How the Economics of Sugar Tariffs Explain Trump’s Election

Maybe not a well known fact to many Americans is that the US has a sugar tariff.  This tariff/quota is used to protect sugar producers in Florida from having to compete with importers. This roughly increases the US price of sugar by 20 cents per pound versus the world price costing American consumers and sugary food/drink producers a lot of money. Now you understand why sugary drinks from Mexico taste better, because they are made from real sugar and not high-fructose corn syrup. If it’s costing us billions of dollars a year and it results in us having less tasty drinks, then why aren’t we passionately demanding change?

sugar

It is because we have fallen victim to the economic concept of Concentrated Benefits Diffused Costs. If the sugar tariffs/quotas/trade distortions went away you’d save probably less than $50 a year. On the other hand, sugar farmers would lose their job which is worth over $100,000 a year. In this case each individual person doesn’t have much incentive to fight for the removal of tariffs while sugar farmers have very high incentives to fight for them. Combining this with the fact that many of these farmers are located in Florida, a presidential swing state, we have a lack of the political will or incentive to fight for a change that would benefit the majority of people (even if some people are trying). This kind of logic also explains the power of the NRA as shown in this video.

How does this relate to the election though?

Let’s look at job loss instead of sugar tariffs. Needless to say there are some areas where we have a lot less jobs then we once did: manufacturing, coal , etc. Now these jobs have been lost for a number of reasons. Natural gas and solar have been giants in the energy industry that have been chipping away at coals control along side environmental pressures due to global warming. Manufacturing jobs have slipped away due to the rise of Chinese industry, cheaper labor in countries like Mexico, and automation.

Needless to say these are complex issues with many different variables to be accounted for. While getting rid of coal might be beneficial to society as a whole with cleaner air and jobs are made in other industry like natural gas, solar, and wind, many times we don’t consider the drastic effects it has on communities that are stung together by coal. Coal mines not only create the mining jobs, they help the city restaurants, trucking, and local shops. Coal companies help pay for school sporting events and local politicians seeking reelection spout the glories of coal. Listen to this episode of Freakonomics to get a better idea of what I mean. You can apply this to other industries like manufacturing.

Now, imagine we’re in a small town and now that coal mine or that car factory shuts down. We just lost our main source of income. Thousands of people are laid off, and over the next few years the local shops start to close up, and eventually we have a town where jobs aren’t coming back anytime soon. Now multiple this by thousands of towns, what happens?

Let’s think of our case with sugar tariffs. A small group of people are able to dictate a policy outcome because they are given incentive to do so while everyone else is worse off but we have no major incentive to fight for change. For jobs, having the job loss occur in a very few areas instead of having dispersed job loss creates similar incentives to a group of individuals. They want their jobs back. They want to support their family. They want to live a decent life.Since the job lose is disproportionate it gives incentives to those groups to fight for their interests significantly more then other groups.

Let’s look at a couple of maps.

america-3

Blue represents sugar farmers interests and red is the interests of everyone else. Collectively all of the red would surpass the blue but since each group’s interests is significantly smaller then the farmer’s so there is trouble organizing resistance to the interests of sugar farmers.

america-2

Now this map looks at what would happen if the job lose (red) was fairly disperse (not representative of reality by any means). Since the job lose happens in a variety of places, no where more significantly than the other, it will have negligent effects on a national election outcome (especially due to the electoral college). However, that isn’t what happened.

america-1

Instead a vast amount of communities throughout the Midwest have been disproportionately effected by economic forces (I made these in paint they do not represent reality completely ). Since are electoral college is set up the way it is this will have a significant effect on a national election outcome because the interests of a group are concentrated in a particular area. Insert a presidential candidate that taps into these interest groups through talk of unfair trade deals to explain their job lose and now you have a force to reckon with.

This by no means explains the entire reason Donald Trump won the election. It does however provide an interesting analysis of how concentrated interest groups can (sometimes unfairly) control the outcome of policy. Like sugar farmers, blue collar workers had more an incentive than many people to get out to vote (just look at the number of people that didn’t feel the need to vote!)

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