The Economics of Racism

I remember standing in line at the Crowne Plaza Hotel in Providence at the heart of a rally for Donald Trump. Like at many other such gatherings across the country, amid the cacophony of excited supporters eagerly exchanging thoughts, an occasional chant of “build the wall,” “ten feet higher,” or “send them home” broke out, sending the crowd into an excited frenzy over the prospect of restoring their country to its supposed past greatness. This did not go unnoticed among the rest of America. There is a sentiment towards Trump’s base of supporters — that they are uneducated racists — that persists among much of the American electorate, especially among the left. However, the anti-immigrant, isolationist stance (scoffed at by the left) that many Trump voters seem to support is rooted in legitimate economic grievance — and it’s one that needs to be addressed in order to reduce xenophobia in the United States.

According to the basics of economic theory, free trade is beneficial in this way: People are able to specialize, and with comparative advantage, everyone is made better off. However, the real world does not always work like an economic model. The volume of world trade has increased about 8-fold since 1980, and every income decile except the 70th-90th percentile has been made better off by it. As it turns out, this cohort includes most of the American lower-middle class, who have instead seen wage stagnation, and even a loss of real wages, while those both above them and below them have enjoyed massive gains. Globalization has vastly increased the economic pie, but the American middle class was shortchanged on its slice. Quite simply, today there is a distinct group of individuals in the American workforce who feel let down and forgotten; they are angry that their lives have not gotten better recently and blame this problem on globalization.

And it is not necessarily wrong for them to do so: As trade barriers were eliminated with the passage of free trade deals such as NAFTA and CAFTA, Americans lost their jobs to foreign workers who were willing to work for much lower wages. In a perfectly functioning free market, workers have the ability to change their jobs and work more productively when the economy adjusts and their jobs are replaced, but economic models don’t always portray the actual costs to the workers required to change their careers. In the US, the government hasn’t been very aggressive in retraining the workers who lost their jobs to globalization, and economic barriers to higher education made it nearly impossible for workers to make the switch to more high-paying jobs. Rather, many of these workers found themselves without work as they watched the political and business elites line their pockets with the profits of trade.

Unsurprisingly, workers who saw their livelihoods destroyed and jobs sent overseas view foreign competition, embodied by the immigrants they see in their own backyards, as the problem. In 2015, a Pew research poll surveying the attitudes of Americans toward immigration found that immigrants are viewed relatively positively for their contributions to science and to culture. However, there were two major issues that were driving negative opinions of immigrants: 50 percent of those polled believed that crime and the economy were made worse because of immigrants.

Globalization has vastly increased the economic pie, but the American middle class was shortchanged on its slice.

The claim that immigrants have a high propensity for crime is unfounded. Many studies have shown that immigrants are actually less likely to commit crimes than native-born Americans. In spite of its inaccuracy, the “crime” argument continues to persist in American political discourse. This could be the result of misinformation, as politicians will frequently lie about the scope of the immigration problem in order to gain support from fearful voters, or possibly the result of bias. Given how entrenched the anti-immigrant narrative has become in the minds of many Americans, it won’t be easy to remedy.

Since the government has no power to forcibly change attitudes, it cannot go up to its angry citizens and force-feed people data about how immigrants actually commit less crime, or force people to believe the statistics when they are readily made available. However, for all those who would like to see a more positive view of immigrants propagate through the American political discourse, there is a solution. Despite being relatively powerless in controlling the political discourse itself, the government does have the ability to influence an underlying factor contributing to these false perceptions: the economy, and the degree to which Americans are able to adapt to it.

As factories move overseas and more jobs in America require an advanced degree, it is time we passed policies that make sure we don’t leave the middle-class behind. Again, globalization did increase the size of the economic pie, so it is possible that everyone’s slice could be bigger. Yet, this is not what happened. A middle-class that is not left behind economically is a middle class less likely to blame their economic woes on a class of immigrants. An essential part of this process is ensuring broader access to higher education. The benefits of a mid-career community college education include around a 20 percent increase in lifetime income — this is a plausible solution for those who lost their jobs to foreign competition. Furthermore, a Georgetown University Report theorizes that by 2020, 65 percent of all jobs in the United States will require an education level beyond high school; making sure that the education required can be obtained affordably will be greatly beneficial for our future economy. Alternatively, the government can pass social programs that share the gains from globalization and cushion the transitionary period. We could strengthen unemployment insurance, expand the Trade Adjustment Assistance program, or even move to a guaranteed universal basic income, ensuring that some amount of prosperity is guaranteed to all.

Individual opinions do not exist in a vacuum. As external circumstances change, so do deeply held political opinions. Right now, there are two major themes driving negative attitudes towards immigrants: crime and the economy. If people begin to see immigrants as a benefit to the economy, this knocks the reasons down to one. Without needing a scapegoat for their economic grievances, previously down-on-their-luck Americans are also more likely to reconsider their views on immigrant’s values, or revise the commonly held opinion that they are criminals.

Changing the economic situation will not fix racism or cure xenophobia; however, it breaks down one of the barriers preventing a change in social attitudes. Change will not be instantaneous, and deeply entrenched attitudes are slow to adapt. However, over time, a revised opinion on immigrants, at least from a purely economic perspective, can only push these attitudes in a more positive direction. Even in a world where individual opinions seemingly exist in a vacuum, a policy to share the gains from globalization will have broad benefits because at the very least it will provide more education to Americans. Education isn’t the the only solution, but it will be a necessary first step to enable and inspire other solutions to equitably share the gains from trade and build more accepting communities. No longer will the economy become a sticking point for the discussion on immigration. Only then can we can see a future where instead of chanting “build the wall,” Americans chant “let them in,” appreciating all that immigrants have to offer and welcoming them into our globalized world.

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