret the fact that he was able to amass this war chest as evidence that he was not affected by the loss of powerful supporters. That is a myopic view. One must remember that all the influential media is in the hands of rich and powerful people; and if they view a candidate as unfavourable, there are a million ways to undermine his or her campaign. Power cannot be measured by money alone. 

Third, as the DNC email scandal showed, the Democratic Party organization itself was working to defeat him. The full scale of the manoeuvres against him will never be known – we know only what is known from the WikiLeaks expose.

The consequent defeat of Bernie Sanders in the Democratic Primary left Donald Trump as the only outsider choice. One could argue that many of these disadvantages were shared by Donald Trump as well – being an outsider and not being liked by many leading Republicans. But a crucial difference was that Trump was wealthy, and belonged to the same economic class as the rich and powerful donors who fund both Democratic and Republican parties. And that, as we will see, makes a difference.

Globalization and the Collapse of the American Working Class

The rise of Trump (and Sanders) is a direct consequence of the globalization of business. Since 2000, America has lost as many as 5 million manufacturing jobs. Millions more have been lost in the service sector, such as call centres and service centres. Not only have the number of American jobs dropped drastically, the quality of what jobs remain has also dropped. Many of the jobs available today are part-time jobs or contract jobs with no benefits, and many are minimum wage jobs. The available government data on the percentage of unemployed is also not completely reliable because it does not measure the large number of people who have completely given up looking for jobs. Home ownership dropped in the second half of 2015 to its lowest levels since 1967.

In all, it is a very perilous situation for the blue-collar American.

Why Has This Happened?

All this has been an inevitable consequence of the globalization of business. It is an inevitable consequence of capitalism.

Capitalism seeks to get the cheapest and highest-quality inputs for any business and produce the highest quality goods and services for achieving the greatest profits for the company shareholders – mainly the promoters of firms, as they are usually the largest shareholders.

For decades, Americans enjoyed very high standards of living relative to the third world. This was sustainable for a long time because of two reasons: 1. most countries had barriers to trade, and 2. the technology for conducting international trade were very primitive.

This meant that Americans developed technologies in America (for example, the Wright Brothers building the first airplane), built factories and employed Americans to build products (like the Ford Motor Company did), and sold cars and other products worldwide by shipping them abroad. The profits were retained within America, and the workers who benefited were American. This was true in every country. Both the workers and the company paid taxes to the American federal government and to local and state governments, financing the upkeep of public works and public services.

But then, American capitalists realized that they could make more profits if their input costs were lower. Initially, they achieved this by getting the government to encourage immigration to the US from all over the world. The constant influx of new labour kept the costs of labour low and kept American manufacturing robust.

However, even this was not enough, because any workers in America would have to be paid according to American labour laws, including rules like minimum wage. It would be much more profitable if American companies could establish overseas operations and employ workers in foreign countries with much lower wage requirements, as well as lower environmental standards and worker safety standards. But this came with two major constraints, and in some cases three.

How Early Barriers to Globalization Were Overcome

One, products made in distant countries like India or China needed to be shipped back to the USA for consumption by American consumers, because America was the largest prosperous country and consumed the most goods. Transoceanic shipping is expensive and adds significantly to product cost. In spite of this, for decades, clothes commissioned by American designers were mass-produced in sweat shops in India, Bangladesh, and Pakistan, and sold in American malls. The fact that these workers were paid pennies to the dollar offset the costs of transportation.

Two, communication between the headquarters in America and the satellite offices in India, China, or anywhere else were very poor. In the old days, a transoceanic trunk call would be very painful. Mail would take weeks. For a top executive to fly to the satellite operation was a costly and time-consuming affair.

Three, in many non-English speaking countries, language was an issue.

The communication issue was overcome by rapid advances in communication technology. In 1990, very few people outside of Universities in the US had email accounts. Today, almost everyone who is in business worldwide has an email account. Telephone communication has become ubiquitous and extremely efficient, and the growth in mobile telephony has revolutionized business. Combine this with the power of e-mail, and now colleagues in the US and in India can seamlessly exchange information, edit common documents, and even have teleconferences with technology that makes you feel the other person is in the same room.  So doing transoceanic business has become much easier.

Language issues do exist in a lot of countries, such as China, where English is not as easily understood. In India, it is not a problem at all, as most Indians do study in the English language. Even in China, people have realized the advantage of learning English, and the movement to learn English is very big.

The third issue, or rather the first in my list, which was the issue of transportation costs, also changed decisively because of decisions by countries like India and China on liberalizing their economies.

China was a completely closed economy since the Communist revolution in 1949, until Deng Xiaoping opened the country to business with the west in the 1980s. He offered incentives to western companies to set up manufacturing plants in China, so that Chinese workers would get employment and an income. Over the last 35 years, China has moved from an impoverished country to the second-largest economy in the world. The economic prosperity has created a booming middle-class with a huge appetite for consumers goods, cars, luxury items, housing, and the like.

A similar transformation occurred in India. In 1991, faced with a balance-of-payments crisis, India agreed to liberalize its economy in return for an emergency loan by the IMF. 25 years later, India has a staggering 250 million plus people in the middle class alone – equal to the entire population of the United States – again with a huge appetite for consumerism. And this is expected to double by 2025.

The net effect of these changes is that the biggest market for American businesses is no longer America but Asia. So the old idea of making goods in a China or an India for America does not make economic sense any more. You needed to make for India or China. If the main buyers of products were living in India and China, what is the point of making something in America and shipping it across the oceans and incurring a huge shipping cost?

So, for American businesses, making a profit now meant changing the location of their factories. This is no longer just a question of getting cheap labour. It means having the manufacturing units where the consumers are. There was no need to ship products back to the US, since the markets were in the same countries the factories were.

So American companies started shipping factories, and thereby jobs, overseas. And since communications were now excellent, they could manage entire factories in third-world countries from the US with just a few people sitting in headquarters in the USA and a few business trips now and then.

Consequences of Accelerated Globalization

All this was (and still is) true not only for America, but for any industrialized nation, be it Germany, France, Italy, Japan, or the UK. And it is true not only for manufacturing, but also for a range of other professions, from software to medical transcription.

In Bangalore, where I used to live, there is a place called Electronics City, which is full of companies from over the world, in every imaginable business domain, having back offices, service centres, and R&D operations – including GE, 3M, Amphenol, HP, APC (Schneider Electric), Continental AG, Bosch, and Siemens. Another location in Bangalore, with bigger units, is Whitefield, full of companies with R&D operations and technical headquarters. The main software development centre of SAP is located here, as is the main back-office of Tesco, as are the huge R&D operations of General Electric, General Motors, Daimler Benz, Dell, Shell, Schneider Electric, UTC, and a host of other companies.

The southern city of Chennai is the biggest automotive hub in India. It is home to the manufacturing operations of several foreign automotive and automotive ancillary companies, including Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Daimler Benz, Datsun, BorgWarner, Caterpillar, and Visteon, to name just a few.

Pune, where I live today, is another major hub for the automotive industry in India. Every major automotive company and automotive ancillary company has a presence here, from GM to Fiat to Piaggio to Daimler Benz to JLR to Volkswagen to John Deere. A big reason for this is that sales of cars in India are booming because of the growing middle class. John Deere sells its tractors to the huge farming sector in India.

Local governments are keen to have foreign investment in their states, and so offer plenty of incentives to western companies, such as tax holidays and cheap land to help them establish their units in India. This makes opening overseas manufacturing facilities extremely profitable for American companies. And it shows in their balance sheets and in their stock prices. If you were working for a company like Ford and had shares in the company, your shares probably appreciated when they laid you off along with 2000 of your fellow-workers, as they closed down the Detroit plant in which you worked, and relocated the plant to Pune.

Each time a company lays off people, shuts down factories in the USA, and moves manufacturing to India or China, the company’s bottom line looks better, because it has traded expensive workers for cheaper workers, and it has established a factory closer to the intended market, reducing its labour and transportation costs. And of course, the Dow Jones Industrial Average (DJIA) will probably go up as a result of these transactions which may have resulted in the company becoming “leaner.” But it is an easy calculation as to whether you are better off by your stock portfolio appreciating $10,000 this year or by not losing your job.

The stock market is one of the common distortions of reality that is highlighted extensively in the media. People are made to think that the country is doing well when the NYSE index is higher, though all that number does tell you is how profitable companies are. The idea that profitable companies translate to more prosperous citizens is a major and deliberate misconception that mass media actively indulges in perpetuating. This is true worldwide. In India, too, the media obsessively focuses on how the Indian stock exchange index, the SENSEX, is doing, tracking its performance intra-day, weekly, monthly, and yearly. A layoff, which actually means misery for the people laid off, usually helps a company shed unprofitable businesses and employees, and boosts the NYSE (in the medium term; in the short term, the company takes a hit because it needs to make severance payments to the employees who are laid off). The public trading of company shares gives rise to the illusion that the public at large benefits from a bullish market; in reality, only a small percentage of the total stock is traded by common people, the rest being held by very wealthy investors. So while the DJIA going up will push up your stock value, it helps rich investors orders of magnitude more than someone from the middle class.

Loss of jobs sets up a vicious cycle for the country as a whole. If people do not have jobs, or have low-paying jobs, they cannot pay as much in taxes into the system. If the government does not earn revenue in taxes, it becomes hard for it to provide services.

Of course, the government does earn in corporate taxes, and this could make up for the shortfall in taxes from common people. But how much do corporates pay by way of taxes? The nominal rate in the US is about 35%; however, due to various deductions and loopholes in the law, the actual amount paid is much less. In a report published this April, the US Government Accountability Office made the following points:

1.      At least two-thirds of all active corporations had no federal income tax liability.
2.     Among large corporations (more than $10 million in assets), 42.3% paid no federal income tax in 2012.
3.     Of those large corporations whose financial statements showed a profit, 19.5% paid no federal income tax.
4.     Even though the statutory rate for corporate tax is between 15% and 35%, between 2008 and 2012, profitable large corporations paid only an effective rate of 14% on their pre-tax income.

Does it make sense that profitable companies should pay no taxes at all? Or that they should pay a tax rate that is significantly lower than what many salaried workers pay? What this means is that there are clearly many loopholes in the tax code which allow companies to legally evade paying tax.

Globalization and the relocation of American manufacturing has not happened by accident or by a natural process of economic evolution. Quite to the contrary, they have been actively promoted by the government in Washington at the urging of corporate bigwigs. The example of job exports to India will make this very clear.

How the American Government has Lobbied for Jobs to Be Exported

India was traditionally (since independence in 1947) a socialist government, which means that it did not believe in the free market. Instead, India believed in tight government control on every sector of the economy for a very long time. The government decided how much of a product could be produced, which products be produced, and where they could be produced. This changed in 1991, when India liberalized and opened up its economy, forced by the US-dominated International Monetary Fund (IMF), which agreed to loan India money to solve its balance-of-payments crisis only if India agreed to its conditions.

But the story does not end here. In spite of the push, India only partially liberalized its economy. But even this half-hearted liberalization allowed a lot of American companies to come in and set up shop, mostly in joint ventures with Indian industry, because the rules at that time were still quite restrictive and did not allow American companies to fully own Indian subsidiaries. But American companies immediately saw the huge business potential of opening shop in India, and have been lobbying the US government to put more and more pressure on the Indian government to keep opening up its economy.

India has come a long way since 1991, and most sectors of the Indian economy now allow companies from foreign nations like the USA to open fully-owned subsidiaries in India. Yet American business continues to lobby the US government to operate even more freely in India. When President Obama visited India on a state visit in 2015, he was accompanied by 150 top executives of American companies seeking closer business relationships with India and more concessions from the Indian government.

Since the Obama visit in 2015, the Modi government in India has further reduced restrictions for American companies (and companies from other countries) to establish operations in India. One important change is the fact that now American defence companies can start 100% owned subsidiaries in India. The same is true of civil aviation. These will be established not only to sell defence equipment to India, but also to use Indian labour and engineering skill to produce aircraft, tanks, and other military equipment that will be sold to other countries as well, including even possibly the USA. This has happened because of concerted lobbying by companies like Lockheed Martin, Boeing, and others with the American government in order that their profitability can improve.

And Obama has delivered for American industry by pushing for and obtaining concessions from the Indian government. What does this mean for Americans? It means that Boeing can now build airplanes in Gurugram in India (as an example location) in addition to Seattle, and sell those planes to India as well as to other countries in Asia, Europe, and Africa from its India plant. It means that Lockheed Martin can set up a plant in Pune to build F-16 aircraft and export it to customers worldwide, in addition to the Indian government. 

What does that mean for the employees of Boeing in Seattle and the 30,000 employees working there? Or for the employees of Lockheed Martin who make the F-16 aircraft at its plant in Texas? For a few years, probably nothing. But once the management of these companies is able to confirm that the plants in India are successful and working efficiently to produce the same quality airplanes that are being made in their American operations, they would have to downsize their American operations. Lockheed Martin has already indicated that it intends to close down its American plants that currently manufacture the F-16 if it can move those factories to India. There is no economic sense is maintaining an expensive operation in the US when one can make the same product for a fraction of the cost in India. Apart from the key management and the top technical staff, who would still be based in the US and directing all operations in India, most of the blue-collar American workers would probably be given pink slips.

None of this is a secret, and this does not involve only the President. US lawmakers – Congressmen and Senators – have actively lobbied the President to help open up India more to benefit American businesses. In a letter to President Obama before his 2015 visit to India, several American Senators urged the President to create more favourable conditions for American business in India, also noting the potential of such actions to help create more jobs in India:

They also focused on the job-creation potential of such liberalisation, they said, noting, “It also has the potential to increase competition in India by providing less expensive goods and creating 250,000 jobs directly, with the potential for more than 1 million jobs in customer service, IT, logistics, transportation, and administration by 2021.”

So the export of jobs outside the USA has been actively promoted by American lawmakers, both Republican and Democrat, with the express intent of helping American businesses. But helping American businesses is not the same as helping ordinary Americans. In fact, there is a direct contradiction between the two when it comes to globalization. Because of the high wages of American labour relative to the developing world, helping American-owned businesses with globalization usually means getting rid of expensive American jobs.

Helping American companies, even at the cost of ordinary Americans, is not unique to Obama. George W. Bush did the same thing, as every American President has done. When Bush visited India in 2006, he also brought in a huge contingent of business executives with him to expand opportunities for those companies to establish base in India. Helping big business is not a partisan issue.

So why do American Presidents, Congressmen, and Senators act so explicitly against the interest of American people and in the interest of American businesses? Because it is campaign contributions from American businesses that help parties finance expensive elections. In return for all that cash, elected representatives and Presidents have to pay them back, and the way to pay back big business is to do whatever possible to help the businesses prosper – by creating the right conditions in the USA or elsewhere in the world – even if that ends up hurting ordinary Americans.

It should be remembered that corporations in today’s world have no national loyalties. Most global multi-national companies earn a significant portion of their revenue from overseas operations. A US News report from 2011 stated that, for example, Exxon-Mobil earned 45% of its total revenues of $342 billion from overseas operations, and GE earned 54% of $149 billion from overseas operations. The figures for several other prominent large corporations, from the same source, can be seen in Table 1.

Table 1. Percentage of Total Revenue From Overseas Operations for Major US Corporations (from 2011)

Looking at this table, could anyone say with a lot of conviction that Dow Chemical, IBM, Intel, McDonald’s, GE, and Nike are truly “American” companies? Their loyalty is not to America, but to their shareholders; their only sacred duty is to ensure year-on-year profits to their shareholders, increase in share values, and greater dividends. Even if their CEOs are American (not always the case), the most they can do is express sympathy for the American jobs that are being slashed as the company looks to greater and greater profitability for that amorphous mass called “shareholders.”

Why Voters Support Bernie and Trump

With that background on the consequences of globalization, we can come back to the main premise of this article: why do I think Trump will win, and win big, in November?

Since 2000, there have been four American Presidencies – two terms of Mr. George W. Bush, and two terms of Mr. Barack Obama. Time and again these Presidents, along with their party lawmakers, have told the American people that they will bring back jobs to America.

Time and time again, they have lied. The jobs will never return.

And now, finally, after 16 years of job losses, the American people have figured out they were being lied to. This was the reason for the Occupy America protests as well – people realized that the policies of this country were being set to help the top 1% of Americans prosper, not the remaining 99%. More realistically, it is the top 10%. Needless to say, these are the wealthy people who benefit the most when American industry is helped, and when stock prices go up. The top 1% own 35% of all stock in the US. The next 9% own nearly 46% of the total stock, leaving only 19% for the remaining 90% of the people. This can be seen in Table 2 below.

Table 2. Distribution of Wealth in the US by Type of Asset

Political parties need to cater to those who help them win elections and run campaigns. Ultimately, money talks, and the parties pay back by helping businesses.

For the disenchanted and unhappy American middle-class and lower-class workers, what remedy do the mainstream parties have? Nothing whatsoever.

This is what has led to the rise of Donald Trump and Bernie Sanders – disillusionment of the middle-class American with the mainstream parties. Both of them, as outsiders, correctly identified the main problem – free trade. It is free trade that has brought America to this pass. And free trade is an essential component of capitalism.

But there is one more reason. America has been a victim of its own success. It is because it was so successful in the days past when it was insulated from the world that it is now too expensive a destination to do business in a globalized world.

Why are Republicans and Democrats unable to provide a solution to the problem?

Because there is no good solution for ordinary Americans.

In a free market system, the only way for things to turn is for an equilibrium to happen. Right now, things are far from equilibrium. There are people in America who live in 2000 sq. ft. homes and still want more while making $60,000 a year, and there are people in India who live in 400 sq. ft. homes and are grateful for $5,000 a year. When the gulf is so great, jobs will move from the US to India, China, Vietnam, Romania, and a host of other countries until the world is more equitable, unless artificial barriers are imposed. The fact is that if free trade were allowed to continue, the process will take perhaps 20 or 30 years to equilibrate. And for that long, things are going to be bad in America. The American standard of living will need to drop and the standard of living in the rest of the developing world will have to rise, until they reach the same level.

No American politician has the guts to say this bitter truth to the American people. American leaders have floated ridiculous and unrealistic solutions to what is (in the short term) an unsolvable problem. It is understandable, though – no politician will ask for voters to elect him while saying, “Things are going to get worse for you.”

One example of an unrealistic solution was when President Obama said in a speech that the way out for Americans was to excel in math and science so that students in Beijing and Bangalore do not out-educate them. The flaw in this speech is that it is not that Indian or Chinese kids are particularly smarter than American kids. There is a bell curve for intelligence in any country. What American businesses get by coming to Bangalore is not smarter students necessarily, but a much larger talent pool. India has a population of 1.2 billion people, as against 250 million Americans. That means more engineers, more scientists, etc., merely from a numbers perspective. And this is the case today, when many Indians do not have proper access to good education. As India’s prosperity improves, this is only going to get better for India. So right now, the ratio of educated and skilled Indians to Americans will be less than the 1.2/0.25 ratio, but it will get there eventually. And it will only get harder for Americans then.

The solution is not, and cannot, be for Americans to get more educated in math and science. These things cannot be forced. In any population, there are only a certain percentage of people who will do well in math, science, and engineering. India will have more skilled scientists and engineers in the long run simply because it has a bigger population. You cannot force an artist or a cook to become a scientist. But yes, economic competition can incentivise someone to go for science and engineering. That is what has happened in India. Engineering has been seen for decades as the means to a good life, and so most Indian students try to become engineers. But the problem in the USA is not that there are no engineers for the jobs there; the problem is that the high standard of living in the USA has made them unaffordable for companies to hire them.

Do the Candidates Have Solutions to the Problem?

So, do the “outsiders,” Trump and Bernie, have solutions to this problem? They did identify it, but what is the solution? Can we find the answer in their positions (I only discuss the published positions dealing with the export of jobs)?

Donald Trump’s Proposed Solutions

Let us first examine Donald Trump’s positions, because they are much easier to analyse:

1.      Build a wall on the Mexico border. Like I said, the Trump part is going to be easy. First of all, it won’t be that easy to make Mexico to pay you, and second, you cannot stop the remittances. People will find ways. There will be a huge black market. Third, even if you did build that wall, people will find ways to smuggle people. There are already miles of barbed wire, watch towers, searchlights, dogs, and lots of police. It has not stopped illegal immigration. This is a hare-brained idea.
2.     Reforming the US-China trade relationship. The details contain a lot of adversarial language, but they fail to understand the key issue: US businesses are going to China because they find it lucrative, despite all the problems that Trump highlights. For example, Trump talks about how China forces companies to part with their IP rights and how this is unfair. True, but what does it tell you when China informs companies of this requirement up front, as a condition for investing in China, and companies still go in? It means companies know all these things and still think investing in China is a good deal. As for lax labour and environmental standards – yes, stopping that will make labour in China costlier and can make American companies re-calculate the cost of doing business in China, but good luck trying to get China to comply. Environmental change in China will not happen because of external pressure; it will happen once the prosperous middle class in China, having sated its immediate consumerist needs, starts to think of quality of life issues, such as Beijing’s polluted air and its effects on their life spans.

All in all, utterly worthless ideas. But Trump has skilfully turned this debate around and found a scapegoat for America’s problems: immigrants. He has channelled Americans’ frustrations about their economic condition into anger against immigrants, because that is a problem he can suggest solutions to. It is like replacing a difficult question in an exam paper that you don’t have an answer to with an easy question that you can answer. He has over-simplified the problem and turned it into a war against “the other” – be they Mexicans or Muslims. It is a smart strategy, because the solution is easy to grasp.

Many have complained that Trump has led to the rise of racism in the United States. But that would be putting the cart before the horse. Trump did not make the US a more racist country. The fact that Trump’s racist ideas have traction tells us that he is a person in the right place at the right time. The problem is that America has become more racist. This is not a surprise. A country that is prosperous will be more tolerant of others and be willing the share the wealth. One that is in economic crises will be angry, be willing to blame others, and become more intolerant. And that is what has happened.

Bernie Sanders’ Proposals

1.      Sanders does get the corporate tax theft, and proposes to be stricter about this. I believe this is probably why he lost in the primaries – the big corporates who fund the Democratic Party would never approve of a man like Sanders.
2.     But the corporate tax reform, while it might give the government more money, does not address the jobs problem. What has Sanders to say about that? Well, he has an FDR New Deal-type plan to revive the economy through massive public spending. Not a bad idea.
3.     Go back on trade deals like NAFTA, etc. Not a practical idea. If the US went into isolationism, American corporations would collapse. Let’s take an example. Let us say that GE pulled out of the world and stuck to America and only hired American workers with their high wages. Siemens, one of GE’s biggest competitors, being a Germany-headquartered company, does not follow suit. What happens? Siemens continues to have its plants in India and China, producing goods much cheaper than GE. GE becomes unprofitable and shuts down, and all its employees are out of a job. You cannot put the free trade genie back in the bottle. Free trade cannot be ended until everyone agrees to end it and go back into their isolationist bubbles, and that clearly is not going to happen.

So both Trump’s and Bernie’s ideas on getting the jobs back are unreasonable. On most other issues, Bernie is a lot more sensible and his positions are well thought-out and well-argued.

Hillary Clinton’s Solutions

For completeness, let me also bring in what Hillary Clinton has to say about this issue:

1.      A $10 billion investment to help manufacturing in the US. Businesses that take part will pledge not to ship jobs overseas.
2.     Make China behave (similar to Trump’s idea, which we have already discussed.)
3.     Tax incentives for hard-hit communities.
4.     Crack down on companies that ship jobs overseas.
5.     Create incentives for companies that create jobs in the US.
6.     Create apprenticeships and training to improve American manufacturing skills.

Seriously, who writes this stuff? You probably noticed that I had very few comments. What do you comment? This is such vague stuff that it is mostly not worth commenting about – still, I’ll try.

Okay, so you give me money so I don’t ship jobs overseas. Are you going to compensate me adequately to the extent that my competitor is saving by operating a factory in India or China? How long will that work? Plus, if you do that, how different are you from China? How will you defend yourself in the WTO? After all, your complaint against China is that it gives its home-grown companies unfair advantages. How different would this be?

You are going to “crack down” on companies that ship jobs abroad to stay competitive? Then what? Force them to operate in the US and be uncompetitive? And eventually shut down? Are you even thinking about the economics of this thing? If China is giving unfair advantages to companies there, you cannot make them stop. You have no leverage. You stop your companies from dealing with China, you are only disadvantaging them. The most you can do is complain against China in the WTO. The US is already doing that, and that takes time. It is hard to fight China on trade. China is very powerful economically. If you try things like sanctions, they have plenty of ways to retaliate.

And American manufacturing skills are not the problem. There is nothing wrong with American manufacturing skills. They don’t need specialized training. This is a problem of economics, not skills. The Chinese are beating the Americans not because they are more skilled than the Americans. It is because they are willing to work for much lower wages. Often, their skills may not even be up to American standards. And they are still worth it because of their low cost.

So Hillary is clearly clueless. This “manufacturing plan” seems to have been written only to tick off a box – so she can say “I have a plan.” But I kind of expected that, because that is the lie that the American people have figured out by now. That neither the Republicans nor the Democrats really have a plan. They come up with nonsense like Hillary did, and do not have the guts to level with the American people on just how serious the problem is and how there is no real solution.

Why Trump Will Win

So if all the candidates’ plans to stop the basic problem of the American economy – the export of jobs – are unrealistic, why are Americans in support of Trump and Bernie?

Because, having been fooled by both the Democrats and Republicans, the American public now has deep distrust of both parties. At this point, it is not about logic. It is about emotion. Ordinary people don’t have the time and energy to analyse every position and figure out if the candidate is talking nonsense. Beyond a point, they go with emotion. At this point, only an outsider can win. Hillary is untrustworthy because she is part of the same establishment that has created the status quo and fooled them into thinking there is a solution where there is none. That only leaves Trump.

Had the Democrats voted Sanders as their nominee, he would have the same advantage that Trump has, of being an outsider. Most of his ideas are sensible, with the exception of pulling America out of free trade agreements. That one can never happen. With Sanders as a nominee, the Democrats might have had a reasonable chance of winning the Presidency. But with Trump as the nominee, it is clearly advantage Trump. The strike against Hillary is that with all that experience in government, she could not solve these problems in spite of being in the establishment.

Trump may talk nonsense, but at least he is not trying to bullshit people with management mumbo-jumbo like Clinton; and he is untested in politics, so there is no record on which to attack him. In fact, the more outrageous he can be, the better for him, just to draw the distinction between him and an establishment candidate. I strongly suspect he is being deliberately outrageous to make this point – using blunt and coarse language to convey the impression that he is a man who says it like it is and does not sugar-coat his responses. And more and more people are loving it – the idea that he may be rude, crude, and definitely not a prude, but that he is honest. (I am talking about the image he is projecting, not the reality.)

To add to all this are the already well-discussed issues like Hillary’s basic un-likeability, her email scandal which will keep haunting her, her corruption scandals with her husband, and the fact that, very likely, the fact that Sanders Democrats will not forget the way their candidate was out-hustled in the primaries, and in any case do not see Hillary as being able to deliver on their agenda – as a person who has sold her soul to the big corporates.

If all of Sanders’ supporters were to stay home on Election Day, it would hurt Hillary a lot more than it would hurt Trump if all of Ted Cruz’s and John Kasich’s supporters stayed home.

A lot of this is going to be about who can get the vote out. And I doubt if Hillary can get the Sanders Democrats to come vote for her in sufficient numbers. I wouldn’t blame them. This is a demoralized electorate.

One of my friends said to me that Trump could not win because “fear can only take you so far.” She was referring to fear of Muslims, of Mexicans, etc., that you can hear in the Trump rhetoric. But I’d like to turn it around and tell Hillary the same thing: Fear – fear of Trump – that voting Donald Trump in as the President of the USA will be a catastrophe and utterly destroy America – will only take you so far. The British realized this truth in the recent Brexit vote. The Remain campaign indulged in as much scaremongering as they could – on how leaving the EU would be disastrous for the UK and sink the economy – and still the Leave campaign won handily, by a 52%-48% margin. The same thing is true here. Hillary does not have a positive agenda on how to solve the problems America is facing. Scaring voters about Trump only goes so far.

And all that is why I predict a landslide victory for Donald Trump in November.

360 Electoral Votes.

I realize that what I am predicting now is going against the tide. Most people expect Hillary Clinton to win the Presidency in November. To illustrate, Nate Silver's highly respected website, Five Thirty Eight, has put Donald Trump's chances of winning at the time of writing at 27%. However, that number is based on the current percentages that support Trump and Clinton, and how things have played out from this point in past elections. I do not believe that past elections are a good guide to the results this elections, because I believe the fundamentals have changed, as I have discussed in this article. That is why I am being bold enough to offer my prediction - I believe the political fundamentals are conducive to a Trump victory in November.


I would like to thank my wife, Sandhya Srinivasan, for reading a draft of this article and giving me her feedback. I would also like to thank Swapnil Pathare for some helpful discussions on a few select topics that have helped make this article clearer.

Disclaimer: All the opinions expressed in this article are the opinions of Dr. Seshadri Kumar alone and should not be construed to mean the opinions of any other person or organization, unless explicitly stated otherwise in the article.