How Free Trade Made Democracy A Disadvantage

This is my presentation from last week's Netroots Nation panel session: Revitalizing Manufacturing: The Road to Renewed Job Growth [1]. Click through [1] for panel details and other panelists, here [2] for a pdf of slides, including Jared Bernstein's. See below for video -- and be sure to watch Beri Fox!!!

Four Stories

I want to share four quick stories:

1. Democracy

The story of America: We fought a wealthy powerful few who had all the say and didn’t let us have a say. We won and made a country where We, the People made the decisions and share the benefits.

So because we had a say we built up a country with good schools, good infrastructure, good courts, and we made rules that said workers had to be safe, get a minimum wage… we protect the environment, we give out social security. We take care of each other. This made us prosperous.

And we used to protect that. We used to put a tariff on goods coming in if they were made by people who didn’t have the ability to speak up and better their condition. It was called the American System. Look it up. [3] We’d let the goods in but we would use a tariff to strengthen our country, our infrastructure, our schools – our democracy.

But that changed. Superman left and we stopped protecting the American Way. We started letting goods in made by people who had no say, so the goods were cheap and they undercut us.

We have made democracy a disadvantage. We made it a disadvantage in world markets -- an added cost -- instead of an advantage that brought us prosperity.

Make no mistake, people who say they want things more “business friendly” they mean they want America to be less of a democracy, with fewer of the protections we fought to build for ourselves.

2. Trade

Once upon a time some areas made or grew some things well, and other areas made or grew other things well, and they would trade, and both areas could have the things they made AND the things made somewhere else, and everyone benefitted. Bananas and wheat, clocks and dinnerware. And both areas increased the number of customers they had.

And so to most people “trade” means we buy things made somewhere else, and they buy things we make here. In what world does “trade” mean closing a factory that is located here, moving it there where they don’t already make whatever it is, laying off all the people, and then bringing back here the same things that used to be made here and selling them in the same stores?

And the result is a lot of people have lost jobs, devastating our communities.

And then they tell workers who still have jobs that the same can happen to them, we can just close this factory or move your job, so shut up and don’t expect raises or benefits or safety or dignity.

What we see happening when a company moves production out of the country is not trade, it is getting around the borders of the democracy we built, and the things we fought and sacrificed to build.

Letting companies move factories away meant giving up our ability to make a living. Sure a few people might get really rich from it, but look around and you see that the rest of us, and our communities, and our economy have been sent sliding down a hill into the sewer.

3. The Deal

There once was a company. The company made a deal with a company in the next county, we make something you don’t, and you make something we don’t. So the deal is you’ll buy things from us if we buy from you. And we start buying from them, but they aren’t buying from us. And this goes on, and they still aren’t buying from us, but we are starting to owe them a lot of money. And so we’re borrowing from them to buy from them, and they still aren’t buying from us.

And then they show up in our county selling the things we already made and sold, buy they used the money they got from selling to us to set up to make what we made.

And by the way they say now we have to pay them what we owe them.

That is how our deal with China is working out. We bought from them, they didn’t buy form us, and now they have accumulated $1.5 trillion which they were supposed to have been buying American-made goods with.

And they cheated. Or I would say they were smart and watched out for their own interests excessively, and we didn’t at all.

$1.5 trillion! So imagine what would happen if we said we're going to default on our debt but these bonds are redeemable in the next 3 months for American made goods. Can you imagine what $1.5 trillion of orders would do for our economy right now? $1.5 trillion in orders? Full employment... Factories humming...

Well the picture of what that would do FOR our economy is a way of understanding what that has done TO our economy.

4. The Cost

I like to tell you a story about the cost of our free-trade deals and tax policies.

I took a road trip last fall, through four industrial states, MI, OH, WV, PA to visit some of the Manufacturing Town Hall meetings that Scott’s group (AAM) put on. [Note - see posts about this tour here [4].]

They call this are the "rust belt" because so many factories are closed and rusting.

From town to town you see downtowns devastated, because the way you make a living is gone and the cheap imported goods at wal mart competing with local businesses. Michael Moore wrote about Flint after the auto plants closed. That kept happening, town after town, year after year, and got worse.

You have to see to first hand. [Note - there are pics in this post [5].]

But I’ll tell you, we’re even seeing it now in Silicon Valley [6], seeing downtowns with lots of empty storefronts. Empty office and manufacturing buildings everywhere. That wave that hit the Midwest has reached the tech areas now.

So the moral of the four stories is that We the People have to protect the things we fought for and won. And we have to remember that We, the People have to take care of and watch out for each other because the wealthy and powerful won’t do that for us. And markets aren’t about that, either.

When we relax our eternal vigilance they will come back with a vengeance.

Progressive Solutions

a. Industrial Policy

We don’t believe in having the government help. We think the markets will fix everything. But other countries don’t see it that way.
We are pitting our companies on their own against the national resources of governments. We can live in an ideological dream world and say we shouldn’t, but our competitors in the rest of the world DO.

b. Protect Democracy

Tariffs. Call it a democracy tariff. Or a thugocracy tax. Use this to help lift others out of their exploitation. By making democracy a disadvantage we are only encouraging the worst, and encouraging it here, too. “Business friendly” is a code word that means get rid of all the protections We, the People have built for ourselves.

They can protect the environment, etc, or charge a tariff to bring those goods in.

c. Renegotiate Trade Deals

Trade can mean something different. We still have a huge market. We can require goods to either be made by people who are not exploited and who have a say so

d. Enforce Trade Laws

China cheats in so many ways, and we all know it. Currency rates. Indigenous innovation . Forcing companies to turn over proprietary IP…

We can do these things. Because of the strong prosperity that democracy brought us others really want to sell into our markets.

And my own favorite:

e. Top tax rates

With high top rates it takes time to build a fortune. You have to have long-term plans, sustainable businesses that are surrounded by healthy communities, good schools, good infrastructure.

Lower rates, you can make a fortune in a few days. Business models changed, became short term, cash in, quick-buck schemes. Harvest infrastructure, close factories, no need for healthy communities, etc.

Video Of The Panel

Scott Paul opens
Jared Bernstein at 6:02
Rep. Jim McGovern at 17:00
Beri Fox at 31:29
Dave Johnson at 48:13

IF the video below doesn't show up, click to see it here [7].

Sobotka

As always, Frank Sobotka explains what's wrong: