Nov 08, 2016
ere's a question to ponder during the final crazy moments of the 2016 election. Who will own the working-class anger once Donald Trump has been dumped by the voters? If Hillary Clinton wins the election, the Democratic Party will have the chance to reclaim its ruptured relationship with working people--the wounded victims who lost their livelihoods to brute-force globalization.
With Trump out of the way, Democrats could reclaim their old franchise by proposing an aggressive agenda for reforming US industrial strategy--restoring the economy's balance and equity that Bill Clinton's New Democrats effectively dismantled a generation ago under the banner of "free trade." Trump's fed-up rebellion was driven by many things, but especially by the gutting of US manufacturing.
Michelle Obama has given us a bright slogan for reform: "When they go low, we go high." Instead of Trump's cheap-shot bigotry and vile resentments, Democrats need to envision a generational shift of positive purpose. Not to withdraw from global trade--of course not--but to adopt substantive reforms that redefine America's own national priorities and terms of trade so that globalization can actually benefit all sectors of our society, not just the greedy One Percenters.
We know this is possible in globalization because our rivals in trade manage to sustain broadly shared prosperity for their societies by designing their own self-interested industrial strategies. They do not ask themselves what will be good for the global trading system. They ask if it will be good for Germany or Japan, Sweden or China. Donald Trump's ad-lib slogan--"America First"--was widely ridiculed by establishment cheerleaders in the United States. But "Germany first" or "Japan first" (not to mention Sweden and China first) are implicit strategies of the most successful exporting nations.
Only in America do the policy-makers claim to be above such crass nationalism. They want the United States to be seen as the high-minded "indispensable nation" leading the world to higher ground. Foreign rivals privately scoff at US pretensions, but they also know how to manipulate American hubris at the negotiating table.
Washington policy-makers essentially identify the US national interest in terms of American owners, not workers.
The US approach to trade policy involves a crucial difference. Washington policy-makers essentially identify the US national interest in terms of American owners, not workers. That is, the policy objective reflects the interests of the investors and shareholders who own the multinational enterprises and far-flung capital investments. Elsewhere in the world, a German or Japanese economist--and probably most politicians--would say it is the interests of the workforce that determine the national interest.
In other words, the US government's industrial policy focuses first on serving capital, with an unspoken assumption that labor and society will benefit too if US multinationals succeed. Thus, US industrial strategy has willingly sacrificed the wage incomes of American workers to boost the profits of US multinationals by encouraging the offshoring of American jobs.
This policy preference is embedded in trade deals, the tax code, and the permissive rules of corporate governance, in which CEOs are personally enriched for concentrating primarily on "shareholder value." That narrow-minded standard has spawned a generation of fraudulent returns, but it also warps the economy.
The distinctive US industrial strategy helps explains why globalization destabilized the American middle class.
The distinctive US industrial strategy helps explains why globalization destabilized the American middle class while rival trading nations prospered by promoting social solidarity--defending workers and shielding vulnerable sectors from globalization's stormy pressures.
In Germany, for example, during the financial crash of 2008, the German labor federation made a deal with major manufacturers. Instead of massive layoffs, the companies agreed to keep workers on the payroll rather than dismantle its experienced workforce. As sociologist (and longtime Nation contributor and editorial board member) Norman Birnbaum explained, "Germans shared the political view that what made Germany strong was its educated, highly skilled working class." The German chancellor oversees such industrial relationships and can pressure wayward companies attempting to go against the national consensus. German employees--both white-collar and blue-collar--have a formal voice in kibitzing management decisions.
In contrast, America's high-tech companies in Silicon Valley have routinely offloaded millions of jobs to Taiwan or China when new product lines are ready to be upscaled for mass production. The investors demand it. Shifting the production to low wages in Asia boosts their returns on capital. The federal government gives its blessing and facilitates the job shift with its permissive trade agreements.
The late Andrew Grove, the legendary inventor and co-founder of Intel, reported for Bloomberg back in 2010 that Apple had 25,000 jobs in the United States and 250,000 in South China. Grove, who died last March, complained repeatedly that US industrial strategy was destroying America's own manufacturing prowess. The multinationals reaped bigger profits, but China and Taiwan gained the engineering experience and infrastructure to dominate the future. With corporate tax cuts and generous subsidies, Washington was unwittingly financing the American decline.
Grove proposed a "jobs-centric economic theory" to stop the bleeding and launch the American restoration. He suggested an extra tax could be levied on multinationals for their products made by offshore labor but sold to US consumers. The revenue would finance a general fund to assist companies that intend to scale up their new production in America instead of shipping jobs and technological skills to foreign countries.
CEOs and corporate directors whose companies are shrinking the US industrial base would be reminded that their personal rewards depended upon the industrial strength of the home country, which they have been systematically dismantling. "If what I'm suggesting sounds protectionist, so be it," Grove wrote. "If the result is a trade war, treat it like other wars--fight to win."
It sounded like Donald Trump might have been channeling Andy Grove.
After millions or billions of words, we still don't know what Clinton really thinks about globalization.
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Many House and Senate Democrats might want to push fundamental trade reforms, but they have a problem. Her name is Hillary Rodham Clinton. Their newly chosen party leader is by nature a cautious and defensive politician, and she finessed the subject of trade reform during the long presidential campaign. While Trump pounded "stupid trade deals," HRC concentrated on worthy social and economic reforms. After millions or billions of words, we still don't know what she really thinks about globalization.
Yet Clinton will inherit the public anger if she has nothing substantive to say about big change. The party's progressive ranks will probably form a loose caucus of the usual suspects to give her a push, and they won't wait patiently to do so. No time for happy talk and no honeymoon for Hillary. If Clinton assumes the anger has faded and she can ignore it, she will be preparing for a one-term presidency.
While Trump led to the GOP crackup, a Clinton II presidency might generate a parallel clash among Democrats. In olden days, the Democratic Party would have naturally stood up for the working class and organized labor. But the New Democrats of the Clinton-Obama era backed away from both. New Dems are more comfortably aligned with business and banking elites, as well as professionals with progressive social values.
The first decisive test for Clinton will arrive even before she can take the office. President Obama and the business lobby are planning to push through the Trans-Pacific Partnership deal in the lame-duck session of Congress right after the election. HRC says she is opposed, but the White House has wired the deal with the GOP. If they prevail, it will instantly ruin the legitimacy of Clinton's presidency. If she claims she is opposed, who will believe her? The arrogant corporate establishment would be rigging government in the face of public anger, abetted by the lame-duck Democratic administration.
Political reporters in 2016 narrowly portrayed Trump's angry voters as only aging white guys who lost their factory jobs. But the victims of depressed incomes and lost prospects are a far more diverse assemblage of wounded Americans. They share the same hurt and insecurities across their differences of race, religion, ad ethnic loyalties.
Rump-group rebel Democrats in the Senate are in the minority, but they will have the voters on their side.
The ranks of the discontented include millions of Democratic voters--working-class African Americans and Latinos, young people struggling to get started, women seeking equity and power, old liberals and young Bernie supporters. The Democratic Party could build a stable governing majority if it could figure out how to reunite all these disparate people with the white guys who share the same economic grievances.
The rump-group rebels--people like Senators Elizabeth Warren, Bernie Sanders, Jeff Merkley, and Sherrod Brown--are definitely in the minority, but they will have the voters overwhelmingly on their side. And that potentially includes lots of Trump voters, too.
In theses troubled times, the old politics of class solidarity can become the new politics of fundamental reform. Democrats must learn again how to listen to these neglected citizens--really listen--in order to create an economic agenda that speaks concretely to what people want and need. In practical terms, this means reinventing an old-fashioned political party that gains its power from organized people instead of organized money.
* * *
Oddly enough, the next great trade debate has already started in Washington circles. In recent weeks, various establishment voices have been churning out their views in blogs and op-ed columns in leading newspapers. Their new theme is sympathy for the losers. But their real objective is to define the limits of acceptable thinking in the coming political debate. None of them accept blame for the wreckage their globalization doctrine caused Americans, much less offer apologies to the victims.
The wise men of Wall Street and Washington are clearly nervous, however, about the rebellious direction of 2016 politics. In The Washington Post, financier Robert Rubin, architect of Clintonomics, offered a grab bag of business-school cliches he titled "Inclusive Growth." "Develop innovative measures to address ongoing wage and job pressure," Rubin suggested. "Restore a sense of common purpose." Nice words that don't say anything. My translation: "Please don't shoot us bankers."
Leaders of the Brookings Institution and American Enterprise Institute--two corporate fronts that pose as academic think tanks--offered similar bromides and sounded more anxious. Despite the sweet talk, their corporate agenda hasn't really changed. It still includes cutting corporate taxes, subjecting regulation to rigorous cost-benefit calculations, shrinking Social Security and other federal programs that common folks value greatly.
But I encountered a shocking deviation from a most unlikely source--Lawrence Summers. He was Rubin's sidekick in the Clinton administration and succeeded him as Bill Clinton's Treasury Secretary. Time magazine famously dubbed Rubin and Summers and Fed chairman Alan Greenspan as the "Committee to Save the World." A few years later, their world famously crashed in the Great Recession.
Now Larry Summers sounds like a heretic. In a July column in The Washington Post, Summers abandoned the elite faith in globalization and urged instead a new doctrine he calls "responsible nationalism." With both NAFTA and China's admission to the World Trade Organization, he acknowledged "the most extravagant predicted benefits have not materialized."
The popular rebellion of 2016, he said, indicates "the willingness of publics to be intimidated by experts into supporting cosmopolitan outcomes appears, for the moment, to have been exhausted." The former Harvard president suddenly sounds vaguely populist. Summers proposed a commonsense way to think about reforming the US trading system:
A new approach has to begin from the idea that the basic responsibility of government is to maximize the welfare of citizens, not to pursue some abstract concept of the global good.... It may be inevitable that impersonal forces of technology and changing global economic circumstances have profound effects. But it adds insult to injury when governments reach agreements that further cede control to international tribunals of one sort or another. This is especially the case when, for legal reasons or reasons of practicality, corporations have disproportionate influence in shaping global agreements.
Read his words again and you can glimpse a rough blueprint for reforming the US approach to globalization. Summers, in fact, is reversing the harsh top-down priorities he and other Clintonistas enforced when they were in power. He is now putting people first in the national interest and subordinating corporate power.
Summers doesn't have answers for every disorder he cites. But he does ask some stinging questions. Why should the global system prevent sovereign nations from limiting inflows of foreign capital in their economies? Why should a country be prohibited from shielding its citizens from GMO crops? Why do corporations have the right to their own private legal system, the "investor state," where they can sue a nation for damages if it enacts environmental regulations that threaten corporate profits? NAFTA created this bizarre arrangement and the TPP proposes to expand it (see my Nation article from 2003, "Rolling Back the 20th Century").
Summers has evidently switched sides. When he was in power with Clinton and Obama, he was a ruthless advocate of corporate privilege and bankers first. Summers now insists that new trade agreements must be different: "judged not by how much is harmonized or by how many barriers to global commerce are torn down but by whether people as workers, consumers and voters are empowered."
Summers almost sounds like a Bernie Sanders revolutionary. But can we trust him? Alas, no. I once wrote a Nation blog about Summers titled "Professor Pants on Fire." A friend of mine suggests he is slyly lobbying again to become Federal Reserve chair, the post Summers was denied when left-liberal progressives (myself included) stormed against his appointment and Janet Yellen got the job. He may once again be playing a double game, hopeful no one will catch up with his contradictions. Unfortunately for him, there is WikiLeaks. Earlier this year, the professor urged the Clinton campaign not to indulge in "bank bashing." John Podesta, Clinton's campaign chairman, dismissed his message as "the worst advice ever."
Nevertheless, I suggest that reform activists can test his sincerity. Invite Summers to join their fight for reform and advise them on strategy. He is a brainy guy. He could become a sophisticated ally in the fight ahead. If he turns out to be a fake, take charge of his sound ideas and dump him hard.
Meanwhile, there is another important document people can consult to get a stronger understanding of the battlefield for reforming the trading system. It's called "The New Rules of the Road: A Progressive Approach to Globalization." The co-authors are two heavyweight intellectuals--Lori Wallach and Jared Bernstein--and longstanding critics of corporate-led globalization. They believe the system has reached a tipping point in both small-democratic rebellion and economic distress.
"The current 'trade' agreement process," Wallach and Bernstein write, "has been co-opted by corporate interests whose goal is to establish binding, enforceable global rules that protect their investments and profits. The corporate capture comes at the expense of both peoples' rights to democratically govern their own affairs and the ability of sovereign governments to effectively enforce worker, consumer and environmental safeguards."
Their prose is clear and uncompromising. They recite the new rules that the country must embrace if it is to get back on track and rebalance society. The process is necessarily long term. It took a generation to disassemble things.
But this document is an epochal rebuke to the governing elites that have owned both political parties for the last generation. The Wallach and Bernstein text is not just another trade debate; they have raised the political stakes in honest language and shocking detail. They accuse the globalists of stealing self-government from the American people.
Once this assertion is on the table in plain English, it becomes a stark challenge to citizens, not just their elected representatives. Will citizens rise to the crisis of democracy and fight back? Or will they shrug off their embarrassment and settle for the status of weaklings?
I am an optimist about America for the long run, because I know the American story well enough to know about the long delays and detours that frustrated the yearnings for justice or simple fairness. There are lots of cruel chapters when people did not redeem their principles. At the risk of sounding melodramatic, I sense that we are again at one of those testing moments.
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