The GOP And Populism
Via Rod, I see that Michael Lind is warning that the Democrats are oblivious to the rise of economic populist sentiment in the country and that this might spell their political doom. It would be more accurate to say that the President has been oblivious to this, because he has tended to hew more to the establishment’s free trade, pro-globalization views. Congressional Democrats have been tapping into it for years, and it was an important part of their victories in 2006 and 2008. This is the point Sirota has been making. Huckabee flirted with the phrase “fair trade” and was attacked ferociously from almost every side of the conservative movement. There is a reason elected Midwestern Republicans are fast becoming as endangered as New England Republican officeholders, and much of it has to do with the fate of domestic manufacturing in these states. Even if it is true that only a third of jobs lost in this sector are the result of trade agreements, that is still an enormous number of jobs, and it has largely been the GOP, much more than the Democrats (whose leaders, it is true, are far from blameless), who have been singing hallelujah to the river god of “creative destruction” for the last twenty years. It has overwhelmingly been the Republicans in Congress who have been railing against the “Buy American” provisions in the stimulus, and it was their former presidential candidate who tried and miserably failed to introduce an alternative bill that had stripped out all of these provisions. At present, the provisions remain in the bill, but as I discuss in the new column in this issue there is still a danger that they will be stripped out before final passage. Obama has not shown signs yet that he will heed ideological calls for a veto of the bill if these provisions remain in place, but he has also hardly been a defender of the provisions. However, if the public is going to blame anyone for the removal of these provisions it is hard to see why they would not pin the blame on the party most of them already dislike, namely the GOP.
As a matter of electoral politics, it is insane that the GOP refuses to tap into economic populist sentiment, which is hardly limited only to working and middle-class voters after the last year, but this is a function of the structure of the party. Cultural populism, especially the empty posturing sort, is good for mobilizing voters and it does not for the most part threaten the status of GOP elites, because they tend not to be cultural elites. Directing the ire of your voters against academics, bureaucrats, journalists and entertainers is fairly easy when most of the targets are already on the other side. When your party exists primarily to serve the interests of corporations, it doesn’t matter to you what your voters think about trade policy, because your party is not going to support the trade policy that your voters want in any case. The GOP cannot capitalize on any unpopular moves that the administration makes in this area because they have strong disincentives to go down the populist road and most, with the exception of some House members such as Duncan Hunter, have zero credibility on this issue.
During the campaign, I was frequently amused to read arguments that claimed the election pitted an advocate of globalism against a defender of American exceptionalism. My question was always this: which one is which? In economic and immigration policy, no one was more of a globalist than McCain. Because of Democratic labor constituencies, Obama at least had to go through the motions of pretending that domestic industry and labor were important, but he was largely on board with most free trade agreements. As Lind’s piece suggests, the leadership of both parties is hostile or at least unresponsive to populist concerns, but it is the Democrats who have the opportunity to exploit rising anti-globalization sentiment in the country. The GOP had their chance in the ’90s and again when they controlled both Congress and the White House, and they blew it both times. Maybe they will have a third chance, but it seems improbable.
During the Republican primaries, Huckabee made some noises that caused a few people to think that he had Buchananite instincts (this was normally not a friendly observation), but actual Buchananites could see that his appeal to working and middle-class voters on trade and the economy was its own kind of pose. Just as national Republicans like to ham it up and pretend that they are just like culturally conservative, small-town folks, Huckabee put on an act that he would challenge free trade ideology, but this was purely symbolic economic populism that his critics mistook for the real thing. Huckabee caused most of the activists in the conservative movement to break out in hives; an actual protectionist candidate would send them screaming from the room. It is not just that there are huge obstacles to economic populism taking root in the GOP, but there is also the directly related problem that there just aren’t any viable candidates who can articulate these arguments with any credibility. Anyone who has wanted to make his way in Republican politics with any success has learned that free trade is one of the unquestionably good things that he must support, so even if some leading Republican were now to position himself opportunistically as a critic of NAFTA, the WTO or free trade generally it would be an exercise in posturing and would be seen as such.
Political consequences aside, the economic consensus is that protectionism is a total crock. I know you’ve written a lot and maybe I just missed it, but have you ever tried to argue that protectionism fundamentally works? Or explain what “tapping into economic populism” means if you mean something else.
Works to do what? If you mean that it doesn’t maximize the rate of GDP growth, you’re right. If you think that trade policy should be governed by considerations besides that, and that governments have obligations to serve the interests of their citizens first, certain protectionist measures may not seem so unwise.
Works to do something. To the extent that it’s fair to characterize you a supporter of protectionism, what is it supposed to accomplish? The idea that we could save umpteen million manufacturing jobs if we could just slap big tariffs on Korean televisions had some traction maybe 25 years ago, but I don’t think anybody believes this now. So I don’t want to impute this view to you if in fact you don’t believe it.
But if not that, then what?
What does the CAP in Europe accomplish? It shores up domestic agricultural production against cheaper competition by providing subsidies and other supports. Naturally, agricultural producers in the developing world don’t like these supports, because they know that they create barriers to their otherwise cheaper products. The Doha round fell apart largely because Western countries weren’t going to abandon these supports to satisfy developing countries. The barriers these supports create are a problem if your only objective is to secure the cheapest prices for imported goods and materials. If you want to preserve domestic production in certain sectors and the communities connected to them, these sorts of policies work reasonably well. Jacking up tariff rates is about as crude and heavy-handed as you can get when it comes to these things, so I wouldn’t necessarily recommend doing that. I think it would be particularly unwise to do it at the present time, because now is a time when we can least afford to increase prices of imports. The “Buy American” provisions are entirely different, but free trade zeal says that there must be no privileging of American industry.
The point is that even critics of protectionism don’t deny that it works to achieve its goals, but that it introduces inefficiencies that they believe should not exist and which ought to be removed. They are interested in the benefits that consumers reap, but then perhaps our policy should not be geared towards facilitating mass consumption financed by private debt and resulting in massive trade deficits.
“The point is that even critics of protectionism don’t deny that it works to achieve its goals, but that it introduces inefficiencies that they believe should not exist and which ought to be removed.”
Is that really so? My understanding of the case against protectionism is that it introduces inefficiencies, like you say, but it is also that it can’t be enforced, ie, requires more border control than we have. It also corrupts the industries it “supports” something that I think has been verified with our auto and textile industries. And in theory at least, it also causes shooting wars (though that one hasn’t happened in a while).
In any case, have you ever tried to really argue that protection works to achieve its goals? The substance of such an argument would be controversial to say the least.
Well, enforcement depends on the measures in question. Obviously banning all goods made in country X, or imposing a fee on ships coming from country X, could be very cumbersome and there would be a lot of gaps in the system and incentives for bribery and kickbacks, etc. That approach would be hard to enforce and would probably create incentives for black market smuggling and the like. I doubt that this would be a good approach. Industry supports can make companies less innovative, but a lot of the domestic auto industry’s problems, for example, stem from the high cost of doing business in heavily regulated, relatively higher-tax states. The burden of old compensation and pension packages also continue to eat up a lot of their resources. Our auto industry hasn’t seen that much in the way of significant, consistent government support for most of the last 30 years. The latest auto bailout was more fiercely contested than any of the other proposed bailouts, and it is not much more than a band-aid.
Protective tariffs designed to foster domestic industry did work in the 19th and early 20th century, and not just here, if you grant that the goal was to build up domestic industry and keep the prices of foreign goods high. These could be taken to excess, and when raised to the levels that they were at the start of the Depression they did contribute to significant contraction. That does not make any and all protectionist measures invalid as instruments of policy.
I suppose I haven’t made a comprehensive argument in support of protectionist measures. Parts of that argument are scattered here and there through my archives, but I haven’t endeavored to make the full case for it. Perhaps I will try to bring those different threads together in the near future.
I’ll be interested to see what you come up with, especially given what you wrote in the first paragraph above. Even if you can convince yourself that some forms of protectionism are a policy net-plus, I think it will be difficult for you argue that they can really solve any significant macro-level problem. But that’s what I think. Obviously we disagree about other things so we might end up disagreeing about that too.
What I’m trying to articulate, however haltingly, is a need for greater balance between facilitating the movement of goods and limiting the upheaval of “creative destruction” to far more manageable levels. I can see advantages in both, and my criticism of free trade ideology is based in the view that we have ended up far too much on the side of valuing cheap goods and cheap labor to the detriment of our own citizens and domestic industrial production.
My view on immigration is similar. I can see obvious value in allowing educated and skilled workers to contribute to the national economy, but the status quo is geared toward embracing any and all comers as if we were still living in the 1880s when we could readily absord more unskilled and uneducated laborers and farmers and the frontier was still open. The severe imbalances in both policies require pushing as strongly in the other direction as possible to make a dent.
I see your point (and fwiw I’m completely with you on immigration). But wrt free trade, I think it’s much more difficult to conclude that you will get any solvency for limiting the upheaval of creative destruction.
I frankly could not disagree with you more on issues of free trade. But the reasons for that aside, I think your instincts on the political usefulness of anti-free trade economic populism for the GOP are probably correct. I’m not sure if you saw this in May, but NPR put out a poll which showed that when respondents were asked to choose between the official Dem (protectionist) and official Republican (pro-free trade) views, but without any labels as to which party preferred which policy, a significant majority of self-identified Republicans stated a preference for the Dem position (which was a good 20-point swing over the results when party labels were included). Meanwhile, Dems experienced a similarly largely shift in opinion when labels were added, just in the opposite direction. The end result is that protectionist rhetoric is probably more likely to get the GOP “base” to vote and is sufficiently popular amongst the public as a whole that it would be a truly wise electoral strategy for Republicans. The poll is here; you’ll want page 30: http://joshkahn.files.wordpress.com/2008/05/npr-national-may-08.pdf
Strange that you say Obama is an establishment free-trader, since one of my conservative friends was worried he was a protectionist who would tear up NAFTA, and I saw similar sentiments among conservatives in general.
Yes, I know that was a common view. It was incorrect.
re: cheap goods/cheap labor/immigration –
But it’s all connected, isn’t it?
One of the strongest or most pervasive arguments in favor of free trade is that Wal-Mart-type prices benefit those with lower incomes. And on a material basis, that’s probably correct; the poor, I suspect, are able to live lives that are materially more prosperous (when we’re talking about things like owning TVs, etc.) than at any previous point in history.
Yet at the same time, when policy is based upon providing low, low prices – that in itself becomes a rationale for paying low, low wages. It’s sort of the reverse of Henry Ford’s maxim, to pay his workers enough to buy the product. In a country where large chunks of the population are making Wal-Mart wages, we must have low, low prices, otherwise you have public disorder, or at least you run that risk.
I agree with you that the goal of American economic policy ought to be serving the interests of its citizens first. But here’s my problem: I am not certain that policies which ultimately served to restrict cheap imports, and favor American-made products – which likely would cost more due to laboor costs – would also be accompanied by a general rise in wages. In other words, we might favor domestic manufacturing, saving and perhaps even creating new manufacturing jobs that would pay relatively well. But what of those who continue to be paid low, low wages – retail, for example. Ultimately, I think we wind up in a place where their cost of living increrases, or at least the “luxuries” which afford them that relatively high material standard of living go up to the point of unaffordability. And then you’re back to square one – the prospect of disorder.
I’m completely in your camp in terms of economic policy, but this is the once circle I can’t square.
The other issue Daniel doesn’t bring up is the VAT, which is ubiquitous, except in the US. It is used by foreign countries to favor exports and R&D (for which they grant rebates to the manufacturer) and disfavor imports (on which they impose the VAT.)
Now, a small gov’t person would want the VAT to replace some or all of the income tax. (I believe that was Archer’s position, who, as Ways and Means Chairman, long advocated for a VAT.) But that Democrats never advocate for it shows the hypocrisy of their “protectionism.” Doubtless the leftist refrain is a VAT is “regressive” because it taxes consumption, which is disproportionately by the poor. But even Huckabee discussed having some rebates associated with the VAT to offset this.
No tariffs and not even a VAT. The US is wholly-disarmed in world trade. Indeed, the whole “protectionist” v. “free trade” debate is phony. We don’t have free trade. We have managed trade in which multinationals use foreign countries for labor arbitrage against the US.
Daniel’s observation about the electoral benefit to the GOP of “populism” is correct. The clearest sign that McCain was not serious about winning the Presidency was shown by his support of the TARP. After picking Palin, the obvious route for him to pursue would be a pseudo-populist one. Had Palin been able to inveigh against “Wall Street” (as oppose to Bill Ayers) then it would have been Obama and the buffoonish Biden on the defensive. Instead, McCain backed TARP (and made an ass of himself in so doing) and rendered Palin a ridiculous sideshow (leaving aside the otherwise merits/demerits of her candidacy about which Daniel wrote extensively.)
That the GOP continually sides against its constituency on matters of their economic interests simply shows that it is what it has always been: a statist, corporate capitalist party beholden to vest monopolistic/oligarchic interests and against the interests of small business, workers, farmers, etc.
“We don’t have free trade. We have managed trade in which multinationals use foreign countries for labor arbitrage against the US.”
This is right. This is ironically why some libertarians are as fiercely against trade organizations and agreements as actual protectionists. It is a point I have not stressed enough lately, and it gives the impression that free traders are actually advocating for a system taken from the mind of Bastiat rather than a system that serves the interests of concentrated wealth. Whatever the problems with Bastiat, he was at least genuinely interested in removing all trade barriers.
It ought to be pointed out that the United States’ great industrial wealth was created in the 19th century under extremely drastic protectionist tariffs. WIthout those tariffs we would never have become the great industrial power that we were then and up until recently. Now, through “free trade” we have given up that industrial strength bit by bit, in exchange for what exactly? Mountains of debt to the rest of the world? When you ask whether protectionism “works”, the answer is obviously yes, given its history in the US. The greater question is, what does free trade “work” to accomplish, other than the dismemberment of the US’s real power and strength?
“When you ask whether protectionism “worksâ€, the answer is obviously yes, given its history in the US.”
“Obviously” works, like what, the earth is “obviously” flat or something? For those of us for whom this point is less than obvious (ie, the whole world) could you actually articulate an argument for this if you tried? Daniel hasn’t, at least for now.
Koz,
Despite the widespread belief that protectionism is bad for a nation, those countries which actually became great economic powers practiced protectionism to get there. That is obvious. Read the economic history of the United States, Great Brittain, Germany, etc. We can see, on the other hand, that free trade has “succeeded” only in destroying our economic power and transferring it to transnational corporations who don’t care about the nation’s welfare, only their balance sheets. That you somehow can ignore this history, and declare it to be a “flat-earth” theory, is testimony to the brainwashing power of this belief in free trade, that ignores the actual facts, and pretends it is somehow a incontravertable and irrefutable absolute, rather than a method for transferring wealth to cosmopolitan elites.
Conrad,
First of all, have you noticed that, for all your advocacy of protectionism (and Daniel’s too for that matter), there’s no accountability in any of it. Ie, if we could just put quotas on this or tariffs on that, we could accomplish blah.
Of course that’s out of necessity, because it allows you dwell in your own Hegelian world-animating realm of fiat. Ie, that we consider the path of economic history as deriving from decision points about tariffs. Whether or not America had tariffs in the 19th century, I don’t think you could find a reputable historian to argue that American economic development during that time was due to them. In fact, it’s much more plausible to go the other way. The US Constitution bans any kind of tariffs or duties between the states, so in that sense America is the very definition of a free trade zone.
And even if you could show that historically America prospered because of protectionism (which you can’t), it still doesn’t necessarily follow that protectionism is desirable or even feasible now.
Koz,
I didn’t advocate tariffs or protectionism, I just tried to make clear the actual history of these things. But you certainly will find many, if not most, economic historians who will say that America’s economic growth in the 19th and early 20th centuries was made possible in part by tariffs which protected our native industries. We might well have become just another third world country which shipped off its natural resources to other nations, like Britain, to produce finished manufactured goods. We didn’t, in large part because of the protectionist stance of our government. which wanted to foster native grown industries, and succeeded greatly at this. When we abandoned these protections, it’s no big mystery as to why our manufacturing base began to evaporate and travel overseas. If you want to argue about accountability, fine, but please then make free trade accountable for the losses of jobs and stagnant earnings by most Americans while the upper classes have profited tremendously.
You are of course right that banning internal tariffs certainly led to US economic development, but that has nothing to do with external trade issues, unless you simply think this justifies some kind of religious belief in the value of free trade regardless of the actual results of those policies. Free trade has certainly enriched free traders, but it has not enriched the average citizen. Instead, it has made their economic security remarkably insecure, unstable, and constantly threatened by competition from other nations who lack our economic base, but who instead are able to live off it while at the same time turning us into a debtor nation. All for cheaper crap at Wallmart.
As for whether protectionism is desirable now, the question is, for whom? It’s certainly not desirable for the elites who run this country, who get rich off the labor of others, but some forms of protectionism would be quite desireable for those who actually work for a living at stagnant or declining wages.
The notion that one can’t show that America prospered through protectionism is sheer historical revisionism of almost Stalinist proportions. Look at all our major industries of the 19th and early twentieth centuries, from steel to textiles to manufacturing to automobiles, etc. Are you honestly suggesting that these industries didn’t grow and prosper due to protectionist import policies? That’s simply laughable and beyond ignorant, it’s just plain propagandistic deceit. You could certainly try to make a case as to why protectionism would be bad now, but you simply can’t pretend that it didn’t protect American industries during the vital phases of their economic growth. I guess you could try to argue that we would have grown even faster and better with free trade, but that’s not how we became the industrial leader of the world that we did. Messing with success is not often a good strategy, as we have seen over the last 35 years of free trade policy, during which time our economy has been stagnant or in decline for most people in this country, after over 150 years of growth during mostly protectionist policies.
“I didn’t advocate tariffs or protectionism, I just tried to make clear the actual history of these things.”
Ok for starters how do you want your other remarks to be interpreted then?
As statements of basic facts – that protectionism is not necessarily a bad thing, but can produce positive results, as has been demonstrated historically in this country. It of course depends on what specific results you want, and which measures will produce them. I don’t think I’d recommend much in the way of protectionist measures during this economic crisis, it would just make things worse most likely, but as a long-term economic strategy I think we have to get away from the religious mania surrounding free trade, as if it is by its very nature some kind of unquestionable good.
I’m somewhat happy with free trade between economic equals, in relation say to Japan or the EU, but between highly advanced nations and developing nations, it’s often rife with exploitation on both sides. Undercutting American labor by relying on cheap foreign imports from countries with massive labor surpluses does not strengthen our economy, it weakens it for everyone but the upper classes. Likewise, raping developing nations of their natural resources and leaving them unable to develop their own competitive industries does not help them, and leaves them incredibly vulnerable to political instability and rapacious governments, with no civil order ever established. There’s plenty of good circumstances in which protectionist policies are both sane and productive of a better economic and social order than that which is produced by the “creative destruction” of unrestricted free trade.
Ok, so you _do_ support protectionism, but only in principle (ie not at the moment because of the recession).
Furthermore you seem to believe that protectionism actually had a historically causative relationship with respect to American prosperity. AFAIK, this is a train of thought that no one actually believes (except you, of course). If you had some support for this I’d like to see it.
Leaving that aside for now, presumably you agree that the implementation of tariffs or quotas has to be context-dependent, that’s why you’re not in favor of it at the moment. So let’s say we have a recovery this year or next, and it’s “safe” to implement protectionism. And furthermore we could implement tariffs or quotas or whatever as you specified. What would you hope to accomplish with your hypothetical policy?
Koz,
What happened to Britain’s economic position viz Germany and the US in the late 19th and early 20th century when she pursued free trade policies, and US and Germany did not?
I think Conrad’s point is, even granting your assertion that he cannot point out a causative relationship between “protectionism” and prosperity, you cannot demonstrate a negative causation either. (Other than the hoary canard about Smoot-Hawley, I suppose.)
Of course, there are philosophical objections to tariffs as well. Democrats (historically the conservative party, decentralizing party with its Southern base) opposed them. The GOP (historically the centralizing party) avidly supported them. But I would assert that, in fact, “free trade” is a tool for centralization and has been shown as such over the past 40 odd years by breaking down regional and local economies, thus undermining the distinctives of those areas–for a start.