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Trump should order Amazon to stop innovating

If incoming president Donald Trump wants to protect American jobs, he’ll have to do more than cancel a few offshoring deals. The real job-killer these days isn’t China or Mexico, but innovation.

Amazon (AMZN) shows why. Its latest project, Amazon Go, is a supermarket concept with no need for cashiers or checkout counters. A smartphone app scans you into the store. Every item you drop in the cart goes on your digital tab. Then, you just leave, with your account digitally billed for whatever you took. Technology does what human checkout clerks do in other stores.

Amazon plans a couple thousand such stores, and while it won’t make clerks extinct overnight, the history of technology suggests they’ll become as rare as bank tellers and travel agents. That’s not all. Amazon has plans to replace warehouse workers with robots, delivery drivers with drones, and, for all we know, all of its managers with Jeff Bezos clones.

Trump pulled off (yet another) publicity coup when he persuaded Carrier (UTX), the heating and air conditioning company, to reverse plans to outsource 1,000 US jobs to Mexico and keep them in Indiana instead. He has promised other such interventions, singling out Rexnord (RXN), another industrial company, for a plan to move 300 Indiana jobs to Mexico. And he has threatened to slap tariffs on imports of any US companies that move manufacturing out of the United States and try to ship goods suddenly made overseas back into the United States.

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While Trump is scoring points on offshoring, something even more powerful is gobbling up American jobs: new technology. It’s difficult to quantify the total effect, but some data give a clue. The United States has lost 5 million manufacturing jobs since 2000, a 29% decline. That makes it sound like we don’t build as much stuff in the United States as we used to. But that’s not true: US manufacturing output is 17% higher than it was in 2000, and that’s adjusted for inflation. Here are the charts:

Source: St. Louis Federal Reserve
Source: St. Louis Federal Reserve
Source: St. Louis Federal Reserve
Source: St. Louis Federal Reserve

So we build more stuff with far fewer people, a trend that seems certain to continue and maybe even intensify. And that has nothing to do with offshoring. It should be no surprise to anybody that robots, computers, sensors and now artificial intelligence are able to do more and more work once performed by humans.

If Trump were to apply the same heavy-handed interventionist tactics to the challenge of automation that he does to offshoring, he’d start directing tweets at Amazon and threaten the company with punitive measures unless it kills its cashierless store, its hyperefficient warehousing and the machines it hopes will replace the postman. Robots aren’t going to make America great again. Only people are.

The problem obviously goes far beyond Amazon. General Motors (GM), Ford (F), Uber, Tesla (TSLA) and many other companies are developing self-driving technology that could put more than a million truck and delivery drivers out of work. Cancel it! Smartphone apps, tablet devices and kiosks can now take orders more efficiently than millions of waiters and waitresses. 86 it! IBM’s (IBM) Watson artificial intelligence can research complex problems thousands of times faster than human toilers. Mothball it! Mainframes were good enough.

It would obviously be self-defeating to shackle innovation in the US economy, which would give other nations a better chance of catching up. But that’s the template Trump is setting by jawboning manufacturers into scrapping overseas investment and committing to more expensive US production. Yes, it can save jobs in the short term, but it also puts American firms at a cost disadvantage relative to foreign competitors, it increases the incentive for companies to substitute equipment for labor, and it could lead some companies to completely exit lines of business where the government meddles too much.

What to do instead? One way to start is by looking at the kinds of workers companies actually need today instead of forcing them to keep the workers of yesterday. Amazon doesn’t employ many traditional manufacturing workers, but it has a huge workforce of more than 270,000, not counting seasonal workers, most of them in the United States. Its web site lists more than 20,000 jobs open right now—20,000!—in 32 fields including sales, human resources, operations and customer service.

No, it’s not easy for people displaced from one industry to go to work in another. For some, it might be impossible. Yet it’s also futile to cling to outdated jobs or businesses that can be done more cheaply some other way. Capitalism always displaces inefficiency.

Trump has said virtually nothing about finding ways to spread the massive wealth being created in the digital economy more broadly. Yet that’s where the money is, to borrow the old saw about why robbers target banks. Preparing more workers—or their kids—for employment in the part of the economy that’s going gangbusters might make America even greater than it was before—and let everybody enjoy a world without checkout lines, even people who used to be cashiers.

Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.