Elizabeth Warren, Financial Crisis, financial regulation, Im-Politic, Jobs, Main Street economy, Mainstream Media, offshoring, One Percent, Trade, trade Deals, trickle down economics, Wall Street reform
One of the most heartening trade policy-related developments of recent months has been Senator Elizabeth Warren’s growing interest in the issue. In addition to expressing concern that President Obama’s Trans-Pacific Partnership (TPP) trade deal will undercut the Wall Street reforms she’s helped spearhead, she devoted some lines to trade in her recent economics speech to the AFL-CIO that were more than mere talking points.
Given the Massachusetts freshman’s burgeoning role in Democratic party politics – and signs of some appeal to populist conservatives – these remarks represent one more small sign that much of her party is moving beyond stale, narrow cliches when talking trade. Indeed, they encouragingly echo a previous speech by her New York colleague, Chuck Schumer, a member of the Democratic leadership as chair of the Democratic Policy and Communications Center.
Nonetheless, Warren and her colleagues have a ways to go before they develop a trade-related campaign pitch that both excites voters and yet isn’t completely trashed by the trade-liberalization-worshipping Mainstream Media.
That last point is worth elaborating on a bit. It’s not that voters will read in any detail the MSM’s descriptions of any candidates critical of trade and conclude that opposition to current policies disqualifies them from public office. It’s that constant MSM descriptions of such candidates as neanderthals and know-nothings and xenophobes and the like tend to saddle target politicians with a distinctive “fringe” or at best (hopeless) “protest candidate” label.
In any event, it was good to see Warren, a la Schumer before her, in part blame the woes of the American middle and working classes in part on government decisions that “turned loose giant international corporations to…outsource more jobs.” Even better was Warren’s critique of “trade pacts and tax deals that let subsidized manufacturers around the globe sell here in America while good American jobs get shipped overseas.”
But Warren oversimplifies. As a result, she needlessly leaves herself and other trade policy critics needlessly vulnerable to charges of being anti-capitalist, and misses a chance to knit together her domestic and international positions into the strongest possible political force.
The main culprit behind offshoring isn’t the “trickle-down economics” she villifies in the AFL speech and more generally. It’s a more specific set of trade policies that inevitably slow U.S. growth and therefore hiring by encouraging American (and other foreign) companies to supply the lucrative American market from foreign production sites that are much lower cost, lightly regulated, still heavily protected by (difficult-to-identify) non-tariff trade barriers, and (yes) often subsidized.
Moreover, precisely because recent trade deals and related policies have offered this sugar-sweet deal to U.S. companies, they inevitably have increased the pressure in America to deregulate dramatically in order to compensate – including on Wall Street. And if restoring or even raising U.S. trade barriers made investing abroad much less attractive to the One Percent (because selling the output to American customers would be that much harder) much more of the wealthy’s wealth would indeed trickle down to the rest of Americans. In that trade policy environment, new financial regulations could genuinely ensure that most corporate investment benefits the real Main Street U.S. economy and strengthens its foundations, rather than underwrite unproductive and even reckless Wall Street shenanigans.
Just as important, Warren needs to connect trade-induced offshoring with the onset of the financial crisis. As I’ve pointed out previously, she’d have plenty of world-class academic company. But it’s imperative to popularize the idea that most of the gains from offshoring went to third world populations who were still left way too poor to buy much of what Americans could hope to export them. Most of the losses, meanwhile, went to Americans whose consumption was still vital to fueling the nation’s and the world’s growth. When Washington decided to offset those income losses with oceans of cheap credit, bubble inflation and then bursting was guaranteed. So if Warren is genuinely determined to improve the financial stability of the American economy – as seems the case – then she’ll concentrate more of her energies on a trade policy makeover.
Because of her skyrocketing profile, Warren will be influencing the next presidential campaign whether she runs or not. Let’s hope she uses the opportunity not only to stoke populist emotions that should be heated, but to raise the odds that they’ll generate the most constructive change.