Making Trade and the Global Economy Work for the American Worker

The global economy is a fact and there is no avoiding it.  Trade is also a necessary fact of economic life.

The question is, how to make the global economy and trade work for America.  And by work I mean work for the American worker, not allowing corporations to prosper and investors to get rich at the expense of workers.  In today’s multi-national corporate world, we must remember that the interests of the corporation are often if not mostly not in line with the interests of their workers because of off-shoring and out-sourcing; we are increasingly not producing here to send abroad, but producing abroad to import here.

As I’ve stated previously, corporate interests have been the true driving force behind most government decisions in this as in all areas for the last 3-4 decades.  While that should continue to be part of our strategy, for the health of both corporations and investors are  very important to our economy, those interests should not be the driving force.  Instead, our most important goal must be to make the global economy work for the American worker.

As I stated in my 2004 book, We Still Hold These Truths, the American worker is the backbone of the American economy.  “Whether blue collar or white collar, whether skilled or unskilled, whether managing a major corporation or a local fast-food operation … each individual American worker contributes to and sustains the American economy.  He/she is both producer and consumer.”    I would note as an aside that American independent farmers, as opposed to big farm corporations, are self-employed American workers and so very much part of the backbone of our economy.

It is the American worker as consumer, together with constructive government action, that has enabled our economy to sustain itself and recover from hard times.   Not corporate America.

How would this revised decision-making perspective impact government policy in the areas of  trade, industrial development, infrastructure investment, worker education, and Third World development?  I am not an expert on economics, and so I will not pretend to have solutions or opinions on how best to implement such a strategy.  

We will need to develop new economic models that show how the American economy and its workers can prosper in this changed environment.  We must ask questions, like, are even “smart” free-trade deals that harm American workers while enriching corporations better for the economy and the worker than having no free-trade deals?  What is the role of government-funded infrastructure projects, so badly needed for our future economic health, to providing un- or under-employed ex-factory workers with good-paying jobs?  How do we encourage corporate investment in manufacturing jobs in the United States?  Is the best way of restoring the economic strength of the middle-class worker to bring development and rising wages to the Third World?

Let me just say a few words on this last point.  It is to the American worker’s benefit for our government to aid Third World development.  Why?  As the standard of living rises in the Third World, wages will rise and the benefit of off-shoring or out-sourcing work will decrease for American business.  That has already happened to some extent with China where companies have transferred production to lower cost countries in Southeast Asia.  When their wages rise, as they inevitably will, jobs will start returning to the U.S.  This is admittedly not a short-term solution, but it must be part of the strategy.

The Democratic Party must make this an important part of its 2020 campaign platform.  It fits seamlessly with the Democratic vision statement I proposed in my post, “The 2020 Election Is about the Survival of American Democracy, Our Historic Values.”  

And it provides an important differentiation between Democratic policy and Trump policy.  Despite his rhetoric, Trump has approached nothing, including the revision of NAFTA, with the interests of the American worker as the driving force.  It’s been business as usual, what’s best for corporate interests.  Democrats must make this startlingly clear.

Income Inequality Per Se Is Not the Problem

In an ideal world, at least in my mind, you would not have the extremes of rich and poor.  But people have different intelligence levels, different talents, and different aptitudes which, even with all other things being equal, would translate themselves in the real world to significant disparities in earning opportunities.  Add to that that all other things have never been equal and we have the situation in which rich and poor have always been a part of human existence and it will likely always remain so.  But that fact in and of itself is not the problem.

The problem is how the rich, or I should say the very rich, the top 1%, got there and are increasing their share of the economic pie at the expense of the rest of us.  It’s a classic case of exploiting those less powerful to make your own fortune.

“Oh come off it,” you  may well say.  “That’s a bit extreme.  A leftist diatribe.”  Alright, it may be, but lets see what the facts show.

The very rich, or those they inherited their money from, get there typically through a combination of two things.   First, they engage in an enterprise which in one of various ways exploits, which is to say unfairly takes advantage of, others for their own personal benefit.  (This does not gainsay the innovative value or quality of the product or the management excellence of the enterprise.)  Second, they influence Congress to slant the tax laws in a way which benefits themselves at the expense of everyone else.  

The first point is understood by anyone with an open mind as examples are everywhere.  Whether one looks at the classic robber barons of the early industrial revolution (and most corporate CEOs today) or the masters of finance who orchestrated the toxic investment instruments that resulted in the 2008 market crash, the very rich have achieved their wealth and power by exploiting others, whether it’s their workers or whether it’s investors (yes, they even prey upon their own clients) or whether it’s gullible people looking to buy a home. 

“How can you say that workers are exploited?” you may ask. “They have their contracts and if there’s a union, collective bargaining.”  Decades ago, when industrial jobs were plentiful and unions were strong, your point would be well-taken.  And in that era, the disparity between CEO compensation and worker compensation, although large, was far narrower than today.  Blue collar workers were solidly middle class, except in the South where there typically were no unions and workers were exploited.  

In today’s global economy, workers have no power, even if there is a union, because the job market is so bad and the owners have the practical opportunity in many cases to close and open up business in a lower-cost foreign country.  And so workers are taken advantage of because management and stockholders have only one concern ... improving the bottom line.  If the choice is between maximizing profits and giving the workers a higher wage, the choice will always be to maximize profits.  

As a result, workers’ wages have stagnated over the past few decades and if their jobs have gone and they’ve found other employment their wages have typically fallen.  In both cases, the working class has been left ever poorer, just treading water above poverty, as costs continue to rise.   While the CEOs and management keep getting richer.

But it is in the impact of the tax laws which have been passed to enable the rich to become richer (supposedly to grow the economy through increased investment and the “trickle down” effect, although that’s been shown to be nonexistent; the economy has not exploded in growth as we were promised) that the hidden and less known harm of income inequality has been felt.  The reason is quite straight-forward.  Lower taxes = less revenue for the government.

Because the tax breaks that the very rich and their corporations receive have greatly reduced tax revenues (15.8% of GDP in 2012, the lowest since 1950, compared with the high of 20.6% in 2000), there is less money available for government, whether federal, state or local, to accomplish their responsibility.  That responsibility as stated in the Declaration of Independence is to “secure the rights” of all people to life, liberty, and the pursuit of happiness.   

Government has for much of the 20th century tried to meet that responsibility and ensure the general welfare through programs that provide quality education for all, support for the poor, a sound infrastructure, and all the basic services that government needs to provide and pay for in order for the country and individual communities to functions effectively and efficiently and thrive.  

But with significantly reduced tax revenues, all levels of government are finding it necessary to reduce services and quality in almost every area of government activity (and no, the problem is not principally the recession but tax cuts for the rich and corporations as well as the holy cow of military spending).  This has not only resulted in exacerbating the impact of the recession, increasing the abjectness of those already living in poverty and throwing more people and families into poverty.  Through cuts in services, it is making the already disappointing experience of many of our citizens in the areas of education, health, income inequality, social mobility, and equal opportunity (see my post, “American Exceptionalism - A Myth Exploded”) even more dismal.

It is no crime to be rich and successful.  But to be rich and successful at the expense of others, especially those with less power, is a social crime.  And it is a violation of the American social contract under which we all as citizens share responsibility for government’s efforts to promote the general welfare, each contributing according to his means, which unfortunately is more violated today than honored.  

America has enough wealth to ensure that those who are poor, and everyone else for that matter, have access to good health, education, and housing and do not go hungry.  America has enough wealth to insure that the infrastructure on which our viability depends remains strong and world-class.  And still allow people to be quite rich.

If America continues on this path where the rich feel entitled to more and more and where they have no concern and feel no responsibility towards their fellow citizens, let alone employees, then America’s greatness will become a thing of the past.  Not because China or some other country vaults into first place as the largest economy in the world.  But because America will have failed its own people, its own heritage, its own promise.