American workers and the health of their communities should be at the center of our nation’s economic policy.
From the loss of good jobs, to a weakened industrial base, to shortages of basic grocery and pharmaceutical items, Americans are suffering from decades of misguided offshoring to countries like China. If we want to be a strong nation, we have to rebuild and invest in critical industries at home. This bill lays the groundwork by creating the roadmap, using existing tools within our government, to focus on and invest in things that actually matter. — Sen. Marco Rubio
Last month, Marco Rubio and Ro Khanna co-sponsored the National Development Strategy and Coordination Act of 2022. For its sponsors, this bicameral, bipartisan legislation serves as the first step in an ambitious “national project to restore our nation’s manufacturing leadership and unify Americans around a shared purpose.” This shared purpose includes the dignity of millions of American workers by providing good jobs to individuals and communities left behind by hyperglobalization and technological change.
For far too long, policy debates have ignored something fundamental to justice and human welfare: the status of work and the workers who perform it. Trade reforms have been justified according to economic models that give no attention to the standing of workers and treat community membership (and in some cases political citizenship itself) as irrelevant to, or even a barrier to, efficiency. Trade and financial liberalization offered the promise of greater economic growth and lower cost goods through more complete and competitive markets. What they brought with them was the steady erosion of the power of ordinary workers—in contemporary parlance, those without access to high-demand human capital. Workers were told, in effect, that in order to keep their jobs they had to give up hard won gains in wages and labor rights.
Status matters because human beings are social creatures. We care about our relationship to others, the power or control others have over our lives and work, and whether we are recognized for the contributions of our labor. Few thinkers in history understood these basic features of humanity better than Adam Smith, the Scottish moral philosopher often thought of as the father of the discipline of economics. Central to Smith’s argument for markets is the way they elevate both the wealth and the status of ordinary workers.
This is the main lesson from Smith’s oft-cited example of the butcher, brewer, and baker. In the feudal system, workers were more like beggars than free persons, dependent upon the good will of their masters. In a well-ordered market society, by contrast, citizens need only appeal to each other’s self-interest. Workers receive “liberal” material and social reward for their industry. They are able to take pride in their efforts and command the respect of others in society and in the marketplace, rather than look upon powerful landlords and merchants with fear and a deference characteristic of “servile dependency.”
Smith’s Wealth of Nations was the book of political economy for founding fathers such as Alexander Hamilton and Thomas Jefferson in their efforts to build the American republic. While Hamilton and Jefferson disagreed on many issues, both framed their arguments and policies in terms of the central end of republicanism: the repudiation of servile dependency. Slavery is the most flagrant violation of republican freedom. Slaves are subject to domination that is both wide in scope (over most aspects of their lives) and great in intensity (nearly total).
Domination, however, need not be total to undermine the status of individual citizens. For republicans, free and equal citizenship depends upon political accountability (famously embodied in the slogan “No Taxation without Representation”) and economic independence. Hamilton argued that the freedom and security of the republic lie in a developed and diversified economy that did not depend upon foreign resources and manufacturing. Jefferson and James Madison, in turn, claimed that an economy comprised primarily of wage earners, who lived by taking orders and depended on capital owners for their basic needs, was inconsistent with free citizenship. This political philosophy provided the central justification for the 1803 Louisiana Purchase.
Eighty-three years after the initial publication of Wealth of Nations, Abraham Lincoln articulated his vision of just and free work. “The prudent penniless beginner,” he argued, “labors for wages awhile, saves a surplus with which to buy tools and land, for himself; then labors on his own account another while, and at hires another new beginner to help him. This is free labor—the just and generous, and prosperous system, which opens the way to all—gives hope to all, and energy, and progress, and the improvement of condition of all.”
For Lincoln and others, the charge of the Republican Party was to redeem the moral core of the Union as represented by the Declaration of Independence. This meant not only the abolition of slavery but also the breaking up of feudal plantations to ensure that recently freed slaves possessed the productive resources necessary for economic independence (known today as the promise of “40 acres and a mule”). It also meant building the physical and legal infrastructure necessary to enable a rapidly expanding economy of free and independent craftsmen, farmers, and shopkeepers.
Lincoln reasoned—hoped may be a better word—that, through a comparatively egalitarian distribution of productive land, greater infrastructure development, and universal education, we could build an economy consistent with free citizenship. Republican political philosophy certainly played a role in unleashing the productive energies of American workers. The contrast with other post-slave societies in the Americas is telling here.
Nonetheless, the 40 acres and a mule failed to materialize. Instead, millions of freed slaves and their descendants, denied political liberties and subject to black codes after reconstruction, fled the South for opportunities in the rapidly expanding industrial centers of the North. Technological change, in turn, brought with it economies of scale that overwhelmed Lincoln’s vision.
Worker recognition and freedom from domination, as a result, would depend upon economic policy committed to productivity growth, combating corporate concentrations of power, and full employment. In the mid-twentieth century, these commitments, buttressed by the political organization of labor unions, made possible the rise of a giant, property-owning middle class. They also made the United States the great manufacturing power of the world.
Like Smith and Lincoln, Martin Luther King Jr. highlighted the material component of worker status. While all labor that serves humanity has dignity, he told audiences of sanitation and meat-packing workers, society fails to respect that dignity when the wages of work are insufficient for leading a decent, middle-class life by the standards of that society.
When characterizing what it means to live a middle-class life, the relevant framework of comparison is not to humans throughout the world or throughout human history. The fact that the purchasing power of King’s audience, or a displaced worker in Ohio a generation or two later, is greater than virtually all people throughout history does not enable them to relate to their fellow citizens as free and equal. It does little to secure their pride of place as workers or their freedom to deny unreasonable demands of employers or customers. It does not provide them with hope for a better life for themselves, their children, or their communities.
King repeatedly expressed concern that structural transformations in the economy would leave working class communities behind in the days to come. For this reason, he thought that an alliance between the civil rights movement and organized labor, rooted in shared values and interests, would be essential to securing the dignity of all workers. He was right to be worried. While African American communities were often hit first and hardest, the loss of status that came to middle-class employment would be devastating to predominantly white communities, as well.
The liberal reward for labor is central to Smith’s model not only because workers deserve it, but also because that reward brings out the best in them. Its absence makes us worse. Efforts to encourage workers to take greater personal responsibility are self-defeating when accompanied by reforms that ensure that the returns for their hard work will be diminishing status and share of the fruits of economic growth. For those near the top of the economic ladder, in turn, a sharp decline in absolute mobility provides even greater incentive to rig education, housing, and tax policy in their children’s favor. Opportunity hoarding is both a partial cause and a predictable consequence of the loss of middle-class jobs.
The collapse of worker status from middle-class employment has dragged trust in government and support for liberal democracy down with it. This decline makes perfect sense. The liberalizing reforms of the 1980s and ’90s, though they may have been textbook economics, undermined the effectiveness of democracy by making the basic institutions that structure individual market choices less democratically accountable. Financial liberalization gave rise to firms that were too big to fail and markets seemingly too unwieldly to regulate without “outsourcing” regulatory duties to powerful firms themselves.
When firms use global value chains to maximize efficiency by producing the most for the least cost, they also use global wealth chains to finance this production, book their profits, and pay, avoid, or evade taxes. They decide, in effect, what laws and rules to be governed by, and play different governments against each other to get the most favorable deal possible. “Favorable” here, needless to say, is not understood as “most conducive to the creation of middle-class jobs for American workers.”
The predictable result of a loss of democratic accountability was that, when the Great Financial Crisis came, powerful economic actors were bailed out, ordinary workers and homeowners were not, and comparatively powerless citizens in the U.S. and elsewhere paid for the costs of crisis with a politics of austerity. For many citizens, the fiscal and monetary response to the crisis crystalized the reality that for decades neither their leaders nor the economic models those leaders used to justify their policies served their interests and values well. Cheaper consumer goods are a poor substitute for status and community.
Philosophical models at times did not fare much letter. For example, the global justice discourse of the era of liberalization centered on inequalities between citizens of affluent countries and citizens of poor ones and what the former, in general, owed to the latter. With this “North/South” frame, reforms that narrow inequalities between wealthier and poorer countries could be seen as just, even as they hollow out the middle-class in wealthier countries and redistribute power and control from democratic institutions to non-governmental or corporate agents. Both economic and philosophical modelling on trade, in other words, treated the loss of worker status, community, and power as a matter of “social justice” outside their frame of inquiry.
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The legislation offered by Marco Rubio and Ro Khanna represents a different model. Inclusive prosperity makes us better people and better citizens. Declining status, security, and hope, by contrast, provides fuel for the fire of authoritarian populism. By strengthening the middle-class, we can restore faith in democratic institutions. Then, we export both manufactured goods and this middle-class centered version of liberal democracy to the rest of the world. They characterize the project as one of restoration. Critics are likely to reduce this project to a kind of nostalgia for the postwar economy, the core features of which reflect a particular point in history that cannot, and perhaps should not, be repeated.
Throughout American history, however, the key to sustained, pro-worker growth—as opposed to speculative asset bubbles—has been private enterprise, coordinated by democratically accountable agents and agencies, focused on domestic production. The point is as much about public philosophy as public policy. What Rubio, Khanna, and others are calling for is the restoration of an American philosophy, from Smith to Lincoln to King, that puts the dignity and status of ordinary American workers and the health of their communities at the center of our economic policy.
This article is part of the American System series edited by David A. Cowan and supported by the Common Good Economics Grant Program. The contents of this publication are solely the responsibility of the authors.