How often do you hear the argument that it is alright for our trade agreements to hurt our own workers because people in other countries are getting work or better pay? Here is the problem with that: The world’s countries follow an adversarial system, with each country advocating and competing for their own interests – except us, apparently.
In an adversarial system, like our legal system, competing interests are represented by advocates with a responsibility to do their best to present the position and interests of their client. In our system, everyone has the right to be represented, and the representative has a duty to represent the interests of their client as strongly as they can and leave it up to the other side to make their own case. (But see this note.)
The world works the same way. Countries advocate for their own interests. We are supposed to advocate for ours. The idea is that by following an “enlightened self-interest” approach, everyone should find ways for everyone to come out ahead.
But when it comes to trade it seems that the way it works these days is that other countries advocate for the interests of their economy, businesses and working people, and our own elites also advocate for the interests of other countries’ economies, businesses and working people instead of our own. This is because the current trade system working well for them, helping to shift our economy to benefit a few at the top much more than it benefits – and even at the expense of – the rest of us.
Eduardo Porter’s New York Times article this week, “A Global Boom, but Only for Some,” looks at this outcome. Porter takes a well-thought-out, nuanced look at how trade has affected the world since the famous 1993 Al Gore vs. Ross Perot CNN debate on the North American Free-Trade Agreement. Porter argued that Gore won the debate, but the outcome has not been what Gore envisioned – not by a long shot. Perot was right.
Porter writes that the last few decades of trade has actually increased inequality and stagnated the wages of the rest of us, while improving the lives of many elsewhere.
More important, two decades worth of trade deals, including NAFTA and China’s entry into the World Trade Organization, did not live up to Mr. Gore’s implicit promise that globalization would improve the living standards of most American workers. Instead, globalization is now often perceived as a leading driver of rampant inequality and wage stagnation.
[. . .] But what globalization did achieve was to greatly improve the lot of hundreds of millions of people in China and other corners of Asia. The lopsided results have opened a rift between the experience of global capitalism between the developed world and many poor countries.
… What’s happened is that while income growth stalled for middle-class workers in developed countries and surged for people in the 1 percent, it also grew sharply for hundreds of millions of workers in China, India and other Asian countries. In the late 1980s, for instance, workers in the middle of China’s urban income distribution made 56 percent of the median American income, according to Mr. Milanovic’s calculations. By 2008, that figure rose to 71 percent.
This improvement in the lives of people elsewhere should mean that (somewhat) newly prosperous workers in other countries would now be buying things made here in the U.S., and our own economy and prosperity would surge as well. If advocates for the American economy, businesses and workers were advocating for our interests they would be applying the necessary pressure to make that happen.
But that isn’t what is happening. China and the rest are representing their own interests. Meanwhile American elites who benefit from this status quo are also representing the interests of those countries instead of our own. The result is we have a trade deficit in the $500 billion-per-year range, and that is draining our economy.
American billionaires and their giant corporations are benefitting tremendously by tapping into this drain of American’s wealth. They have captured our political system and are using their power and influence to keep the money river flowing past them. They are using this trade drain to keep unemployment high in the U.S., which is driving wages down. And the resulting “job fear” enables their political manipulation to bring them lower taxes and more subsidies, deregulation and other concessions because they are the “job creators.” As our economy drains away these “job creators” divert a slice of that draining wealth for themselves. The draining of our economy continues as our trade deficit increases and increases.
(Please see the charts in the post, Enormous, Humongous Trade Deficit And The Decline Of The Middle Class. They show the coincidence of the rise of the trade deficit, the stagnation of American wages, the corresponding rise in Wall Street’s share of the economy and the rise of our national debt.)
The elites in other countries have caught on. Even as our economy drains wealth to their countries, their own 1 percent now play the same gain against their own people as well.
China may have lifted hundreds of millions of workers out of poverty. But workers’ share of China’s income fell from nearly two-thirds in the early 1990s to less than one-half in 2008, according to the International Labor Organization.
“On the one hand you have people moving from extreme poverty to a little better than poverty,” said Ben Davis, director of International Affairs for the United Steelworkers union. “But at the same time you have the world’s income distribution becoming more skewed from workers to billionaires.” This pattern of global development is unlikely to be stable.
So as more and more jobs and factories are moved out of the country and the trade deficit soars, who is representing the interests of America’s economy, businesses and workers? And who represents the interests of working people elsewhere?
FYI, here is that 1993 Gore v Perot debate, in full:
What we have here is China advocating for China’s interests, and Americans also advocating for China’s interests.
* 2014 rule change: If they want to be a judge, they aren’t supposed to ever represent an unpopular client.