Thursday, July 19, 2007

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Clive Crook vs. economic populism

Clive Crook's Financial Times column today ($$) plows a familar road -- the Democratic turn towards economic populism:

Whoever wins their party’s presidential nomination, the Democrats are preparing to fight the next election on a platform of left-leaning populism. The contrast with Bill Clinton is evident. He was a centrist, pro-trade, pro-enterprise president – an avowed “New Democrat”. The next Democratic occupant of the White House, if the candidates’ campaigns are to be believed, will be old-school.

Mr Clinton campaigned against the odds to secure passage of the North American Free Trade Agreement. Today the party is against such deals. Mr Clinton worked hard to get China into the World Trade Organisation. Hillary Clinton and Barack Obama are Senate co-sponsors of a new China-bashing law. And the move to the populist left is not confined to trade. All the Democratic contenders are turning up the volume on stagnating middle-class wages, soaring profits, swindling bosses, dwindling union membership (Mrs Clinton and Mr Obama back the abolition of secret ballots on union representation), tax loopholes for the super-rich, oil company gouging, insurance company gouging, drug company gouging and every other kind of gouging....

Mr Clinton’s conviction that globalisation was good for America owed a lot to the experts – including economists of the highest professional standing – who surrounded him. Recently, eminent economists such as Alan Blinder, Paul Krugman, Larry Summers (who served as Mr Clinton’s Treasury secretary) and Brad DeLong have all expressed new doubts about the benefits of globalisation for the US. It is all more complicated than we thought, they say. It was hard enough for Mr Clinton to fight for freer trade when every highly regarded economist in the country said it was good for the US. Now that their message has changed to “We might have been wrong about this. We’ll get back to you”, the prospects for liberal trade have dimmed.

Economic populism traditionally marries scepticism on trade with fear of big business: “It’s all about profit.” A striking feature of many Democratic proposals is the belief that cheaper petrol, cheaper drugs, universal health insurance, higher wages, more generous employment benefits, almost any good thing you can think of, can be achieved by demanding them, in one way or another, from companies, or else by raising taxes on the super-rich.

The perverse results of the tax-subsidised healthcare mandate on American businesses show where this approach leads. In the end, the burden falls back on workers and consumers as lower wages and higher prices. The dispiriting wedge between growth in productivity and growth in earnings, the organising principle of the Democratic party’s current economic thinking, gets even bigger.

There is no question that the Democratic contenders are talking about the issues that concern most Americans. There is an excellent centrist case to be made for tax reform, to lift the burden of income and payroll taxes from the low-paid and to increase the burden on the better-off. Universal healthcare is long overdue, a shameful state of affairs in so rich a country. Americans pay more than they should for their medicines. More generous and more imaginative assistance for Americans who lose their jobs because of trade – or because of changing tastes and technology – is needed.

The present administration has little to offer on any of these questions. But the costs of reform cannot be confined to foreigners and plutocrats.

posted by Dan on 07.19.07 at 10:55 AM


Like almost everyone else, Clive Crook leaves off the progressive agenda the one thing that can make the other improvements possible: re-unionization of American -- this time with the sector-wide/nation-wide bargaining setup they have in well fed-labor countries.

Until the power is reset in the labor market -- which will automatically reset it in the political realm (David Broder says that when he started out 50 years ago, all the lobbyists in D.C. were union) the core cause of all the other inequalities will not have been removed.

posted by: Denis Drew on 07.19.07 at 10:55 AM [permalink]

I am of the impression that Clinton's campaign was of a much more populist vein; his governance was centrist to be sure, but after the initial two years brought disillusionment and failure.

posted by: Nick Kaufman on 07.19.07 at 10:55 AM [permalink]

I am of the impression that Clinton's campaign was of a much more populist vein; his governance was centrist to be sure, but after the initial two years brought disillusionment and failure.

posted by: Nick Kaufman on 07.19.07 at 10:55 AM [permalink]

Isn't the excellent centrist case Crook refers to in the final paragraph the platform of most Democrats? Read Obama's, Richardson's and HRC's websites...

It is the GOP that is resisting all of those 'centrist' points: tax reform, universal health care, assistance for displaced workers.... FoxNews (Pravda-GOP) conflates universal health care with Terrorism all the time (using the Glasgow bombings and the NHS). John Boehner decries the estate tax as confiscatory.

Yes, most Dems are now anti-free trade, but that is because the 'free trade' lobby is so rabid and ideological that there is no common ground with them. The free trade lobby goes crazy at the mention of even basic environmental and labor protections in FTAs. It balks at some form of redistribution to ensure that free trade's benefits accrue to more than just shareholders (or in the form of cheap Wal mart socks). So why should the Dems advance their agenda?

The free trade agenda is dead for at least a decade or more, unless its advocates can come up with some sort of compromise that doesn't completely screw working-class people. The piece in the current FA is a start, but simply readjusting payroll taxes is not enough.

posted by: SteveinVT on 07.19.07 at 10:55 AM [permalink]

As my handle would suggest, I am generally in favor of free-trade, but with assurances that our trade partners respect the environment and workers rights to the same extent we do. Without these provisions, it's not really free trade. As a result, workers in both countries get screwed and we are basically paying other countries to pollute the air and water while we pat ourselves on the back for our wonderful environmental laws . As SteveinVT points out, many free trade advocates, including our esteemed blog host, are blissfully unaware of the costs of this "un-free" trade. I have given up trying to persuade him. But I appreciate the opportunity to discuss these issues with other bloggers.

posted by: OpenBorderMan on 07.19.07 at 10:55 AM [permalink]

Free trade is free regardless of the environmental trading practices of one's partners. That's just a definitional matter.

But is it a good thing? That depends on four main considerations: How much foreign workers/consumers/citizens care about environment vs. other goods on the margin, how much we care about the well-being of foreigners, whether foreign pollution spills over onto our shores, and how much we gain from the greater efficiciency of specialized trade.

These are not independent points--if, for example, foreigners would prefer more environmental protection than their government delivers but we don't care about them, then increases in polluting production abroad would be okay with us. My sense is that most of our foreign trading partners with weaker environmental regulations are reflecting the mainstream of their citizens' preferences--getting your first refrigerator is worth browner skies to a lot of people.

Given that belief, and given our selfish reasons for pursuing a dynamic internatioanl division of labor, I don't see any reason to cram our rich-nation eco-tastes on our trading partners. The spillovers point should be addressed separately from the trade question; I don't think Chinese soot floating over North America is a good reason to impose tariffs on Chinese goods, if only because I don't think it would actually reduce the problem.

posted by: srp on 07.19.07 at 10:55 AM [permalink]

SRP, You seem to support my point without saying so. US workers do not have a free market in which to sell their labor. Chinese workers are even more constrained. Only the multinational businesses have anything close to a free market, although barriers still abound. A factory in Chicago must comply with US law, or close or move to Asia at considerable cost. The fact that so many of them do move is evidence of the advantage in doing business in a less eco-aware and worker-rights-aware country. Your point about the first refrigerator is well taken. But with global warming the number 1 environmental issue, and China being the number 1 greenhouse gas emiter, how can you say that it doesn't matter?

posted by: OpenBorderMan on 07.19.07 at 10:55 AM [permalink]

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