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Will the Wall Street Democrats Part the Blue Wave?

The Wall Street Democrats sure hope so. They have little desire to emphasize working class economic issues, many of which could threaten their vast riches. 

Minority Whip Steny Hoyer, a 36-year veteran of the House, remains a key member of the Democratic Party leadership. (Photo: AP/J. Scott Applewhite)

Some Democratic Party leaders believe they have discovered a new winning formula: Suburbanites, women and minorities, and forget about the white working class.

The Wall Street Democrats sure hope so. They have little desire to emphasize working class economic issues, many of which could threaten their vast riches. After all, aren't suburbanites supposed to be liberal on social issues and fiscally conservative?

As the Democrats move towards 2020, it is crucial to recall that Wall Street benefited mightily from the policies put forth by the Clinton and Obama administrations. Bill Clinton gave us massive financial deregulation, NAFTA, and welfare cuts.  Barack Obama bailed out Wall Street, but not Main Street, called for austerity to cut deficits, and then pursued the Trans-Pacific free trade agreement, which labor abhorred.  He did pass the Affordable Care Act, but it depends heavily on the private insurance industry and therefore poses no threat to financial interests. Even Dodd-Frank did little to shackle Wall Street’s financial strip-mining activities.

It simply a matter of modern laissez faire economics. Wall Street wants little regulation on itself or the global economy as it rapidly moves capital around the globe. Wall Street also wants governments to balance their budgets in order to stall even the slightest whiff of inflation. This often means pressing for austerity policies for the masses in the form of constrained government spending on social programs and public employment. However, when trouble hits, say goodbye to the free-market ideology: government handouts to Wall Street are demanded and received. 

This formula, which academics call neoliberalism, has given us forty years of runaway inequality, stagnant wages and the worst financial crash since the Great Depression. Many working class voters first looked to the Obama administration for hope and help. Later, many of these same voters turned to Trump.

It’s inevitable, isn’t it?

The conventional wisdom continues to hail these neoliberal policies as the pathway to prosperity. It holds that Wall Street-styled globalization and automation are inevitable economic forces that cannot and should not be stopped. It is simply a fact of life that our industrial base will move overseas no matter what, wiping out millions of jobs in the upper mid-west and other industrial centers.  In 1980, there were nearly 20 million manufacturing jobs in the United States. Today there are fewer than 12 million. Unfortunate, but unavoidable. (See Runaway Inequality)

But the conventional wisdom is wrong. Germany which still has over 23 percent of its economy dedicated to manufacturing. Not only is its manufacturing sector twice as large as ours as a percent of GDP, but its wages are higher and it is more exposed to international trade than the US. So there is nothing inevitable about the rapid decline of manufacturing.  It is the result of policies, not acts of God.

Giving up on manufacturing workers white, black and brown?

For more than a quarter of a century American industrial workers and their unions have been up in arms about the loss of decent-paying jobs in manufacturing. They complain about the lack of a level playing field, which is heavily tilted by China through dumping and state subsidies.  They complain that NAFTA puts them in competition with low wage labor in Mexico, and therefore exerts enormous downward pressure on US wages, making it all too easy to shift factories south of the border… or threaten to.

Nevertheless most of these working people and their unions remained loyal to the Democratic Party for decades. That’s because they understood that the Republicans were even more committed to unfair trade deals, Wall Street deregulation, and cutting social programs like the ACA, Social Security, Medicaid, and Medicare.

Until Trump came along, that is.

For the first time a Republican outflanked the Democrats on corporate-friendly, anti-worker trade deals. Much of what Trump said about China and NAFTA was remarkably similar to what industrial workers and their unions were calling for: changing NAFTA and taking China to task. He even forced modest living wage stipulations into Mexican automobile sector through NAFTA renegotiations

Furthermore, Trump and the entire Republican Party threw concerns about the deficits and inflation to the wind with their trillion dollar tax cut (and record military spending.) Of course the tax cut enormously favors the rich, but the massive pump priming appears to be responsible for driving the unemployment rate far below where the Democrats were willing to go, and where Wall Street wanted them to go.  Such a massive fiscal stimulus with unemployment already at 4 percent would never have been considered, let alone advocated by the Clinton and Obama administrations or their Wall Street advisors.

Fork in the Road

The Democratic Party establishment already is attacking Trump and the Republicans from the right. Singing from the Wall Street hymnal, they argue that the rising deficits are dangerous and attacks on free trade will derail the economy. They continue to have little to say to industrial workers and their communities about decent paying jobs, other than protecting Obamacare and offering vague promises about “opportunity.” 

This is a dangerous and foolish path to follow. The Blue Wave could spread widely through Pennsylvania, Michigan and Wisconsin and beyond (and not just in the urban areas). But this requires that the Democrats actually be willing to interfere with free market in order to create new jobs in the areas hardest hit by unfair trade.  Germany has found a way to train a skilled manufacturing workforce that produces the highest value added components for everything from automobiles to iPhones. For more than a generation it has developed policies to upgrade its workforce and provide high-wage, stable employment.

Similarly, the Democrats need a convincing program, rather than platitudes. For starters they should advocate an infrastructure program that directly creates jobs at living wages plus benefits, targeting the hardest hit areas. They should put a stop to Wall Street’s financial strip-mining practices that have loaded up corporations with debt, milked them through stock buybacks and driven manufacturing off-shore. And they need to move towards Medicare for All as well as free higher education, which would provide enormous economic help for struggling working families.

But Wall Street will never feel comfortable with policies that cut-back into their profitability. It is far less costly to the bottom line to call for social justice for minorities, immigrants, women, and the LBGTQ communities, rather than redistributive policies which reverse runaway inequality. Better to write off the working class all together.

There is no reason to pit economic justice against social justice. The American working class is enormously diverse, including in manufacturing. (As of 2017, that workforce was 19.5% women, 10.1 % black, and 16.6% Hispanic.) They all deserve a party that demands economic as well as social justice, rather than being written off as Neanderthals.

If Trump weren’t such a xenophobic, infantile narcissist, he could once again build a powerful 2020 campaign on these issues in the Midwest. He could claim that he is the only president in the last 40 years who had the guts to challenge free-trade agreements and dramatically cut unemployment to record lows. Hopefully, he will continue to believe that economic issues are “boring” compared to sending the armed troops to the border to stave off an invasion of women and children.  

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Les Leopold

Les Leopold

Les Leopold, the director of the Labor Institute in New York is working with unions, worker centers and community organization to build a national economics educational campaign. His latest book, Runaway Inequality: An Activist's Guide to Economic Justice (Oct 2015), is a text for that effort. All proceeds go to support this educational campaign. (Please like the Runaway Inequality page on Facebook.) His previous book is The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It (Chelsea Green/2009).

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