By Kuttner, Robert
The American Prospect , Vol. 19, No. 1
Middle Class--Economic Aspects
Trade Policy--Political Aspects
Trade Policy--Economic Aspects
Labor Policy--Political Aspects
Labor Policy--Economic Aspects
President of the United States--Economic Policy
President of the United States--Social Policy
President of the United States--Influence
President of the United States--Forecasts and Trends
If America is to redeem its status as the great middle-class nation, the next president will need to transform how we address the interlinked areas of labor and foreign trade. Laissez-faire trade is advertised as a policy that serves the general interest, resisted only by selfish interest groups. In reality, however, for two decades the trade agenda has been set by business elites in service of their own narrow interests. Business is so politically potent--so hegemonic--that its parochial goals succeed in parading as the public good. So the first task of a new progressive president is to remind citizens, as Franklin Roosevelt did, that corporate interests are not tantamount to the national interest.
We Americans, after all, are aware that business is not self-regulating--when we support domestic government action to temper such predatory behavior as corporations polluting the environment, cooking company books, making deceptive sub-prime loans, producing unsafe products, discriminating against minority or women workers, destroying the right of workers to bargain collectively, or looting pension funds. But when it comes to cross-border commerce, financial elites and their economist allies wave a wand and bless all unregulated corporate behavior as "free trade"--efficient and virtuous by definition.
In truth, recent multilateral agreements such as the one establishing the World Trade Organization, and numerous bilateral and regional deals like the North American Free Trade Agreement, have been less about promoting commerce and more about enforcing a brand of capitalism that weakens the mechanisms of a mixed economy, both in the U.S. and overseas. Under NAFTA, for example, consumer-protection regulations in any of the three participating nations can be deemed violations of free trade and challenged in a special court. The goal is to return capitalism to its model circa 1890, in which property rights are paramount, without the inconvenience of offsetting social regulations.
A PROGRESSIVE PRESIDENT needs to signal a new course--to inject greater balance into trade agreements and use the leverage of the United States to bring a managed form of capitalism to global commerce, rather than allow trade to destroy a mixed economy at home. One good idea is to take a "time out" from the bilateral trade deals being feverishly promoted by business, and to insist on better corporate behavior as well as more robust domestic programs to help those displaced by trade as the price of further trade agreements.
The trade problem can be broken down into three separate challenges.
Foreign Mercantilism. Recent administrations of both parties have indulgently allowed other nations to practice forms of economic nationalism that the U.S. itself shuns and that harm the U.S. economy. China is a poster child for how not to run a laissez-faire economy. Beijing manipulates its currency to keep Chinese exports artificially cheap and uses a combination of carrots and sticks--subsidies, mandatory licensing, and technology transfers--to induce U.S. corporations or their supply chains to relocate there. But when China acts this way, flagrantly violating the letter or spirit of the free-market WTO, the fiercely nationalistic Bush administration turns oddly docile. High-level missions come and go, progress is promised, memoranda of agreement are signed, but little changes.
Why do U.S. presidents tolerate behavior that violates our own professed ideology of laissez-faire--behavior that leads to structural trade deficits, a dangerous dependence on loans from Asian central banks, and a new vulnerability to foreign "sovereign investment funds" that are hardly free-market creatures? One reason is that American corporations like this environment. If they relocate in China, they move to the more attractive sides of the wage divide, the currency divide, the regulatory divide, and the subsidy divide.
Big banks and investment houses are also content, as long as they get to play. …