Im-Politic: How Bernie Can “Win”

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2016 elections, amnesty, Bernie Sanders, Buy American, carbon tariff, China, climate change, Democrats, Donald Trump, energy, environment, fossil fuels, fracking, greenhouse gases, gun control, Hillary Clinton, Im-Politic, Immigration, Jobs, liberals, multinational corporations, natural gas, offshoring, Open Borders, Populism, progressives, third world, Trade, unions

Like Donald Trump, Bernie Sanders is doing such a good job of influencing the agenda of other 2016 presidential candidates (namely Hillary Clinton) that there’s no useful advice I can offer on that score. Yet the Vermont Senator still has a ways to go if he wants to generate more lasting change in American politics, and the recipe, not too surprisingly, is the inverse of that for Trump.

First, some background. I’ve had the privilege of working with Sanders firsthand on trade and jobs issues, and greatly admire his dedication to getting America’s international economic policies right. He’s not only been a longtime champion of this cause – he’s been a tireless worker as well. Sanders has also kept his focus squarely on the most important victims of offshoring-friendly and otherwise flawed trade policies – the American worker and the productive segments of the U.S. economy. That’s a refreshing change from most others on the leftward end of the political spectrum, who have consistently muddied both the politics and economics of trade issues by (wrongly) emphasizing the harm allegedly inflicted on developing countries by American and American-supported policies.

Even better, it’s already clear that Sanders recognizes the importance of generating crossover appeal. In addition to noting that many of his positions – like Wall Street reform – resemble those of real conservative populists, he has walked this walk on an important social/cultural issue: gun control. But if he genuinely wants to shake up American politics and not simply worry Clinton through next November, the Democratic contender needs to understand the game-changing potential of more realistic immigration and climate change policies.

Earlier in this year’s campaign, Sanders was chided by numerous progressives for being too quiet on immigration issues. Unfortunately, he responded with a June speech to Latino-American elected officials by appearing to pander to this Open Borders crowd. His trade policy position, however, makes clear how substantively mistaken these views are. In particular, as suggested above, he has recognized that failed U.S. trade policies have betrayed America’s “working people” by sending “their jobs…to China and Mexico….” (Although he’s also made some nods to “third world victimhood-mongering.”) Unlike Trump, moreover, he correctly targets multinational companies – not foreign governments – for most of the blame.

But why, in this case, does Sanders (along with most other liberal and Democratic party trade critics) now favor immigration policies that also will take more jobs from Americans, and drive wages down? If trade deals that, among other failures, make many more very low-paid workers in the third world much more available to U.S.-based businesses have these effects, why would immigration policies that literally encourage such workers to come to America produce different results?

In fairness, Sanders and other liberal immigration supporters have an answer: Foreign workers who come to the United States will be much easier to union-ize, and thus will earn higher wages, than their counterparts who remain abroad. But given the labor movement’s major and chronic failure to stem dramatic shrinkage – especially in the private sector – that clearly belongs in the wishful thinking category. Moreover, labor’s recent organizing successes have come almost entirely in service sectors that don’t face any foreign competition. As for parts of the economy that are heavily traded, like manufacturing, continuing new legal or illegal immigration influxes, along with amnesty, will surely intensify the competition for remaining domestic jobs and drive wages even lower.  

Further, as I’ve written, liberals’ claims that mass immigration can produce a new mass middle class overlook that their conception of mass immigration has no logical stopping point – and therefore is likeliest to furnish American businesses with not only huge, wage-killing labor gluts, but with huge, never-ending labor gluts.   

More important, in an election year, populist-minded voters on the Right are bound to reject this reasoning. For any hope of recruiting them to his ranks, Sanders’ immigration approach will need a thorough overhaul. And of course, by extension, this goes for any Democratic candidate.

Sanders has been one of Washington’s leading champion of high priority efforts to fight climate change, which means that re-positioning on this issue to broaden his base will be even more difficult than on immigration. But it could also pay some political dividends, and could be engineered in a way to satisfy at least some environmentally minded Democrats. In three related ways, moreover, the kinds of trade policies Sanders favors are very helpful.

First, Sanders should start emphasizing that one of the best ways to reduce global greenhouse gas emissions is to reduce China’s emissions – and that this objective in turns requires slowing down the Chinese export machine. I’ve long emphasized that, given the huge market for Chinese goods represented by the United States, American trade curbs would be a big environmental plus – whether put in place unilaterally, through sanctions on currency manipulation, or possibly better, through the kind of multilateral carbon tariff that even prominent economists are starting to favor.

Second, Sanders could win some business support for this approach by pointing out that, the less competition American businesses face from countries where environmental (and other) regulations are non-existent or not enforced, the more environmentally friendly regulation they could bear.

Third, as a strong opponent of trade decisions that have gutted the nation’s ability to administer strong Buy American regulations governing government purchases, Sanders will have no problem insisting that federal support for green manufacturing and technology be restricted to operations and facilities in the United States that employ American workers.

At the same time, Sanders will have to take much more seriously the inevitably dominant role fossil fuels will play in the country’s energy future for the foreseeable future, and his energy approach will need to make much more room for greenhouse-friendly natural gas in particular. As a result, he’ll need to view whatever pollution issues are posed by fracking not as an excuse to reject or neglect gas, but as a problem to be solved technologically.

The good news, in contrast to Trump, is that Sanders does seem to take advice from outside his ideological comfort zone and political base – his dealings with me and colleagues, when I worked at a small manufacturers’ organization, represent just one body of evidence. And representing even a small state like Vermont inevitably has exposed Sanders to the kinds of voters and their direct feedback that a one-percenter like Trump probably rarely encounters. For these reasons alone, he seems to be a more plausible candidate to help create an enduring populist alternative to the two major parties.

Just with my treatment of Trump, this analysis of Sanders’ chances doesn’t mean that I view him as an ideal candidate or, similarly, that I’m with him on most or even many issues other than those mentioned here. What it does signal is my belief that these two figures boast the potential to rework American politics by identifying crucial areas of overlap on the core pocketbook issues that are vital both to voters and to the nation’s future. Will they? Leaving aside their personal traits, recent history doesn’t provide many reasons for hope. But of course it’s precisely because meaningful change sometimes happens that we’ve had history in the first place.

Following Up: More Cold Water Thrown onto Manufacturing Renaissance Claims

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competitiveness, energy costs, Following Up, fracking, manufacturing, manufacturing renaissance, natural gas, reshoring

It’s getting so that with each passing week, claims that reshored factories are producing an American manufacturing renaissance look more and more specious. Last week, I wrote about Massachusetts Institute of Technology scholars who found that the supposed reshoring wave is much more talk than action. Now they’ve filled in some of the details, and the Federal Reserve has undercut the renaissance myth with a recent study of its own on what much lower natural gas prices are and are not doing for domestic industry’s competitiveness.

In an article for IndustryWeek, Jim Rice and Francesco Stefanelli of MIT’s Center for Transportation and Logistics acknowledge that some reshoring has taken place recently – by which they reasonably argue means “a change in policy from a previous decision to locate manufacturing offshore from the firm’s home location.” But they contend that their own research has unearthed precious little evidence that these corporate decisions add up to a “major trend” – or anything close.

According to Rice and Stefanelli, most of the more than 50 reported instances of reshoring they investigated were actually alleged plans to reshore, not actual reshoring. In addition, they note, accounts of these supposed renaissance-inducing events “tend to lack certain key details. For example, there is seldom mention of whether the offshore operation has been closed, which means that the company could be adding domestic capacity while continuing to support offshore production.”

Their conclusions: “[T]here is no clear reshoring trend in the U.S. Companies do not appear to be abandoning overseas operations in droves; some are building new capacity in the U.S. and other countries to meet domestic demand. And the level of reshoring activity varies widely depending on the industry involved.”

Moreover, the authors shed much needed light on the politics of reshoring. The renaissance claims, they note, are “especially appealing at a time when Americans yearn for a return to the heyday of homegrown manufacturing when jobs were seemingly plentiful. Moreover, vested interests are eager to provide evidence of a national manufacturing base that is being rejuvenated by its believed newfound competitiveness. “

And they issue a warning that could not be more important: “If the reshoring revolution turns out to be a false dawn, it could distract us from the policies and investments that need to be put in place in order to make supply chains more competitive and effective, or even identify a different phenomenon that will affect supply chains in the future.”

But what about fracking revolution and the huge cost advantage cheap natural gas is bound to give U.S.-based manufacturing? A June report for the Fed by William R. Melick of Kenyon College found that lower energy prices have certainly been helpful to American industry, but far from a game-changer.

It’s not that gas prices in the United States aren’t way down. In the past eight years, Melick states, they’ve declined by two-thirds compared to the gas prices paid by Europe-based manufacturers. But for their U.S.-based counterparts as a whole, the natural gas price bonanza has meant only a 10 percent increase in capital spending during this period, an increase in production of less than three percent, and an increase in employment of less than two percent. And the impact of cheaper gas on the global competitiveness of American manufacturing is even smaller.

Lower natural gas prices have had a much bigger impact on America’s most energy-intensive manufacturing sectors, according to Melick. But he also notes that the four most intensive gas-using industries – nitrogenous fertilizers; alkalies and chlorine; carbon black; and flat glass – represented only 0.5 percent of U.S. manufacturing’s total value added in 2011.

According to Melick, the fracking revolution’s effects on domestic manufacturing could become significant over time. But to date, they’ve been about as revolutionary as the decidedly less-than-renaissance-y rebirth of American industry.