Apr 2nd 2016

Debunking America’s Populist Narrative

by J. Bradford DeLong

J. Bradford DeLong, a former Assistant US Treasury Secretary in the Clinton administration, is Professor of Economics at the University of California at Berkeley.

BERKELEY – One does not need to be particularly good at hearing to decipher the dog whistles being used during this year’s election campaign in the United States. Listen even briefly, and you will understand that Mexicans and Chinese are working with Wall Street to forge lousy trade deals that rob American workers of their rightful jobs, and that Muslims want to blow everyone up.

All of this fear mongering is scarier than the usual election-year fare. It is frightening to people in foreign countries, who can conclude only that voters in the world’s only superpower have become dangerously unbalanced. And it is frightening to Americans, who until recently believed – or perhaps hoped – that they were living in a republic based on the traditions established by George Washington, Abraham Lincoln, and Teddy and Franklin Roosevelt.

But what is even more unsettling is the political reality this rhetoric reflects. There can be no comparing Democratic presidential candidate Bernie Sanders’s policy-oriented critique of neoliberalism to the incoherent bluster of Donald Trump or Ted Cruz on the Republican side. And yet, on both the right and the left, a common narrative is emerging – one that seeks to explain why the incomes of working- and middle-class Americans have stagnated over the past generation.

Unfortunately, this narrative, if used as a basis for policymaking, will benefit neither the US nor the rest of the world; worse, it has yet to be seriously challenged. For decades, senior Republican politicians and intellectuals have been uninterested in educating the American people about the realities of economic policy. And Democratic frontrunner Hillary Clinton has been too busy trying to fend off Sanders’s challenge.

Broadly, the narrative goes something like this. American middle- and working-class wages have stagnated because Wall Street pressed companies to outsource the valuable jobs that made up America’s manufacturing base, first to low-wage Mexicans and then to the Chinese. Moreover, this was a bipartisan effort, with both parties unified behind financial deregulation and trade deals that undermined the US economy. First, the North American Free Trade Agreement (NAFTA) led to the export of high-quality manufacturing jobs to Mexico. Then the US established permanent normal trade relations with China and refused to brand its government a currency manipulator.

The reason this narrative is wrong is simple. There are good reasons why the US adopted policies that encouraged poorer countries to grow rapidly through export-led industrialization. In helping Mexico, China, and other developing countries grow, the US is gaining richer trading partners. Furthermore, there is a strong case that US national security will be improved if, 50 years from now, schoolchildren around the world learn how America helped their countries prosper, rather than trying to keep them as poor as possible for as long as possible.

It was not globalization that caused incomes to stagnate. Trade with countries like China and Mexico is just one factor affecting income distribution in the US, and it is by no means the most important one. The reason that incomes have stagnated is that American politicians have failed to implement policies to manage globalization’s effects.

As Steve Cohen and I argue in our book Concrete Economics, macroeconomic management requires the government to do what it always did before 1980: pragmatically adopt policies that promote equitable growth.

There were good reasons for the US to offload industries that required low wages to be globally competitive. But there was little reason for the US to offload industries that had become important “technology drivers.” Nor were there good reasons for a lot of other bad decisions, such as allowing the financial industry to profit by convincing investors to bear risks they should not and allowing health-care providers to profit from administration at the expense of the care and treatment of the sick. Other bad decisions include incarcerating 2% of the country’s young men and concluding that America’s economic problems would be solved if only the rich could keep more of their money.

It is not difficult to see where the blame lies. As Mark Kleiman of NYU’s Marron Institute points out, the Republican Party’s rigid and die-hard ideological opposition to “taxing the rich [has] destroyed, on a practical level, the theoretical basis for believing that free trade benefits everyone.” It is difficult to argue for redistributing the benefits of globalization when you believe that the market channels gains to those who deserve them. Nor can you ameliorate the painful effects of globalization if you believe that social-insurance programs turn their beneficiaries into lethargic “takers.”

It is not globalization, poor negotiation tactics, low-wage Mexicans workers, or the overly clever Chinese that bear responsibility for what is ailing America. The responsibility lies instead with politicians peddling ideology over practicality – and thus with the citizens who elect them, as well as those who don’t bother to vote at all.


Copyright: Project Syndicate, 2016.
www.project-syndicate.org

 


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Apr 13th 2022
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Apr 8th 2022
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Apr 3rd 2022
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Apr 1st 2022
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Apr 1st 2022
EXTRACT: "For Putin, the past that matters most is the one the dissident author and Nobel laureate Aleksandr Solzhenitsyn exalted: the time when the Slavic peoples were united within the Orthodox Christian kingdom of Kievan Rus’. Kyiv formed its heart, making Ukraine central to Putin’s pan-Slavic vision. ---- But, for Putin, the Ukraine war is about preserving Russia, not just expanding it. As Russian Foreign Minister Sergei Lavrov recently made clear, Russia’s leaders believe that their country is locked in a “life-and-death battle to exist on the world’s geopolitical map.” That worldview reflects Putin’s longstanding obsession with works of other Russian emigrant philosophers, such as Ivan Ilyin and Nikolai Berdyaev, who described a struggle for the Eurasian (Russian) soul against the Atlanticists (the West) who would destroy it. ---- Yet Putin and his neo-Eurasianists seem to believe that the key to victory is to create the kind of regime those anti-Bolshevik philosophers most detested: one run by the security forces. A police state would fulfill the vision of another of Putin’s heroes: the KGB chief turned Soviet General Secretary Yuri Andropov."
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Mar 26th 2022
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Mar 24th 2022
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Mar 21st 2022
EXTRACT: "As Russia’s war in Ukraine continues, China’s role has been thrown into sharp relief. Prior to the war, some commentators suggested that China would openly side with Russia or seek to act as a mediator – so far Beijing appears to have resisted doing either. As Qin Gang, China’s ambassador to the US, wrote recently in the Washington Post, Beijing has nothing to gain from this war, arguing “wielding the baton of sanctions at Chinese companies while seeking China’s support and cooperation simply won’t work”. Ambassador Qin also stressed that Beijing had no prior knowledge of the conflict,...."
Mar 17th 2022
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Mar 17th 2022
EXTRACT: "An influential Shanghai-based academic commentator on international affairs, Hu Wei, recently advanced a cautionary argument that has been circulated widely in Chinese-language publications. In his commentary, which is unlikely to have been published without the approval of some of Xi’s senior courtiers, Hu wondered how Chinese communists would react if the war escalated beyond Ukraine, or if Russia was clearly defeated." ------- "For Hu, the answer for China’s leaders is simple. They should wash their hands of the relationship with Putin, ....."
Mar 12th 2022
EXTRACT: "Meanwhile, Xi seems to have realized that Putin has gone rogue. On March 8, one day after Chinese Foreign Minister Wang Yi had insisted that the friendship between China and Russia remained “rock solid,” Xi called French President Emmanuel Macron and German Chancellor Olaf Scholz to say that he supported their peacemaking efforts."
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EXTRACTS: "........Russia has been isolated by draconian Western sanctions that could devastate its economy for decades,...." ---- "Russia’s prospects are bleak, at best; without China, it has none at all. China holds the trump card in the ultimate survival of Putin’s Russia."
Mar 3rd 2022
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Mar 2nd 2022
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Feb 26th 2022
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