Americans are tormented these days by an awkward contradiction—the loss of American triumphalism. Instead of leading the world to higher ground, the United States has become the fumbling fall guy. The popular faith usually invested in America’s global leadership lies in ruins. Lots of people are blaming Donald Trump.
Trump’s harsh attacks on the “free trade” system and his scattershot proposals for tariffs are flatly dismissed by the strategists of corporate capitalism, though his moves were also criticized by some on the left. Media-wise guys piled on to ridicule Trump’s economic thinking as retrograde. It’s not clear what, if anything, he will accomplish.
But do not write off the Trumpster as just an addled screwball. He is supported by devastating fallout from a lopsided globalization, which ultimately destroyed working-class prosperity in America and fostered the political triumph of… Trump. The blame properly belongs with Washington and Wall Street. Those power centers collaborated company-by-company in the globalization strategies that moved work and wages to developing economies eager to embrace US manufacturing.
Strangely enough, one seldom hears this explanation for the dismantling of US production. Usually, the outmigration is explained as a natural evolution of industrial chains—factories and workers linked across great distances for internal reasons. Modern communications and transportation allowed the dispersal of managements across national and regional boundaries. Peasants may acquire advanced industrial skills.
If nothing else, Trump has reengineered the American political system. As a result, American capitalism has been opened to ideas and arguments it traditionally dodged as left-wing perspectives. I predict we will hear more—new variations on left-labor responses to the economic dilemmas of working people. And Democrats will move left, or lose relevance.
How did Trump accomplish this? Shock therapy. He told people the raw truth about their failing position in American society—though with a very mixed message, blaming immigrants, especially Mexicans. He accused the political establishment of betrayal and promised to restore prosperity with honest talk for working-class ranks. He told voters what they already seemed to know: They were screwed.
Trump went public with a taboo message—a warning that neither political party would candidly acknowledge. Globalization meant a transformed economic system that hollowed out US production and redistributed work and wages to low-wage economies. This was disparaged by labor leaders as the “road to the bottom,” but they were dismissed as backward. And the labor movement did not offer a convincing, coherent alternative to the new globalization, beyond protectionist remedies. In addition, by the time of NAFTA, organized labor had been so decimated by the corporate onslaught—and undermined by their former backers, the Democrats—that they could offer only limited resistance to the new trend.
Congress and the federal government took their cues from the strategists of corporate capitalism, supervising America’s premier industrial corporations. Factory workers watched as their advanced machinery was packed up and shipped to Asia or Eastern Europe. Then media pundits scolded the American workforce for losing its edge.
This is the essential point Americans should understand: The federal government created this new industrial system in collaboration with both major political parties. Trump warned that conventional players of two-party politics could not be trusted to reform this system. They are the same people who corrupted it. Nor was it obvious that Trump could be trusted to restore the lost prosperity, since he is a con man himself.
The Democratic Party’s crude betrayal of the working class was carried out by Bill Clinton and Al Gore when those “New Democrats” won power in 1992. The Clinton-Gore administration swiftly enacted NAFTA, with Republican votes, sealing the deal with Republican policy-makers and selling out the remnants of organized labor.
Globalization, in other words, was not foisted upon us by the Chinese; it was fashioned in Washington by the best minds in corporate strategy (the Business Roundtable, the US Chamber of Commerce, the National Association of Manufacturers, and other influential policy peddlers). The Chinese were simply opportunists, who had shifted from a socialist state to a raw, hyper-capitalist economy willing to ignore the rules of trade and exploit opportunities opened for them by the Americans and Europeans.
But why did Democratic Party leaders not tell the stark truth to the American work force? Who would organize the rebellion and resist corporate capitalism’s exploitation of the weak and the poor, if not the Democrats and organized labor? At this critical juncture, Americans needed an independent labor movement willing to resist conventional politics. A few tougher politicians—notably senators like Bernie Sanders and Sherrod Brown—have pushed aggressively for thorough reform that would help to balance the relationships in globalized capitalism. This reform ought to be the next great challenge of trade politics—creating a system that shares the rewards equitably but also punishes the cheaters.
The big question for political reform: Why did representative democracy fail to respond to this crisis in the globalized economy? I think I know the answer: It was American hubris. We had just won the Cold War struggle; it was time to bathe in the glory. American power celebrated with yet another war (and another and another). Now it would claim its economic rewards for leading the world to peace and plenty, but America’s economic hegemony was widely felt to be our reward for righteous struggle. The weakening of labor after years of assault from corporate America was combined with the more decisive shift of the Clinton-led Democratic Party—appeasing the corporate sector instead of forcing it to serve the country in a larger challenge.
Twenty years ago, I traveled the world to write a long book about the emerging global economy, One World, Ready or Not: The Manic Logic of Global Capitalism. It was a dark portrait that accurately foresaw the devastation suffered by working Americans (conventional critics like Paul Krugman and David Ignatius hated the book).
When I interviewed corporate planners and managers in a dozen countries, I was struck by their private doubts. They explained the logic of global industrial development—everyone should benefit from rising growth—but many on-the-scene managers expressed doubts. How could US companies shift factories from the prosperous United States to low-wage countries without injuring the displaced workers? Factory managers were typically wishful but skeptical.
The US economy, it turned out, would become the perennial loser. This was Trump’s core complaint. Instead of a balanced trading system, the United States is stuck with a $500 billion trade deficit every year. That failure is what Trump the dealmaker says he wants to correct with his numerous tariffs.
But multinational corporations have a loyalty problem of their own. Are they really American? Sometimes they are, other times not. What I learned is that homebound, domestic corporations typically pursued objectives very different from those of their globe-trotting competitors spanning the world. The latter truly are homeless creatures, without national loyalties.
Boeing, I learned from its senior vice president, disperses elements of its production to foreign manufacturers as a way to boost its total manufacturing. That is, Boeing sells more airplanes if it assembles more of them in other countries.
“I am scratching their itch,” said Lawrence Clarkson. “I have to create some jobs in those countries to get those markets.… Will I have a lot of US suppliers or will I have more international suppliers? I don’t know the answer, but it’s clear that the US suppliers don’t bring me any market.”
The same logic favored shifting production overseas, privileging hot new markets over longstanding old favorites back home. In the 1990s, trade officials broadcast lists of “BEMs”—big emerging markets—to steer customers to the ten hottest prospects: Argentina, Brazil, China, Hong Kong, India, Mexico, Poland, South Korea, Taiwan, and Turkey. The lazy assumption among cheerleaders was that fast-expanding economies were naturally safer bets for strong returns (though some on the list failed big time).
Oscar Marx III was a Ford executive in China with restrained expectations. He had seen the Japanese tear up Ford’s auto market and was chastened by the experience. “I don’t see big boatloads of cars coming from China the way they did from Japan,” Marx explained. “I don’t think the US will permit another Asian country to do what Japan did to it. Our people won’t stand for it.”
On the other hand, a Detroit executive on the plane home from Shanghai thought this was naive. “The UAW doesn’t want to hear that, but the good times aren’t coming back,” my fellow passenger asserted. “I don’t see how that can happen, not in our lifetime. The developing countries are going to do the manufacturing. We will have to do something else.” What might that be? The auto exec shrugged. “Services or something, whatever that means,” he answered.
In other words, the great debate over free trade is still with us. Trouble is, Trump wants to do all the talking.