In April 2016, presidential candidate Donald Trump promised to “surrender this country or its people to the false song of globalism” no longer. “I am skeptical,” he said in a speech at the Mayflower Hotel in Washington, “of international unions that tie us up and bring America down.” Two months later, campaigning against Hillary Clinton, Trump reiterated: “Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.”
As president, Trump has made good on his promises, with a variety of actions: He has pulled the United States out of the Trans-Pacific Partnership; announced that he would do the same with the Paris climate agreement; held up nominations to the World Trade Organization; begun renegotiating the North American Free Trade Agreement; instituted tariffs on steel and aluminum imports; targeted Chinese trade and investment; and threatened to shut down the government if Congress doesn’t fund a great wall with Mexico.
Democrats and some of Trump’s fellow Republicans have roundly condemned many of these moves as either useless or of questionable utility. And they were often right to do so: His decision to dump the Paris accord or separate immigrant children from their parents at the border, or even to withdraw from the TPP, would do little to end the poverty and heartache that he believes globalization has caused. Still, whether wittingly or not, Trump’s attack on globalization has struck at profound failings of American economic policy, and liberals who might otherwise dismiss Trump would do well to acknowledge them. If their goal is to create a kinder, more generous, more livable country without gaping differences in income and power, they must consider globalization’s downsides.
One of the first economists to warn against globalization was Harvard’s Dani Rodrik. In his 1997 book, Has Globalization Gone Too Far?, Rodrik argued that globalization would empower mobile businesses at the expense of their workers and threaten the welfare state.
At the time, his claims were highly controversial. Throughout the 1990s, Bill Clinton had made the case for globalization. As he won approval for NAFTA and for America’s entry into the WTO, he urged Americans to “make change our friend” and to “embrace the inexorable logic of globalization.” New York Times columnist Thomas Friedman, another champion of globalization, argued that it was making the world “flat.” Many believed that by enriching Mexicans, NAFTA would stem the flow of unauthorized immigrants to the United States, and that China’s entrance into the WTO would propel the country toward free-market democracy. Meanwhile, the free movement of capital and currencies would guard against instability and boost prosperity.
None of these contentions proved correct. Rather than creating a global free market that was stable and consistent, financial globalization instead contributed to a succession of major crises. Between 1945 and 1973, while the Bretton Woods agreement still regulated currency values, no crises occurred, but since the 1980s, there have been at least 13, climaxing in the Great Recession of 2008.
After the Recession, establishment economists began to echo Rodrik’s early warnings. Was globalization creating inequality? Because of the rapid growth of China and India, globalization did contribute purely on average to a decline in global inequality. But the gap between rich and poor nations widened, and as former World Bank chief economist François Bourguignon has noted, within the United States, as well as much of Europe, and even in China and India, inequality rose between 1990 and 2010.
Under the new order, corporations were competing to find countries where they could pay workers lower wages and governments fewer taxes. As Trump pointed out during the 2016 campaign, Nabisco had cut its labor costs by moving a food processing plant from Chicago to Salinas, Mexico, laying off 600 workers. In 2011, Samsonite had moved its headquarters from Massachusetts to Luxembourg to reduce its tax bill. Hoping to keep their businesses globally competitive and their rich at home, advanced capitalist countries slashed taxes. In the 1980s, most had corporate tax rates higher than 46 percent. By 2011, the 34 countries of the OECD had cut them to an average of 25 percent. With less money coming into government coffers, elected officials were forced to cut public expenditures on health care, education, infrastructure, and the environment. Globalization, in other words, has begun to undermine the fundamental promise of social democracy in Europe and of post–New Deal liberalism in the United States: to provide economic and social security and upward mobility.
Globalization’s effect on the United States was particularly pronounced. NAFTA not only encouraged American auto companies to move out of the Midwest; it also, as labor economist Kate Bronfenbrenner has argued, allowed employers to use the threat of moving to Mexico to undercut private-sector unions. (When the United Auto Workers tried to organize one Michigan auto parts plant in 1995, managers parked 13 flatbed trucks with signs reading “MEXICO TRANSFER JOB” for workers to see.) The decision to sponsor China for the WTO had an even more dramatic effect. Under the WTO’s umbrella, China was able to use currency manipulation and hidden export subsidies to drive American firms out of business or abroad. According to a study released by the National Bureau of Economic Research, its entry into the WTO cost Americans as many as 2.4 million jobs between 1999 and 2011.
The jury is still out on whether Donald Trump is helping the voters who have lost jobs to globalization. Will his tariffs on Chinese imports lead the Chinese to abandon the strategy of dumping their products at below cost? Or will the tariffs simply damage American companies dependent on foreign steel? Mexico recently agreed to impose tariffs on cars made with less than 75 percent North American parts. But will this bolster U.S. car manufacturers? Or, as trade expert Alan Tonelson has charged, is the 2.5 percent tariff too low to be effective? Trump may not have the answers, but for all his casual bigotry and corruption, at least he has fairly accurately identified the damage wrought by globalization.
Even so, many Democratic policy intellectuals have peremptorily rejected his initiatives. Last July, when Trump criticized American business leaders for being “more for their business than they are for the United States,” he was accused by Aaron Rupar of ThinkProgress—an offshoot of the liberal Center for American Progress—of striking “a fascistic note while criticizing American business leaders [for] not doing more about unfair trade deals.” Robert Litan of the Brookings Institution compared Trump’s trade policies to Herbert Hoover’s, and in The Atlantic, Annie Lowrey accused Trump of initiating a “pointless, destructive round of mercantilism.” Destructive? Maybe. Pointless? Absolutely not. On China, in particular, eight years of international appeals under the Obama administration had done little to stop the Chinese from undercutting American industries.
Some Democrats, like Senate Minority Leader Chuck Schumer, have encouraged, without fully endorsing, Trump’s trade initiatives and his attempt to strengthen the Committee on Foreign Investment in the United States, which can block foreign takeovers of critical American firms. And instead of dismissing Trump’s efforts, policy experts at the Economic Policy Institute and the Information Technology and Innovation Foundation have devised their own responses to Chinese mercantilism. (Rob Scott at EPI stresses pressuring China to accede to a currency realignment.) But these solutions rarely make it to the top of Democrats’ political agenda, subsumed instead by the emphasis on Trump’s personal malfeasance and most egregious social policies.
Democrats can and should promise to help the people hurt by globalization, rather than leaving it to the president. After all, on certain key matters, Trump has made the impacts of globalization worse. By pulling out of the Paris agreement and propping up coal, he is posing an immediate health risk to the silent majority he claims to speak for. By stacking the National Labor Relations Board with anti-union appointees, he is depriving workers of their best means of resisting globalization. And by almost halving corporate taxes, Trump has fueled the global race to the bottom among corporate managers and money movers, thereby depriving the federal government of revenue it needs for social spending.
Some American workers may be the incidental beneficiaries of Trump’s attack on globalization. But many will be casualties. Democrats need to fashion remedies that speak to those workers. They don’t need to reject multilateral trade deals and international organizations. They do have to insist that those organizations operate in the national interest—not, as they have in the past, in the interest of footloose corporations and countries willing to bend the rules to their own advantage.