AMERICA’S presidential contest offers voters a stark choice. Hillary Clinton represents continuity with the Obama administration—not a bad pitch to voters, given low unemployment, steady job growth and a recent upturn in the rate of increase of real incomes. In the opposite corner is Donald Trump, standing on a radical platform of protectionism, draconian immigration restrictions, massive defence spending and construction of a big, beautiful wall along the Mexican border. Mr Trump’s dangerous economic nationalism demands an explanation. Is he the predictable consequence of years of hardship for many Americans?
Two broad theories vie to explain Mr Trump’s ascent. One camp sees him as an inevitable backlash against economic-policy priorities that have left many Americans behind. As America and the world have grown more economically integrated, growth in household incomes has stagnated and inequality soared. The costs of freer trade were borne most acutely in Southern and Mid-Western manufacturing towns exposed to competition from cheap Chinese imports. A series of recent papers shows that the most affected labour markets have…Continue reading